Arelious Reed v. the Auto Club Group ( 2023 )

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
ARELIOUS REED, UNPUBLISHED
June 22, 2023
Plaintiff-Appellant,
v No. 362614
Wayne Circuit Court
THE AUTO CLUB GROUP, LC No. 21-002154-ND
Defendant-Appellee.
Before: REDFORD, P.J., and O’BRIEN and FEENEY, JJ.
PER CURIAM.
In this action seeking insurance coverage for automobile theft, plaintiff Arelious Reed
appeals as of right the order granting summary disposition under MCR 2.116(C)(10) (no genuine
issue of material fact) to defendant The Auto Group Club (Auto Club) on the basis of failure to
disclose the use of the automobile “for hire” as required under the insurance policy . On appeal,
plaintiff argues the trial court erred by (1) declining to enter a default judgment against defendant
as a sanction for an alleged discovery violation, and (2) granting summary disposition to defendant
when plaintiff’s use of his vehicle did not fall under the statutory definition of a commercial
vehicle. We affirm.
I. BACKGROUND FACTS AND PROCEDURAL HISTORY
This case arises from plaintiff’s loss of his 2011 Lincoln Town Car Executive Stretch
Sedan Limousine (the “limousine”), which was insured under Auto Club’s policy of automobile
insurance (the “Policy”). At the time of renewal of the Policy for the period of November 8, 2019
to May 8, 2020, plaintiff declared he would be using the limousine for the following personal
purpose: “Drive to Work/School, 3-9 Miles One Way, Less Than 10,000 Miles Per Year.”
The Policy included permissive comprehensive coverage. The exclusions of this section
of the Policy include: “We will not pay for loss . . . to an insured car while being used to . . . carry
persons or property for compensation or a fee . . . .”
The General Policy Conditions are noted as “applying to all parts of [the] policy.” These
conditions include the following relevant provisions:
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15. DUTY TO REPORT CHANGES
You must promptly report to us all changes, including additions and
deletions, in policy information. Further, you must report to us certain changes no
later than 30 days after the change occurs. These are changes to:
* * *
d. an insured car and how it is used . . . .
If you fail to inform us of these changes within 30 days, we may void
coverage as provided under Condition 21—Concealment, Misrepresentation or
Fraud.
* * *
17. DECLARATIONS
By accepting this policy the principal named insured agrees that:
a. the statements on the Declaration Certificate and in the application for
this policy are his/her own; and
b. this policy is issued in reliance upon the truth of those
representations . . . .
* * *
21. CONCEALMENT, MISREPRESENTATION OR FRAUD
We may void the policy applying to an insured car at any time, including
after the occurrence of an accident or loss, if you or any insured person has
concealed or misrepresented any material fact or circumstance or engaged in
fraudulent conduct relating to:
a. this insurance; or
b. declarations made in applying for, changing or renewing coverage, as
provided under Condition 17—Declarations, including, but not limited to
statements regarding the license and driving history of you; resident relative; all
persons of driving age residing in your household; all persons who regularly operate
an insured car; the description of the cars to be insured; the location of the principal
place of garaging; and your place of residence.
If we void this policy, it will be void from its inception (void ab initio), and
no coverage will be provided. This means that we will not be liable for any claims
or damages.
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We may void this policy or deny coverage for an accident if you or any
insured person have concealed, omitted or misrepresented any material fact or
circumstance, or engaged in fraudulent conduct, in connection with the presentation
or settlement of a claim.
Plaintiff alleges he was carjacked on April 13, 2020. Plaintiff claims, while he was stopped
and looking for something in the vehicle, three men with clown masks approached demanding
money and his car keys. Plaintiff reported the car theft to the police and defendant, stating he gave
the men his keys and they drove away in the limousine.
