Meemic Ins. Co. v. Fortson

• Citation: 954 N.W.2d 115,506 Mich. 287
• Decision Date: 29 July 2020
• Docket Number: Calendar No. 2,Docket No. 158302
• Parties: MEEMIC INSURANCE COMPANY, Plaintiff/Counterdefendant-Appellant, v. Louise M. FORTSON and Richard A. Fortson, Individually and as Conservator for Justin Fortson, Defendants/Counterplaintiffs-Appellees.
• Court: Supreme Court of Michigan

506 Mich. 287

954 N.W.2d 115

MEEMIC INSURANCE COMPANY, Plaintiff/Counterdefendant-Appellant,

v.Louise M. FORTSON and Richard A. Fortson, Individually and as Conservator for Justin Fortson, Defendants/Counterplaintiffs-Appellees.

Docket No. 158302

Calendar No. 2

Supreme Court of Michigan.

Argued November 6, 2019

Decided July 29, 2020

Viviano, J.

In this action, Meemic Insurance Company seeks to void its policy with defendants Louise and Richard Fortson and stop paying no-fault benefits to their son. Although the benefits are mandated by statute, Meemic seeks to avoid its statutory obligations by enforcing the antifraud provision in the policy. The issue before the Court is the extent to which a contractual defense like the one here is valid and enforceable when applied to coverage mandated by the no-fault act, MCL 500.3101 et seq. We hold that such contractual provisions are valid when based on a defense to mandatory coverage provided in the no-fault act itself or on a common-law defense that has not been abrogated by the act. Because Meemic's fraud defense is grounded on neither the no-fault act nor the common law, it is invalid and unenforceable. Accordingly, we affirm the Court of Appeals on different grounds and remand the case to the trial court for further proceedings consistent with this opinion.¹

I. FACTS

In September 2009, defendant Justin Fortson suffered serious injuries when he fell from the hood of a moving automobile.

Most significantly, brain damage left him in need of constant supervision. Doctors prescribed long-term care. Rather than sending Justin to a brain-injury

rehabilitation center, Justin's parents, codefendants Richard and Louise Fortson, opted to provide 24-hour-a-day attendant care themselves.

At the time of the accident, Meemic provided no-fault coverage to Justin and his parents. Richard and Louise were the named insureds in the policy. But Justin was also an "insured person" under the policy's "resident relatives" provision and under MCL 500.3114(1).² Meemic agreed to pay the parents $11 an hour to provide attendant-care services to Justin and requested that the Fortsons send Meemic monthly bills documenting actual hours spent providing care. From October 2009 to October 2014, Justin's parents submitted bills for attendant care, and Meemic paid them. In May 2013, however, the insurance company began a formal investigation. The investigation revealed that between September 2012 and July 2014, Justin had been in jail for 233 days and in drug rehabilitation for another 78 days. During this period, Justin's parents had continued to bill Meemic for attendant care.

Meemic's current suit against Richard, Louise, and Justin seeks to void the policy pursuant to the policy's antifraud provision so that Meemic is no longer required to pay Justin's claim.³ The antifraud provision provides:

This entire policy is void if any insured person has intentionally concealed or misrepresented any material fact or circumstance relating to:

A. This insurance;

B. The Application for it;

C. Or any claim made under it.

For the no-fault coverages, "Insured Person(s)" is defined under the policy to include the named insureds, who were Louise and Richard; any "resident relative," which included Justin; and "any other person occupying the Insured motor vehicle, or any person, subject to the priorities set forth in the [no-fault act], injured as a result of an accident involving the Insured motor vehicle while not occupying any motor vehicle." (Emphasis omitted.) The complaint claims breach of contract, fraud, common-law and statutory conversion, and unjust enrichment. Meemic sought damages and a determination that defendants’ actions voided the insurance policy. The Fortsons filed a counterclaim for the past and future attendant-care benefits that Meemic was refusing to pay.

Meemic moved for summary disposition, asking the trial court to enter an order that would void the insurance policy under the policy's antifraud provision, terminate any future liability, and require the Fortsons to reimburse Meemic for the fraudulent attendant-care statements. The trial court initially denied the summary disposition motion on the basis of the innocent-third-party rule, under which an insurer could not rescind a contract on the basis of fraud to avoid liability for benefits owed to innocent third parties. But Meemic moved for reconsideration after the Court of Appeals issued its opinion in Bazzi v. Sentinel Ins. Co. , 315 Mich. App. 763, 891 N.W.2d 13 (2016), aff'd in part and rev'd in part 502 Mich. 390, 919 N.W.2d 20 (2018), which concluded that the innocent-third-party rule was no longer good law. The trial court subsequently granted Meemic's motion for summary disposition.

