If this opinion indicates that it is “FOR PUBLICATION,” it is subject torevision until final publication in the Michigan Appeals Reports.STATE OF MICHIGANCOURT OF APPEALSBRIAN WEBB,FOR PUBLICATIONJanuary 28, 20219:05 a.m.Plaintiff-Appellee,andVHS OF MICHIGAN, INC., doing business asDETROIT MEDICAL CENTER,Intervening Plaintiff-Appellee,vNo. 351048Wayne Circuit CourtLC No. 18-012887-NFPROGRESSIVE MARATHON INSURANCECOMPANY,Defendant-Appellant,andMICHIGAN AUTOMOBILE INSURANCEPLACEMENT FACILITY also known asMICHIGAN ASSIGNED CLAIMS PLAN,Defendant-Appellee,andUNNAMED SERVICING INSURER,Defendant.Before: JANSEN, P.J., and SERVITTO and RIORDAN, JJ.JANSEN, P.J.-1-
In this no-fault action, defendant, Progressive Marathon Insurance Company (Progressive)appeals by leave granted1 the trial court’s order denying Progressive’s motion for summarydisposition under MCR 2.116(C)(10), which sought to rescind coverage on the basis that theinsurance policy at issue was procured by fraud. We reverse, vacate the portion of the trial court’sorder denying Progressive’s motion for summary disposition as to Clark, and remand for furtherproceedings consistent with this opinion.I. BACKGROUNDThis case arises out of a motor vehicle accident that occurred on March 24, 2018, in Detroit,Michigan. At the time of the accident, plaintiff, Brian Webb, was driving a 2013 Dodge Challengerregistered to his mother, Chirece Clark, and insured in her name. Webb was not listed as a driveror member of Clark’s household on the policy. Webb spent approximately two weeks in thehospital after the accident.Progressive sought to deny coverage because Clark did not disclose on her application forinsurance that Webb lived with Clark. According to Progressive, Clark’s premiums would havebeen 32% higher had Webb’s identity been disclosed. Two telephone call recordings betweenClark and Progressive agents were disclosed during the course of discovery. During the first call,which occurred on November 23, 2016, Clark did in fact disclose Webb’s identity and residencein her home. She also disclosed that Webb would be the primary driver of the vehicle. Clark wassoliciting quotes from the agent, but did not purchase a policy at that time. Instead Progressiveemailed Clark a quote at the e-mail address she provided. During the second call, which occurredon November 30, 2016, the topic of who was in Clark’s household did not come up. However,when Webb spoke with the insurance agent to make payment for the policy, he told the agent hewas Clark’s “friend.” When Clark eventually submitted the application for insurance, Webb wasnot listed as a resident relative in Clark’s home. Clark did not attempt to add Webb as a residentof her home after receiving the completed application for insurance from Progressive, which shesigned and returned.The trial court denied Progressive’s motion for summary disposition, concluding therewere genuine issues of material fact regarding whether Clark committed fraud when submittingthe application for insurance. The trial court also concluded Webb was innocent to Clark’s fraudand, when balancing the equities between Webb’s need for coverage and Progressive’s desire toavoid liability, those equities favored Webb.2 This appeal followed.1Webb v Progressive Marathon Ins Co, unpublished order of the Court of Appeals, enteredJanuary 10, 2020 (Docket No. 351048).In a separate order, the Michigan Automobile Insurance Placement Facility (“MAIPF”) wasdismissed from the case when the trial court granted its motion for summary disposition. Thatorder has not been appealed.2-2-
II. STANDARD OF REVIEW“Appellate review of the grant or denial of a summary-disposition motion is de novo . . . .”West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). This Court “review[s] amotion brought under MCR 2.116(C)(10) by considering the pleadings, admissions, and otherevidence submitted by the parties in the light most favorable to the nonmoving party.” Latham vBarton Malow Co, 480 Mich 105, 111; 746 NW2d 868 (2008). “Summary disposition isappropriate . . . if there is no genuine issue regarding any material fact and the moving party isentitled to judgment as a matter of law.” West, 469 Mich at 183. “A genuine issue of material factexists when the record, giving the benefit of reasonable doubt to the opposing party, leaves openan issue upon which reasonable minds might differ.” Id.The interpretation of a contract, such as an insurance policy, is also reviewed de novo.Reed v Reed, 265 Mich App 131, 141; 693 NW2d 825 (2005); see also Meemic Ins Co v Fortson,324 Mich App 467, 481; 922 NW2d 154 (2018) (insurance policies are reviewed under standardprinciples of contractual interpretation), aff’d on other grounds Mich ; NW2d(2020) (Docket No. 158302). “When interpreting a contract, such as an insurance policy, theprimary goal is to honor the intent of the parties.” Fortson, 324 Mich App at 481 (quotation marksand citation omitted).Rescission is “granted only in the sound discretion of the court.” Lenawee Co Bd of Healthv Messerly, 417 Mich 17, 26; 331 NW2d 203 (1982). “The trial court abuses its discretion whenits decision falls outside the range of reasonable and principled outcomes.” Berryman v Mackey,327 Mich App 711, 717; 935 NW2d 94 (2019).III. ANALYSISA. FRAUDULENT MISREPRESENTATION IN THE PROCUREMENT OF THE POLICYProgressive first argues the trial court erred when it concluded that factual issues precludedsummary disposition on the issue of whether Clark committed fraud when submitting herapplication for insurance. We agree.The elements of fraud in connection with an insurance policy are as follows:To establish actionable fraud, [Progressive] bears the burden of proving that (1)[Clark] made a material misrepresentation; (2) it was false; (3) when [Clark] madeit, [she] knew it was false, or else made it recklessly, without any knowledge of itstruth, and as a positive assertion; (4) [she] made it with the intention that it shouldbe acted on by [Progressive]; (5) [Progressive] acted in reliance on it; and (6)[Progressive] thereby suffered injury. [Titan Ins Co v Hyten, 491 Mich 547, 571572; 817 NW2d 562 (2012).]“When there is a question of fact on at least one of the elements, and the insured is not otherwiseentitled to summary disposition, the matter is one for the jury.” Nahshal v Freemont Ins Co, 324Mich App 696, 719; 922 NW2d 662 (2018).-3-
“Rescission is justified in cases of innocent misrepresentation if a party relies upon themisstatement, because otherwise the party responsible for the misstatement would be unjustlyenriched if he were not held accountable for his misrepresentation.” Lash v Allstate Ins Co, 210Mich App 98, 103; 532 NW2d 869 (1995). Thus, even if it is true that Progressive completed theapplication and Clark did not read it, Progressive was still entitled to an order that Clark committedfraud in connection with the application for insurance. See Montgomery v Fidelity & GuarantyLife Ins Co, 269 Mich App 126, 129-130; 713 NW2d 801 (2005) (“Whether it was plaintiff, thedecedent, or the agent who misrepresented the decedent’s tobacco use on the application is notmaterial because plaintiff and the decedent signed the authorization, stating that they had read thequestions and answers in the application and that the information provided was complete, true, andcorrectly recorded.”).The evidence of record in this case is clear that Clark committed fraud in the procurementof the insurance policy at issue. During the first phone call with Progressive’s agent, Clark initiallydisclosed that Webb was not only a member of her household, but that Webb would be the primarydriver of the vehicle. Clark asked the agent to run various coverage scenarios in order to find abetter price to insure the Challenger, and even inquired if transferring the title of the vehicle toWebb’s name only would provide a better insurance rate. Progressive’s agent indicated that theinsurance rate would only drop minimally, because Webb and Clark were members of the samehousehold. After the call ended, the agent forwarded an insurance quote to the e-mail addressClark provided. One week later, Clark again called Progressive and spoke to a second agent,explaining that the quote sent to her via e-mail by the first agent was “way higher” than discussed.At no point during the second phone call did Clark mention anything about Webb living in herhousehold or driving the vehicle, and when Webb spoke to the agent to pay the premium, heidentified himself as a friend.To be clear, we conclude that Progressive is entitled to rescind its policy as it pertained toClark in its entirety: (1) the policy was procured through Clark’s misrepresentation that no oneelse lived in her household, and this misrepresentation was material; (2) the representation wasfalse, as Clark was not the sole member of her household, nor would she be the primary driver ofthe vehicle; (3) Clark knew that she was not the sole member of her household and that she wasnot the sole driver of the vehicle; (4) Clark made the misrepresentation with the intent that shewould obtain insurance, as evidenced by Clark’s signature on the insurance application thatcontained the misrepresentation; (5) Progressive relied on the misrepresentation in issuing theinsurance policy; and (6) Progressive was injured where it would not have ordinarily issued thepolicy according to its underwriting guidelines and for a decreased premium as the actual risk ofproviding the insurance was not fully contemplated. Titan Ins Co, 491 Mich at 555, 571-572.Thus, we conclude that Progressive was entitled to summary disposition in its favor on the issueof whether Clark committed fraud when procuring the policy at issue.B. WEBB AS AN INNOCENT PARTY AND THE BALANCING OF THE EQUITIESNext, Progressive argues the trial court erred when it concluded that Webb was an innocentparty with respect to Clark’s fraud. Progressive asserts that Webb conspired with Clark to defraudProgressive, evidenced by Webb’s statement to the insurance agent that he was Clark’s “friend.”We conclude that a question of fact remains regarding whether Webb participated in the fraudulent-4-
