STATE OF MICHIGAN
COURT OF APPEALS
FARM BUREAU GENERAL INSURANCE UNPUBLISHED
COMPANY OF MICHIGAN, January 24, 2017
Plaintiff-Appellant,
v No. 329332
Grand Traverse Circuit Court
ROBERT ELZER, doing business as DIVERSE LC No. 14-030621-CK
CONTRACTING,
Defendant,
and
DEVON HOLMES,
Intervening Defendant,
and
CITIZENS INSURANCE COMPANY OF
AMERICA and STATE FARM AUTOMOBILE
INSURANCE COMPANY,
Intervening Defendants-Appellees.
Before: WILDER, P.J., and BORRELLO and GLEICHER, JJ.
PER CURIAM.
Robert Elzer secured no-fault insurance coverage under his Farm Bureau commercial
automobile policy for a personal vehicle owned and operated by a family friend. Elzer’s
misrepresentation to Farm Bureau entitled the insurer to rescind the policy. And according to
binding precedent, even an innocent person with no role in the application process may be denied
first-party no-fault benefits following the policy’s rescission. However, the circuit court rejected
Farm Bureau’s attempt to avoid providing coverage. We now reverse that decision and remand
for further proceedings.
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I
Robert Elzer owns a business—Diverse Contracting. Elzer secured a business
automobile insurance policy through Farm Bureau General Insurance Company of Michigan.
The insurance application indicated that all insured vehicles must be titled to Elzer. Elzer also
checked a box indicating that he was the sole driver of the vehicles insured by the policy.
On January 20, 2014, Elzer contacted Farm Bureau to add a 2002 Ford Explorer to the
policy. Elzer neither owned nor drove the vehicle. The vehicle was titled to and used by
Danielle Petrie, a friend of Elzer’s wife. Farm Bureau contends that Elzer represented during a
telephone call with a Farm Bureau agent that he was the owner and driver of this vehicle, a point
that Elzer denies. Elzer indicated during his deposition that he had employed Petrie part-time in
the past but she was no longer a Diverse contracting employee by the time he added her vehicle
to his policy. Rather, Elzer added the Explorer because Petrie “couldn’t afford insurance of her
own” and Elzer wanted “to help her out.”
One month later, the Explorer was involved in an accident. Petrie’s sister’s fiancé,
Shawn Kimbrough, was driving and collided head-on with a vehicle in which Devon Holmes
was a passenger. Both Kimbrough and Holmes were injured. Kimbrough was treated at Munson
Medical Center and incurred more than $200,000 in medical expenses.
Munson approached Farm Bureau for reimbursement of personal protection insurance
(PIP) benefits. Farm Bureau denied the claim based on Elzer’s purported misrepresentation that
the Explorer was titled to and driven by him and was used for his business. Munson eventually
filed an application with the Michigan Assigned Claims Plan (MACP). The MACP assigned
Citizens Insurance Company of America to handle the claim.
A series of lawsuits followed. The current action was filed, in part, to determine whether
Farm Bureau could rescind the policy covering the Explorer and to determine the priority of
insurers to cover Kimbrough’s first-party PIP benefits: Farm Bureau (as issuer of Elzer’s
commercial auto policy), Citizens (as assignee by MACP), or State Farm Automobile Insurance
Company (the no-fault insurer of Kimbrough’s mother, with whom he resided). Farm Bureau
sought to rescind all coverage of the Explorer based on Elzer’s alleged misrepresentations.
Citizens raised a summary disposition motion, arguing that Farm Bureau could not rescind the
policy because this would deny coverage to an innocent third party—Kimbrough—who played
no role in the application process. Citizens also asserted that it was not liable for Kimbrough’s
PIP benefits because, pursuant to MCL 500.3114(4)(b), Farm Bureau was the “insurer” of
Kimbrough under the commercial automobile policy as Kimbrough was operating a “covered
auto.”
Ultimately, the circuit court accepted Citizen’s position. First, the circuit court reasoned
that the subject policy, which required that Kimbrough be operating a “covered auto” for Farm
Bureau to be the “insurer of the operator” under MCL 500.3114(4)(b), did not require that Elzer
own the vehicle and, consequently, the Explorer was a “covered auto.” Second, the court
recognized that our Supreme Court in Titan Ins Co v Hyten, 491 Mich 547; 817 NW2d 562
(2012), held that “the liability portion of a policy that exceeds the statutory mandated minimum”
may be rescinded due to applicant fraud despite that an innocent person seeking third-party
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liability damages may be affected. This case, however, involved statutorily required first-party
PIP benefits, which “were not at stake in” Titan. Accordingly, the circuit court found the
innocent party doctrine remained good law and applicable and ordered Farm Bureau to
reimburse Citizens for benefits it had provided on Kimbrough’s behalf.
