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Lake States Insurance Company v Wilson; (COA-PUB, 8/21/1998; RB #2018)


Michigan Court of Appeals; Docket No. 200038; Published  
Judges Doctoroff, Fitzgerald, and Talbot; Unanimous; Per Curiam  
Official Michigan Reporter Citation:  231 Mich App 327; Link to Opinion alt   

Coordination with Other Health and Accident Medical Insurance [§3109a]  

Reformation of Insurance Contracts  
Cancellation and Rescission of Insurance Policies
Equitable Estoppel   

In this unanimous per curiam published Opinion, the Court of Appeals permitted reformation of a non-coordinated PIP policy to make it a coordinated policy where the insured and her independent agent had made material misrepresentations in the application for coverage. The court, in reaching its conclusion, determined that non-coordinated PIP coverage is "excess coverage," and therefore, optional coverage within the meaning of MCLA 257.520(g), which permits rescission of an insurance policy to void optional coverage obtained through fraud or misrepresentation.

Lake States sought to reform a no-fault insurance policy purchased by June Wilson through the Larkin Insurance Group. On the application which was signed by her, June Wilson was the only person listed in a block labeled "Resident and Driver Information." This information was incorrect, in that there were five persons living in the Wilson household. Subsequent to the application, Lake States sent a written request to the agent requesting the name, date of birth and driver's license number for all persons in the Wilson household. Before receiving the agent's response, Lake States issued a non-coordinated no-fault policy for June Wilson. Subsequently, the agent responded to the prior request for information indicating "none" as to the questions concerning licensed drivers. These responses provided in the application and by the agent were incorrect, in that among the additional residents in the household was a Donna Wilson who had been previously convicted of driving under the influence of alcohol. Lake States asserted that Donna Wilson was ineligible for motor vehicle insurance, and therefore, Lake States would not have written the policy had it known that Donna Wilson resided in the household.

Prior to Lake States' discovery of the incorrect information, a motor vehicle accident occurred in which a different resident of the same household was injured while occupying a vehicle driven by her cousin. The injured party was covered by a health insurance policy issued by Blue Cross. Benefits were sought and paid by both Blue Cross and Lake States under its non-coordinated insurance policy. After having discovered that the information regarding residents in the household was incorrect, Lake States sought to “reform" the automobile insurance policy previously provided to June Wilson so as to provide for coordinated personal injury protection coverage.

The Court of Appeals in reversing the lower court decision in favor of the insured, held that once an innocent third-party is injured in an accident in which coverage was in effect with respect to the relevant vehicle, the insurer is estopped from asserting fraud to rescind the insurance contract. MCLA 257.520(f)(1)- However, an insurer is not precluded from rescinding the policy to avoid any "optional" insurance coverage [MCLA 257.520(d)], unless the fraud or misrepresentation could have been "ascertained easily" by the insurer. Farmers Insurance Exchange v Anderson, 206 Mich App 214; 520 NW2d 686 (1994).

In this case, the Court of Appeals concluded that non-coordinated no-fault insurance coverage is "excess coverage" and therefore optional within the meaning of the statutory provisions which would permit rescission and reformation of the contract, based upon material misrepresentations in the application. Under these facts, Lake States could not have easily ascertained the fact that other persons and drivers resided in the same household, and therefore, rescission was permitted.

Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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