As part of its investigation, defendant conducted and transcribed a telephone interview with
plaintiff, in the presence of his former attorney. When asked about his use of the limousine,
plaintiff stated:
Q. Okay. Well what are you using the Lincoln Town Car for then?
A. Like weddings and parties.
Q. Okay. So you’re using it for hire?
A. Yeah. I was getting paid cash.
Q. Do you advertise this or?
A. On Craig’s List I had it advertising.
Approximately two weeks later, defendant notified plaintiff it was voiding his coverage
under the Policy, as of November 8, 2019, alleging plaintiff made material misrepresentations.
Defendant stated the following false or misleading information was provided by plaintiff and relied
on by defendant when it issued the Policy and calculated the premium: “The 2011 Lincoln Town
Car is used to drive to & from work 5 days per week.” Defendant stated this characterization of
the use of the limousine, by which plaintiff procured insurance coverage, was contradicted by
plaintiff’s admission he used the car in a commercial capacity to transport passengers for hire.
“Therefore,” defendant stated, “by application of General Condition[s] 15, 17 and 21 of your Car
Policy, the coverage under this policy is rescinded; that is, it is void as of November 8, 2019.”
Defendant refunded the premium paid for November 2019 to May 2020 to plaintiff.
Plaintiff filed a complaint against defendant, listing causes of action under the Michigan
Vehicle Code, MCL 257.1 et seq., and the no-fault act, MCL 500.3101 et seq. Four months later,
plaintiff moved to compel discovery. Within two weeks, defendant sent an e-mail to plaintiff,
instructing: “Please see attached hereto documents [bate[s]-]stamped ‘Defendant ACG 0001’
through ‘Defendant ACG 0058.’ ” A file entitled “Discovery Production–A Reed v ACG.pdf”1
was attached to the e-mail. The trial court granted plaintiff’s motion to compel discovery three
1
Nothing in the lower court file is identified as this document or was identified as such.
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weeks after this e-mail was sent, ordering defendant to “submit the requested discovery within 14
days.”
Defendant moved for summary disposition under MCR 2.116(C)(10), arguing plaintiff
materially misrepresented his use of the limousine, entitling defendant to void the policy.
Defendant also argued, even if it was not entitled to void the Policy, plaintiff’s loss was explicitly
excluded by the language of the Policy because it occurred while the vehicle was being used to
carry persons for a fee.
Plaintiff moved to strike defendant’s motion for summary disposition under MCR 2.115,
arguing because his use of the limousine did not fall within the definition of the use of a
“commercial vehicle” under MCL 257.7 and MCL 257.7a, defendant’s characterization of the
limousine as being used “for hire” was inaccurate. Plaintiff argued he had used the limousine for
“nonbusiness purposes,” but did not dispute the statements he made during the telephone interview
about using the limousine for hire, getting paid cash for this service, and advertising this service.
Plaintiff also argued an application for insurance is not part of an insurance agreement. In addition
to requesting the trial court “strike” defendant’s motion for summary disposition, plaintiff
requested the trial court “strike” the transcript of the telephone interview, which had been
submitted to the trial court for the first time as Exhibit 4 to defendant’s motion for summary
disposition. Plaintiff argued the transcript should be struck:
for disqualification, because the Plaintiff deposition was taken by one of the
Defendant’s AUTO CLUB REP., for servicing their own commercial dealings on
financially [sic] interested in the action pursuant to MCR 2.304 (C)(3) Persons
Before Whom Depositions May Be Taken.
. . . Furthermore, Plaintiff . . . is requesting that his deposition that was taking by
[sic] the Defendant’s AUTO CLUB REP., be waived and be Strike [sic] down for
effect of errors or irregularities in depositions on behalf of its harmless error
pursuant to MCR 2.308(A)(C) and MCR 2.308 (C)(3),(d)(4)(5) Use of Depositions
in Court Proceedings.
Defendant argued plaintiff’s motion to strike should be denied because MCR 2.115(B)
applies to pleadings and not to dispositive motions. Defendant also argued plaintiff’s contention
regarding the definition of a “commercial vehicle” under MCL 257.7 was immaterial to
defendant’s argument for summary disposition.
