Morrison v. SECURA INS.

• Decision Date: 29 December 2009
• Docket Number: Docket No. 286936.
• Citation: 286 Mich. App. 569,781 N.W.2d 151
• Parties: MORRISON v. SECURA INSURANCE.
• Court: Court of Appeal of Michigan — District of US

781 N.W.2d 151

286 Mich. App. 569

MORRISON v. SECURA INSURANCE.

Docket No. 286936.

Court of Appeals of Michigan.

Submitted November 10, 2009, at Lansing.

Decided December 29, 2009, at 9:00 a.m.

Sinas, Dramis, Brake, Boughton & McIntyre, P.C. (by Timothy J. Donovan and Steven A. Hicks), Lansing, for plaintiffs.

Plunkett Cooney (by Christine D. Oldani, Detroit, and David K. Otis, East Lansing), for defendant.

Before: TALBOT, P.J., and O'CONNELL and DAVIS, JJ.

DAVIS, J.

Defendant appeals by delayed application for leave to appeal granted the trial court's order granting summary disposition for plaintiffs in this declaratory judgment action. We affirm. This appeal has been decided without oral argument pursuant to MCR 7.214(E).

This case arises out of an automobile accident in which a 1997 Chevrolet Cavalier driven by Sarah Jo Warfield struck plaintiffs' motorcycle. Plaintiffs suffered serious injuries. At issue is the validity of a no-fault insurance policy covering Warfield's vehicle.

The relevant facts in this case are not disputed. The insurance policy at issue was purchased by Warfield's mother, JoEllen Schwartz Fisher, in October of 2005. It listed Fisher as the named insured, but both Fisher and Warfield were listed as "drivers" of three vehicles, including the Cavalier. Warfield was the only person who ever drove the Cavalier. Fisher pre-paid the premiums for an entire year. At the time she did so, she was the owner and registrant of the Cavalier. Fisher and Warfield both lived in the same residence at all relevant times. In March of 2006, Fisher transferred title to the Cavalier to Warfield, who applied for a new title and registered the Cavalier in her own name. The accident occurred on April 14, 2006. Defendant's sole argument¹ is that Fisher did not have an insurable interest in the Cavalier at the time of the accident, and so the insurance policy was void at that time.

"Under Michigan law, an insured must have an `insurable interest' to support the existence of a valid automobile liability insurance policy." Smith v. Allstate Ins. Co., 230 Mich.App. 434, 439, 584 N.W.2d 355 (1998). Moreover, the insurable interest must be that of a "`named insured.'" Id. at 440, 584 N.W.2d 355. This issue presents a question of law, which, like an order granting summary disposition, we review de novo. Manzo v. Petrella & Petrella & Assoc., PC, 261 Mich.App. 705, 711, 683 N.W.2d 699 (2004).

The Court in Allstate Ins. Co. observed that the "insurable interest" requirement arises out of long-standing public policy. Allstate Inc. Co., supra at 438, 584 N.W.2d 355. Specifically, it arises out of the venerable public policy against "wager policies"; which, as eloquently explained by Justice COOLEY, are insurance policies in which the insured has no interest, and they are held to be void because such policies present insureds with unacceptable temptation to commit wrongful acts to obtain payment.²O'Hara v. Carpenter, 23 Mich. 410, 416-417 (1871). Thus, "fundamental principles of insurance" require the insured to "have an insurable interest before he can insure: a policy issued when there is no such interest is void, and it is immaterial that it is taken in good faith and with full knowledge."³Agricultural Ins. Co. v. Montague, 38 Mich. 548, 551 (1878). However, an "insurable interest" need not be in the nature of ownership, but rather can be any kind of benefit from the thing so insured or any kind of loss that would be suffered by its damage or destruction. Crossman v. American Ins. Co., 198 Mich. 304, 308-311, 164 N.W. 428 (1917).

Plaintiffs argue, and the trial court found, that Fisher had an insurable interest in the vehicle because she "certainly has an insurable interest in protecting her daughter from financial ruin." While any concerned parent clearly has an interest in his or her child's welfare, financial or otherwise, we need not take up the additional challenge of evaluating whether that interest is insurable—in other words, whether that interest is sufficiently tangible that it can truly be insured against.⁴ We agree with the trial court's result because of several other striking characteristics of the facts in this case.

