NO RESCISSION BECAUSE INJURED INSURED DID NOT PARTICIPATE IN FRAUD, AND MISREPRESENTATION WAS NOT MATERIAL

Cloie Y. Chidiac

In the recent “for publication” decision of Melvina Howard et al. v. LM General Insurance Co. et al (No. 357110, January 12, 2023), the Court of Appeals addressed the question of whether an insurer could rescind a policy as to PIP/UIM coverage when there was more than one named insured, and the injured insured did not participate in the fraud.

This action arose from a May 7, 2019 motor vehicle accident wherein the Plaintiff-Appellee, Melvina Howard, was injured while driving her 2008 Mercury Mariner. The Mariner was covered under a policy of insurance with LM General Insurance Company, which was originally issued in 2014 to Howard and Jasmine Bartell as co-named insureds. Prior to the subject accident, on April 19, 2019, Bartell alone added a 2008 GMC Yukon to the LM policy, certifying that she owned the Yukon and that it would be garaged at her home. However, LM later discovered it was the vehicle of Bartell’s relative and that it was being garaged in Detroit – both facts which LM contends would have led to a denial of coverage for the Yukon or at the least, a greatly increased premium.

On October 19, 2019, LM notified both Bartell and Howard that the entire policy would be rescinded retroactive to April 19, 2019 – the date of the Yukon’s addition to the policy – as a result of Bartell’s misrepresentation regarding the Yukon. Howard filed suit asserting that she was not complicit in any misrepresentations, nor was she driving the Yukon at the time of her accident.. LM provided no evidence that Howard was involved in the misrepresentation, and its motion for summary disposition was denied.

On appeal, the Court first found Bartell made a material misrepresentation that she knew was false intending for LM to act on it and LM did act on it. Titan Ins Co v Hyten, 491 Mich 547, 567-568; 817 NW2d 562 (2012). However, LM suffered no injury because the coverage obtained on the Yukon by way of the misrepresentation was not at issue. Moreover, there was no evidence that Plaintiff, herself, made any false representations. The Court then performed a balancing of equities analysis, Pioneer State Mut Ins Co v Wright, 331 Mich App 396, 411; 952 NW2d 586 (2020), finding the factors and other considerations weighed against rescission as to the Plaintiff’s PIP coverage. For example, LM could have discovered the misrepresentation when the Yukon was originally added to the policy, and before the subject accident took place. Further, Howard had no alternative basis to receive PIP benefits due to the one-year back rule.

Regarding Plaintiff’s UIM claim, the Court noted the language of the policy, which permits “voiding” coverage for all insureds if any insured makes a material misrepresentation. The Court stated LM had not proffered any evidence to support that the misrepresentation was material as to the eligibility for coverage on the involved vehicle – the Mariner. Instead, LM offered the affidavit of Randall Lawrence-Hurt, an LM senior compliance analyst, who merely stated that the false representation was “integral to and directly influenced LM General’s decision to add the 2008 Yukon to [the policy].” Thus, the misrepresentation was not a basis to rescind coverage on the Mariner.