Westfield Insurance Company v. Brittney Cole ( 2020 )


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  •             If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
    revision until final publication in the Michigan Appeals Reports.
    STATE OF MICHIGAN
    COURT OF APPEALS
    WESTFIELD INSURANCE COMPANY,                                       UNPUBLISHED
    December 3, 2020
    Plaintiff/Counterdefendant-Appellant,
    v                                                                  No. 347713
    Washtenaw Circuit Court
    BRITTNEY COLE, LYLE WILSON, and TAMIKA                             LC No. 17-000648-NF
    WILLIAMS,
    Defendants/Counterplaintiffs/Cross-
    Plaintiffs-Appellees,
    and
    MICHIGAN AUTOMOBILE INSURANCE
    PLACEMENT FACILITY1 and BRANDON
    JAMAL YOUNG,
    Cross-Defendants-Appellees.
    Before: JANSEN, PJ., and FORT HOOD and RONAYNE KRAUSE, JJ.
    PER CURIAM.
    In this first-party no-fault insurance action, plaintiff, Westfield Insurance Company,
    appeals by leave granted2 the trial court’s order granting partial summary disposition pursuant to
    MCR 2.116(C)(10) in its favor against defendants, Brittney Cole, Lyle Wilson, and Tamika
    Williams. We reverse and remand with instruction to the trial court to grant summary disposition
    1
    Modified from Michigan Assigned Claims Plan to Michigan Automobile Insurance Placement
    Facility, pursuant to trial court’s March 2, 2018 order of substitution of parties.
    2
    Westfield Ins Co v Cole, unpublished order of the Court of Appeals, entered July 25, 2019 (Docket
    No. 347713).
    -1-
    to plaintiff in its entirety as it pertains to defendants Cole and Wilson, but to more fully explore a
    balancing of the equities as it pertains to Defendant Williams.
    I. FACTUAL BACKGROUND
    This declaratory action arises out of plaintiff’s rescission of an insurance policy that
    otherwise would have provided coverage for two motor vehicle accidents that occurred on
    April 11, 2017, during which Williams, Cole, and Wilson were injured.
    On April 7, 2017, Cole and Wilson went to the J.P. McKeone Insurance Agency, an
    independent agency not owned or operated by plaintiff, to obtain insurance for a 2006 Dodge
    Charger and a 2007 Ford Crown Victoria. Only Cole was the named insured on the policy. The
    insurance application contained a section titled, “Auto Eligibility Questions.” The box was marked
    next to the statement that “[n]one of the Auto Eligibility Questions are applicable.” The fourth
    statement in the section was: “An insured vehicle is not solely owned by and registered to the
    applicant (other than encumbrances, trusts or leases).” The insurance application also contained a
    declaration from the applicant that the information provided in the application was true:
    APPLICANT’S STATEMENT: I have read the above application and any
    attachments. I declare that the information provided in them is true, complete and
    correct to the best of my knowledge and belief. This information is being offered
    to the company as an inducement to issue the policy for which I am applying.
    The application further included the statement that in “making this application for insurance, it is
    understood that as a part of our underwriting procedures, an investigative consumer report
    containing driving record information may be obtained for each driver in the household.” Cole
    signed the application.
    Cole later asserted that she told the insurance agent that Wilson was to be on the policy,
    that Wilson should also be a covered driver, and that she was not the sole owner of either car.
    Wilson noted that she showed the agent both titles of the vehicles, which demonstrated that Cole
    was not the sole owner of either vehicle. Cole stated that the agent “was supposed to put” Wilson
    on the application, that the agent had asked Cole to return on April 10, 2017, so that he could add
    Wilson as a driver of the vehicle, but that she got in the car accident and was not able to make it
    back.3 In reliance on the representations in the application for insurance, plaintiff issued policy
    number WNP 5520261, providing coverage for both vehicles.
    Three days after obtaining the insurance, Cole loaned her Ford Crown Victoria to Williams,
    who lost control of the vehicle on wet pavement. Wilson was a passenger in the car at the time.
