McCauley v. Progressive Marathon Ins. Co.
| Docket Number | 361847 |
| Decision Date | 20 July 2023 |
| Parties | ANGELA MCCAULEY, Plaintiff-Appellant, v. PROGRESSIVE MARATHON INSURANCE COMPANY, Defendant-Appellee. And AMERICAN SPECIALTY PHARMACY CAREPLUS, LLC, d/b/a ASP CARES, Intervening Plaintiff, |
| Court | Court of Appeal of Michigan — District of US |
UNPUBLISHED
Wayne Circuit Court LC No. 21-004859-NF
Before: PATEL, P.J., and BOONSTRA and RICK, JJ.
In this action for personal injury protection (PIP) benefits under the no-fault act, MCL 500.3101 et seq., Angela McCauley appeals as of right the order granting Progressive Marathon Insurance Company's motion for summary disposition pursuant to MCR 2.116(C)(10). We find that there is a genuine issue of material fact whether there was a material misrepresentation regarding the "garaging" of McCauley's vehicle and whether she was an innocent third party. We further conclude that the trial court abused its discretion in granting rescission of the policy ab initio. We reverse and remand the case for proceedings consistent with this opinion.
On or about March 25, 2020, McCauley's brother Willis,[1] applied for an automobile policy of insurance with Progressive by filling out an application on his phone.[2] Willis identified three vehicles in the application: a 2019 Dodge Ram owned by Willis, a 2008 Dodge Nitro owned by McCauley, and a 1999 Jeep Cherokee. Willis indicated that all three vehicles would be garaged at his Redford home. Both McCauley and Willis are named insureds on the Progressive policy.
On or about January 8, 2021, McCauley was operating her 2008 Dodge Nitro when her vehicle was rear-ended. It is undisputed that McCauley did not cause or contribute to the accident. Following the accident, McCauley submitted a claim for PIP benefits to Progressive. Progressive sent a reservation of rights letter asserting that it had "identified an issue with the garaging address for the vehicle(s) on [the] policy" and requested that McCauley provide additional documentation. On February 22, 2021, Progressive notified Willis and McCauley that the automobile policy was "rescinded and considered null and void" effective March 25, 2020 due to a misrepresentation in the policy application. Progressive refunded the policy premium in full.
Thereafter McCauley filed this action to recover PIP benefits.[3] During discovery, McCauley testified that she has lived with Willis at the Redford address for over six years. All her mail is delivered to the Redford address and her driver's license reflects the Redford address. She gives Willis money for utilities and other household bills. McCauley denied that she lived with her boyfriend at his Detroit home or at any other Detroit address in the last five years. But she admitted that, for approximately two years, she had been spending the night at her boyfriend's home "[m]aybe three to four times a week." When asked whether she ever spent more than three or four times a week overnight at her boyfriend's home, she responded, She later testified:
McCauley does not have her own bedroom or a closet at her boyfriend's home. She keeps a change of clothes and other personal necessities "[b]etween my car and a bag." She has not paid her boyfriend rent or any utilities, and is not otherwise registered to his address.
McCauley testified that Willis completed the Progressive insurance application and she did not participate in the application process. She simply knew that her 2008 Nitro was to be included on the policy and that she was listed as the driver. Willis told her the amount of her monthly premium, which she paid to him each month. McCauley maintained that her vehicle was garaged at the Redford address.
Willis testified that he had lived in his Redford home for approximately 10 years and McCauley has lived with him for over six years. He stated that McCauley comes and goes as she pleases and sleeps at the Redford home "when she wishes to." She has her own bedroom, keeps clothes there, and receives mail there. Sometimes, McCauley's Nitro has been parked overnight in the garage even though she was not there. When asked to quantify the number of days per week that McCauley stayed overnight at her boyfriend's home in Detroit since 2020, Willis stated that it varied from week to week. Willis admitted that he did not inform Progressive that McCauley's vehicle may sometimes be in the city of Detroit when he applied for the policy, but he expressed uncertainty about the garaging distinction. He explained that he included McCauley's vehicle on the policy and used the Redford address because "she was staying here at the time and . . . is still staying here."
