Therese Root v. Holly Palmer ( 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
THERESE ROOT, UNPUBLISHED
June 29, 2023
Plaintiff-Appellant,
and
BEAUMONT HEALTH,
Intervening Plaintiff,
v No. 361722
Macomb Circuit Court
HOLLY PALMER, LC No. 2021-000976-NI
Defendant,
and
FALLS LAKE NATIONAL INSURANCE
COMPANY,
Defendant-Appellee,
Before: MARKEY, P.J., and JANSEN and K. F. KELLY, JJ.
PER CURIAM.
In this no-fault insurance action, plaintiff, Therese Root, appeals by right the trial court’s
order granting summary disposition in favor of defendant, Falls Lake National Insurance Company
(Falls Lake), under MCR 2.116(C)(10). The trial court determined as a matter of law that Root
made a material misrepresentation in her application for insurance with Falls Lake; therefore, she
was not entitled to any personal protection insurance (PIP) benefits from Falls Lake after she was
injured in a motor-vehicle accident. We affirm.
Root, who had a no-fault policy issued by Falls Lake, was injured in a car crash involving
defendant, Holly Palmer, on April 7, 2020. Intervening plaintiff, Beaumont Health, subsequently
provided medical treatment to Root for her accident-related injuries. Root filed suit against Palmer
and Falls Lake. Pertinent here, she alleged that Falls Lake unreasonably refused to pay PIP benefits
in connection with her injuries sustained in the motor-vehicle accident. Falls Lake denied liability,
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asserting that the insurance policy was void ab initio because in her application for insurance Root
had misrepresented the number of vehicles that she owned or were registered in her name.
Although Falls Lake alleged that Root made additional material misrepresentations in the
insurance application, the trial court ultimately ruled in favor of Falls Lake solely on the basis of
the misrepresentation regarding vehicle ownership or registration by Root, which is the focus of
her appellate argument.
Root owned a Ford Escort, and she was driving the Escort when the accident occurred. In
the insurance application, she only listed the Escort with respect to identifying vehicles registered
in her name or owned by Root. In the application for insurance, Root further and expressly
indicated that she did not own any other insured or uninsured vehicles and that there were no other
insured or uninsured vehicles registered in her name. As part of that particular question, the
application warned:
It is unacceptable to not list all vehicles registered in your name as they may
cause a premium increase or a declination of coverage. The listing of all vehicles
registered in your name is a conditional precedent to binding coverage.
The application also contained the following acknowledgement by the applicant: “I agree that if I
conceal or misrepresent a material fact or circumstance relating to the insurance, the policy shall
be null and void.”
In his deposition, Root’s husband, Douglas Root, testified that he and Root jointly owned
the Escort. Douglas further stated that he owned a Chevy van. Root testified in her deposition
that the van was kept at the couple’s residence. She also indicated that the van was drivable or
operable. Douglas testified to his belief that the van was uninsured at the time of the accident. He
additionally observed that they had the van when Root applied for auto insurance on the Escort.
There was testimony that Douglas had used the van in the past for work, at which time it was
insured; however, he was not using the van during the period when the insurance application was
made and the accident took place because he was not working at the time.
In its brief on appeal, Falls Lake asserts that the van was registered in Root’s name. But
the record citations given by Falls Lake in support of that proposition do not reveal that the van
was registered in Root’s name. We could not locate any documentary evidence in the record
demonstrating that Root was an owner or registrant of the van. At the summary disposition
hearing, counsel for Falls Lake contended that “[a]ccording to the Michigan Secretary of State,
that [van] is owned both by Therese Root and Douglas Root.” Root’s attorney did not challenge
that assertion or voice an objection. Indeed, Root has never challenged Falls Lake’s claim that
Root owned the van or that it was registered in her name at the time she applied for the insurance
policy. And in her brief on appeal, Root actually states that “[i]t is undisputed that Ms. Root owned
the Chevy van.” Accordingly, we proceed on the basis that at the time Root submitted the
application for insurance, she owned the van and/or the van was registered in her name.
Paul Serota, the Vice President of the automobile division of Arrowhead Group, which was
the entity in control of Falls Lake’s underwriting function, explained that Falls Lake required all
vehicles to be listed on an insurance application, whether operable or not. Falls Lake also required
that all of an applicant’s operational vehicles be insured. Serota testified that had Root disclosed
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in the insurance application that she owned the van or that it was registered in her name, the policy
premium would have increased by $845. In an e-mail to Michael Keough, a personal-injury-
protection adjuster, Serota stated that he would not have written the policy for Root had he known
that there was an unlisted vehicle that was owned, registered, or regularly operated by applicant
Root. In the e-mail, Serota also confirmed that adding the operable and uninsured unlisted van to
the policy would have increased the premium by $845. Falls Lake’s Rules Manual for Michigan
provided:
11. All operable motor vehicles registered or owned by the name
insured must be listed on the application.
