Farm Bureau Gen. Ins. Co. of Mich. v. ACE Am. Ins. Co.

• Decision Date: 29 April 2021
• Docket Number: 352753
• Citation: 337 Mich.App. 88,972 N.W.2d 325
• Parties: FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN, Plaintiff/Counterdefendant-Appellant, v. ACE AMERICAN INSURANCE COMPANY, Defendant/Cross-Defendant-Appellee, and Mark Rueckert and Maryan Petoskey, Defendants, and Robynn Rueckert, Defendant/Counterplaintiff/Cross-Plaintiff, and Bristol West Preferred Insurance Company, Defendant.
• Court: Court of Appeal of Michigan — District of US

337 Mich.App. 88

972 N.W.2d 325

FARM BUREAU GENERAL INSURANCE COMPANY OF MICHIGAN, Plaintiff/Counterdefendant-Appellant,

v.ACE AMERICAN INSURANCE COMPANY, Defendant/Cross-Defendant-Appellee,andMark Rueckert and Maryan Petoskey, Defendants,

and

Robynn Rueckert, Defendant/Counterplaintiff/Cross-Plaintiff,

and

Bristol West Preferred Insurance Company, Defendant.

No. 352753

Court of Appeals of Michigan.

Submitted April 6, 2021, at Grand Rapids.

Decided April 29, 2021, 9:05 a.m.

Willingham & Coté, PC, East Lansing (by Curtis Hadley and John A. Yeager ) for Farm Bureau General Insurance Company of Michigan.

Plunkett Cooney, Bloomfield Hills (by Robert G. Kamenec and Josephine A. DeLorenzo ) for ACE American Insurance Company

Before: Shapiro, P.J., and Cavanagh and Redford, JJ.

Shapiro, P.J.

In this insurer-priority dispute, plaintiff Farm Bureau General Insurance Company of Michigan (Farm Bureau) appeals by right the trial court's opinion and order denying Farm Bureau's request for equitable rescission as to third party Robynn Rueckert following an evidentiary hearing. For the reasons stated in this opinion, we affirm.

I. BACKGROUND

This case concerns a no-fault policy that Mark Rueckert and his step-daughter Maryan Petoskey procured from Farm Bureau. Robynn is Mark's wife and Maryan's mother; all three lived together when the policy was obtained. On February 25, 2013, Mark and Maryan went to the Farm Bureau office near their home to purchase a no-fault policy for a 1996 Dodge Ram van that they jointly own. Jeffrey Brandt was the Farm Bureau insurance agent at the office. Both Mark and Maryan testified that Robynn was present, and Brandt, testifying years later, could not recall if she was.¹ Brandt's main recollection was that Mark and Maryan were adamant that they would be the only drivers of the vehicle.²

Mark and Maryan were required to complete an insurance application for Farm Bureau and a membership application for Farm Bureau's parent company, Michigan Farm Bureau. Either Brandt or his assistant read the questions to Mark and Maryan and then recorded their verbal answers. The membership application was completed in Mark's name. Under "spouse information," Robynn's name is listed, along with her date of birth and partial Social Security number. On the insurance application, only Mark and Maryan are listed as owners or drivers of the vehicle. The next section, which directed the applicants to "[l]ist all vehicle owners, residents of household, and/or separated spouse not listed above,"³ was left blank. Mark's marital status is listed as "M." The application also contained a list of eligibility questions. Three questions are relevant to this case. Question 1 asks, "Do all drivers have a valid Michigan driver license?" The applicants answered affirmatively. Question 9 asks if any driver within the last 36 months has been convicted of "[o]perating a motor vehicle under the influence or while impaired by liquor or controlled substance, whether or not causing serious injury or death?"⁴ The applicants answered negatively. Question 13 asks, "Has the Applicant or a member of the Applicant's household driven or moved any vehicle owned by the Applicant which has NOT had the required insurance in force for the preceding six months?" The applicants answered negatively and listed Bristol West Preferred Insurance Company (Bristol West) as the previous insurer, providing the policy number and an expiration date of May 2, 2013. Mark provided a certificate of insurance for the Bristol West policy showing that the policy covered a 2006 Chevrolet Trailblazer LMT.

The first premium payment was made at the time of application, and the application was preapproved by Farm Bureau on March 4, 2013. Larry Clark was the Farm Bureau underwriter who reviewed Mark and Maryan's application. Clark determined that the application contained incomplete or inaccurate information. Specifically, the application indicated that Mark was married but did not contain his spouse's name or other required information. There was also inconsistent address information pertaining to Maryan. On March 22, 2013, Clark sent an e-mail to Brandt asking for information about Mark's wife and Maryan's address. After Brandt did not respond for a week, Clark decided to cancel the policy. On April 22, 2013, Farm Bureau sent Mark a letter informing him that the policy was being canceled because of an incomplete or inaccurate application and that his coverage would end on May 25, 2013.

