Johnson v. USA Underwriters

• Decision Date: 14 May 2019
• Docket Number: No. 340323,340323
• Citation: 328 Mich.App. 223,936 N.W.2d 834
• Parties: Niles JOHNSON, Plaintiff, v. USA UNDERWRITERS, Defendant/Cross-Defendant-Appellant, and Courtney Eisemann and Steven Vandeinse, Defendants, and Citizens Insurance Company of America, Defendant/Cross-Plaintiff/Appellee.
• Court: Court of Appeal of Michigan — District of US

328 Mich.App. 223

936 N.W.2d 834

Niles JOHNSON, Plaintiff,

v. USA UNDERWRITERS, Defendant/Cross-Defendant-Appellant,andCourtney Eisemann and Steven Vandeinse, Defendants,andCitizens Insurance Company of America, Defendant/Cross-Plaintiff/Appellee.

No. 340323

Court of Appeals of Michigan.

Submitted October 9, 2018, at Lansing.

Decided May 14, 2019, 9:25 a.m.

Varnum LLP, Novi (by Bradley S. Defoe ) for USA Underwriters.

Conlin, McKenney & Philbrick, PC (by Erik Duenas and Joy M. Glovick, Ann Arbor) for Citizens Insurance Company of America.

Before: Beckering, P.J., and Riordan and Cameron, JJ.

Cameron, J.

Defendant/cross-defendant, USA Underwriters, appeals the trial court’s orders (1) denying USA’s motion for summary disposition, (2) granting the motion for summary disposition filed by defendant/cross-plaintiff, Citizens Insurance Company of America, on its cross-claim against USA, (3) granting Citizens’ motion for entry of judgment, and (4) granting Citizens’ motion for attorney fees. We reverse the trial court’s orders and remand this case for proceedings consistent with this opinion.¹

I. FACTUAL AND PROCEDURAL BACKGROUND

In June 2015, defendant Steven Vandeinse purchased a 2011 Chevy Impala from a used-car dealership in Ypsilanti. Before the dealership would finalize the sale, Vandeinse was required to obtain automobile insurance. Vandeinse went to a nearby L.A. Insurance agency and asked the insurance agent, Jennifer Essak, for a policy to cover the Impala. According to Vandeinse, he asked her for a "full coverage policy." Vandeinse left the agency with a USA insurance policy that provided collision and comprehensive insurance coverages only. The insurance agent, however, stated in an affidavit she provided during discovery that she had "explained to [Vandeinse] the difference between no-fault coverage and collision and comprehensive coverage and offered to assist him with obtaining both." Sometimes, "it was less expensive for the customer to obtain no-fault coverage from one carrier and then collision and comprehensive coverage through [USA]." She further asserted that Vandeinse "declined my offer to assist him with obtaining no-fault coverage, and asked only for collision and comprehensive coverage through [USA]."

The application for automobile insurance that Vandeinse completed was entitled "Application for Physical Damage Insurance Economy Program" through USA. The declarations section of the application stated: "This application is for Auto Physical Damage Insurance only. It does not provide bodily injury, property damage or any other Michigan statutory No-Fault coverages." Additionally, Vandeinse initialed a provision in the application that stated: "PHYSICAL DAMAGE ONLY . This insurance is physical damage only coverage and does not meet the requirements of the Michigan No-fault Act, Chapter 31 of the Michigan Insurance Code." After obtaining the collision and comprehensive insurance policy, Vandeinse purchased the Impala from the dealership using a certificate of insurance that USA provided. Like the insurance application, the certificate of insurance² stated, "This insurance is physical damage only, coverage does not meet the requirements of the Michigan No-fault Act, Chapter 31 of the Michigan Insurance Code." At the hearing on Citizens’ motion for summary disposition, an attorney for plaintiff Niles Johnson asserted that the certificate "looks like a regular no-fault certificate ... that you would take to the Secretary of State to get your tabs renewed." The Michigan Secretary of State apparently accepted this certificate and registered the Impala with the state of Michigan.

On September 8, 2015, defendant Courtney Eisemann drove the Impala. As Eisemann exited a parking lot, she struck Johnson, who was riding his bicycle on the sidewalk. Johnson sustained injuries and was transported to the hospital. On February 29, 2016, Johnson filed a complaint against Eisemann, Vandeinse, and the Michigan Automobile Insurance Placement Facility (the Facility). The parties eventually stipulated to adding USA as a defendant to the first amended complaint, to substitute Citizens for the Facility as a defendant, and to dismiss the Facility. Citizens moved for summary disposition under MCR 2.116(C)(10), seeking dismissal from the lawsuit because Vandeinse had a no-fault policy through USA, and therefore, Johnson was ineligible for any benefits through the Facility. USA moved for summary disposition under MCR 2.116(C)(8), claiming that USA’s insurance policy did not include mandatory no-fault coverage. The trial court ultimately held that USA’s practice of selling automobile insurance with certificates of insurance but without mandatory no-fault coverages amounted to "an intent to defraud," and it denied USA’s motion for summary disposition. The trial court signaled to the parties that it would wait to rule on any claims to reform the policy until the issue "ripen[ed]."

