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Fraud by Insurer Provides an Exception to the No-Fault One-Year Back Rule
January/February 2009
The No-Fault One Year Back Rule


     The no-fault one year back rule has two essential requirements.  First, an injured claimant must file a written no-fault application within one year of the date of accident.  Secondly, under current rules, a no-fault claim must be paid within one year of the date the expense is incurred or the claim is forever barred.


 

Fraud is Exception to Rule

 

     In Cooper v Auto Club Ins Ass'n, 481 Mich 399; 751 NW2d 443 (2008), the Michigan Supreme Court held that the one-year-back rule of MCL 500.3145(1) does not apply to a fraud action.  In this case, plaintiffs alleged that the no-fault insurer fraudulently induced their mother to accept an unreasonably low compensation rate for her in-home attendant care services.  The trial court had held that an independent cause of action of fraud was not subject to the no-fault one-year-back rule.  The Court of Appeals reversed the lower court finding the action barred by the one-year-back rule.  The Michigan Supreme Court reversed the Court of Appeals and held that a fraud action is an independent and distinct action for recovery of damages payable under the common law for losses incurred as a result of the insurer's fraudulent conduct as opposed to an action for PIP benefits payable under the No-Fault Act.
Additional Damages Recoverable


 

     The Court also held that in a fraud case, the plaintiff may recover damages for any losses caused by the fraudulent conduct of the insurer including, "the equivalent of no-fault benefits, reasonable attorney fees, damages for emotional distress and even exemplary damages." Therefore, the damages recoverable in this type of case are not limited to traditional personal injury protection claims recoverable under the no-fault statute.  Other causes of actions which fall outside the contract and no-fault statute such as estoppel or contract theories may also provide a means to avoid this one-year-back rule under the recent decision.


 

Uncertain Future


     Given the uncertainty of how the Michigan Appellate Courts may interpret the no-fault one-year-back rule in the future, injured persons and medical providers should continue to keep track of their claims and seek legal representation if the one year time limit is approaching.  However, the one-year-back rule is no longer absolute, and it is possible that the Appellate Courts will provide additional exceptions to the one-year-back rule in the future.