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Michigan Supreme Court Holds that an Action Seeking Damages as a Result of an Insurer's Fraudulent Conduct is not Subject to the One-Year Back Rule

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Pamela C. Dausman
Foster Swift No-Fault E-News
June 27, 2008


On June 25, 2008, the Supreme Court held that the one-year back rule of MCL 500.3145(1) does not apply to a fraud action seeking damages for a No Fault insurer’s allegedly fraudulent conduct. Cooper v Auto Club Insurance Assoc. (Docket No. 132792).


In January 1987, the plaintiffs were passengers in their mother’s car when they sustained severe brain injuries in an automobile accident. In 1989, Defendant suggested that the mother quit her $50/day job to stay at home to provide attendant care, and offered to pay her $50/day to do so. The mother agreed to this plan. By October 2000, the payment rate had increased to $10/hour.

Plaintiffs filed suit in 2003, alleging underpayment and fraudulent inducement to accept an unreasonably low payment rate. Defendant sought summary disposition pursuant to the one-year back rule of MCL 500.3145(1). Plaintiffs countered that their claim sounded in common law fraud, not No Fault.

The Supreme Court agreed with Plaintiffs, and held that a fraud action could be distinguished from an action for no-fault benefits because fraud actions require proof of different elements, accrue at a different time, and permit recovery of different damages. The Court indicated that a lawsuit premised on an insurance policy can nevertheless allege liability for tortious conduct that is separate from an insurer’s contractual and statutory duties to an insured.


This case is important because it recognizes that an action based on tortious conduct separate from the insurer’s contractual duties is not be subject to the one-year back rule.