Michigan Court of Appeals; Docket # 336514; Published
Judges Jansen, Servitto, and Shapiro; author: Shapiro; dissent: Jansen
Official Michigan Reporter Citation: Not applicable; Link to Opinion; Link to Dissent
STATUTORY INDEXING:
Disqualification From PIP Benefit Entitlement [500.3113]
TOPICAL INDEXING:
Fraud/Misrepresentation
CASE SUMMARY:
In this non-unanimous published opinion written by Judge Shapiro, the Court of Appeals upheld the trial court’s grant of summary disposition in favor of Plaintiff Dale Maurer (“Mr. Maurer”). The Court of Appeals upheld the trial court because it found Mr. Maurer’s alleged fraud was committed in 2006 when the wrong was committed and the six-year statute of limitations barred Defendant Freemont Insurance Company (“Freemont”) from raising a fraud defense. The Court of Appeals also rejected the argument that Mrs. Maurer was barred from benefits under MCL 500.3113(b) because the Court reasoned that Mr. Maurer, as her spouse, was a constructive owner and properly insured the vehicle. Judge Jansen dissented and found that Mr. Maurer’s alleged fraud was committed in 2012, and so Freemont was not barred from raising fraud as a defense.
In 2006, Mr. Maurer contacted an insurance agent to purchase no-fault insurance for his family’s three vehicles. The insurance was purchased by the agent on Mr. Maurer’s behalf from Freemont. One of the insured vehicles was a 1992 Buick Regal that was used primarily by Amy Maurer (“Mrs. Maurer”). The application asked if any of the vehicles were used in business. Mr. Maurer told the agent that Mrs. Maurer used the Buick Regal for mail deliveries on Saturdays. The agent indicated on the application that the vehicle was not used for any business activities. Mr. Maurer noticed the response and asked the agent if it should be changed. The agent told Mr. Maurer not to worry about it and the answer was not changed. The agent was independent, but he did have the authority from Fremont to bind it to policies. In 2012, Mr. Maurer contacted the insurance agent and notified him that the family would be replacing the 1992 Buick Regal with a 2004 Buick Century. Mr. Maurer again notified the agent that the vehicle was being used primarily by his wife, and it was being used to deliver mail. The agent again did not represent in the application that it was being used to deliver mail. The 2012 application told applicants to inform their agents if any change occurred regarding the use of the vehicles.
On December 3, 2012, Mrs. Maurer was injured in an automobile accident while driving the 2004 Buick Century and delivering mail. Fremont promptly learned of the accident and that it occurred while Mrs. Maurer was delivering mail. An action was brought against the at-fault driver in 2013. An application for no-fault benefits was submitted to Freemont, but Mrs. Maurer’s medical benefits were paid by the Federal Employee Compensation Act (“FECA”) because she was injured while delivering mail. The United States Postal Service (“USPS”), which paid the medical benefits under FECA, was entitled to reimbursement from the tort action. USPS was reimbursed from the tort action and Fremont became responsible for payment to Mrs. Maurer for the amount collected by USPS. Fremont did not agree to reimburse Mrs. Maurer.
On October 27, 2014 Freemont rescinded the contract telling Mr. Maurer that it was doing so based on his answers to the 2006 application. Freemont sent a check to Mr. Maurer refunding all his premiums paid since 2006. Mr. Maurer returned the check to Freemont. In January 2014, Mrs. Maurer filed an action seeking a judgment ordering Fremont to pay her the cost of her medical care. In January 2015, Fremont filed a counterclaim for rescission asking the trial court to declare that the policy rescinded and void ab initio. Both parties sought summary disposition. The lower court granted Mrs. Maurer’s motion for summary disposition because it found the statute of limitations had run for Fremont to rescind a contract based on fraud. Fremont appealed.
The Court of Appeals first upheld the lower court’s ruling that Fremont was barred from rescinding the contract by the statute of limitations. Both parties agreed that claims of fraud are governed by MCL 600.5813, which provides a six-year limitation period. The parties disagreed however about when the claim accrued. The Maurers argued that it accrued in 2006, while Fremont argued that it accrued in 2012. Citing to MCL 600.5827, the Court explained that a claim “accrues at the time the wrong upon which the claim is based was done regardless of the time when damage results.” The Court found that the wrong was the 2006 application because Fremont believed the wrong occurred in 2006. This was evidenced by the company telling the Maurers it was rescinding the policy based on the 2006 misrepresentation and returning all the premiums dating back to 2006. The Court also explained that Mr. Maurer did not commit a wrong in 2012 because Mr. Maurer disclosed to the agent that the vehicle was being used to deliver mail. The 2012 application required Mr. Maurer to disclose any changes in the application to the agent, not to Fremont.