On May 22, 2013, three days before the cancellation date, Robynn was severely injured as a pedestrian when she was struck by a garbage truck at 4:20 a.m. The truck was making a left-hand turn and hit Robynn while she was in the crosswalk when the "walk" sign was on. Robynn suffered traumatic brain injuries

resulting in permanent cognitive deficits. The garbage truck was insured by defendant ACE American Insurance Company (ACE). The 1996 Dodge Ram was not involved in the accident.

Farm Bureau was made aware of Robynn's claim for benefits under the policy when it received a bill from her hospital on June 21, 2013. Kurt Simon, a special investigator for Farm Bureau, investigated Robynn's claim. After his investigation, Simon informed Mark and Maryan in a letter dated October 22, 2013, that their policy was being rescinded and declared null and void from its inception date for material misrepresentations in the application. Simon detailed the findings of his investigation, including that Robynn was Mark's wife; that she resided at his home; and that Robynn's driving record contained multiple convictions for operating under the influence of liquor or while intoxicated. Simon also determined that the Bristol West policy relating to the Chevrolet Trailblazer listed on Mark and Maryan's February 25, 2013 application had been rescinded in November 2012 and that Robynn had been driving the uninsured vehicle on February 18, 2013, when she received a citation for driving with a suspended license. Simon concluded that the insurance application contained material misrepresentations because Robynn should have been disclosed as a driver of the insured vehicle and because Eligibility Questions 1, 9, and 13 were answered incorrectly.

In November 2013, Farm Bureau filed a two-count complaint seeking rescission of the policy and a declaratory judgment that ACE was first in priority to pay Robynn's claim of no-fault benefits. In October 2014, Farm Bureau moved for summary disposition under MCR 2.116(C)(10) (no genuine issue of material fact). Farm Bureau argued that there were material misrepresentations in the application for insurance and therefore it properly rescinded the policy pursuant to the antifraud clause. The trial court denied summary disposition to Farm Bureau and granted summary disposition to ACE on the ground that Farm Bureau's decision to cancel the policy prevented it from later rescinding the policy.

On appeal, this Court reversed, reasoning that "the insurer cannot be estopped from [rescinding the policy] on the basis of facts of which the insurer was actually unaware, even if those facts could have been easily ascertained." Farm Bureau Gen. Ins. Co. of Mich. v. ACE American Ins. Co. , unpublished per curiam opinion of the Court of Appeals, issued January 19, 2017 (Docket No. 329585) (Farm Bureau I ), p. 2., 2017 WL 242750 The panel also rejected ACE's argument that Farm Bureau could not rescind the policy as to Robynn, an innocent third party, because the innocent-third-party doctrine was no longer viable in Michigan. Id. at 3. The panel concluded that there was "room for disagreement whether Robynn could or should be considered a ‘driver’ within the meaning of the policy application" but noted that Eligibility Question 13 pertained to "any other member of the household," which Robynn indisputably was. Id. at 4. The panel also noted that ACE made a persuasive argument that Mark and Maryan did not engage in intentional fraud, but the panel concluded that Farm Bureau could seek rescission on the basis of an innocent misrepresentation. Id. In sum, the panel concluded that there was no genuine question of fact that Mark and Maryan made a material misrepresentation that entitled Farm Bureau to rescind the policy. Accordingly, the panel reversed the trial court's order granting summary disposition to ACE and remanded for entry of summary disposition in Farm Bureau's favor. Id. at 5.

ACE applied for leave to appeal in the Michigan Supreme Court. On July 18, 2018, the Supreme Court decided Bazzi v. Sentinel Ins. Co. , 502 Mich. 390, 396, 919 N.W.2d 20 (2018), in which it held that Titan Ins. Co. v. Hyten , 491 Mich. 547, 562-571, 817 N.W.2d 562 (2012), abrogated the innocent-third-party rule. However, the Court clarified that rescission was an equitable remedy and that insurers did not have an "automatic" right to rescind an insurance policy with respect to third parties. Bazzi , 502 Mich. at 411, 919 N.W.2d 20. Following Bazzi , in lieu of granting leave to appeal in this case, the Supreme Court vacated the Court of Appeals opinion "only to the extent it held that Farm Bureau was automatically entitled to rescission as a matter of law" and remanded the case to the trial court "to determine whether rescission is available as an equitable remedy as between Farm Bureau and Robynn Rueckert." Farm Bureau Gen. Ins. Co. of Mich. v. ACE American Ins. Co. , 503 Mich. 903, 903, 919 N.W.2d 394 (2018) ( Farm Bureau II ). The Court denied leave in all other respects. In a concurring statement, Justice MARKMAN identified five nonexclusive factors for trial courts to consider in "innocent-third party cases" to determine whether rescission would be equitable. Id. at 906-907, 919 N.W.2d 394 ( MARKMAN , C.J., concurring).

On remand, Farm Bureau and ACE engaged in additional discovery before filing competing motions for summary disposition under MCR 2.116(C)(10), with each party arguing that it was entitled to summary...