In reply, plaintiff argued defendant failed to tender its “Exhibit 4” within 14 days of the
trial court’s order granting plaintiff’s motion to compel discovery. Although plaintiff did not
explain what he meant by “Exhibit 4,” it appears he was referring to Exhibit 4 to defendant’s
motion for summary disposition—the transcript of the telephone interview. Plaintiff maintained
the discovery produced by defendant did not include this transcript. Plaintiff argued defendant
must provide the transcript because MCR 2.302 required production of oral and written statements
“in their possession, custody, or control,” which may be used “to support its claims or defenses.”
Because defendant did not tender the transcript before the deadline set by the order compelling
discovery, plaintiff requested the trial court “award Plaintiff full sanctions in the amount of
$1,000,000.00 against the Defendant.”
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The trial court issued an opinion and order granting defendant’s motion for summary
disposition. The trial court stated because the dispute concerned permissive automobile insurance
coverage and not coverage mandated by the no-fault act, “the contractual language and not public
policy controls.” The trial court found:
The policy language is clear on the point of declaring business uses (as they
increase risk and therefore the premium), and the language of coverage, of
exclusions, and of the right to void the agreement for things like misrepresentation
are all consistent.
* * *
[T]he Court has not identified any ambiguity or inconsistency in the policy
language, nor has Plaintiff argued in this vein.
Addressing plaintiff’s argument regarding the MCL 257.7 definition of a “commercial vehicle,”
the trial court reasoned “[u]se of the Vehicle Code is inapposite . . . because its purpose is to define
how motor vehicles are categorized for purposes of registration, licensing, titling, transfer and
regulation and does not in any way involve issues of insurance.” The trial court found, under the
Policy, the duty to disclose any change in the vehicle’s use was “a blanket requirement of
disclosure and is not related to how a vehicle was being used at the time of the loss in question,”
and because the Policy language was an unambiguous allocation of risk, it was irrelevant if plaintiff
failed to comprehend this duty to disclose. Ultimately, the trial court found plaintiff had not met
his burden of establishing there remained a genuine issue of material fact whether defendant was
entitled to void the Policy.
The trial court succinctly denied plaintiff’s motion to strike simply stating it did not “find
any failure to comply with the court rules on the pleadings or pleadings that include ‘redundant,
immaterial, impertinent, scandalous, or indecent matter.’ ” The trial court did not address
plaintiff’s specific arguments concerning striking “Exhibit 4,” or his request for sanctions for a
discovery violation concerning the failure to timely deliver this transcript.
Plaintiff moved for rehearing or reconsideration, arguing the trial court committed palpable
error in granting summary disposition without granting plaintiff leave to amend his pleadings,
although plaintiff had not made a prior motion to amend. Plaintiff also reasserted the interview
transcript had not been delivered within 14 days of the order to compel, and argued this omission
prejudiced plaintiff and required leave for plaintiff to amend a pleading. Plaintiff asked for relief
from judgment under MCR 2.612, and a default judgment against plaintiff for failure to comply
with the order to compel discovery.
The trial court denied plaintiff’s motion for reconsideration, finding no palpable error. In
doing so, the trial court found plaintiff’s argument for a discovery sanction regarding the interview
transcript failed because the transcript was publicly available in defendant’s filing of its motion
for summary disposition, and plaintiff is presumed to know his own statements. This appeal
followed.
II. DEFAULT JUDGMENT
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Generally, any error raised on appeal must be that of the trial court; it cannot be an error
“to which the aggrieved appellant has contributed by planned or neglectful omission of action on
his part.” Smith v Musgrove, 372 Mich 329, 337; 125 NW2d 869 (1964). To preserve an issue for
appeal, “a party need only bring the issue to the [trial] court’s attention—whether orally or in a
brief or both.” Glasker-Davis v Auvenshine, 333 Mich App 222, 228; 964 NW2d 809 (2020).
