STATE OF MICHIGAN
COURT OF APPEALS
AUTO-OWNERS INSURANCE COMPANY, UNPUBLISHED
November 19, 2015
Plaintiff/Counter-Defendant-
Appellant,
v No. 322635
Calhoun Circuit Court
WILLIAM MORSE and CALLY MORSE, LC No. 2012-000320-CK
Defendants/Counter-
Plaintiffs/Third-Party Plaintiffs-
Appellees,
and
HUMANA HEALTH PLAN OF MICHIGAN,
INC.,
Defendant,
and
ACUITY INSURANCE COMPANY,
Third-Party Defendant.
Before: SERVITTO, P.J., and WILDER and BOONSTRA, JJ.
PER CURIAM.
In this interlocutory appeal, plaintiff appeals by leave granted1 the trial court’s order
denying its motion for summary disposition pursuant to MCR 2.116(C)(10) (no genuine issue of
material fact) and granting summary disposition in part to defendants William and Cally Morse
1
Auto-Owners Ins Co v Morse, unpublished order of the Court of Appeals, entered December
16, 2014 (Docket No. 322635).
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pursuant to MCR 2.116(I)(2) (opposing party entitled to judgment).2 The trial court’s order
reformed a no-fault automobile insurance policy issued by plaintiff to Mor-Dall Enterprises,
Incorporated (Mor-Dall), a business owned by defendants’ son, Aaron Morse, so as to provide
personal protection (PIP) benefits to defendants for injuries sustained in an out-of-state
automobile accident. We reverse and remand for further proceedings.
I. PERTINENT FACTS AND PROCEDURAL HISTORY
While vacationing in Hawaii in 2011, defendants, passengers in a rental van, were
involved in a motor vehicle accident. At the time of the accident, neither defendant owned a
vehicle or was listed as a named insured on a Michigan no-fault automobile insurance policy.
Nonetheless, defendants sought PIP benefits from plaintiff under the policy it had issued
to Mor-Dall; the parties refer to that policy as “Policy 42.” Aaron had obtained Policy 42, in his
individual name, in June 2006 through Medler Insurance Agency. In September 2006, at
Aaron’s request, the named insured on Policy 42 was changed to Mor-Dall.
In 2009, plaintiff canceled defendants’ personal no-fault policy at defendants’ request and
transferred their names to Policy 42 as “added drivers.” The endorsement adding defendants as
drivers also added William’s 2005 Ford Explorer as a vehicle on Policy 42. On the date of the
accident, Policy 42 listed five identified drivers and seven vehicles. Defendants were two of the
listed drivers. Two of the vehicles were owned by Mor-Dall and the other five, including
William’s Explorer, were privately owned. However, despite remaining listed on the policy, it is
undisputed that William sold the Explorer more than three months before the accident. At the
time of the accident, Policy 42 did not provide “broad form coverage” to either defendant.3
Plaintiff denied coverage to defendants, citing the language of Policy 42. “SECTION II –
PERSONAL INJURY PROTECTION” of the “no-fault insurance endorsement” section of
Policy 42 provides in relevant part:
1. COVERAGE
Subject to the provisions of this endorsement and of the policy to which this
endorsement is attached, we will pay personal injury protection benefits to or on
behalf of an injured person for accidental bodily injury arising out of the
ownership, operation, maintenance, or use of a motor vehicle as a motor vehicle,
subject to the provisions of Chapter 31 of the Michigan Insurance Code.
2
Defendant Humana Health Plan of Michigan, Incorporated and third-party defendant Acuity
Insurance Company are not parties to this appeal. Accordingly, this opinion will refer to
William and Cally Morse as “defendants.”
3
The record reflects that a broad form coverage endorsement is commonly used in commercial
automobile insurance policies where the named insured is a corporation. Such an endorsement
confers upon listed persons “named insured” status, entitling those persons to bodily injury and
PIP coverage.