Citizens filed a cross-claim against USA seeking reformation of Vandeinse’s insurance contract with USA to include mandatory no-fault coverages as a matter of law and public policy. USA answered. Citizens then moved for summary disposition against USA under MCR 2.116(C)(10). According to Citizens, issuing an insurance policy with only optional coverages was a violation of MCL 500.3101(1) and against the public policy of the state to ensure that all drivers have mandatory no-fault coverage. Moreover, Citizens argued that USA and the insurance agent misrepresented the type of insurance Vandeinse obtained, therefore, necessitating reformation. In response, USA argued that Citizens had not shown that reformation was an acceptable remedy because there was no mistake or fraud by either party to the insurance contract, especially in light of the insurance agent’s affidavit. Additionally, USA argued that the no-fault act did not prevent insurers from providing insurance policies containing only collision and comprehensive coverages. The trial court granted Citizens’ motion for summary disposition, concluding that USA’s policy was issued "with an intent to deceive the consumer and the Secretary of State, [and] that the policy violates the Michigan No-Fault Act." Therefore, the trial court reformed USA’s insurance policy "to include no fault/PIP coverage, liability coverage, and property damage."

On appeal, USA argues that the trial court erred when it reformed the insurance policy to include mandatory no-fault coverages because (1) there was no mistake or fraud by either party, (2) issuing insurance policies limited to collision and comprehensive coverages did not contravene the no-fault act, and (3) public policy did not allow for reformation under these circumstances. We agree.

II. REFORMATION OF USA'S POLICY

A. STANDARD OF REVIEW

This Court reviews de novo motions for summary disposition under MCR 2.116(C)(10). Johnson v. Recca , 492 Mich. 169, 173, 821 N.W.2d 520 (2012). MCR 2.116(C)(10) provides that a trial court may grant judgment on all or part of a claim where "[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." The moving party must support its motion with affidavits, depositions, admissions, or other documentary evidence. Bronson Methodist Hosp. v. Auto-Owners Ins. Co. , 295 Mich. App 431, 440, 814 N.W.2d 670 (2012). If the moving party properly supports its motion, the opposing party then has the burden of demonstrating with "evidentiary materials that a genuine issue of disputed material fact exists." Id . at 440-441, 814 N.W.2d 670. "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 N.W.2d 468 (2003). This Court, reviewing the record in the same manner as the trial court, "must consider the pleadings, affidavits, depositions, admissions, and any other evidence in favor of the party opposing the motion, and grant the benefit of any reasonable doubt to the opposing party." Radtke v. Everett , 442 Mich. 368, 374, 501 N.W.2d 155 (1993).

Insofar as the motion for summary disposition involves questions regarding the proper interpretation of a contract, this Court’s review is de novo. Rory v. Continental Ins. Co. , 473 Mich. 457, 464, 703 N.W.2d 23 (2005). Additionally, "[t]his Court reviews de novo the trial court’s decision to grant or deny equitable relief." Olsen v. Porter , 213 Mich. App. 25, 28, 539 N.W.2d 523 (1995). When considering whether a trial court properly ordered reformation, this Court must be "mindful that courts are required to proceed with the utmost caution in exercising jurisdiction to reform written instruments." Id . To reform a contract, "the facts necessary for the allowance of the remedy shall be proved by clear and convincing evidence and not by a mere preponderance." Woolner v. Layne , 384 Mich. 316, 319, 181 N.W.2d 907 (1970) (quotation marks and citation omitted). "Evidence is clear and convincing when it produce[s] in the mind of the trier of fact a firm belief or conviction as to the truth of the allegations sought to be established...." In re Martin , 450 Mich. 204, 227, 538 N.W.2d 399 (1995) (quotation marks and citation omitted; alteration in original).

B. REFORMATION BASED ON MISTAKE AND FRAUD

USA first argues that there was insufficient evidence to support reformation of USA’s insurance policy on the basis of fraud. Therefore, USA asserts that the trial court erred when it granted summary disposition in favor of Citizens and reformed the policy to include no-fault, liability, and property-damage coverages on the basis of USA’s fraudulent conduct. We agree.

Courts of equity have the power to reform an insurance contract so that it conforms to the agreement actually made. See Casey v. Auto Owners Ins. Co. , 273 Mich. App....