Wilmore-Moody v. Zakir

• Docket Number: 163116
• Decision Date: 31 May 2023
• Citation: Wilmore-Moody v. Zakir, 999 N.W.2d 1, 511 Mich. 76 (Mich. 2023)
• Parties: Adora WILMORE-MOODY, Individually and as Next Friend of Daimler Aaku, Plaintiff/Counterdefendant-Appellee, v. Mohammed ZAKIR, Defendant-Appellant, and Everest National Insurance Co., Defendant/Counterplaintiff-Appellee, and PDB Investments & Insurance Co., Michigan Assigned Claims Plan, and Michigan Automobile Insurance Placement Facility, Defendants.
• Court: Michigan Supreme Court

999 N.W.2d 1

511 Mich. 76

Adora WILMORE-MOODY, Individually and as Next Friend of Daimler Aaku, Plaintiff/Counterdefendant-Appellee,

v.Mohammed ZAKIR, Defendant-Appellant,andEverest National Insurance Co., Defendant/Counterplaintiff-Appellee,

and

PDB Investments & Insurance Co., Michigan Assigned Claims Plan, and Michigan Automobile Insurance Placement Facility, Defendants.

No. 163116

Supreme Court of Michigan.

Argued on application for leave to appeal December 8, 2022

Decided May 31, 2023

John H. Gillis, J.

The Mike Morse Law Firm, Southfield (by Keith M. Banka and Marc J. Mendelson) for Adora Wilmore-Moody.

Foster Swift Collins & Smith PC(by Julie I. Fershtman, Detroit and Scott L. Mandel, Lansing) for Mohammed Zakir.

Nadia Ragheb-Gonzalez for the Michigan Association for Justice, amicus curiae.

Jacobs and Diemer, PC(by Eric P. Conn) for the Michigan Defense Trial Counsel, amicus curiae.

BEFORE THE ENTIRE BENCH (except Bolden, J.)

OPINION

Cavanagh, J.

₇₉Under Michigan’s no-fault act, MCL 500.3101 et. seq., a person injured in an automobile accident typically may file two different actions: a claim against the responsible insurer for "first-party benefits" such as medical expenses, work loss, and replacement services, and a claim against the at-fault driver for what are colloquially referred to as "third-party benefits"—non-economic damages for death, serious impairment of a bodily function, or permanent serious disfigurement.These third-party benefits are not recoverable, however, if the injured person was operating their own motor vehicle at the time the injury occurred and did not have an insurance policy in effect for that vehicle.MCL 500.3135(2)(c).The issue presented in this case is whether a motorist is without the required insurance "at the time the injury occurred,"MCL 500.3135(2)(c), if their insurance company rescinded their insurance policy after the accident.

We hold that an insurer’s decision to rescind a policy postaccident does not trigger the exclusion in MCL 500.3135(2)(c).Rescission is an equitable remedy in contract, exercised at the discretion of the insurer, and does not alter the reality that, at the time the injury occurred, the injured motorist held the required security.Rescission by the insurer postaccident is not a defense that can be used by a third-party tortfeasor to avoid liability for noneconomic damages.Accordingly, ₈₀we affirm the Court of Appeals’ reversal of the trial court’s grant of summary disposition to defendantMohammed Zakir.

I.UNDERLYING FACTS & PROCEEDINGS

The material facts of this case are not in dispute.On April 6, 2017, plaintiff, Adora Wilmore-Moody, and her minor son were parked outside his school when Zakir rear-ended plaintiffs vehicle.According to plaintiff, as a result of the collision she and her son suffered serious injuries to their heads, necks, and backs.At the time of the collision, plaintiff held an insurance policy issued by defendantEverest National Insurance Company.Following the collision, plaintiff submitted a claim to Everest for first-party no-fault benefits.Rather than paying plaintiff benefits, Everest notified her that it would be rescinding her policy and returning her premiums because it concluded that she had made a material misrepresentation in her insurance application.¹

On March 6, 2018, plaintiff filed suit on behalf of herself and her son.Relevant here, she asserted a claim against Everest for first-party personal protection insurance (PIP) benefits and a third-party tort claim against Zakir for his alleged negligence in causing₈₁ the collision.²Everest moved for summary disposition under MCR 2.116(0(10), arguing that it had a right to rescind plaintiff’s insurance policy because of the material misrepresentations she made in her insurance application.³The trial court agreed, granted Everest’s motion for summary disposition, and dismissed the first-party claim.

Following this ruling, Zakir also moved for summary disposition under MCR 2.116(0(10).Zakir argued that plaintiff was barred from recovering third-party noneconomic damages because, he reasoned, once the contract was rescinded plaintiff no longer had the required security "at the time the injury occurred."MCL 500.3135(2)(c).The trial court agreed and granted Zakir summary disposition.

Plaintiff appealed.Germane to this appeal, she argued that the trial court erred by granting summary disposition in Zakir’s favor on the basis of Everest’s rescission of the insurance policy.⁴The Court of Appeals agreed, reversing the trial court in part and remanding for further proceedings.Wilmore-Moody v ₈₂Zakir, unpublished per curiam opinion of the Court of Appeals, issued May 6, 2021(Docket No. 352411, 2021 WL 1837852).