procurement of the insurance policy at issue. Accordingly, the trial court erred by finding Webbwas an innocent party and then proceeding to engage in a balancing of the equities analysis.Under prior caselaw, “[t]he ‘innocent third party’ rule prohibit[ed] an insurer fromrescinding an insurance policy because of a material misrepresentation made in an application forno-fault insurance where there is a claim involving an innocent third party.” Sisk-Rathburn v FarmBureau Gen Ins Co of Mich, 279 Mich App 425, 430; 760 NW2d 878 (2008). Recently, in Bazziv Sentinel Ins Co, 502 Mich 390; 919 NW2d 20 (2018), our Supreme Court addressed the viabilityof the innocent-third-party rule in the context of no-fault law. In Bazzi, the plaintiff, the son of theinsured, brought suit against the defendant insurer for PIP benefits. Bazzi, 502 Mich at 396. Thedefendant obtained a default judgment against the insured rescinding the policy on the basis offraud. Id. The defendant then moved for summary disposition in the trial court with respect to theplaintiff’s claims, which the trial court denied on the basis of the innocent-third-party rule. Id.at 397. This Court reversed, concluding “the innocent-third-party rule did not survive this Court’sdecision in Titan because there was no meaningful distinction between the easily-ascertainablefraud rule and the innocent-third-party rule and because no statute prohibits an insurer from raisinga fraud defense with respect to PIP benefits.” Id. at 397-398.Our Supreme Court agreed with this Court that the innocent-third-party rule was notapplicable. The Court first noted that “[i]n the absence of any applicable statute . . . the rights andlimitations of the coverage are entirely contractual and construed without reference to the statute.”Bazzi, 502 Mich at 399-400. Our Supreme Court also reiterated that in Titan, it held “ ‘an insureris not precluded from availing itself of traditional legal and equitable remedies to avoid liabilityunder an insurance policy on the ground of fraud in the application for insurance, even when thefraud was easily ascertainable and the claimant is a third party.’ ” Id. at 403, quoting Titan, 491Mich at 571. Thus, our Supreme Court conclusively held that Titan abrogated the innocent-thirdparty rule in the context of the no-fault act. Bazzi, 502 Mich at 407.After reviewing the record evidence in this case, we conclude that a question of factremains regarding whether Webb participated in the fraudulent procurement of the insurancepolicy at issue. The evidence is clear that during the first phone call between Clark andProgressive’s agent, Webb spoke directly to Progressive’s agent regarding coverage and the costof the policy. Webb also spoke to Progressive’s agent during the second phone call. However,this time, Webb did not indicate that he would be the primary driver of the vehicle or that he wasa member of Clark’s household. Rather, Webb provided authorization to use his debit card topurchase the policy. Webb provided Progressive’s agent with his address and phone number, andidentified himself as Clark’s “friend.” Thus, a material question of fact remains regarding whetherWebb participated in the fraudulent procurement of the insurance policy. If a trier of fact answersthat question in the affirmative, then Webb cannot be considered an innocent party, and the trialcourt need not engage in any balancing of the equities where Progressive would be entitled torescind coverage to Webb. Indeed, our Supreme Court recently explained that “[a]t common law,the defrauded party could only seek rescission, or avoidance of the transaction, if the fraud relatedto the inducement to or inception of the contract.” Meemic Ins Co v Fortson, Mich ;NW2d (2020) (Docket No. 158302); slip op at 14. Thus, under the no-fault act, an insurermay only deny all coverage under a policy on the basis of fraud if the policy itself was procuredby fraud. Id. at ; slip op at 15-16.-5-
IV. CONCLUSIONWe reverse, vacate the portion of the trial court’s order denying Progressive’s motion forsummary disposition as to Clark, and remand for further proceedings consistent with this opinion.We do not retain jurisdiction./s/ Kathleen Jansen/s/ Deborah A. Servitto/s/ Michael J. Riordan-6-
Webb's name only would provide a better insurance rate. Progressive's agent indicated that the insurance rate would only drop minimally, because Webb and Clark were members of the same household. After the call ended, the agent forwarded an insurance quote to the e-mail address Clark provided.