Liar, Liar, Pants on Fire

You Can’t Commit a little Fraud any more than you can be a Little Dead

Insurance policies invariably exclude coverage for an insured that commits a fraud in the presentation of a claim. When a person has a legitimate claim but attempts to increase the claim by committing a fraud on a single part of a legitimate claim the entire claim should be, and will be, excluded.

The Michigan Court of Appeals, in Marija Sabados v. State Farm Mutual Automobile Insurance Company, No. 342088, State of Michigan Court of Appeals (February 12, 2019) was faced with a claim from Marija Sabados that she should be paid for the legitimate portion of her claim even though there was some fraud in the claim.

Plaintiff, proceeding in propria persona, appeals the order granting defendant’s motion for summary disposition.


On April 18, 2016, plaintiff was involved in an accident while driving her son’s car. At the time of the accident, plaintiff was a named insured under a no-fault automobile insurance policy through defendant that covered the car. Plaintiff alleged that she was injured and filed a claim for recovery of personal protection insurance (PIP) benefits. When State Farm denied the claim, plaintiff filed a complaint seeking recovery of PIP benefits.

Defendant moved for summary disposition arguing that plaintiff made misrepresentations about her accident-related injuries and, for that reason, her claim for PIP benefits was barred under her insurance policy’s fraud exclusion provision. The trial court granted the motion because “reasonable minds could not differ and no rational trier of fact could ever reach any conclusion other than that Plaintiff has engaged in indisputable fraud by knowingly making numerous material misrepresentations.”

In support of her claim for PIP benefits, plaintiff testified at her deposition that she could not drive, and had not driven since the accident, because of her injuries. After being confronted with the possibility that there was video evidence of plaintiff driving to her deposition, plaintiff conceded that she could drive. On appeal, plaintiff argues the trial court erred by granting defendant’s motion for summary disposition on the basis of the fraud exclusion.


Plaintiff’s insurance policy contained a “concealment or fraud” provision, which stated: “There is no coverage under this policy if you or any other person insured under this policy has made false statements with the intent to conceal or misrepresent any material fact or circumstance in connection with any claim under this policy.”

The rules of contract interpretation apply to the interpretation of insurance contracts, so a court must enforce the clear language of an insurance policy. For fraud exclusions in particular to void a policy because the insured has willfully misrepresented a material fact, an insurer must show that:

  1. the misrepresentation was material,
  2. that it was false,
  3. that the insured knew that it was false at the time it was made or that it was made recklessly, without any knowledge of its truth, and
  4. that the insured made the material misrepresentation with the intention that the insurer would act upon it.

A statement is material if it is reasonably relevant to the insurer’s investigation of a claim.

The appellate court noted that it is undisputed that plaintiff misrepresented that she could not drive as a result of the accident. This misrepresentation was material because it was evidence of the severity of her injuries, which is reasonably relevant to defendant’s investigation of the claim. The misrepresentation was also material because plaintiff claimed “driving” as one of the replacement services to which she was entitled. Next, plaintiff’s misrepresentation that she could not drive was clearly false, as she admitted at her deposition and continues to admit in her brief on appeal.

Plaintiff knew that the representation was false because, if nothing else, she drove herself to the deposition before she gave the testimony that she could not drive. Lastly, reasonable minds could not disagree that plaintiff intended for defendant to rely upon the misrepresentation. Plaintiff listed the inability to drive on her replacement-services form, and then testified at her deposition that she still could not drive as a result of the accident. Plaintiff only admitted that she could drive after she was confronted with the possibility that defendant had video footage of plaintiff driving to the deposition.

The issue presented to the court was whether plaintiff committed fraud such that her claim was barred under the insurance contract’s fraud exclusion provision.

The issue is plaintiff’s misrepresentation and whether it was sufficient to trigger the fraud exclusion in the insurance contract. Plaintiff’s entitlement to otherwise valid services is irrelevant because, under the insurance contract’s fraud exclusion provision, plaintiff was entitled to “no coverage under [the] policy” for a material misrepresentation.


Fraud by an insured voids coverage on any policy that contains a misrepresentation or fraud provision. The plaintiff tried to get payment under the no-fault coverage because she was entitled to the benefits other than the benefits for not being able to drive. She claimed she only committed fraud with regard to one part of her claim and should be paid for all other parts of her claim. She was wrong.

© 2019 – Barry Zalma

This article, and all of the blog posts on this site, digest and summarize cases published by courts of the various states and the United States.  The court decisions have been modified from the actual language of the court decisions, were condensed for ease of reading, and convey the opinions of the author regarding each case.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant  specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He also serves as an arbitrator or mediator for insurance related disputes. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 50 years in the insurance business. He is available at and

Mr. Zalma is the first recipient of the first annual Claims Magazine/ACE Legend Award.

Over the last 51 years Barry Zalma has dedicated his life to insurance, insurance claims and the need to defeat insurance fraud. He has created the following library of books and other materials to make it possible for insurers and their claims staff to become insurance claims professionals.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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