12. The listing of all operable motor vehicles registered or owned by the
name insured on the application is a condition precedent to binding coverage, and
coverage will not or would not have been bound without the disclosure of operable
motor vehicles registered or owned by the name insured because the non-disclosure
of said vehicle or vehicles constitutes an unacceptable risk.
Falls Lake moved for summary disposition, arguing that Root’s failure to list the van
constituted a material misrepresentation that allowed Falls Lake to rescind the insurance policy,
or, at a minimum, to deny Root’s claim because the policy was procured through fraud. Root
responded by arguing that Falls Lake was obligated to pay the claim because her failure to list the
van was not material. Root reasoned that it was not material because the failure to list the van did
not affect the decision by Falls Lake to insure the Escort—the relevant vehicle. The trial court
granted the motion for summary disposition, ruling that Root’s failure to list the van in the
insurance application was a material misrepresentation because it may have exposed Falls Lake
“to additional responsibility.” The court also ruled that the van was jointly owned by Root and
Douglas and that the premium was affected by Root’s failure to disclose the van.1
On appeal, Root contends that the trial court erred by concluding as a matter of law that
her failure to disclose the van in the insurance application amounted to a material
misrepresentation. Root argues, therefore, that the trial court erred by granting Falls Lake’s motion
for summary disposition.
This Court reviews de novo a trial court’s ruling on a motion for summary disposition. El-
Khalil v Oakwood Healthcare, Inc, 504 Mich 152, 159; 934 NW2d 665 (2019). We also review
de novo the interpretation and application of an insurance contract. Cohen v Auto Club Ins Ass’n,
463 Mich 525, 528; 620 NW2d 840 (2001).2
1
The trial court ruled that there were genuine issues of material fact regarding the other alleged
misrepresentations made by Root.
2
In ascertaining the meaning of a contract, including an insurance contract or policy, this Court
gives the words used in the agreement their plain and ordinary meaning as would be apparent to a
reader of the instrument. Rory v Continental Ins Co, 473 Mich 457, 464; 703 NW2d 23 (2005).
A fundamental tenet of Michigan jurisprudence is that an unambiguous contract is not open to
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MCR 2.116(C)(10) provides that summary disposition is appropriate 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.” A motion brought pursuant to MCR
2.116(C)(10) tests the factual support for a party’s action. Pioneer State Mut Ins Co v Dells, 301
Mich App 368, 377; 836 NW2d 257 (2013). “Affidavits, depositions, admissions, or other
documentary evidence in support of the grounds asserted in the motion are required . . . when
judgment is sought based on subrule (C)(10),” MCR 2.116(G)(3)(b), and such evidence, along
with the pleadings, must be considered by the court when ruling on the (C)(10) motion, MCR
2.116(G)(5). “When a motion under subrule (C)(10) is made and supported . . ., an adverse party
may not rest upon the mere allegations or denials of his or her pleading, but must, by affidavits or
as otherwise provided in this rule, set forth specific facts showing that there is a genuine issue for
trial.” MCR 2.116(G)(4).
“A trial court may grant a motion for summary disposition under MCR 2.116(C)(10) if the
pleadings, affidavits, and other documentary evidence, when viewed in a light most favorable to
the nonmovant, show that there is no genuine issue with respect to any material fact.” Pioneer
State, 301 Mich App at 377. “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). The
trial court is not permitted to assess credibility, weigh the evidence, or resolve factual disputes,
and if material evidence conflicts, it is not appropriate to grant a motion for summary disposition
under MCR 2.116(C)(10). Pioneer State, 301 Mich App at 377. “Like the trial court’s inquiry,
when an appellate court reviews a motion for summary disposition, it makes all legitimate
inferences in favor of the nonmoving party.” Skinner v Square D Co, 445 Mich 153, 162; 516
NW2d 475 (1994). “[S]peculation is insufficient to create an issue of fact.” MEEMIC Ins Co v
DTE Energy Co, 292 Mich App 278, 282; 807 NW2d 407 (2011). A court may only consider
substantively admissible evidence actually proffered by the parties when ruling on the motion.