    Upon learning of the crash, Cole drove her Dodge Charger to the scene. She parked on the shoulder
    of the highway. Another driver, Brandon Jamal Young, also hit the wet pavement, lost control of
    his vehicle, and rear-ended the Charger.
    3
    Defendants got into the car accidents on Tuesday, April 11, 2017, one day after Cole testified
    that she was “supposed to” return to the insurance agent to add Wilson to the policy.
    -2-
    In the course of investigating the accidents, plaintiff discovered that Wilson had been living
    with Cole since at least 2011, and was living with her at the time of the accident. Cole testified to
    the same. Cole further admitted that the insurance application was incorrect because it reflected
    that she was the sole owner of the Dodge Charger and the Ford Crown Victoria. Plaintiff obtained
    information from the Michigan Secretary of State’s Office showing that the vehicles were not
    solely owned by or registered to Cole, and that contrary to Cole’s representations in her application
    for insurance, the Crown Victoria was co-owned by Cole with Wilson and the Dodge Charger
    was co-owned by Cole with her mother. Additionally, both Cole and Wilson admitted that,
    although the application did not list Wilson as a driver of either vehicle, he frequently drove both
    vehicles. Plaintiff obtained Wilson’s driving record from the Michigan Secretary of State’s Office,
    which indicated that Wilson’s driving status was listed as “ineligible.”4
    With the above in mind, plaintiff sought declaratory relief in the trial court to rescind the
    insurance agreement. Plaintiff’s Master Underwriter submitted an affidavit stating that, had the
    true facts been known, plaintiff would not have issued the policy:
    That if these facts had been made known to [plaintiff] at the time of the application,
    [plaintiff] would not have issued policy number WNP 5520261, as our underwriting
    guidelines, approved by the State of Michigan, do not permit the insuring of motor
    vehicles owned by and available for the use of individuals who are ineligible to
    possess a Michigan Driver’s License.
    Additionally, plaintiff’s insurance policy included a fraud section allowing plaintiff to void
    coverage under certain circumstances, specifically stating that the “insurance was issued in
    reliance on the information provided in [the] insurance application;” that plaintiff “may void
    coverage under [the] policy if [an applicant] or an insured . . . knowingly concealed or
    misrepresented any material fact or circumstances, or engaged in fraudulent conduct, at the time
    application was made for insurance or at any time during the policy period;” that plaintiff “may
    void [the] policy for fraud or material misrepresentation even after the occurrence of an accident
    or loss[,] . . . mean[ing] that [plaintiff] will not be liable for any claims or damages which would
    otherwise be covered;” and that if plaintiff voided the policy, “it shall be void from its inception
    as if this policy never took place.” Plaintiff moved for summary disposition under MCR
    2.116(C)(10), arguing that no genuine issue of material fact existed regarding its ability to rescind
    the policy based upon the numerous misrepresentations and omissions committed by Cole during
    the application process.
    The trial court granted plaintiff partial summary disposition, concluding that Cole made a
    material misrepresentation in her application because the cars were not solely owned by and
    registered to her, holding as a matter of law that plaintiff would not have issued the policy as to
    the Ford Crown Victoria because it was co-owned by Wilson. The trial court did not conclude the
    same as to the Dodge Charger, however, noting that it could not find as a matter of law that plaintiff
    4
    The report from the Michigan Bureau of Driver and Vehicle Records obtained by plaintiff
    reflected that, as of May 8, 2017, Wilson’s driving status was “ineligible.”
    -3-
    would have refused to insure the Charger. The court therafter ordered reformation of the insurance
    policy to rescind coverage for the Crown Victoria but not for the Charger.
    On appeal, plaintiff contends that the material misrepresentations made in the application
    for insurance rendered the policy voidable in its entirety with respect to Cole and Wilson.
    However, plaintiff concedes that this matter should be remanded for the trial court to determine
    whether rescission of the contract is appropriate as to Williams, who was by all accounts, innocent
    of the misrepresentations made by her codefendants. We agree.
