Michigan Court of Appeals; Docket # 340323; Published
Judges Beckering, Riordan, and Cameron
Official Michigan Reporter Citation: Pending; Link to Opinion; Link to Dissent
STATUTORY INDEXING:
Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]
TOPICAL INDEXING:
Not Applicable
SUMMARY:
In this majority published decision (Justice Beckering, dissenting), the Court of Appeals reversed the trial court’s denial of defendant USA Underwriters motion for summary disposition and the trial court’s summary disposition order in favor of defendant Citizens Insurance Company of America. The Court of Appeals determined that USA Underwriters did not commit fraud by issuing the plaintiff an insurance policy that provided only collision and comprehensive coverage, but not no-fault coverage. Therefore, the policy did not need to be reformed to include no-fault coverage.
Plaintiff Steven Vandeinse purchased a vehicle from a used car dealership and, upon realizing he was required to obtain insurance, went to a nearby insurance agency and requested a policy. Vandeinse obtained an insurance policy through USA Underwriters that provided collision and comprehensive coverages only, not no-fault coverage. The insurance agent who sold Vandeinse his policy explained to Vandeinse the difference between no-fault coverage and collision and comprehensive coverage and offered to assist him with obtaining both.” The agent further asserted that Vendeinse “declined my offer to assist him with obtaining no-fault coverage, and asked only for collision and comprehensive coverage through [USA],” as such a limited policy was cheaper. Moreover, the application for automobile insurance that Vandeinse completed was entitled “Application for Physical Damage Insurance Economy Program” through USA. The declarations section of the application stated: “This application is for Auto Physical Damage Insurance only. It does not provide bodily injury, property damage or any other Michigan statutory No-Fault coverages.” Additionally, Vandeinse initialed a provision in the application that explicitly stated that the policy only provided collision and comprehensive coverage. After obtaining the policy, Vandeinse purchased an Impala using the certificate of insurance that USA provided. Like the insurance application, the certificate of insurance stated, “This insurance is physical damage only, coverage does not meet the requirements of the Michigan No-Fault Act, Chapter 31 of the Michigan Insurance Code.” The Michigan Secretary of State apparently accepted this certificate and registered the Impala with the State of Michigan.
Several years later, another individual drove Vandeinse’s vehicle into a bicyclist. The bicyclist filed a complaint against Vandeinse, the driver, and the Michigan Automobile Insurance Placement Facility (MAIPF). USA was then added as a defendant, and Citizens—the assignee from the MAIPF—was substituted for the MAIPF. Citizens moved for summary disposition, arguing that USA’s policy of selling collision and comprehensive coverage but not mandatory no-fault coverage was a violation of MCL 500.3101(1) “and against the public policy of the state to ensure that all drivers have mandatory no-fault coverage. Moreover, Citizens argued that USA and the insurance agent misrepresented the type of insurance, therefore, necessitating reformation.” The trial court agreed with Citizens, and reformed USA’s insurance policy to include no-fault coverage, liability coverage, and property damage.
In reversing the trial court’s reformation of USA’s contract, the Court of Appeals first noted that the policy was not purchased based on any misrepresentation made by USA. Moreover, the Court noted that reformation was only available when there was a mistake of fact and not a mistake of law. The Court determined that Vandeinse’s belief he had no-fault insurance coverage was a mistake of law, not a mistake of fact. The Court of Appeals held that because there was no mistake of fact, the policy could not be reformed and there was no further need to determine whether USA committed any fraud. The Court stated, in pertinent part:
As a preliminary matter, we first differentiate between a mistake of fact and a mistake of law. Reformation is permissible on evidence of a mistake of fact, not a mistake of law. A mistake of law is “a mistake by one side or the other regarding the legal effect of an agreement.” Casey, 273 Mich App at 398. Here, USA correctly asserts that the only mistake alleged by Vandeinse was his belief concerning his insurance coverage. Vandeinse stated after the accident that he believed he had “full coverage,” because that is what he requested from his insurance agent. However, Vandeinse’s mistaken belief that he had “full coverage” was simply a mistake about the legal effect of his insurance policy, which is a mistake of law—not fact. Therefore, Vandeinse is not entitled to reformation of the insurance policy.
Additionally, Citizens claims that Vandeinse made a mistake of fact because he mistakenly believed that his policy provided full coverage that could then be used to finance his car and register it with the Michigan Secretary of State. Even if, as Citizens argues, Vandeinse should not have been able to legally finance and register his car using the USA insurance policy, the fact remains that he did indeed finance his new car and register it with the Secretary of State. Vandeinse accomplished exactly what he intended to do when he purchased his insurance policy; thus, there was no mistake of fact at all. Because there is no mistake of fact sufficient to reform the contract, this Court need not determine whether USA committed fraud. Thus, reformation on this basis was error.
The Court of Appeals also determined that USA did not violate the no-fault act or public policy when it issued Vandeinse a policy with only collision and comprehensive coverage. The no-fault act does not bar any such practice, nor has the Michigan Legislature:
Section 3101(1) is clear that an insurer providing mandatory no-fault coverages has the discretion to “allow the insured owner or registrant of the motor vehicle to delete a portion of the coverages under the policy and maintain the comprehensive coverage portion” so long as the “motor vehicle . . . is not driven or moved on a highway.” MCL 500.3101(1). The no-fault act, however, does not bar, let alone address, an insurer’s ability to sell optional insurance coverages only. In this case, the USA policy did not provide the mandatory no-fault coverages to Vandeinse. Indeed, USA does not offer mandatory coverages to any customers; it only sells collision and comprehensive policies, which, according to Vandeinse’s insurance agent, are to be bundled with other insurance policies for a reduced premium. Because the no-fault act does not bar this practice, it does not violate Michigan law, and we cannot read into the statute something that is not there.
. . .
While we agree that Citizens raises real concerns, the fact remains that the Michigan Legislature has not expressly barred insurance companies from offering optional coverages as stand-alone policies. The parties readily acknowledge that there are circumstances when a person may want to purchase limited coverages that do not meet the requirements of the no-fault act. For instance, limited coverage is entirely appropriate when the vehicle will not be operated on public roads or if, as asserted by Vandeinse’s insurance agent, the insured can obtain less expensive mandatory and optional coverages from multiple carriers. MCL 500.3101(1) puts the onus on the insured to obtain the necessary coverages to meet the requirements of the no-fault act. The legislature has not imposed the same duty on insurers. To do so would require insurers to verify that every insured who has purchased polices from more than one carrier has procured all the necessary insurance needed to satisfy the no-fault act. It is the role of the legislature to balance these types of policy considerations, not this Court. Here, USA’s policy is crystal clear that it included coverage for physical damage only and did not meet the requirements of the no fault act. Vandeinse initialed these contract provisions, indicating he understood the scope of the coverage he purchased. Vandeinse’s insurance agent even testified that she explained to Vandeinse what each type of coverage entailed. There was no misrepresentation. While it is true Vandeinse was able to purchase and register his vehicle using USA’s policy, this was not because USA failed to alert Vandeinse or anybody else that the policy did not conform to the no-fault act. The insurance application, the insurance policy itself, and the certificate of insurance all provided notice that the USA policy did not comply with the requirements of the no-fault act. The obligation is on the owner or registrant to procure the proper no-fault coverages. MCL 500.3101(1). Therefore, the trial court erred when it reformed USA’s policy as violative of public policy.
Judge Beckering, dissenting, argued that an insurance company ought not be allowed to sell only the non-mandatory portions of an automobile insurance policy, without providing any of the mandatory coverages required by the No-Fault Act.