Maiden v Rozwood, 461 Mich 109, 121; 597 NW2d 817 (1999); see also MCR 2.116(G)(6).
“[A]n insurer is entitled to rescind a policy ab initio on the basis of a material
misrepresentation made in an application for no-fault insurance.” 21st Century Premier Ins Co v
Zufelt, 315 Mich App 437, 445; 889 NW2d 759 (2016). “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.” Id. at 446 (quotation marks and citation omitted). “[I]t is well settled in Michigan
that fraud in the application for an insurance policy may allow the blameless contracting party to
avoid its contractual obligations through the application of traditional legal and equitable
remedies.” Titan Ins Co v Hyten, 491 Mich 547, 570; 817 NW2d 562 (2012). “[U]nder the no-
fault act, an insurer may only deny all coverage under a policy on the basis of fraud if the policy
itself was procured by fraud.” Webb v Progressive Marathon Ins Co, 335 Mich App 503, 513;
judicial construction and must be enforced as written, thereby respecting the freedom of
individuals to arrange their affairs by contract. Id. at 468.
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967 NW2d 841 (2021). To establish actionable fraud with regard to an insurance policy, the
insurer must prove (1) that the insured made a material misrepresentation, (2) that it was false, (3)
that when the insured made it, the insured knew it was false, or else made it recklessly, without
any knowledge of its truth and as a positive assertion, (4) that the insured made it with the intention
that it should be acted on by the insurer, (5) that the insurer acted in reliance on it, and (6) that the
insurer thereby suffered injury. Id. at 508.
The narrow issue in this appeal is whether Root’s misrepresentation was material. “A
misrepresentation on an insurance application is material if, given the correct information, the
insurer would have rejected the risk or charged an increased premium.” Montgomery v Fidelity
& Guaranty Life Ins Co, 269 Mich App 126, 129; 713 NW2d 801 (2005) (emphasis added); see
also Oade v Jackson Nat’l Life Ins Co of Mich, 465 Mich 244, 254; 632 NW2d 126 (2001); Howard
v LM General Ins Co, ___ Mich App ___, ___; ___ NW2d ___ (2023) (Docket No. 357110); slip
op at 7 (“The purpose of permitting rescission of insurance policies where there has been a
misrepresentation is to protect the insurer from having to pay claims that, but for the
misrepresentation, it would not have insured.”).
Root argues on appeal that there was no evidence whatsoever that the premium for the
Escort would have increased had she disclosed the van in the insurance application and then
declined to include the van on the policy. According to Root, Falls Lake only presented evidence
that adding the Chevy van to the policy would have increased the premium. Root similarly
maintains that there was no evidence that Falls Lake would have refused to cover the Escort had
it known about the Chevy van. We conclude that Root’s arguments lack merit because they are
unsupported by the record and the law.
Falls Lake presented uncontroverted documentary evidence that had Root disclosed the
van when filling out the application, either the premium would have increased by $845 or the
application would have been rejected. Under the caselaw, these undisputed facts amount to a
material misrepresentation. Montgomery, 269 Mich App at 129. With respect to Root’s argument,
we first note that her hypothetical is just that—a hypothetical; the fact is that she did not disclose
the van and then decline to include the van on the policy. Furthermore, there was no evidence that
had Root disclosed the van she would have been able to avoid the additional premium by simply
declining to insure the van and solely insuring the Escort. Indeed, Serota specifically testified that
if a car runs or is operable, Falls Lake requires the owner or registrant to insure that particular
vehicle. There was no evidence to the contrary. Root challenges Serota’s credibility on the basis
of what she characterizes as conflicts in his own testimony and conflicts between his testimony
and other documentary evidence.
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The bottom line, however, is that Serota’s testimony, his e-mail to Keough, the internal
operating rules of Falls Lake, and the language in the application itself established as a matter of
law that Falls Lake would have charged a higher premium or denied coverage had Root disclosed
her ownership of the van and that Root could not have simply declined to insure the uninsured van
in an effort to avoid a rejection or an increased premium. Moreover, the insurance application
warned the applicant that listing all registered vehicles was required and constituted a “condition[]
precedent” to binding coverage; in this case, the condition was not satisfied. We thus conclude
that reversal is unwarranted.
We affirm. Having fully prevailed on appeal, Falls Lake may tax costs under MCR 7.219.
/s/ Jane E. Markey
/s/ Kathleen Jansen
/s/ Kirsten Frank Kelly
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