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September 30, 2019
The Michigan Court of Appeals recently released an unpublished split decision in the case of Bracy v Farmers Ins. Exchange and Geico Indemnity Co. While unpublished, both the majority and dissenting opinions engaged in a lengthy, detailed analysis of a unique factual situation involving the plaintiff, Beth Bracy’s claim for first party no-fault benefits against Farmers Insurance Exchange, the Assigned Claims carrier, and GEICO Indemnity Company. The Court provides analysis concerning who is insured under a no-fault insurance policy and the requirement for insurable interest.
Yolanda Nichols was operating a 1993 Chevrolet Lumina on August 23, 2014, when she struck pedestrian, Beth Bracy. Bracy filed an application for no-fault benefits with the Michigan Assigned Claims Plan because she had no vehicles, no automobile insurance and lived alone at the time of the accident. The MACP assigned Bracy’s claim to Farmers. After Bracy filed suit against Yolanda and Farmers, she discovered that GEICO may have been responsible for payment of her benefits on the basis of a no-fault policy issued to Yolanda’s son, Marcus Nichols. The GEICO policy afforded coverage to several vehicles including the Lumina involved in the accident and Yolanda was identified in the policy as an additional driver. Yolanda, however, testified that she was the sole owner of the Lumina and that Marcus “put me on the insurance with him” because she did not have stable, permanent housing at the time she purchased the vehicle. She neither resided nor was domiciled with her son Marcus.
The Court of Appeals began its analysis by “inferring” from the trial court’s comments during the summary disposition hearing that it found GEICO’s proofs inadequate to establish fraud warranting a rescission of the subject policy. The Court of Appeals noted that the trial court did not address GEICO’s alternative arguments and, instead, granted summary disposition in favor of Farmers.
The majority then considered whether GEICO was Yolanda’s insurer for purposes of establishing priority under MCL 500.3115(1). The majority surveyed several cases and concluded that whether a no-fault insurance carrier is the insurer of someone other than the named insured depends on the language of the insurance policy. The majority observed that under the declaration page of the GEICO policy, Marcus was identified as a named insured and Yolanda as an additional driver however, the GEICO policy did not define who was an insured. The majority held that when the no-fault endorsement of an insurance contract fails to define who is an insured, and nothing in the plain language of the policy’s declaration or general verbiage suggests an intent by the contracting parties to make someone other than the named insured a contractual insured, “this Court has refused to declare the named insured’s family members as contractual insureds under the policy.” This was, according to the majority, “true even when the potential insured person is defined as an additional driver in the policy declarations”. The majority concluded “given the absence of any indication in the policy language that Marcus and GEICO intended for Yolanda to be an insured, we conclude that GEICO is not Yolanda’s insurer for purposes of determining priority for payment of Bracy’s PIP benefits under MCL 500.3115(1).”
Notably, the majority also referenced the recently amended version of MCL 500.3115. The majority found that if the court were to apply the amended version, GEICO would have no liability for Bracy’s PIP benefits because, as a matter of law, she would be required to claim PIP benefits through the Assigned Claims Facility. The majority held though, that it presumed statutory amendments apply only prospectively.
The majority also held that even if it was determined that GEICO was Yolanda’s insurer for purposes of MCL 500.3115(1), it agreed with GEICO’s contention that Marcus lacked an insurable interest in the Lumina.
“Geico offered undisputed evidence showing that Yolanda was the sole titled owner and registrant of the Lumina when Marcus added it to his Geico Insurance policy in 2013. There is no evidence that Marcus had use of the vehicle in a manner that would have afforded him the status of an owner under MCL 500.3101(3)(l). Nor did he undertake a contractual obligation to obtain insurance or have any intention of inquiring the vehicle as was the case in Universal Underwriters Group, supra. In addition, Marcus had has own insurance and was not a member of Yolanda’s household who could potentially turn to her insurance as a resident relative under MCL 500.3114(1), so his interest in protecting his own health and well-being could not form the basis of an insurable interest in the Lumina.”
Consequently, the policy was void with respect to the Lumina. There was no argument as to what type of alternative interest Marcus may have had that would support the issuance of an insurance policy covering the Lumina.
In his dissent, Judge Boonstra, was explicit that he dissented “not because I necessarily disagree with all or any of the majority’s legal reasoning, but rather because I believe we are putting the cart before the horse and reaching conclusions that might or might not prove to be supported were the legal process to run its course – as it has not yet in this case – in the usual and proper manner.” Judge Boonstra was concerned with the trial court failing to articulate a comprehensible rationale for ruling as it did in denying defendant GEICO’s cross-motion for summary judgment and granting Farmers’.
Judge Boonstra was also concerned that the majority decision, while reversing the trial court’s ruling, did not do so on the basis of the ruling itself and that the majority evaluated “anew” whether GEICO was the insurer of the owner, registrant or operator of the 1993 Chevrolet Lumina that struck Bracy, whether GEICO had an obligation to pay PIP benefits under the no-fault statute, and whether Marcus Nichols lacked an insurable interest in the vehicle rendering the GEICO policy void. In sum, Judge Boonstra was not comfortable deciding whether, under the policy, the Lumina was an “insured auto” such that the PIP provisions of the policy would afford coverage to the pedestrian Bracy.
As far as the alternative argument that Marcus did not have an insurable interest, Judge Boonstra noted that the majority had acknowledged that the question involved a fact specific inquiry which may vary upon the nature of the insurance benefits at issue. Consequently, Judge Boonstra would not resolve that “fact specific inquiry without the trial court doing so first.”
It is anticipated that there will be further appeals by way of either a motion for reconsideration or an application for leave to appeal to the Michigan Supreme Court.