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Auto Club Ins Assoc v Corporate Limousine Inc, et al  (COA – UNP 6/17/2021; RB #4280) 

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Michigan Court of Appeals; Docket #345965; Unpublished
Judges  Redford, Borrello, and Tukel;  Per  Curiam
Official Michigan Reporter Citation: Not  Applicable; Link to Opinion


STATUTORY INDEXING:
Determination of Domicile [§3114(1)]

TOPICAL INDEXING: 
Cancellation and Rescission of Insurance Policies
Innocent Third-Party Doctrine


SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s various rulings in favor of Plaintiff Auto Club Insurance Association (“Auto Club”) in Auto Club’s underlying action against Defendant American Country Insurance Company (“American Country”). American Country insured a motor vehicle that struck and injured a pedestrian, Brian Miller, who subsequently sought PIP benefits through the Michigan Assigned Claims Plan (“MACP”), which in turn assigned his claim to Auto Club. After paying approximately $635,232.15 in PIP benefits to Miller, Auto Club filed its lawsuit against American Country, asserting that American Country was liable to reimburse it for all amounts paid to Miller, plus future amounts incurred by Miller for his collision-related injuries. The trial court issued numerous rulings in favor of Auto Club, all of which were affirmed by the Court of Appeals. Specifically, the Court of Appeals held that Miller was not domiciled at his father’s residence on the date of the collision, which would have rendered his father’s insurer, Auto Owners Insurance Company (“Auto Owners”), a higher priority insurer than American Country. The Court of Appeals next held that the trial court properly considered the innocent third-party doctrine and balanced the equities between Auto Club and American Country in disallowing American Country from rescinding the policy that covered the subject motor vehicle on the basis of fraud. Lastly, the Court of Appeals held that the trial court did not err in ruling that the doctrine of laches did not operate to bar Auto Club’s action against American Country, because even though Auto Club waited five years to file its action, the applicable statute of limitations for insurer reimbursement actions is six years, and the doctrine of laches is simply inapplicable where a complaint is filed within the applicable statute of limitations.

Miller did not have his own policy of automobile insurance at the time he was struck by a Dodge Caravan owned by Corporate Limousine, so he sought PIP benefits from the MACP. The MACP assigned his claim to Auto Club, who paid approximately $635,232.15 in PIP benefits to Miller over the ensuing five years, at which point it filed the underlying action against American Country. Auto Club asserted that American Country was the highest priority no-fault insurer responsible for Miller’s benefits because American Country insured the Dodge Caravan. American Country moved for summary disposition, arguing that it was not the highest-priority no-fault insurer because Miller was domiciled with his father at the time of the collision, and that his father’s no-fault insurer, Auto Owners, was therefore highest in priority. The trial court denied American Country’s motion, because even though Miller listed his father’s address on the police report and his driver’s license, and even though he received mail at his father’s house and moved into his father’s house after the collision, the testimony of both his father and mother made it clear that, at the time of the collision, Miller had not lived there for several years and had no plans to return.

In its cross-claim against Corporate Limousine, American Country moved for entry of a default judgment of rescission of its policy with Corporate Limousine, arguing that Corporate Limousine committed fraud by adding the vehicle that hit Miller to its policy on the same day of the collision before informing American Country that the collision had occurred. The trial court denied American Country’s motion after weighing the equities between two parties innocent of the alleged fraud—Auto Club and American Country—and determining that rescission was not appropriate.

American Country filed its last motion for summary disposition based on the doctrine of laches, arguing that Auto Club impermissibly waited for five years to file its lawsuit despite knowing since 2011—the year the collision occurred—that American Country was perhaps an insurer of higher priority. The trial court denied this motion as well, because Auto Club filed its claim within the applicable six-year statute of limitations, thereby rendering the doctrine of laches inapplicable.

On appeal, the Court of Appeals first affirmed the trial court’s ruling regarding Miller’s domicile at the time of the collision. The Court reviewed the testimony of Miller’s father and stepmother, who confirmed that Miller did not have a bedroom at his father’s house at the time of the collision, that Miller was banned from his father’s home at the time of the collision due to drug-related issues, that no one ever came to his father’s home expecting to visit Miller, that the only mail he received at his father’s home was ‘junk’ mail, that he never stored anything at his father’s home, that packages were never sent to his father’s home, and, perhaps most importantly, that Miller had been married twice and lived with his respective wives since approximately 2007. Based on these facts, the Court of Appeals held that the trial court did not err in ruling as a matter of law that Miller did not reside and did not intend to reside at his father’s house at the time of the collision.

"Here, Miller’s father acknowledged that Miller was residing at his house at the time of the deposition, that ‘[h]e’s got mail at [his] house ever since we moved there,’ and that he ‘never, ever changed his address no matter where he’s moved, when he was married or anything.’ However, Miller’s father testified that Miller did not have a bedroom or anything else at his house at the time of the accident. In fact, Miller’s father said he refused to let his son in the home because of drug-related issues he was having prior to the accident. Miller’s father explained that his son said ‘he stayed with some friends . . . in Detroit.’ According to Miller’s father, the last time his son lived at his house “on a permanent basis” was ‘[r]ight after he got out of the Army whenever that was, and he stayed there for a few months, and then he got a place with his new wife there in Ypsi[lanti] somewhere . . . ’ After that marriage ended, Miller’s father testified, his son remarried and lived with his new wife in Belleville and then Ypsilanti before they too divorced. Miller’s father confirmed that, other than the occasional times when Miller stayed over, the last time Miller ‘actually lived with’ him was ‘after [Miller] got out of the Army’ in 2007.