    II. ANALYSIS
    This Court reviews a trial court’s ruling on a motion for summary disposition de novo.
    Zaher v Miotke, 
    300 Mich. App. 132
    , 139; 832 NW2d 266 (2013). “All well-pleaded allegations
    are viewed in the light most favorable to the nonmoving party unless documentary evidence is
    provided that contradicts them.” Hakslouto v Mt Clemens Regional Med Ctr, 
    500 Mich. 304
    , 309;
    901 NW2d 577 (2017). “In reviewing a motion under MCR 2.116(C)(10), this Court considers
    the pleadings, admissions, affidavits, and other relevant documentary evidence of record in the
    light most favorable to the nonmoving party to determine whether any genuine issue of material
    fact exists to warrant a trial.” 
    Zaher, 300 Mich. App. at 139
    (quotation marks and citations omitted).
    This Court also reviews de novo issues involving equitable principles, such as arguments for
    rescission. Kaftan v Kaftan, 
    300 Mich. App. 661
    , 665; 834 NW2d 657 (2013).
    A motion under MCR 2.116(C)(10) tests the factual support of a plaintiff’s claim.
    Summary disposition is appropriate under MCR 2.116(C)(10) if there is no genuine issue regarding
    any material fact and the moving party is entitled to judgment as a matter of law. “A genuine issue
    of material fact exists when the record, giving the benefit of reasonable doubt to the opposing
    party, leaves open an issue upon which reasonable minds might differ.” 
    Zaher, 300 Mich. App. at 139
    (quotation marks and citations omitted). This Court has also held that courts “may not resolve
    factual disputes or determine credibility in ruling on a summary disposition motion.” Burkhardt v
    Bailey, 
    260 Mich. App. 636
    , 646-647; 680 NW2d 453 (2004).
    “[A]n insurer has a reasonable right to expect honesty in the application for insurance . . . .”
    Bazzi v Sentinel Ins Co, 
    502 Mich. 390
    , 407; 919 NW2d 20 (2018), citing Jacobs v Queen Ins Co,
    
    183 Mich. 512
    , 520; 
    150 N.W. 147
    (1914) (noting that “a contract of insurance is one in which the
    utmost good faith is required of the insured”).
    A “representation” in the law of insurance, is an oral or written statement
    by the insured or his authorized agent to the insurer or its authorized agent, made
    prior to the completion of the contract, giving information as to some fact or state
    of facts with respect to the subject of the insurance, which is intended or necessary
    for the purpose of enabling the insurer to determine whether it will accept the risk,
    and at what premium. [Keys v Pace, 
    358 Mich. 74
    , 82; 99 NW2d 547 (1959)
    (quotation marks and citation omitted).]
    A statement in an application for insurance is material if it affects the insurance provider’s
    acceptance of the risk or the hazard assumed by the insurer; said another way, a misrepresentation
    is material if the insurer would have rejected the risk or charged an increased premium and not
    -4-
    have issued the same contract had it been given the correct information. Oade v Jackson Nat’l
    Life Ins Co of Mich, 
    465 Mich. 244
    , 255, 261; 632 NW2d 126 (2001).
    “It is the well-settled law of this state that where an insured makes a material
    misrepresentation in the application for insurance, including no-fault insurance, the insurer is
    entitled to rescind the policy and declare it void ab initio.” Lake States Ins Co v Wilson, 231 Mich
    App 327, 331; 586 NW2d 113 (1998). Rescission is an appropriate remedy when the contract
    would not have been made if the particular circumstance had been expected or contemplated.
    Rosenthal v Triangle Dev Co, 
    261 Mich. 462
    , 463; 
    246 N.W. 182
    (1933). “Rescission is justified
    without regard to the intentional nature of the misrepresentation, as long as it is relied upon by the
    insurer. Reliance may exist when the misrepresentation relates to the insurer’s guidelines for
    determining eligibility for coverage.” Lake States Ins 
    Co, 231 Mich. App. at 331
    .
