Michigan Court of Appeals; Docket #322240; Unpublished
Judges Talbot, Beckering, and Gadola; Unanimous, Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
Fraud/Misrepresentation
CASE SUMMARY:
In this unanimous unpublished per curiam Opinion involving underinsured motorist coverage and allegations of fraud stemming from an auto accident in which the insured's daughter was injured, the Court of Appeals issued several holdings:
1) the trial court properly rescinded the insured's no-fault policy, because the insured engaged in fraud when detailing the circumstances surrounding her daughter's auto accident;
2) an award of restitution to Secura Insurance, which included attorney fees, must be vacated and remanded, because the trial court never set forth the basis for the award;
3) an award of restitution to Secura for the PIP benefits it had paid to the insured's daughter must be left undisturbed, because the issue was not properly before the appellate court; and
4) the insured's daughter was not jointly and severally liable for the full amount of any restitution that was ultimately awarded, because there was no basis in the policy for imposing joint and several liability.
Defendant, Joy Thomas, was in an auto accident in Georgia while driving a Chevy Impala. The Impala was insured by her mother, Delores Swingler-Reid, under a Michigan no-fault policy. When Swingler-Reid added the vehicle to the policy, she represented that she owned it, when in fact she did not. Plaintiff Secura Insurance paid PIP benefits to defendant. Defendant then sought UIM benefits from plaintiff. Plaintiff filed this declaratory action seeking to rescind the policy, claiming Swingler-Reid was not the owner of the Impala and that both Swingler-Reid and defendant had made material misrepresentations about the ownership of the Impala. When plaintiff deposed defendant and her mother, they testified that Swingler-Reid had driven the Impala to Georgia and that defendant was using the vehicle to run errands at the time of the accident. While the UIM litigation was ongoing, Swinger-Reid filed an action against Secura for two other accidents. In that suit, Swinger-Reid testified that she was in Michigan receiving medical care at the time of defendant's accident. Her medical records supported this version of events. Plaintiff moved for summary disposition, claiming the policy was void due to defendant's fraud or misrepresentations.
Secura sought the following as restitution: 1) PIP benefits paid to defendant; 2) costs, expenses, and attorney fees for the Georgia lawsuit; 3) costs, expenses, and attorney fees in the present case; 4) PIP benefits paid in Swingler-Reid's other claims; and 5) costs, expenses, and attorney fees in Swingler-Reid's other lawsuit. The trial court granted plaintiff's motion, stating the policy was "voided and/or rescinded" as to the Impala. The trial court ultimately awarded $68,787.24 in damages to plaintiff.
On appeal, the Court of Appeals held: 1) the trial court properly granted summary disposition in favor of plaintiff and rescinded the policy, and 2) the trial court's award of damages to plaintiff had to be vacated, except for the PIP benefits that were paid.
Policy Rescission
The Court of Appeals found that rescission of the policy was justified pursuant to the terms of the policy, and it did not have to address the elements of actionable fraud. In this regard, the Court said:
"The claim at issue in this case involved underinsured motorist coverage, which is optional coverage not mandated by statute. ... Thus, the express terms of the contract governed the claim. The relevant policy provision provided, in pertinent part, that the policy would be void 'if, whether before or after loss, an insured has' '[m]ade false statements . . . [r]elating to this insurance.' This provision is clear and unambiguous: Secura was entitled to void the policy if an insured, at any time, made false statements relating to the policy. ... Notably, by Swingler-Reid's own admission, she was never in Georgia in February 2010, but was rather in Michigan receiving medical care in connection with her October and December 2009 accidents. Her medical records confirmed as much. As such, because Thomas and Swingler-Reid both made false statements regarding the February 8, 2010 accident, Secura was entitled, under the plain terms of the policy, to void the policy."
Regarding defendant's argument that plaintiff was precluded by MCL 500.2123 from cancelling the policy because it failed to provide notice, the Court of Appeals held that §2123 was inapplicable because it governs the cancellation of policies, not rescission.
Damages
The Court of Appeals held that plaintiff was entitled to some damages, but not the entire amount awarded by the trial court.
Regarding attorney fees, the Court of Appeals vacated this part of the award, instructing the trial judge on remand to articulate a basis for awarding the fees. The Court noted it has recognized an exception to the rule for situations where a party has incurred legal expenses as a result of another party's fraudulent or unlawful conduct. However, the trial court did not make any findings regarding whether an award of attorney fees was proper in light of this exception, the Court said.
As to defendant's argument that the trial court erred by requiring her to make restitution to Secura for the PIP benefits it paid for the accident in Georgia, the Court of Appeals held this issue was not properly before the court and, therefore, did not address it.
Regarding defendant's argument that the trial court erred in holding her and Swingler-Reid jointly and severally liable for the full restitution award, the Court of Appeals agreed. In this regard, the Court said:
"The trial court granted the remedy of restitution, based on its decision to rescind the policy. While a contract — such as the insurance policy at issue — can provide for joint and several liability,... we are unable to find any basis in the policy for imposing joint and several liability in the instant case. Nor has Secura pointed to any provision of the policy indicating that Thomas — who is not a party to the contract but can best be described as a third-party beneficiary with regard to her claims under the policy — should be jointly and severally liable for restitution on a contract for conduct having nothing to do with her or with her status as a third-party beneficiary."
In conclusion, the Court of Appeals vacated "all aspects" of the trial court's damages award, except the restitution award to Secura, and affirmed summary disposition for Secura as to whether it could rescind the policy based on the terms of the policy itself. The Court remanded the case and held that, if the trial court decided to award attorney fees, it must state the basis for doing so on the record.