Miller’s stepmother testified that Miller lived with them before his marriages, but afterwards ‘maybe spen[t] a night or two but never officially lived there.’ She testified that the last time he lived at their home was in 2007 or ‘maybe even before that.’ Like her husband, Miller’s stepmother denied that Miller had a bedroom there and described the mail that he received there as nothing more than ‘junk’ mail. She denied that anyone would ever come to their home expecting to visit Miller, that packagers were ever sent to him there, or that he stored anything at the home. She testified that ‘there were definitely not any’ plans for Miller to live there until the accident left her and her husband with no choice.

In light of this testimony, the trial court did not err in concluding that Miller neither resided in nor intended to reside at his father’s house on the day of the accident. While, as the trial court recognized, ‘Miller did retain his father’s address as his mailing address and used his father’s address on his driver’s license and other documents,’ as the trial court also recognized, the strength of that evidence was ‘outweighed’ by the fact that he ‘has not resided in his father’s residence since approximately 2007’ and had no intention of ever returning to live there. We discern no error in the trial court’s holdings on this issue. In light of that evidence, no factfinder could reasonably find that Miller had established his father’s home as his domicile, as he had not resided there and had no intention of doing so. Accordingly, American Country is not entitled to relief on this issue."

The Court of Appeals next held that the trial court did not err in disallowing American Country from rescinding the policy which covered the Dodge Caravan based on Corporate Limousine’s purported fraud. The Court of Appeals examined the factors set forth by the Supreme Court in Bazzi v Sentinel Ins Co, 502 Mich 390 (2018) for weighing the equities and determining whether a fraudulently procured policy of insurance can be rescinded with respect to innocent-third parties claiming benefits thereunder, as well as the factors set forth by Justice Markman in his concurrence in Farm Bureau Gen Ins Co of Mich v ACE American Ins Co, 503 Mich 903; 919 NW2d 394 (2018). Ultimately, based on these factors, the Court of Appeals held that, in this case, both American Country and Auto Club were equally innocent parties with respect to Corporate Limousine’s purported fraud, and thus the trial court’s denial of American Country’s motion for entry of a default judgment of rescission was not outside the range of principled outcomes.

The Court of Appeals further rejected American Country’s argument that rescission was appropriate given the mere fact that Auto Club would be reimbursed by the MACP in the event that rescission was granted, and thus would not have to bear its loss alone, whereas American Country would have to bear its loss alone if rescission were not granted. The Court of Appeals rejected this argument because such a holding would mean that the MACP-assigned insurer would always lose in cases where the party seeking rescission and the MACP-assigned insurer are equally innocent.

"We conclude that the trial court’s decision that American Country failed to meet its burden with respect to rescission did not fall beyond the range of principled outcomes. As the trial court concluded and all parties seemingly agree, American Country and Auto Club are both equally innocent when it comes to Corporate Limousine’s purported fraud. American Country was the party purportedly defrauded when Corporate Limousine requested insurance coverage for the vehicle involved in the accident after the accident had occurred. While there was no evidence supporting the allegation that Corporate Limousine specifically asked for coverage before the accident, the fact that Corporate Limousine requested coverage for a vehicle on the same day as the accident without disclosing that the same vehicle had been involved in an accident earlier that day involves no misconduct by American Country. Likewise, however, Auto Club was merely assigned by the MACP to administer Miller’s claim for PIP benefits, meaning it engaged in no misconduct. Consequently, ‘neither party is more or less ‘innocent’ than the other . . . ’ Farm Bureau Gen Ins Co of Mich, 503 Mich at 905 (MARKMAN, J., concurring), citing Gardner, 279 Mich at 469."

Lastly, the Court of Appeals affirmed the trial court’s determination that Auto Club’s lawsuit was not barred by the doctrine of laches. The applicable statute of limitations for Auto Club’s action was six years, and Michigan case law makes it clear that an action brought within the applicable statute of limitations is presumptively reasonable, and that the doctrine of laches has no applicability in such actions.

"Here, it is undisputed that Auto Club filed its lawsuit against American Country within the applicable statute of limitations. Under MEEMIC, 460 Mich at 200, ‘because [Auto Club] filed this case within the six-year period of limitation, any delay in the filing of the complaint was presumptively reasonable, and the doctrine of laches is simply inapplicable.’ (Emphasis added.) Any conclusion to the contrary would ‘act to shorten a period of limitation,’ something that the Michigan Supreme Court has made clear the doctrine of laches simply will not do. Id. This is precisely the reasoning that the trial court relied on in reaching its decision, and American Country does not offer any meaningful challenge to that reasoning on appeal. Accordingly, American Country is not entitled to relief on this issue."

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