Westfield Insurance Company v. Brittney Cole ( 2020 )

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WESTFIELD INSURANCE COMPANY, UNPUBLISHED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Westfield Ins Co v Cole, unpublished order of the Court of Appeals, entered July 25, 2019 (Docket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-