Michigan Court of Appeals; Docket # 334848; Unpublished
Judges Jansen, Cavanagh and Cameron; Unanimous, per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Reformation of Insurance Contracts
CASE SUMMARY:
In this unanimous unpublished per curiam opinion, the Court of Appeals held the trial court wrongly denied Plaintiff Auto-Owners Insurance Company’s (“Auto-Owner”) motion for summary disposition, finding there was no genuine issue of material fact about whether a mutual mistake warranted reformation of the no-fault insurance contract. Rather, the Court held that Defendants William and Call Morse (“the Morses”) were unilaterally mistaken about the terms and coverage of the insurance contract.
In a prior appeal, the Court of Appeals had reversed the trial court’s reformation of the Morses’ no-fault policy (Auto-Owners Ins Co v Morse, unpublished opinion, issued November 19, 2015 [Docket No. 322635]), and ruled that reformation of the policy for Mor-Dall Enterprises, owned by Aaron Morse, was not required. In those proceedings, the Court did not reach the issue of whether mutual mistake justified reformation of the policy. On remand, Auto-Owners moved for summary disposition, asserting there was no genuine issue of material fact that a mutual mistake supported reformation of the policy. The trial court denied Auto-Owners’ motion, finding that its acceptance of premium payments established a material factual dispute about whether the parties mistakenly believed the policy offered PIP benefits to all listed drivers under all circumstances. Auto-Owners appealed.
The Court of Appeals found only the Morses were mistaken regarding the coverage of the no-fault policy, and reformation of the contract was inappropriate. The Court explained that reformation was appropriate when there was a mutual mistake of fact or fraud. Citing to Casey v Auto-Owners Ins Co, 273 Mich App 388; 729 NW2d 277 (2006), the Court explained that neither a unilateral mistake nor a mistake of law will support reformation. Here, the Court found that only the Morses were mistaken because the policy clearly stated that PIP benefits were not available for out-of-state accidents unless the injured person was occupying the insured motor vehicle, or the injured person was a named insured under the policy or a spouse or resident relative of a named insured. Here, the rental vehicle involved was not an insured vehicle and the Morses were not named insureds or spouses or relatives of a named insured. Thus, the mistake of fact was only made by the Morses and reformation was inappropriate.
“We conclude that the trial court erred by determining that a genuine issue of material fact regarding mutual mistake remained. On the contrary, this case reflects defendants’ unilateral mistake regarding the terms of Policy 42. The policy clearly stated that PIP benefits were not available for out-of-state accidents unless the injured person was occupying the insured motor vehicle or the injured person was a named insured under the policy or a spouse or resident relative of a named insured. The rental vehicle was not an insured vehicle, and defendants were not named insureds or spouses or resident relatives of a named insured.”
The Court further explained that the receipt of premium payments did not demonstrate a mistaken belief by Auto-Owners. The Court explained that it had previously rejected this argument in its prior decision. Moreover, the Court of Appeals explained that William Morse sold the Ford Explorer involved in the accident four months before the crash, “so no one could have reasonably believed that the premiums paid on the Explorer before the accident provided coverage after the accident.” After defendant-William Morse sold the Explorer, he used another vehicle listed on the policy but did not own it or any of the other listed vehicles, the Court observed. In addition, the Court pointed out that neither defendant-William Morse nor defendant-Cally Morse was a spouse or resident relative of Aaron Morse or Mor-Dall Enterprises. In this regard, the Court stated:
“Although defendants were not entitled to coverage under these circumstances, Auto-Owners’ acceptance of premiums reflects the PIP coverage that Mor-Dall did have. Therefore, the policy did not relieve Auto-Owners of all liability, and Auto-Owners’ acceptance of premiums did not show that Auto-Owners believed that coverage would differ from what was described in the policy.”
Accordingly, the Court of Appeals concluded the trial court erred in denying Auto-Owners’ motion for summary disposition and reversed and remanded for further proceedings.
