Michigan Court of Appeals; Docket #355242, 355956, and 355960; Unpublished
Judges Boonstra, Gleicher, and Letica; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]
Definition of Owner [§3101(2)(h)]
Exception to General Priority for Non-Occupants [§3115(1)]
Cancellation and Rescission of Insurance Contracts
In this unanimous unpublished per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Eric Rush’s first-party action against Defendant Allstate Fire & Casualty Insurance Company (“Allstate”). The Court of Appeals held that a question of fact existed as to whether Toron and Deshalon Brownlee, who were named insureds on a no-fault insurance policy issued by Allstate, were constructive owners of a vehicle titled and registered in their son’s name and which their son was driving when he crashed into Rush, a pedestrian who did not have his own no-fault insurance policy. As a result, the Court held that a question of fact existed as to whether, based on the priority rules set forth in MCL 500.3115, prior to the no-fault reforms passed under 2019 Public Acts 21 and 22, Allstate was higher in the order of priority for payment of Rush’s no-fault PIP benefits related to the crash.
Eric Rush was injured in December of 2017 when he was struck by a Ford Focus being driven by Devaughn Harrell, Toron and Deshalon Brownlee’s son. Harrell purchased the Ford Focus one year prior with help from his parents, and the car was titled and registered in his name. When the Brownlees renewed their Allstate policy, they added the Focus but did not disclose that Harrell had obtained his driver’s license in July of 2016, did not add Harrell as an insured or additional driver, and did not notify Allstate that Harrell was the registered owner of the vehicle.
Just prior to the accident, in September of 2017, a house fire forced Harrell and the Brownlees to move out of the house they shared. Prior to the fire, the Brownlees and Harrell shared regular access to the Ford Focus, Deshalon had her own key to the vehicle, the Brownlees made the insurance payments and all or part of each monthly payment on the loan for the vehicle, and the Brownlees placed restrictions on Harrell’s use of the vehicle.
After the fire, the Brownlees and Harrell relocated to a hotel, which was a temporary arrangement and which Allstate, the Brownlees' homeowners insurer, was aware. In October of 2017, the Brownlees renewed their no-fault policy, but again did not add Harrell as an insured or additional driver. Also in October, Harrell moved out of the hotel and moved in with his uncle until the family home was repaired. Harrell took the vehicle with him to his uncle’s house, then two months later, the subject crash occurred.
After the crash, Rush, who did not have no-fault insurance of his own, sought no-fault PIP benefits from Allstate under the Brownlees’ policy, pursuant to the priority rules set forth in MCL 500.3115, prior to the reforms in 2019 Public Acts 21 and 22. Allstate denied Rush’s claim and moved for summary disposition in his subsequent first-party action, arguing, among other things, that (1) Harrell had to maintain security for the Focus personally, because he, and not his parents, was its sole owner, and (2) the Brownlees were not constructive owners of the Focus for purposes of the former MCL 500.3115(1)(a), because they did not have shared access to the vehicle for more than 30 days prior to the accident, given that Harrell had moved in with his uncle and taken the Focus with him in October of 2017. Furthermore, Allstate argued that it was entitled to void the Brownlees’ policy ab initio because of material misrepresentations the Brownlees made regarding the Focus and Harrell’s status as an additional driver. The trial court agreed with Allstate and dismissed Rush’s first-party against it, without addressing the issue of fraud.
The Court of Appeals reversed the trial court’s ruling that, as a matter of law, the Brownlees were not owners of the Ford Focus for purposes of MCL 500.3115(1)(a). The Court observed, preliminarily, that constructive ownership does not depend on whether or not the purported constructive owner actually used the vehicle during the 30-day period contemplated in MCL 500.3101(3)(l)(i), but rather whether the person had the right to use the vehicle during that period. In this case, even though Harrell had moved to his uncle’s house two months prior to the accident and taken the vehicle with him, that was not necessarily dispositive of the question of whether the Brownlees maintained constructive ownership during that time. The Court adduced the following facts as creating a question of fact as to whether the Brownlees maintained constructive ownership during that time: the Brownlees continued to pay the insurance, as well as most or all of the payments on the loan for the vehicle, and Deshalon kept her own key to the vehicle until the family was reunited. In summation, “even though the Brownlees did not actually use the vehicle after October 2017, they intended to and did retain the right to use vehicle as an owner at the time of the accident.”