The Court of Appeals reversed, concluding that its decision in Bazzi was inapplicable because the fraud here did not occur in the procurement of the policy—it did not, in other words, induce Meemic to enter into the contract with the Fortsons—and thus the fraud did not affect the validity of the contract. Meemic Ins. Co. v. Fortson , 324 Mich. App. 467, 475-476 & 476 n. 1, 922 N.W.2d 154 (2018). The Court held that the policy's antifraud provision was invalid because it would enable Meemic to circumvent the payment of statutorily mandated benefits. Id. at 477-479, 922 N.W.2d 154. It went on to conclude that even if the antifraud provision were valid, at the time they committed fraud, Richard and Louise were no longer "insured persons" under the policy, so the antifraud provision did not apply. Id. at 479-484, 922 N.W.2d 154. Judge CAMERON dissented, arguing that the majority had impermissibly resurrected the innocent-third-party rule. Id. at 485-487, 922 N.W.2d 154 ( CAMERON , J., dissenting). Because the policy permitted rescission on the basis of fraud and fraud occurred here, Judge Cameron would have affirmed the trial court's grant of summary disposition to Meemic. Id. at 489-493, 922 N.W.2d 154.

We granted Meemic's application for leave to appeal. Meemic Ins. Co. v. Fortson , 503 Mich. 1031, 926 N.W.2d 805 (2019).

II. STANDARD OF REVIEW

We review de novo a trial court's decision on a motion for summary disposition. DeFrain v. State Farm Mut. Auto. Ins. Co. , 491 Mich. 359, 366, 817 N.W.2d 504 (2012). In addition, statutory interpretation is an issue of law, which we also review de novo. Cardinal Mooney High Sch. v. Mich. High Sch. Athletic Ass'n , 437 Mich. 75, 80, 467 N.W.2d 21 (1991). To the extent this case involves the interpretation of an insurance policy, insurance policies are interpreted like any other contract.

See Farm Bureau Mut. Ins. Co. of Mich. v. Nikkel , 460 Mich. 558, 566, 596 N.W.2d 915 (1999) ("The principles of construction governing other contracts apply to insurance policies. Where no ambiguity exists, this Court enforces the contract as written.") (citation omitted). Like with other contracts, "[a]ny clause in an insurance policy is valid as long as it is clear, unambiguous and not in contravention of public policy." Id. at 568, 596 N.W.2d 915 (quotation marks and citation omitted).

III. ANALYSIS

We have described the utopian aims of Michigan's no-fault act as follows:

The Michigan No-Fault Insurance Act, which became law on October 1, 1973, was offered as an innovative social and legal response to the long payment delays, inequitable payment structure, and high legal costs inherent in the tort (or "fault") liability system. The goal of the no-fault insurance system was to provide victims of motor vehicle accidents assured, adequate, and prompt reparation for certain economic losses. The Legislature believed this goal could be most effectively achieved through a system of compulsory insurance, whereby every Michigan motorist would be required to purchase no-fault insurance or be unable to operate a motor vehicle legally in this state. Under this system, victims of motor vehicle accidents would receive insurance benefits for their injuries as a substitute for their common-law remedy in tort. [ Shavers v. Attorney General , 402 Mich. 554, 578-579, 267 N.W.2d 72 (1978).]

Whether the no-fault act has lived up to its billing is the subject of an ongoing and vigorous policy debate.⁴ But one thing that is not open to debate is that the act governs the coverages it mandates, and the insurance policy controls coverages that are optional (i.e., not required by the act):

[Personal protection insurance (PIP)] benefits are mandated by statute under the no-fault act, MCL 500.3105 ; MSA 24.13105, and, therefore, the statute is the "rule book" for deciding the issues involved in questions regarding awarding those benefits. On the other hand, the insurance policy itself, which is the contract between the insurer and the insured, controls the interpretation of its own provisions providing benefits not required by statute. [ Rohlman v. Hawkeye-Security Ins. Co. , 442 Mich. 520, 524-525, 502 N.W.2d 310 (1993).]^{[5 ]}

In a footnote in Rohlman , we explained why the no-fault act governs the coverages mandated by the act:

The policy and the statutes relating thereto must be read and construed together as though the statutes were a part of the contract, for it is to be presumed that the parties contracted with the intention of executing a policy satisfying the statutory requirements, and intended to make the contract to carry out its purpose.

A policy of insurance must be construed to satisfy the provisions of the law by which it was required, particularly when the policy specifies that it was issued to conform to the statutory requirement; and where an insurance policy has been issued in pursuance of the requirement of a statute which forbids the operation of a motor vehicle until good and sufficient security has been given, the court should construe this statute and the policy together in the light of the legislative purpose. [12A Couch, Insurance, 2d (rev. ed.), § 45:694, pp. 331-332.]

The definition[s] in an automobile liability insurance policy required by

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