Following discovery, Progressive moved for summary disposition pursuant to MCR 2.116(C)(8) and (10) claiming it was fraudulently induced into issuing the subject insurance policy based on McCauley and Willis's material misrepresentations regarding the garaging addresses of the subject vehicle and thus was entitled to rescind the subject policy. Although it did not attach a copy of its policy, Progressive maintained that its policy "specifically prohibits garaging the vehicles at multiple addresses." Progressive asserted that it would not have issued the policy, or it would have been written at a significantly higher premium, if McCauley and Willis had disclosed the garaging addresses during the application process. Progressive argued that it was entitled to rescind the policy due to McCauley and Willis's material misrepresentations regarding the proper garaging address of their vehicles. And because ASPC's claim was derivative of McCauley's, Progressive asserted that ASPC was bound by the policy rescission. McCauley maintained that there were genuine issues of material fact whether there were misrepresentations regarding garaging of the subject vehicle and asserted that Progressive was not entitled to rescission under the facts and circumstances. The trial court granted Progressive's motion for summary disposition and found that the policy was rescinded ab initio.[4] McCauley now appeals.
McCauley argues that the trial court erred by granting Progressive's motion for summary disposition because there are genuine issues of material fact whether she made material misrepresentations in procuring the automobile policy. We agree.[5]
PIP benefits are mandated by Michigan's no-fault act, MCL 500.3101 et seq., and thus the act governs the rights and limitations of PIP coverage. Meemic Ins Co v Fortson, 506 Mich. 287, 297-298; 954 N.W.2d 115 (2020). "[T]he source of the right to rescind (mandatory) PIP coverage must flow from the no-fault act or the common law, not the policy terms." Howard v LM General Ins Co, __ Mich.App. __, __; __ N.W.2d __ (2023) (Docket No. 357110); slip op at 3, citing Meemic, 506 Mich. at 293. "[A] no-fault insurer's contractual antifraud provision is only valid to deny PIP coverage if it rests on a statutory defense in the no-fault act or on a common-law defense that has not been abrogated." Howard, __ Mich.App. at __; slip op at 4.[6] Because "[t]he no-fault act . . . does not provide a fraud defense to PIP coverage, [an insurer's] antifraud defense is not statutory." Meemic, 506 Mich. at 303-304. And "the mere breach of a contract would not entitle the injured party to avoid the contract at common law." Id. at 308. Accordingly, an insurer must establish common-law fraud to warrant rescission of mandatory PIP coverage due to preprocurement misrepresentations. See id. at 304-305 &n 12.
Fraud in the inducement occurs" 'when a misrepresentation leads another to enter into a transaction with a false impression of the risks, duties, or obligations involved.'" Id. at 306 n 13; 954 N.W.2d 115 (2020), quoting Black's Law Dictionary (10th ed.). Actionable fraud requires a showing that: "(1) the alleged fraudulent party made a material representation; (2) the representation was false; (3) the person making the representation knew it was false or acted recklessly in making the statement; (4) the person intended that the opposing party should act upon the representation; (5) the opposing party acted in reliance; and so (6) suffered injury." Howard, __ Mich.App. at __; slip op at 4. A misrepresentation is material if the insurer would not have issued the policy, in the manner or at the rate at which it was issued, if the insurer had known of the misrepresentation or nondisclosed fact. See Oade v Jackson Nat'l Life Ins Co of Mich, 465 Mich. 244, 253-254; 632 N.W.2d 126 (2001). An insurer's statement that it would not have issued the policy had it known of the undisclosed information is enough to establish that the misrepresentation was material. See Lash v Allstate Ins Co, 210 Mich.App. 98, 103-104; 532 N.W.2d 869 (1995).
We find that there is a genuine issue of material fact whether there was fraud in the inducement. Progressive's motion for summary disposition was premised on its argument that Willis misrepresented where the vehicle was garaged when he completed the application for insurance. But Progressive did not provide a copy of the insurance application to the trial court. Without the application, there is no evidence of Willis's alleged "misrepresentations" or how "garaged" is explained on the application. Further the evidence and testimony reflect that McCauley lived at the Redford address for over six years, all her mail was delivered to the Redford address, her driver's license listed the Redford address,...
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