“Viewing the evidence in the light most favorable to Rush and Breakthrough, a factual question regarding the Brownlees’ ownership interest precluded summary disposition. Before the September 2017 house fire, Harrell resided with the Brownlees and the vehicle was garaged at the family home. Although Harrell was the titled owner and secured a loan for the vehicle in his name, Deshalon used the vehicle without seeking Harrell’s permission. She had her own car key, paid the full amount of the insurance coverage, helped financially with the down payment, and paid all or part of each monthly payment. The Brownlees also placed restrictions on Harrell’s use of the vehicle because he was a young, new driver. At the time of the accident, the Brownlees were living in a hotel and Harrell was living with a relative. Living apart was intended to be a temporary situation while their home was repaired; Deshalon believed that Harrell would move back into the family home with them. During this temporary situation, the Brownlees did not have easy access to the Focus. Yet even after their separation, the Brownlees continued to pay the insurance and made most or all of the vehicle payments. Deshalon kept her own key to the vehicle until it was repossessed in 2018.
. . .
The Brownlees heavily subsidized the purchase and maintenance of the vehicle not only for Harrell’s use, but also for use as a ‘household vehicle.’ This did not end when Harrell temporarily moved in with his uncle. Even though the Brownlees did not actually use the vehicle after October 2017, they intended to and did retain the right to use the vehicle as an owner at the time of the accident. This was enough to create a triable issue of fact. Although there is evidence to the contrary, we must not weigh factual and credibility issues at the summary disposition phase. Bank of America, NA v Fidelity Nat’l Title Ins Co, 316 Mich App 480, 512; 892 NW2d 467 (2016). Summary disposition based on an absence of constructive ownership was improper.”
Thus, the Court of Appeals remanded to the trial court for resolution of that issue, as well as for the trial court to weigh the equities and determine whether Allstate could deny Rush’s claim under the Brownlees’ policy as a result of the Brownlees’ alleged misrepresentations. Regarding the instruction to the trial court to balance the equities, the Court of Appeals offered the following guidance:
“We provide the following guidance to the circuit court. First, the plain language of the Allstate policy does require its insureds to keep the insurer up-to-date regarding the licensed drivers in the home, the vehicles covered, and where those vehicles are primarily garaged. The policy further warns insureds that the policy will be voided in the event of a misrepresentation or concealed material fact related to ‘information of vehicles insured on this policy, disclosure of resident operators, and the address where vehicles are principally garaged[.]’ Second, any claim by Allstate that it was unaware of the Focus’s garage location while Harrell lived in the hotel with his parents cannot be sustained. Allstate insured the Brownlees’ home as well as their vehicles, and was fully aware that the family had moved to a hotel while their home was being repaired. Third, we note that although much of this confusion could have been avoided had Allstate asked for a copy of the insured vehicle’s title and registration and by following up on Deshalon’s statement that the car was purchased for her son, Allstate had no duty to do so. ‘[A]n insurer has no duty to investigate or verify the representations of a potential insured[,]’ even if reasonable diligence in conducting further investigation would have revealed the misrepresentation before the insurer issued the policy. Titan Ins Co, 491 Mich at 570. ‘To hold an insurer to a different and higher standard, one that would require it affirmatively to investigate the veracity of all representations made by its contracting parties . . ., would represent a substantial departure from the well-established understanding of fraud.’ Id. at 571. Finally, we note that an insurer may only rescind an insurance policy if it refunds any premium collected after the effective date of the cancellation. See Burton v Wolverine Mut Ins Co, 213 Mich App 514, 520; 540 NW2d 480 (1995).”