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Webb v Progressive Marathon Ins Co (COA - UNP 1/28/2021; RB #4212)

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Michigan Court of Appeals; Docket # 351048; Unpublished
Judges Jansen, Servitto, and Riordan; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


STATUTORY INDEXING:
Misrepresentation / Fraud as a Basis to Rescind Coverage

TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies


SUMMARY:
In this unanimous unpublished per curiam opinion, the Court of Appeals reversed the trial court’s denial of defendant Progressive’s motion for summary disposition on the issue of Progressive’s ability to rescind the insurance policy at issue based on fraudulent procurement by the plaintiff Webb’s mother and remanded the issue of whether plaintiff was an innocent third party in the fraudulent procurement of the policy. In doing so, the Court found that the evidence in the record was clear that plaintiff’s mother committed fraud in the procurement of the insurance policy at issue, and that a question of fact remained as to whether plaintiff participated in the fraudulent procurement of the policy.

This case arose from an accident involving plaintiff, who was driving a vehicle registered to his mother and insured in her name. Plaintiff was not listed as a driver or a member of his mother’s household on the policy. Progressive sought to deny coverage because plaintiff’s mother did not disclose on her application for insurance that plaintiff lived with her. Two telephone calls recordings between the plaintiff’s mother and Progressive’s agents were disclosed during the course of discovery, which showed that during the first call plaintiff’s identity and residence in the home were disclosed. However, during the second call, the topic of who was in the household did not come up, and when plaintiff spike with the insurance agent to make payments for the policy, he indicated he was a “friend.” When plaintiff’s mother submitted the application for insurance, plaintiff was not listed as a resident relative in the household and was not added after receiving the completed application from defendant, which plaintiff’s mother signed and returned. The trial court denied defendant’s motion for summary disposition, concluding that there were “genuine issues of material fact regarding whether [plaintiff’s mother] committed fraud when submitting the application for insurance.” The trial court further concluded that plaintiff was innocent to his mother’s fraud and “when balancing the equities between [plaintiff’s] need for coverage and [defendant’s] desire to avoid liability, those equities favored [plaintiff].

On appeal, the Court first considered defendant’s argument that the trial court erred when it concluded that “factual issues precluded summary disposition on the issue of whether [plaintiff’s mother] committed fraud when submitting her application for insurance.” The Court agreed, finding that Progressive  was entitled to rescind its policy as it pertained to plaintiff’s mother in its entirety, as “(1) the policy was procured through [plaintiff’s mother’s] misrepresentation that no one else lived in her household, and this misrepresentation was material; (2) the representation was false, as [plaintiff’s mother] was not the sole member of her household, nor would she be the primary driver of the vehicle; (3) [plaintiff’s mother] knew that she was not the sole member of her household and that she was not the sole driver of the vehicle; (4) [plaintiff’s mother] made the misrepresentation with the intent that she would obtain insurance, as evidenced by [her] signature on the insurance application that contained the misrepresentation; (5) [defendant] relied on the misrepresentation in issuing the insurance policy; and (6) [defendant] was injured where it would not have ordinarily issued the policy according to its underwriting guidelines and for a decreased premium as the actual risk of providing the insurance was not fully contemplated.” Thus, the Court concluded that Progressive was entitled to summary disposition on the issue of whether plaintiff’s mother committed fraud when procuring the policy.

Next, the Court turned to Progressive’s argument that “the trial court erred when it concluded [plaintiff] was an innocent party with respect to [his mother’s] fraud.” Progressive contended that plaintiff had conspired with his mother to defraud Progressive, as evidenced by his statements to the insurance agent that he was a “friend.” The Court concluded that a question of fact remained as to whether plaintiff participated in the fraudulent procurement of the insurance policy, and that the trial court had erred by finding plaintiff was an innocent third party and engaging in a balancing of the equities analysis. Thus, the Court reversed and vacated the portion of the trial court’s order denying defendant’s motion for summary disposition and remanded the issue of whether plaintiff was an innocent third party for further proceedings consistent with its opinion.

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