“Where an issue is first presented in a motion for reconsideration, it is not properly
preserved.” Vushaj v Farm Bureau Gen Ins Co of Mich, 284 Mich App 513, 519; 773 NW2d 758(2009). Plaintiff did not argue for default judgment or that he was prejudiced by the alleged delay
in the delivery of the interview transcript until he moved for reconsideration. Because this issue
was not presented in the trial court when the motion for summary disposition was decided,
plaintiff’s contentions that he was prejudiced by the alleged discovery violation and the violation
called for default judgment are unpreserved. Schroeder v HHS (In re Estate of Norbert), 335 Mich
App 107, 119; 966 NW2d 209 (2020) (“[W]hen an issue is first raised in a motion for
reconsideration, it is not properly preserved.”). Accordingly, we decline to address this issue.
III. SUMMARY DISPOSITION
A. STANDARD OF REVIEW
“The interpretation of a contract is a question of law reviewed de novo on appeal.” Lueck
v Lueck, 328 Mich App 399, 404; 937 NW2d 729 (2019) (quotation marks and citations omitted).
We review summary disposition rulings de novo. Grossman v Brown, 470 Mich 593, 598; 685
NW2d 198 (2004). This Court reviews a motion for summary disposition on appeal in the same
way the trial court was obligated to review it. See Bronson Methodist Hosp v Auto-Owners Ins
Co, 295 Mich App 431, 440; 814 NW2d 670 (2012).
Summary disposition under MCR 2.116(C)(10) is warranted when “[e]xcept as to the
amount of damages, there is no genuine issue as to any material fact, and the moving party is
entitled to judgment or partial judgment as a matter of law.” MCR 2.116(C)(10). When moving
under MCR 2.116(C)(10), the moving party has the initial burden to identify “the issues as to
which the moving party believes there is no genuine issue as to any material fact.” MCR
2.116(G)(4); see also Lowrey v LMPS & LMPJ, Inc, 500 Mich 1, 8-9; 890 NW2d 344 (2016). If
the moving party properly asserts and supports his or her motion for summary disposition, the
“burden then shifts to the opposing party to establish that a genuine issue of disputed fact exists,”
and they cannot do this by relying on mere allegations or denials in their pleadings. Quinto v Cross
& Peters Co, 451 Mich 358, 362; 547 NW2d 314 (1996). “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.” West v Gen Motors Corp, 469 Mich 177, 183; 665
NW2d 468 (2003); see also Allison v AEW Capital Mgmt, LLP, 481 Mich 419, 425; 751 NW2d 8(2008).
A motion for summary disposition under MCR 2.116(C)(10) tests the factual support for a
claim. Maiden v Rozwood, 461 Mich 109, 120; 597 NW2d 817 (1999). In considering a motion
for summary disposition, the court need only consider the evidence identified by the parties. See
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Barnard Mfg Co v Gates Performance Engineering, Inc, 285 Mich App 362, 377; 775 NW2d 618(2009). The court must consider the pleadings, affidavits, depositions, admissions, and other
documentary evidence submitted in the light most favorable to the nonmoving party, MCR
2.116(G)(5); Joseph v Auto Club Ins Ass’n, 491 Mich 200, 206; 815 NW2d 412 (2012), and must
draw all reasonable inferences in favor of the nonmoving party, Dextrom v Wexford County, 287
Mich App 406, 415-416; 789 NW2d 211 (2010). The trial court may not make findings of fact or
weigh credibility in deciding a motion for summary disposition, Patrick v Turkelson, 322 Mich
App 595, 605; 913 NW2d 369 (2018), and is limited to the evidence presented to the trial court at
the time the motion was decided, Innovative Adult Foster Care, Inc v Ragin, 285 Mich App 466,
475-476; 776 NW2d 398 (2009).
B. ANALYSIS
The trial court did not err in granting defendant summary disposition because the terms of
the Policy unambiguously give defendant the ability to void the agreement in the event of a
material misrepresentation, such as misstating or misrepresenting the use of the vehicle. Nor, in
light of plaintiff’s admission, is there any genuine issue of material fact that such misstatement or
misrepresentation occurred.