“We conclude that Fremont’s claim for rescission accrued in 2006 when Mr. Maurer submitted the application containing the misrepresentation. That was the wrong upon which Fremont’s claim rests. The allegation that Mr. Maurer failed to disclose the vehicle’s use in 2012 fails, at least for purposes of summary disposition, because the uncontested evidence is that he complied with the directive on the declaration sheet to “contact your agent” in the event of any changes or inaccuracies in the description of the vehicle’s use. Thus, we affirm the trial court’s conclusion that Fremont counterclaim for rescission was untimely and that plaintiff was entitled to summary disposition.”
Fremont also presented an affirmative defense based on MCL 500.3113(b). The Court noted that this defense was untimely filed, and not properly preserved. However, the Court chose to address the issue. MCL 500.3113(b) bars an individual from receiving PIP benefits if the individual was (1) the owner or registrant of a vehicle, (2) involved in the accident, and (3) no-fault insurance was required, but not obtained. Mr. Maurer was not the registrant of the vehicle and Freemont argued that he was not the owner either. Therefore, Freemont argued, insurance was not properly obtained. The Court rejected this argument citing to Iqbal v Bristol West Ins. Group, 278 Mich App 31, 39-40 (2008), where that court had concluded the critical question was whether the vehicle had been insured, and not whether the owner or registrant had been the purchaser. Here the vehicle was properly insured by Mr. Maurer and the Court found no legislative intention to bar PIP benefits for a vehicle where no-fault coverage was purchased by a spouse.
“It would be very difficult to articulate any reason why the Legislature, by adopting MCL 500.3113, intended to prevent a spouse from procuring insurance on a family car when the vehicle is registered to the other spouse, or to impose a complete loss of no-fault coverage on the spouse owning the vehicle for letting his or her spouse procure the policy. Certainly Fremont has not articulated a basis to find such intent. In the absence of a compelling reason to do so, we will not interpret MCL 500.3113(b) in a way that would so undermine both the purpose of the no-fault act and the institution of marriage.”
Accordingly, the Court of Appeals upheld the lower court’s order for summary disposition against Fremont because its fraud defense was blocked by the statute of limitations.
Dissent by Judge Jansen:
First, the dissent argued that the statute of limitations did not bar a claim of fraud because the claim accrued in 2012 when the new application was made. The dissent cited to 21st Century Premier Ins. Co, 315 Mich App at 444, which said a renewal contract is “a new or separate contract.” The 2012 application contained an anti-fraud provision that allowed Freemont to rescind the policy based upon fraud. Because the 2012 application was a “new or separate” contract that contained a rescission provision for fraud the dissent argued that the time of accrual was 2012.
“Put simply, the new contract entered into by Mr. Maurer on September 6, 2012 provided that defendant would be entitled to rescind Mr. Maurer’s no-fault policy if Maurer made any material misrepresentations in order to procure no-fault coverage. Accordingly, the misrepresentation with respect the contract in effect at the time plaintiff was injured occurred on September 6, 2012 when the contract was entered into and took effect. Subject to any equitable defenses, defendant had until September 6, 2018 to bring a claim for rescission.”
Second, the dissent argued that Plaintiff’s claim was also barred by MCL 500.3113(b) and he would grant summary disposition in favor of Defendant on this issue. The dissent argued that this issue was improperly denied by the lower court and the lower court should have granted summary disposition in Defendant’s favor. The dissent argued that Mr. Maurer was not an owner of the vehicle because it was not titled in his name and the only person to drive the vehicle other than Mrs. Maurer was the couple’s daughter. Thus, § 3113(b) would bar no-fault benefits to Mrs. Maurer because Mrs. Maurer was the owner and registrant, was involved in the motor vehicle accident, but did not properly provide no-fault insurance for the vehicle.
“In my view, the record is clear that Mr. Maurer does not qualify as an owner for purposes of the no-fault act. During his deposition, Mr. Maurer testified that the Buick Century was titled only to plaintiff and that the only person to ever drive the Buick Century besides plaintiff was their daughter, whose usage was characterized as occasional. Accordingly, I would conclude that plaintiff is barred from recovering PIP benefits from defendant because the Buick Century lacked the necessary security. MCL 500.3113(b).”
Third, the dissent would have rejected Plaintiff’s alternative grounds for affirmance. The dissent noted that these issues were not properly preserved before the Court. However, the dissent addressed the alternative grounds for affirmance. The dissent rejected Plaintiff’s laches argument because Plaintiff did not have “clean hands.” The dissent next rejected Plaintiff’s argument that Bazzi I was incorrectly decided abrogating the innocent third-party doctrine because the Supreme Court’s decision in Titan Insurance Co v Hyten, 491 Mich 547 (2012), abrogated the innocent third-party doctrine. Finally, the dissent rejected Plaintiff’s argument that the remedy provision of the 2012 application disallowed rescission because § 3113(b) would bar the recovery.
