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Mullen v. Progressive Marathon Ins. Co., et al. (COA – UNP 10/22/2020; RB #4166)

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Michigan Court of Appeals; Docket # 350015; Unpublished
Judges Boonstra, Markey, and Fort Hood; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


STATUTORY INDEXING:
General / Miscellaneous [§3173]

TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies


SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order in favor of defendant Progressive Marathon Insurance Company (Progressive), and reversed the trial court’s summary disposition orders in favor of defendant Michigan Automobile Insurance Placement Facility (MAIPF).  As to Progressive, the Court of Appeals held that the trial court properly balanced the equities before determining that Progressive was entitled to rescind the automobile insurance policy in question, but as to the MAIPF, the Court of Appeals held (1) that the MAIPF should have assigned the plaintiff’s claim for no-fault PIP benefits, because the plaintiff’s claim was not “obviously ineligible” for assignment, and (2) that the plaintiff was entitled to pursue PIP benefits directly from the MAIPF because the MAIPF failed to assign his claim to a servicing insurer.

Ronald Allen Mullen was involved in a motor vehicle crash, and at the time of the crash, Mullen’s license was suspended.  His wife, Valerie Mullen, had an automobile insurance policy with Progressive, and subsequently filed a claim for PIP benefits on behalf of her husband. Shortly thereafter, Progressive discovered that Valerie had failed to list Ronald as a household resident on her application for insurance, and thus denied Ronald’s claim, voided Valerie’s policy, and refunded her the full amount of premiums paid.  Ronald then submitted an application for PIP benefits to the MAIPF, but the MAIPF declined to assign his claim to an insurer.

Both Progressive and the MAIPF moved for summary disposition in Ronald’s subsequent first-party action against them.  The MAIPF argued that Ronald could not seek PIP benefits directly from it because the MAIPF is not, itself, an insurer, and further that it was never required to assign Ronald’s claim because the Progressive policy was valid at the time of the collision.  Progressive argued that it was entitled to declare Valerie’s policy void ab initio considering her failure to list Ronald as a household resident on her application for insurance, and that her misrepresentation was material because it resulted in a lower premium.  Ultimately, the trial court granted summary disposition in favor of both Progressive and the MAIPF.

The Court of Appeals affirmed the trial court’s summary disposition order in favor of Progressive, holding that the trial court properly balanced the equities before determining that Progressive was entitled to rescind the policy with respect to Ronald’s claim under it, in accordance with the Supreme Court’s decision in Bazzi.v Sentinel Ins Co, 502 Mich 390 (2018).  Furthermore, the Court of Appeals held that the trial court properly applied the five-factor equity balance test set forth by Chief Justice Markman in Farm Bureau Gen Ins Co of Mich v ACE American Ins Co, 503 Mich 903 (2018) before making its determination.

Considering all of the facts and circumstances of this case, the trial court did not abuse its discretion by holding that the balance of the equities weighed in favor of granting Progressive’s request to rescind the policy. Our own review of the Markman factors supports this conclusion. The first Markman factor, regarding whether the insurance company could have discovered the fraud before the accident occurred, weighs in favor of Progressive. Farm Bureau, 503 Mich at 906-907 (MARKMAN, C. J., concurring). There is no evidence that Progressive could have done more to discover the truth of Valerie’s misrepresentations, nor did Progressive “owe a duty to the insured to investigate or verify [an] individual’s representations or to discover intentional material misrepresentations.” Hammoud v Metro Prop and Cas Ins Co, 222 Mich App 485, 489; 563 NW2d 716 (1997). The second factor, concerning whether plaintiff’s relationship to Valerie suggested that he had knowledge of the fraud, weighs in favor of Progressive. Farm Bureau, 503 Mich at 906-907 (MARKMAN, C. J., concurring). Again, Valerie testified that she had told plaintiff that he was not included as a driver on her insurance policy.

The third factor, regarding whether plaintiff’s conduct contributed to the accident, also weighs slightly in favor of Progressive. Id. (MARKMAN, C. J., concurring). Although there was no evidence presented that plaintiff had caused the accident, plaintiff nonetheless knew that he was not supposed to drive with a suspended license. Had he not chosen to do so, he would not have been involved in the accident. The fourth factor, which concerns whether plaintiff has an alternate avenue for recovery, weighs in favor of Progressive, because, as discussed later in this opinion, plaintiff could seek recovery of PIP benefits from MAIPF instead of Progressive if the insurance policy was deemed void ab initio and rescinded. Id. (MARKMAN, C. J., concurring). Finally, the fifth factor, regarding whether enforcing the policy would only relieve Valerie of her personal liability to plaintiff, does not apply in this case. Id. (MARKMAN, C. J., concurring). There is no evidence that Valerie is personally liable to plaintiff for his injuries from the accident.

The Court of Appeals reversed the trial court’s summary disposition orders in favor of the MAIPF, however, holding first that the MAIPF did have a duty to assign Ronald’s claim, because his claim was not “obviously ineligible” for assignment.  MCL 500.3173a only allows the MAIPF to deny claims that are “obviously ineligible,” and because Valerie’s policy with Progressive was void ab initio, Ronald’s claim was not “obviously ineligible” for assignment.  The Court of Appeals further held that Ronald was entitled to seek PIP benefits directly from the MAIPF, in light of the Court of Appeals’ holding in Mich Head & Spine Institute, PC, ___ Mich App ___ (2020)—which had not yet been decided when the trial court granted the MAIPF’s motion.  In Mich Head & Spine, the Court of appeals “held that claimants may obtain PIP benefits directly from MAIPF if MAIPF has not assigned the claim to a servicing insurer.”  In this case, the Court of Appeals held that Mich Head & Spine should be applied retroactively, and that the trial court therefore erred in granting the MAIPF’s motion for summary disposition.  Accordingly, the Court of Appeals remanded for further proceedings.

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