MCL 257.7 of the Michigan Vehicle Code states:
“Commercial vehicle” includes all motor vehicles used for the
transportation of passengers for hire, or constructed or used for transportation of
goods, wares, or merchandise, and all motor vehicles designed and used for drawing
other vehicles that are not constructed to carry a load independently or any part of
the weight of a vehicle or load being drawn. Commercial vehicle does not include
a limousine operated by a limousine driver, a taxicab operated by a taxicab driver,
or a personal vehicle operated by a transportation network company driver. [MCL
257.7.]
Plaintiff contends this statutory definition excludes a limousine from the category of a “for hire”
automobile under the Policy. But comprehensive property loss automobile insurance coverage is
not mandated by statute; it is permissive coverage only. See MEEMIC Ins Co v Mich Millers Mut
Ins, 313 Mich App 94, 99; 880 NW2d 327 (2015) (stating the no-fault act mandates only coverage
for personal protection insurance, property protection insurance, and residual liability insurance
under MCL 500.3101(1)). Permissive coverage is governed by the terms of the insurance policy,
and therefore, governed by contract law. Meemic Ins Co v Fortson, 506 Mich 287, 297-298; 954
NW2d 115 (2020); Mate v Wolverine Mut Ins Co, 233 Mich App 14, 19; 592 NW2d 379 (1998).
The terms of the policy include the policy’s declarations sheet. Royal Prop Group, LLC v Prime
Ins Syndicate, Inc, 267 Mich App 708, 715; 706 NW2d 426 (2005).
“Insurance policies are contracts and . . . are subject to the same contract construction
principles that apply to any other species of contract.” Titan Ins Co v Hyten, 491 Mich 547, 554;
817 NW2d 562 (2012) (quotation marks and citation omitted). “[T]he primary goal of contract
interpretation is to ascertain and effectuate the intent of the contracting parties. The law presumes
that the contracting parties’ intent is embodied in the actual words used in the contract itself.” City
of Grosse Pointe Park v Mich Municipal Liability & Property Pool, 473 Mich 188, 218-219; 702
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NW2d 106 (2005). Courts give contractual language its plain and ordinary meaning unless
otherwise defined. English v Blue Cross Blue Shield of Michigan, 263 Mich App 449, 471; 688
NW2d 523 (2004). Courts also construe contracts so as to give reasonable meaning to all of their
provisions. MSI Construction Managers, Inc v Corvo Iron Works, Inc, 208 Mich App 340, 343;
527 NW2d 79 (1995). But “[i]f two provisions of the same contract irreconcilably conflict with
each other, the language of the contract is ambiguous.” Kendzierski v Macomb County, 503 Mich
296, 311; 931 NW2d 604 (2019) (quotation marks and citation omitted). “Where a written contract
is ambiguous, a factual question is presented as to the meaning of its provisions, requiring a factual
determination as to the intent of the parties in entering the contract.” Klapp v United Ins Group
Agency, Inc, 468 Mich 459, 469; 663 NW2d 447 (2003) (quotation marks and citations omitted).
Plaintiff alleges defendant breached the Policy by refusing to honor the comprehensive
property loss coverage. To prove a claim of breach of contract, a party must establish: “(1) there
was a contract, (2) the other party breached the contract, and (3) the breach resulted in damages to
the party claiming breach.” Bank of America, NA v First America Title Ins Co, 499 Mich 74, 100;
878 NW2d 816 (2016). Moreover, a person is presumed to read and understand the contract they
entered into, see Farm Bureau Mut Ins Co of Mich v Nikkel, 460 Mich 558, 567-568; 596 NW2d
915 (1999), and “[a] court must not hold an insurance company liable for a risk that it did not
assume,” Henderson v State Farm Fire & Cas Co, 460 Mich 348, 354; 596 NW2d 190 (1999); see
also Meemic Ins Co, 506 Mich at 297-298.
Under contract law an insurer may invoke common-law defenses such as fraudulent
misrepresentation to avoid enforcement of a policy. See Titan Ins Co, 491 Mich at 554-555, 564.
