April 12, 2010
~DON’T LIE ABOUT YOUR FAMILY MEMBERS AND TRY NOT TO HURT THEM~
PUBLISHED DECISION REINFORCES INSURER’S RIGHT TO REFORM POLICY FOR MISREPRESENTATIONS AND TO LIMIT COVERAGE FOR
INTRA-FAMILY TORT CLAIMS
In Manier v MIC General. ___N.W.2d ___, 2008 WL 4892092, Mich. App., November 13, 2008 (NO. 279586), the Michigan Court of Appeals issued a published decision that once again validates an insurer’s right to reform a policy for misrepresentations and also to place limitations on coverage available to satisfy automobile tort claims by one family member against another.
Plaintiff Terry Manier brought suit on behalf of his two children and his minor ward for sustained injuries in a motor vehicle accident. At the time of the accident, the children were passengers in a vehicle owned by the plaintiff and his mother and driven by his girlfriend. Several months before the accident, MIC issued a policy to Plaintiff’s parents covering several other vehicles as well as the vehicle involved in the accident (the policy also listed Manier as a driver of that vehicle).
After the accident, MIC determined the application for no-fault insurance coverage by Manier’s parents had misrepresented that Manier lived with them in their Westland home, and that the vehicle would be stored in Westland. However, Manier, his girlfriend, and the children actually lived in Ypsilanti and kept the vehicle
there. Despite this misrepresentation, MIC paid all PIP benefit claims submitted on behalf of Manier’s children and ward. MIC then reformed the policy retroactive to the original application date, correcting Manier’s address but making no other substantive changes.
The reformed policy maintained the coverage limits stated in the original policy, $100,000 a person, with a $300,000 limit for a single accident. However, both the original and the reformed policies contained identical household exclusions restricting liability coverage:
“Bodily injury to you or a family member. This exclusion applies only to damages in excess of the minimum limits required by the Financial Responsibility Laws of the state of Michigan.” (Emphasis in original).
Manier sued MIC seeking payment of PIP benefits and a declaration that MIC had improperly reformed the insurance policy by reducing the liability coverage. Manier’s complaint also asserted that he had made no misrepresentations, and that “[d]efendant knew, should have known or easily could have known that the Plaintiff…resided in Ypsilanti.”
In response to MIC’s motion for summary disposition, Plaintiff asserted that MIC could not reform the policy and that the household exclusion could not apply in Michigan. Manier also submitted the Michigan registration for the vehicle that reflected his Ypsilanti address, and an affidavit stating that “some time in March of 2005, someone from the Defendant called me to confirm information and I told that person that I lived in Ypsilanti.”
Plaintiff’s counsel admitted that Plaintiff’s mother had misrepresented the location of Manier’s residence but contended that MIC had an obligation to independently investigate the address. The trial court rejected that argument and found that there was a misrepresentation. Summary disposition was also granted in MIC’s favor with respect to the liability coverage issue, with a finding that the family coverage limitation was valid.
On appeal, Plaintiff raised several challenges to the trial court’s ruling, contending first that, regardless of any misstatements by his mother, MIC failed to dispute its awareness that Manier actually resided in Ypsilanti. Alternatively, Manier asserted that MIC easily could have ascertained his address by reviewing public records like his driver’s license and the vehicle’s registration. Citing to its earlier decision, the Court of Appeals reiterated that an insurer does not owe a duty to the insured to investigate or verify a policy applicant’s representations or to discover intentional material misrepresentations.
In this case, Plaintiff’s mother advised MIC that her son resided in her home and claimed to have no awareness of his driver’s license number. Nor was MIC informed that Plaintiff’s girlfriend drove the vehicle. The Court concluded that the insurer could not have “easily ascertained” the applicant’s misrepresentations at the time she made them, and that MIC had no duty of investigation that compelled it to perform further research regarding Manier’s residence.
Plaintiff also asserted that Michigan’s financial responsibility statute precluded the insertion of a household-related exclusion or limitation of coverage provision in the policy, because household exclusions violate public policy and the financial responsibility act. The Court ruled, however, that the exclusion did not eliminate coverage for members of the insured’s household; rather, it limited liability coverage to the statutory minimum provided in the financial responsibility statute. The opinion clearly reiterated earlier case precedent that if a clause in an insurance policy is clear and does not contravene public policy, it must be enforced as written. Furthermore Plaintiff failed to identify any Michigan case law invalidating a no-fault policy’s household exclusion, where statutorily mandated residual liability coverage exists.
Garan Lucow Miller’s Appellate Department has also successfully represented other insurers with family exclusions or coverage limitations like this one. Any additional questions on this issue should be directed to Ms. Moskus or Daniel Saylor dsaylor@garanlucow.com