True Crime of Insurance Fraud Video Number 57

I Didn’t Know the Gun Was Loaded

A Lie to Get Insurance Benefits

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Pre-Existing Condition Material to No Fault Claim

No fault insurance plans, like that in Michigan, provide benefits to an injured person regardless of fault. All the state asks from the injured party is that he or she is honest in the presentation of the claim. Misrepresenting material facts in the presentation of a no fault claim is considered fraud and deprives the person injured of the right to receive benefits.

In Mark Smith v. Michigan Automobile Insurance Placement Facility, a Michigan Court of Appeals decision, Smith lied to the Placement Facility when making his claim and tried to avoid losing benefits by claiming he forgot his previous condition and did not intentionally lie.

Smith visited his doctor, Dr. Mohamed Ayad, twice complaining of “chronic” and “acute” back and neck pain. Smith was involved, shortly thereafter, in an automobile accident that, Smith alleged, injured his back, neck, and shoulder. Smith then filed an application with the Michigan Automobile Insurance Placement Facility, for personal protection insurance (PIP) benefits. In this application, plaintiff indicated that he did not have any preexisting conditions and did not seek treatment for such conditions before the accident.

Smith falsely testified that he did see Dr. Ayad before the accident, but only for general health checkups. Smith’s medical records from Dr. Ayad, however, showed that Smith visited Dr. Ayad for “chronic” and “acute” back and neck pain.

The insurer claimed that Smith committed fraud when he indicated on his application that he did not have neck and back issues before the accident.

Smith, unhappy, sued contending that the insurer unreasonably and unlawfully neglected to assign an insurer to pay Smith his requested PIP benefits.

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

One makes a knowing false statement when they have knowledge that the statement is false, or when the statement is made recklessly even without knowledge of the truth.

Smith complained of back and neck pain, which was characterized as “chronic” and “acute,” six months before he filed the application seeking benefits. He was prescribed medications for this pain and did not indicate that he had stopped taking the medication before his application for benefits was submitted. Smith did not state in his deposition that he went to the doctor before the accident for neck and back pain, but merely forgot by the time he applied for benefits—rather, he stated only that he visited the doctor for regular checkups and mild neck pain from sleeping wrong.

Smith did not submit an affidavit or other evidence in response to the insurer’s allegation in its motion for summary disposition that Smith knowingly misrepresented information in his application. Smith did not provide evidence of a preexisting condition, let alone an aggravation of that condition.

In fact, he initially denied having any significant pain in his back or neck prior to the accident. The alleged fraud was material because it was pivotal to whether his claim could be accepted, with or without a preexisting condition.

This case is a perfect example of the last ditch attempt by a criminal who claimed – after being charged with a crime of violence – the “I didn’t know the gun was loaded.”

He knew, he lied, and his medical records established the lie. No one, not even in a no fault auto insurance state, should be allowed to profit from a fraudulent claim. What the trial court and the court of appeal should have done at the end of their decision is refer Smith to a local prosecutor for an act of criminal insurance fraud. They did not, they were satisfied he was unable to collect.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

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 practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at and

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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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