Further, an insurer may invoke a common-law equitable remedy to rescind a policy, declaring it
void ab initio, if the insured intentionally concealed or misrepresented a material fact relating to
his coverage. Auto-Owners Ins Co v Harrington, 455 Mich 377, 382; 565 NW2d 839 (1997); Lash
v Allstate Ins Co, 210 Mich App 98, 103; 532 NW2d 869 (1995). Rescission abrogates the contract
and restores the parties to their relative positions had the contract never been made. See Wall v
Zynda, 283 Mich 260, 264-265; 278 NW 66 (1938). “[A] fact or representation in an application
is material where communication of it would have had the effect of substantially increasing the
chances of loss insured against so as to bring about a rejection of the risk or the charging of an
increased premium.” Oade v Jackson Nat’l Life Ins Co of Mich, 465 Mich 244, 253-254; 632
NW2d 126 (2001) (quotation marks and citation omitted).
Turning to the terms of the Policy, the conditions of the contract state: “By accepting this
policy the principal named insured agrees that . . . the statements on the Declaration Certificate
and in the application for this policy are his/her own; and . . . this policy is issued in reliance upon
the truth of those representations . . . .” The Declaration Certificate for the coverage period
encompassing the date of the theft stated the limousine was being used to “Drive to Work/School,
3-9 Miles One Way.” The Policy conditions require plaintiff to “report . . . certain changes no
later than 30 days after the change occurs,” including how an insured car is used. Most
importantly, the conditions of the Policy, explicitly state: “We may void the policy applying to an
insured car at any time, including after the occurrence of an accident or loss, if you or any insured
person has concealed or misrepresented any material fact or circumstance,” or if the insured person
fails to report certain changes, including the use of the car, within 30 days. This condition goes
on to specify: “If we void this policy, it will be void from its inception (void ab initio), and no
coverage will be provided.”
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During a telephone interview, plaintiff stated he used the limousine for “weddings and
parties” for hire, “getting paid cash,” and nowhere in the trial court record, or in his brief on appeal,
does he dispute this transcription or that he was using the limousine in this way. Additionally,
the exclusions listed in the Policy section concerning comprehensive property loss coverage state:
“We will not pay for loss . . . to an insured car while being used to . . . carry persons or property
for compensation or a fee . . . .”
Recall, a “representation . . . is material where communication of it would have had the
effect of substantially increasing the chances of loss insured against . . . .” Oade, 465 Mich at 253-
254. In issuing the policy, defendant relied upon plaintiff’s statements in the Declaration
Certificate that he was not using an insured vehicle for hire, as evidenced by the policy exclusion
of coverage when the vehicle is being used to “carry persons…for compensation on a fee”; and
the policy acknowledged this reliance (“By accepting this policy the principal named insured
agrees that . . . this policy is issued in reliance upon the truth of [the] representations [made in the
Declaration Certificate and in the application for the Policy] . . . .”). Thus, plaintiff’s declaration
that the limousine was only going to be used to travel to work or school, 3 to 9 miles one way,
when it was actually going to be used for hire, was a material misrepresentation.
Under both the terms of the Policy, and under common law, defendant was entitled to
rescind the Policy, declaring it void ab initio, because of this misrepresentation, Auto-Owners Ins
Co, 455 Mich at 382, avoiding the unacceptable alternative of holding defendant liable for a risk
it explicitly did not assume, Henderson, 460 Mich at 354. Thus, plaintiff’s claim that defendant
breached the policy must fail because, on rescission, the contract is abrogated and the parties are
restored to their pre-agreement position. Wall, 283 Mich at 264-265. There is no remaining
question of whether defendant breached, because there is no contract left to enforce. Bank of
America, NA, 499 Mich at 100. Accordingly, the trial court properly found that no genuine issue
of material fact existed and defendant was entitled to summery disposition pursuant to MCR
2.116(C)(10). Maiden, 461 Mich at 120.
IV. CONCLUSION
Affirmed. Defendant may tax costs.
/s/ James Robert Redford
/s/ Colleen A. O’Brien
/s/ Kathleen A. Feeney
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