    Notably, however, our Supreme Court recently reiterated that, “[b]ecause a claim to rescind
    a transaction is equitable in nature, it ‘is not strictly a matter of right,’ but is granted only in ‘the
    sound discretion of the court.’ ” 
    Bazzi, 502 Mich. at 409
    , quoting Amster v Stratton, 
    259 Mich. 683
    ,
    686; 
    244 N.W. 201
    (1932). With specific respect to no-fault insurance policies, “rescission does
    not function by automatic operation of the law.”
    Id. at 411.
    “Fraud in the application for insurance”
    does not “imbue an insurer with an absolute right to rescission of the policy with respect to third
    parties.”
    Id. That is, even
    where an insurance contract is void ab initio as to certain parties on the
    basis of the “fraudulent manner in which it was acquired,” courts should nonetheless consider
    within their discretion whether that contract should also be voided as it pertains to innocent third
    parties. See Bazzi, 411-412. Courts should do so on a case-by-case basis in light of a balancing
    of the equities between the innocent parties.
    Id. at 411.
    An automobile insurer may seek to rescind an automobile insurance policy and declare the
    policy void ab initio if that policy was procured through the insured’s intentional, material
    misrepresentation, i.e., fraud. To demonstrate fraud, the insurer must establish with a reasonable
    degree of certainty: (1) that the insured made a material misrepresentation, (2) that the
    representation was false, (3) that when the insured made the representation he or she knew it was
    false or made it with reckless disregard as to its truth or falsity, (4) that the misrepresentation was
    made with the intent that the insurer would act upon it, (5) that the insurer acted on the
    misrepresentation, and (6) injury was suffered as a result. Titan Ins Co v Hyten, 
    491 Mich. 547
    ,
    571-572; 817 NW2d 562 (2012). Upon rescission, “[i]n effect, the insurance policy is considered
    never to have existed.” 
    Bazzi, 502 Mich. at 408
    .
    First, we conclude that, in keeping with the trial court’s factual determinations, plaintiff
    should have been permitted to rescind its policy as it pertained to Cole and Williams in its entirety.
    The policy was procured through Cole’s material misrepresentation: (1) Cole’s omission ad
    misrepresentation were material; (2) the representations were false, as Cole was not the sole owner
    of either vehicle and Cole testified that she knew Wilson was not on the policy5; (3) Cole knew
    5
    We acknowledge but are not persuaded by Cole’s deposition testimony that she provided the
    vehicles’ titles to the independent agent and told him that Wilson drove the vehicles. Cole
    nevertheless signed the policy acknowledgement that listed her as the sole owner of the vehicles
    -5-
    that she was not the sole owner of the vehicles; (4) Cole made the misrepresentation with the intent
    that she would obtain insurance, as demonstrated by her signing the insurance application that
    contained the statement, “This information is being offered to the company as an inducement to
    issue the policy for which I am applying”; and (5) and (6) plaintiff acted upon the misrepresentation
    to its detriment by providing insurance where it otherwise would not have according to its
    underwriting guidelines and for a decreased premium not contemplating the actual risk of
    providing the insurance. See Titan Ins 
    Co, 491 Mich. at 555
    , 571-572.
    Moreover, the manner in which the trial court elected to only partially rescind the policy
    in this case was erroneous. After it concluded that Cole committed fraud in obtaining the policy,
    the trial court elected to effectively piecemeal the policy on the basis of its finding that there was
    a question of fact as to whether plaintiff would have provided coverage for the Dodge Charger,
    but there was no question of fact regarding whether plaintiff would have provided coverage for the
    Ford Crown Victoria.
    Our Supreme Court has made clear that whether a misrepresentation is material with
    respect to an insurer’s right to rescind a contract is determined with reference to the policy at issue,
    and that it would be an error to focus on whether the insurer would have issued a policy irrespective
    of the misrepresentation. 