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2. EXCLUSIONS
We will not pay personal protection insurance benefits for:
* * *
d. bodily injury sustained outside of Michigan unless:
(1) the injured person was occupying the insured motor vehicle, the motor
vehicle accident occurred within the United States, its territories, and possessions
of Canada, and if other than the named insured or relative is not entitled to
benefits as a named insured or relative in any other insurance policy providing
benefits under Chapter 31 of the Michigan Insurance Code.
(2) the injured person
(a) is a named insured under this insurance policy; or
(b) is the spouse or relative of such named insured.
This exclusion is consistent with MCL 500.3111, which provides:
Personal protection insurance benefits are payable for accidental bodily
injury suffered in an accident occurring out of this state, if the accident occurs
within the United States, its territories and possessions or in Canada, and the
person whose injury is the basis of the claim was at the time of the accident a
named insured under a personal protection insurance policy, his spouse, a relative
of either domiciled in the same household or an occupant of a vehicle involved in
the accident whose owner or registrant was insured under a personal protection
insurance policy or has provided security approved by the secretary of state under
subsection (4) of section 3101.
After defendants threatened to bring suit for PIP benefits, plaintiff filed a complaint for
declaratory judgment, requesting that the trial court declare that defendants were not entitled to
PIP benefits under Policy 42. Defendants counterclaimed, in part requesting the trial court
reform the policy to make them named insureds that would therefore be entitled to PIP benefits.4
Plaintiff moved for summary disposition on both its declaratory judgment claim and
defendants’ counterclaim pursuant to MCR 2.116(C)(10). The trial court denied the motion and
4
Defendants also asserted a claim for breach of contract. As discussed later in this opinion,
defendants concede that, under Policy 42 as written, they are not entitled to PIP benefits for the
subject accident. As a result, absent the reformation defendants seek, plaintiff cannot be found to
have breached Policy 42 by failing to pay PIP benefits. Defendants’ claim for breach of contract
is thus dependent on the validity of the trial court’s reformation of the policy.
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instead granted partial summary disposition to defendants under MCR 2.116(I)(2). Specifically,
and in reliance on Corwin v DaimlerChrysler Ins Co, 296 Mich App 242; 819 NW2d 68 (2012),
the court found that Policy 42 must be reformed to make defendants named insureds because (1)
Mor-Dall lacked an insurable interest in Policy 42, and (2) the policy impermissibly shifted
plaintiff’s primary statutory burden for the payment of defendants’ PIP benefits. This Court
granted plaintiff’s application for leave to appeal.
II. STANDARD OF REVIEW
We review de novo a trial court’s ruling on a motion for summary disposition under
MCR 2.116(C)(10). “Equitable issues, such as arguments for . . . reformation, are also reviewed
de novo.” Kaftan v Kaftan, 300 Mich App 661, 665; 834 NW2d 657 (2013). Likewise, whether
one has an “insurable interest” is a question of law that we review de novo. Morrison v Secura
Ins, 286 Mich App 569, 572; 781 NW2d 151 (2009).
III. ANALYSIS
At the outset, we reject plaintiff’s unpreserved argument that defendants, as non-parties
to Policy 42, lacked standing to request reformation of the policy. In initiating this action,
plaintiff identified defendants as named parties to the action, and requested that the trial court
declare it not to be responsible for the payment of PIP benefits to defendants under Policy 42.
Defendants’ future conduct in pursuing PIP benefits would be guided by the result of this
declaratory action. Accordingly, the trial court was entitled to declare the rights and
responsibilities of all parties under the policy, including reforming the policy if appropriate. See
Allstate Ins Co v Hayes, 442 Mich 56, 61, 69-70; 499 NW2d 743 (1993); MCR 2.605. An actual
controversy thus existed between the parties, and we decline to reverse the trial court on standing
grounds. See Lansing Schools Educ Ass'n v Lansing Bd of Educ, 487 Mich 349, 372; 792 NW2d
686 (2010).
Defendants concede that they are not entitled to PIP benefits under Policy 42 as written.
