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Auto-Owners Ins Co v Morse; (COA-UNP, 11/19/2015; RB #3474)


Michigan Court of Appeals; Docket # 322635; Unpublished  
Judges Servitto, Wilder, and Boonstra; Unanimous; Per Curiam  
Official Michigan Reporter Citation: Not Applicable; Link to Opinion alt  

Compulsory Insurance Requirements for Owners or Registrants of Motor Vehicles Required to Be Registered [§3101(1)]
Out of State Accidents [§3111]
When Claimants Can Receive PIP Benefits Through the Assigned Claims Facility [§3172(1)]

Reformation of Insurance Contracts 

In this unanimous unpublished per curiam Opinion, the Court of Appeals held there was an insurable interest for which coverage was provided under a no-fault policy issued to a corporation, and therefore reforming the policy to designate the claimants as named insureds was improper. The court further held the claimants were not entitled to PIP benefits for an out-of-state accident because they were not named insureds on the applicable policy and were not occupants of an insured vehicle.

Defendants, William and Cally Morse, were injured in an accident in their rental car while on vacation. Neither defendant owned a vehicle nor was listed as a named insured on a Michigan no-fault policy. Defendants sought PIP benefits from Auto-Owners under a policy (Policy 42) issued to Mor-Dall Enterprises, a company owned by defendants’ son, Aaron. Aaron obtained Policy 42 in his own name, but later changed the named insured to Mor-Dall. While defendants were not listed as named insureds on Policy 42, they were listed as drivers. Auto-Owners denied PIP coverage to defendants, claiming they were not named insureds, the accident did not occur in Michigan, and the accident did not involve an insured vehicle. Auto-Owners then brought this declaratory action, seeking a ruling that it was not liable for PIP benefits. Defendants filed a counterclaim, acknowledging they were not entitled to benefits under the policy as written, but asserting the policy should be reformed to make them named insureds because Mor-Dall lacked an insurable interest. Citing Corwin v DaimlerChrysler Ins Co, 296 Mich App 242 (2012), the trial court found the policy should be reformed to make defendants named insureds because Mor-Dall lacked an insurable interest in the policy, and the policy impermissibly shifted Auto-Owners’ payment burden.

At the outset, the Court of Appeals denied Auto-Owners’ argument that defendants lacked standing to request reformation of the policy, finding that an “actual controversy” existed between the parties.

The Court of Appeals then held the trial court erred in reforming the policy. In this regard, the court said:

“The Defendants concede that they are not entitled to PIP benefits under Policy 42 as written. … We hold that the trial court erred in concluding that Mor-Dall lacked an insurable interest in Policy 42. Mor-Dall was statutorily obligated to carry no-fault insurance with respect to the two insured vehicles owned by the corporation. … By paying insurance premiums to plaintiff for these two vehicles, Mor-Dall received not only the benefit of complying with this statutory mandate, but received coverage for property damage and residual liability arising from the use of these two vehicles. Further, the policy provided for PIP benefits relating to bodily injury resulting from the use of these two vehicles. Pursuant to the policy language, Mor-Dall also received coverage for property damage and residual liability involving the five listed privately owned vehicles, and PIP benefits were available for bodily injury arising out of the use of those five vehicles.”

Regarding the claim that Mor-Dall lacked an insurable interest in the policy, the Court of Appeals said:

“Mor-Dall received several types of coverages, applicable in several different circumstances, as a result of its payment of insurance premiums to plaintiff. By contrast, in Corwin, the named insured, a corporation, lacked any insurable interest in the no-fault policy, i.e., absent reformation, there was no situation in which the defendant-insurer would be liable for the payment of personal protection, property protection, or residual liability benefits. … Defendants also place great weight on the fact that, as a corporation, Mor-Dall cannot suffer bodily injury. … While this is true, it does not necessarily follow that Mor-Dall received no benefit from its payment for PIP coverage. On the contrary, as discussed, PIP benefits were available to occupants of the listed vehicles if they were involved in an accident. In this case, however, defendants were not in a listed vehicle when injured and were out of state at the time. Coverage in those circumstances was excluded by Policy 42; however, the presence of an exclusion does not equate to the lack of an insurable interest, provided that there are some situations (as indeed there are here) where plaintiff would be required to pay PIP benefits on behalf of Mor-Dall. … Accordingly, the trial court erred in concluding that reformation of Policy 42 was required because Mor-Dall lacked an insurable interest.”

After holding that policy reformation was improper, the Court of Appeals ruled the trial court erred in finding that the policy shifted responsibility for the payment of PIP benefits from Auto-Owners to the Michigan Assigned Claims Facility. In this regard, the court said:

“At the time of the accident, defendants did not own a motor vehicle and, therefore, were not required to carry no-fault insurance. … The described situation is therefore one to which the Assigned Claims Facility is expressly intended to apply. … For all of these reasons, Policy 42 did not impermissibly shift plaintiff’s statutory responsibility to the Assigned Claims Facility.”

Accordingly, the Court of Appeals reversed and remanded the case.

Michigan auto accident attorney 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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