    Oade, 465 Mich. at 254
    . Where the undisputed evidence makes clear
    that the misrepresentation “would have led the insurer to charge an increased premium, hence a
    different contract,” “the proper materiality question . . . is whether ‘the’ contract issued, at the
    specific premium rate agreed upon, would have been issued notwithstanding the misrepresented
    facts.”
    Id. Moreover, MCL 257.520(a)
    of the motor vehicle code relevantly provides the definition
    of a motor vehicle liability policy to “mean an owner’s or an operator’s policy of liability
    insurance . . . as proof of financial responsibility, and issued . . . by an insurance carrier duly
    authorized to transact business in this state, to or for the benefit of the person named therein as
    insured.” The “owner’s policy of liability insurance” “[s]hall designate by explicit description or
    by appropriate reference all motor vehicles with respect to which coverage is thereby to be
    granted.” MCL 257.520(b). That is, the motor vehicle code provides that multiple vehicles may
    be covered under one policy.
    Likewise, Cole submitted one application for insurance coverage, paid one premium, and
    was issued one policy, with one policy number, which provided coverage for both of her vehicles.
    The policy specifically stated that it would be rescinded in its entirety if Cole knowingly concealed
    or misrepresented any material fact or circumstance or engaged in fraudulent conduct. Plaintiff
    further asserted that its underwriting guidelines would not have allowed for it to provide the
    insurance coverage to Cole because Wilson did not have a valid driver’s license. And, even if
    and the only insured driver. Further, Cole and Wilson both testified at their depositions that they
    knew Wilson was not a covered driver on the application and that the agent asked them to return
    to the agency to add him, but that they failed to do so. Lastly, an independent agent is deemed to
    be an agent of the insured/policy holder and not the insurer. See Genesee Food Servs v
    Meadowbrook, Inc, 
    279 Mich. App. 649
    ; 760 NW2d 259 (2008). Therefore, the agent was a
    representative of Cole, not plaintiff, and any fault of the agent’s cannot be construed against
    plaintiff.
    -6-
    plaintiff, knowing of the correct state of facts, would have issued a policy with an increased
    premium or issued a policy for coverage only for the Dodge Charger, it would have been a different
    policy. See 
    Oade, 465 Mich. at 254
    . Accordingly, the trial court’s piecemealing of the policy in
    this case was erroneous.
    Lastly, we agree with plaintiff that, to the extent that the trial court’s piecemealing of the
    policy was partially done on the basis of a balancing of the equities as provided in Bazzi, that
    analysis should not have been applied to Cole and Wilson. Cole and Wilson were not innocent
    third parties and defendants and cross-defendant make no argument to the contrary. On the other
    hand, it is undisputed that Williams was an innocent third party in this case, and to that end, we
    conclude that, while the policy should be considered void ab initio as it pertains to Cole and
    Wilson, the trial court should further determine within its discretion whether that same result
    should be equitably applied to Williams. See 
    Bazzi, 502 Mich. at 411-412
    .
    With all of the above in mind, when viewing the allegations in the light most favorable to
    defendants, summary disposition against defendants Cole and Wilson is proper because no genuine
    issue of material fact exists regarding their innocence with respect to the misrepresentations made
    in this case, nor whether plaintiff would have issued the policy in question had it been aware of
    the same. However, the trial court should balance the equities as they pertain to plaintiff and
    Williams, an innocent third party, and determine within its discretion whether plaintiff is entitled
    to rescind the contract as it pertains to Williams. See 
    Bazzi, 502 Mich. at 412
    .
    Reversed and remanded for the trial court to grant summary disposition in favor of plaintiff
    with respect to defendants Cole and Wilson, and to determine whether the same is appropriate with
    respect to defendant Williams on the basis of the equities. We do not retain jurisdiction.
    /s/ Kathleen Jansen
    /s/ Karen M. Fort Hood
    /s/ Amy Ronayne Krause
    -7-
    

Document Info

Docket Number: 347713

Filed Date: 12/3/2020

Precedential Status: Non-Precedential

Modified Date: 12/4/2020