It is undisputed that Fisher did have an unambiguous insurable interest in the Cavalier at the time she purchased the insurance policy and paid the entire year's premiums. The case law we have found on the genesis and development of the "insurable interest" requirement shows that public policy forbids the issuance of an insurance policy where the insured lacks an insurable interest. Public policy does not appear to require an otherwise valid insurance policy to become void automatically. Particularly where, as here, the actual risk never changed and was fully known (i.e., Warfield was always the only driver of the Cavalier). We emphasize that we are not presented with a situation in which Fisher attempted to renew the insurance policy covering the Cavalier after she had parted with any interest in it.

Furthermore, and even more significantly, the purpose behind the "insurable interest" requirement is not present here: we cannot imagine how Fisher, or anyone in her position, could possibly be tempted by the transfer of ownership to commit any illegal or unethical act in order to collect proceeds from the insurance policy at issue. The "insurable interest" requirement arose in the context of insurance policies payable to the insured. In such a circumstance, it is obvious how an insured with "nothing to lose" might be tempted to commit socially intolerable acts for financial gain. But the nature of the no-fault insurance at issue here is radically different. Because the insurance here is less likely to be exploitable as a "wager policy," the basis for the "insurable interest" requirement is weakened.

Finally, the conveyance of the Cavalier here was an intrafamily transfer. Family members share large portions of their lives and properties in ways that they do not share with strangers in arms-lengths transactions, and intrafamily vehicle transfers, particularly between parents and children, are common. The word "family" can mean many things, but Michigan jurisprudence recognizes that the term more commonly refers to relationships in which multiple people live together under a head of the household who has a legal or moral duty to support the others or other. See Rogers v. Kuhnreich, 247 Mich. 204, 206-209, 225 N.W. 622 (1929). Notwithstanding Warfield's being over the age of majority, she and Fisher were clearly "immediate family members." See Latham v. Nat'l Car Rental Sys., Inc., 239 Mich.App. 330, 337-338, 608 N.W.2d 66 (2000). Transferring vehicles between family members is not treated the same as it is between strangers. See Clevenger v. Allstate Ins. Co., 443 Mich. 646, 658-659, 505 N.W.2d 553 (1993). Public policy clearly recognizes that the family unit is, and always has been, entitled to a special status in the law. We would not find public policy supportive of terminating what amounts to a family insurance policy upon an intrafamily vehicle transfer.

Thus, we need not reach the issue whether, at the time of the accident, Fisher had an "insurable interest" in the Cavalier. Fisher did have an "insurable interest" in the Cavalier at the time the insurance policy was bought and paid for, the insured-against risk did not change, the basis for the "insurable interest" requirement is weak, and the public policy favoring family units is strong. The trial court's result was, therefore, correct.

Affirmed.

O'CONNELL, J., concurred.

TALBOT, P.J. (dissenting).

I respectfully dissent from the majority opinion, which finds the retention of an insurable interest despite a change in the registration of ownership of a vehicle, impliedly based on a familial relationship between the insured and the registered owner.

"Under Michigan law, an insured must have an `insurable interest' to support the existence of a valid automobile liability insurance policy." Smith v. Allstate Ins. Co., 230 Mich.App. 434, 439, 584 N.W.2d 355 (1998). "An insurable interest in property is broadly defined as being present when the person has an interest in property, as to the existence of which the person will gain benefits, or as to the destruction of which the person will suffer loss." Madar v. League Gen. Ins. Co., 152 Mich.App. 734, 738, 394 N.W.2d 90 (1986), citing Crossman v. American Ins. Co., 198 Mich. 304, 308-309, 164 N.W. 428 (1917). Moreover, the insurable interest must be that of a "named insured." Allstate Ins. Co., supra at 440, 584 N.W.2d 355. Insurance policies "founded upon mere hope and expectation and without some interest in the property," are contrary to public policy and...