Zakir then sought leave to appeal in this Court.On March 23, 2022, we ordered oral argument on the application, directing the parties to address "whether the rescission of an insurance policy under the no-fault act, MCL 500.3101 et seq., bars recovery of noneconomic damages under MCL 500.3135(2)(c) on the basis that the claimant‘did not have in effect … the security required by [MCL 500.3101(1)] at the time the injury occurred.’"Wilmore-Moody v Zakir,509 Mich. 881, 881-882, 970 N.W.2d 892(2022).

II.STANDARD OF REVIEW

[1–3]We review de novo a trial court’s decision to grant summary disposition.El-Khalil v Oakwood Healthcare, Inc,504 Mich. 152, 159, 934 N.W.2d 665(2019).A motion for summary disposition submitted pursuant to MCR 2.116(0(10) tests the factual sufficiency of a claim.Taxpayers for Mich. Constitutional Gov’t v Dep’t. of Technology, Mgt., and Budget,508 Mich. 48, 61, 972 N.W.2d 738(2021).Summary disposition is appropriately granted only when no genuine issue of material fact exists.Id.

[4–6]We also review de novo questions of statutory interpretation.Esurance Prop. & Gas. Ins. Co. v Mich. Assigned Claims Plan,507 Mich. 498, 508, 968 N.W.2d 482(2021).The key purpose of statutory interpretation is to "ascertain the legislative intent that may reasonably be inferred from the statutory language."Krohn v Home-Owners Ins Co,490 Mich. 145, 156, 802 N.W.2d 281(2011)(quotation marks and citation omitted)."The most reliable evidence of that intent is the plain language of the statute."Rouch World, LLC v Dep’t of ₈₃Civil Rights, 510 Mich. 398, 410, 987 N.W.2d 501(2022)(quotation marks, brackets, and citation omitted).

[7]Finally, the application of an equitable doctrine such as rescission is also reviewed de novo.Esurance,507 Mich. at 509, 968 N.W.2d 482.

III.LEGAL & EQUITABLE PRINCIPLES

In this casewe are asked to examine provisions of the no-fault act, particularly MCL 500.3135(2)(c).Zakir asserts that this case also calls for our attention "to the law of contracts and rescission in equal measure with statutory interpretation."We therefore begin by summarizing the applicable legal principles, both statutory and contractual.

A.RELEVANT NO-FAULT ACT PROVISIONS

[8, 9]"Michigan’s no-fault insurance system is a comprehensive scheme of compensation designed to provide sure and speedy recovery of certain economic losses resulting from motor vehicle accidents."Bazzi v Sentinel Ins. Co.,502 Mich. 390, 398, 919 N.W.2d 20(2018).As part of this system, the no-fault act requires registrants and operators of motor vehicles to maintain compulsory no-fault insurance.MCL 500.3101(1);Shavers v Attorney General,402 Mich. 554, 579, 267 N.W.2d 72(1978).

Apart from certain enumerated exceptions, the no-fault act abolished tort liability for harm caused while owning, maintaining, or using a motor vehicle in Michigan.American Alternative Ins Co v York,470 Mich. 28, 30, 679 N.W.2d 306(2004).The relevant exception here is MCL 500.3135, which allows claims for noneconomic loss caused by the ownership, maintenance, or use of a motor vehicle that resulted in ₈₄death, serious impairment of body function, or permanent serious disfigurement.MCL 500.3135(1).However, there are circumstances that bar recovery under this statute.At the time of the motor vehicle collision at issue, MCL 500.3135(2)(c) provided:

Damages shall not be assessed in favor of a party who was operating his or her own vehicle at the time the injury occurred and did not have in effect for that motor vehicle the security required by [MCL 500.3101] at the time the injury occurred.⁵

In other words, one consequence of failing to maintain no-fault insurance is that the injured motorist loses the opportunity to seek third-party noneconomic damages from a negligent tortfeasor.

B.RESCISSION AS A CONTRACTUAL REMEDY

[10–12]"[F]raud in the application for an insurance policy may allow the blameless contracting party to avoid its contractual obligations through the application of traditional legal and equitable remedies."Titan Ins Co v Hyten,491 Mich. 547, 570, 817 N.W.2d 562(2012).One equitable remedy that may be available is rescission.Id. at 558, 817 N.W.2d 562."Rescission abro- gates a contract and restores the parties to the relative positions that they would have occupied if the contract had never been made."Bazzi,502 Mich. at 409, 919 N.W.2d 20;see alsoUnited Security Ins. Co. v Comm’r of Ins.,133 Mich App 38, 42, 348 N.W.2d 34(1984).Rescission is, stated simply, a "legal fiction" meant to restore the contracting parties to the ₈₅status quo.Esurance,507 Mich. at 524, 968 N.W.2d 482(Clement, J., dissenting);see alsoWall v Zynda,283 Mich. 260, 264, 278 N.W. 66(1938).

[13] Rescission, notably, does not "function by automatic operation of the law."Bazzi,502 Mich. at 411, 919 N.W.2d 20.Instead, because rescission is an equitable remedy, it should be "granted only in the sound discretion of the court."Lenawee Co. Bd of Health v Messerly,417 Mich. 17, 31, 331 N.W.2d 203(1982);see alsoBazzi,502 Mich. at 411, 919 N.W.2d 20("Equitable remedies are adaptive to the circumstances of each case ….").

IV.APPLICATION

[14]The Court of Appeals...