Therefore, the sole issue is whether the trial court erred in reforming the policy. We conclude
that it did. “An automobile insurance policy may be reformed as a result of fraud, mutual
mistake, or inequitable conduct.” Liberty Mut Ins Co v Mich Catastrophic Claims Ass’n, 248
Mich App 35, 47; 638 NW2d 155 (2001).5 Additionally, in Corwin, 296 Mich App at 247, this
Court held that the no-fault insurance policy at issue in that case required reformation because
5
The trial court declined to grant summary disposition under MCR 2.116(C)(10) on grounds of
mutual mistake, finding that a question of fact existed in that respect. Although an argument to
the contrary was advanced in plaintiff’s application for leave to appeal, plaintiff’s brief and reply
brief advance no such argument. Accordingly, we deem any issue related to mutual mistake
abandoned for purposes of this appeal and decline to address it. Prince v MacDonald, 237 Mich
App 186, 197; 602 NW2d 834 (1999) (“It is axiomatic that where a party fails to brief the merits
of an allegation of error, the issue is deemed abandoned by this Court.”). Defendants did not
allege before the trial court that the policy should be reformed on the grounds of fraud or
inequitable conduct.
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(1) as written, the policy was void since the named insured lacked an “insurable interest”; and (2)
the policy as written allowed the insurer to “avoid or shift its statutory primary responsibility for
PIP benefits.” This Court thus found that the policy at issue in Corwin violated public policy and
the legislative intent behind the no-fault act, see MCL 500.3114. Id. at 261-263.
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. See MCL 500.3101(1). 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.
Defendants appear to argue that Mor-Dall lacked an insurable interest because defendants
were not eligible for PIP benefits under the particular circumstances of this accident. However,
“[A]n ‘insurable interest’ . . . can be any kind of benefit from the thing so insured or any kind of
loss that would be suffered by its damage or destruction.” Corwin, 296 Mich App at 257-258
(quotation marks and citation omitted). 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.
Id. at 258. Defendants also place great weight on the fact that, as a corporation, Mor-Dall cannot
suffer bodily injury. Id. at 259. 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. See id. at 258. Accordingly, the trial court erred in concluding that
reformation of Policy 42 was required because Mor-Dall lacked an insurable interest.
The trial court also erred in concluding that Policy 42 shifted responsibility for the
payment of PIP benefits from plaintiff to the Assigned Claims Facility. Benefits from the
Assigned Claims Facility are only available for accidents occurring in Michigan,
MCL 500.3172(1); thus, the Assigned Claims Facility has little bearing on the instant question.
Moreover, even if the accident had occurred in Michigan, Policy 42 would not necessarily have
shifted liability from plaintiff to the Assigned Claims Facility. In that event, PIP benefits would
have been available under the policy if at the time of the accident defendants had occupied a
vehicle listed in Policy 42. If, on the other hand, defendants had been injured in a Michigan
accident while occupying a vehicle not listed in Policy 42, they indeed then would only have
been eligible for PIP benefits from the Assigned Claims Facility. See MCL 500.3114. However,
this fact does not require reformation of the policy. At the time of the accident, defendants did
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not own a motor vehicle and, therefore, were not required to carry no-fault insurance.
MCL 500.3101(1). The described situation is therefore one to which the Assigned Claims
Facility is expressly intended to apply. MCL 500.3172(1) (An individual is entitled to PIP
benefits from the Assigned Claims Facility “if no personal protection insurance is applicable to
the injury”).6 For all of these reasons, Policy 42 did not impermissibly shift plaintiff’s statutory
responsibility to the Assigned Claims Facility.
We accordingly reverse the trial court’s partial grant of summary disposition in favor of
defendants.7 We remand for further proceedings consistent with this opinion. We do not retain
jurisdiction.
/s/ Deborah A. Servitto
/s/ Kurtis T. Wilder
/s/ Mark T. Boonstra
6
By contrast, in Corwin, this Court noted that the insurance policy, as written, was void, and
absent reformation the plaintiff would have been in violation of his statutory duty to maintain no-
fault insurance, which he had attempted to comply with by purchasing insurance from the
defendant. See Corwin, 296 Mich App at 260. No such concern exists in the instant case.
7
As a result, we need not address plaintiff’s argument that the trial court abused its discretion in
denying its motion for reconsideration.
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