In the recent, 2-1 published decision of Maurer v Fremont Ins. Co., Michigan Court of Appeals docket no. 336514 (September 18, 2018), the Michigan Court of Appeals found that the statute of limitations for fraud claims is six (6) years from the date of the policy inception, not the date of renewal, and that Barnes v Farmers Ins. Exchange does not apply to bar the claims of spouses of named insureds.
Dale Maurer obtained a policy of insurance with Defendant, Fremont Insurance Company, in 2006. His wife, Plaintiff, was not a named insured under the policy. One of the vehicles listed on the policy was used for business purposes by Plaintiff who delivered mail for the USPS; however, such use was not disclosed on the forms provided by Maurer at the inception of the policy. Maurer contends that he advised his agent of the incorrect vehicle designations at both the policy inception, and when the policy was renewed in September 2012. The agent did not make the appropriate changes. Plaintiff sustained catastrophic injuries in a December 2012 motor vehicle accident, while she delivered mail for the USPS.
After Plaintiff filed the present litigation, Fremont mailed a “Letter of Rescission” to Maurer and refunded the policy premiums dating back to 2006. Fremont identified only the 2006 misrepresentation in its correspondence. It did not assert that it would have declined to insure the vehicle had it had the correct information. While the policy in question did not contain a rescission provision, it did allow for the retroactive adjustment of premiums to correct errors in the application, and provided an exclusion of coverage for an individual who made an intentional misrepresentation at the policy inception. There was no evidence that Plaintiff provided any information to Fremont, or knew of any information provided by Maurer, at the inception of the policy or its renewals.
The trial court determined that the 2006 policy inception dated was controlling for purposes of rescission, and found that there was no evidence that Maurer violated any policy provision at the 2012 policy renewal. In particular, it found that the declarations page directed the insured to advise his agent of any errors in the coverage. Because Maurer testified that he had done so, the trial court found no misrepresentation in 2012, and therefore, 2006 was the controlling date. Thus, Fremont’s rescission claim was barred by operation of the statute of limitations.
On appeal, the Court of Appeal first addressed the rescission/statute of limitations issue and determined that Fremont’s claim for rescission accrued in 2006. The Court focused on Fremont’s rescission letter which only addressed the 2006 application, rather than also addressing the 2012 misrepresentation, and also on Fremont’s reimbursement of premiums dating back to the 2006. Because the statute of limitations for fraud claims is six years the Court of Appeals found Fremont’s claim of rescission based upon fraud was barred by the statute of limitations.
The Court of Appeals next addressed Fremont’s argument that because Plaintiff was the sole title holder of the vehicle she was operating at the time of the accident, and because Plaintiff was not a named insured on Fremont’s policy, Plaintiff was barred from recovery under MCL 500.3113(b) and Barnes v Farmers Ins. Exchange, 308 Mich App 1 (2014). The Court of Appeals majority declined to apply Barnes to the present case, however, stating that it did not believe the Legislature intended to preclude a the spouse who owned the vehicle from recovering no-fault PIP benefits under a non-owner spouse’s policy. Therefore, the majority found that Plaintiff was not precluded from coverage under MCL 500.3113(b).
In a thorough dissent, the Honorable Kathleen Jansen opined that the 2012 policy renewal date should have been the controlling date for purposes of determining when Fremont’s claim of rescission accrued, as the Court of Appeals previously determined that each policy renewal is a new or separate contract. The dissent also opined that pursuant to MCL 500.3101, and Barnes, the “owner or registrant of a motor vehicle” shall maintain security for payment of benefits under PIP insurance, and Plaintiff did not maintain that security. The dissent opined that Maurer did not qualify as an “owner” of the vehicle because there was no evidence he ever used the vehicle. Therefore, the dissent opined that the trial court abused its discretion by refusing to allow Fremont to amend its affirmative defenses to include MCL 500.3113(b), and opined that Plaintiff’s claims should have been barred.
The Michigan Supreme Court is holding oral argument in October 2018 in Dye by Siporin & Assoc, Inc v Esurance Property & Casualty Insurance Company, 501 Mich 944 (2017), addressing whether an owner or registrant of a motor vehicle may be entitled to PIP benefits where no owner or registrant of the vehicle maintains security for payment of PIP benefits. We will keep you apprised of the Court’s decision in that matter as soon as it is issued. In the meantime, it is possible that the Maurer decision may be used by insureds to defend against insurers’ attempt to rescind a policy. To combat such arguments, insurers should be prepared to issue detailed letters of rescission that identify each and every date the fraud or misrepresentation occurred .
_________________________________________________________________________________________
Check out our News & Events page to see what’s happening at GLM and find out about our upcoming seminars.
_________________________________________________________________________________________
Sarah Nadeau, Editor of the Law Fax Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com