II
We review de novo a circuit court’s decision on a summary disposition motion. Allstate
Ins Co v Dep’t of Mgmt & Budget, 259 Mich App 705, 709; 675 NW2d 857 (2003). “Under
MCR 2.116(C)(10), a court must consider the pleadings, affidavits, depositions, admissions, and
other documentary evidence in the light most favorable to the nonmoving party.” Amerisure Ins
Co v Auto-Owners Ins Co, 262 Mich App 10, 14; 684 NW2d 391 (2004). Summary disposition
is proper if no genuine issue of material fact exists and the moving party is entitled to judgment
as a matter of law. Amerisure Ins Co v Coleman, 274 Mich App 432, 434; 733 NW2d 93 (2007).
A genuine issue of material fact exists when the record leaves open an issue upon which
reasonable minds could differ. Debano-Griffin v Lake Co, 493 Mich 167, 175; 828 NW2d 634
(2013).
III
At the time the circuit court entered judgment, the premise that Titan’s abrogation of the
innocent party doctrine applied only to third-party liability claims was true. On June 14, 2016,
however, this Court extended Titan’s reasoning to first-party no-fault cases. Bazzi v Sentinel Ins
Co, ___ Mich App ___; ___ NW2d ___ (Docket No. 320518, 2016). Now an innocent
permissive driver loses entitlement to first-party PIP benefits when the insurer rescinds coverage
due to someone else’s fraud in the application process. Whether we agree with Bazzi’s reasoning
or not, we are bound to follow it. Leave to appeal has been sought in the Michigan Supreme
Court, but the Court has yet to take action. Unless and until the Supreme Court overrules Bazzi,
it remains binding law.
Pursuant to Bazzi, Farm Bureau had the authority to rescind the policy for the Explorer
and deny PIP benefits even to Kimbrough, who played no role in the application process, if Elzer
committed fraud.
To establish the contract defense of actionable fraud, Farm Bureau must show:
(1) That defendant made a material representation; (2) that it was false; (3) that
when he made it he knew that it was false, or made it recklessly, without any
knowledge of its truth and as a positive assertion; (4) that he made it with the
intention that it should be acted upon by plaintiff; (5) that plaintiff acted in
reliance upon it; and (6) that he thereby suffered injury. [Titan, 491 Mich at 555.]
Elzer made a material misrepresentation when he contacted his insurance agent to add a
vehicle to his commercial policy knowing that the vehicle was not being used for commercial
purposes. A misrepresentation need not be an oral or verbal statement. “ ‘Misrepresentation’ . . .
means any manifestation by words or other conduct by one person to another that, under the
circumstances, amounts to an assertion not in accordance with the facts.” Restatement,
Contracts, § 470(1), pp 890-891. As stated by our Supreme Court, “A representation . . . is
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anything short of a warranty which proceeds from the action or conduct of the party
charged. . . .” Groenig v Opsata, 323 Mich 73, 83; 34 NW2d 560 (1948) (quotation marks and
citation omitted). Elzer’s request to add the Explorer to his commercial automobile policy
amounted to a representation that the subject vehicle was part of Elzer’s commercial fleet. Elzer
clearly knew the commercial policy covered only vehicles used for his business. Therefore, by
calling to add the vehicle, Elzer was representing that the vehicle was commercial in nature.
Yet, Elzer admitted at his deposition that he knew the vehicle was not commercial.
According to Elzer, Petrie no longer worked for Elzer’s company but he added Petrie’s personal
vehicle to his commercial policy anyway as a favor. Elzer’s own admissions established the
second and third elements for Farm Bureau’s fraud defense. Elzer also clearly intended Farm
Bureau to act in response to his misrepresentation. He called the insurance agent to elicit
action—the addition of the vehicle to his policy. And Farm Bureau acted in reliance on Elzer’s
misrepresentation by following through and adding the vehicle to the policy’s coverage. If Farm
Bureau were not permitted to rescind the policy, it would suffer harm as a result of relying on
Elzer’s knowing, material misrepresentation.
Elzer’s admissions supported Farm Bureau’s claim to rescind the insurance coverage of
the Explorer, warranting summary dismissal of any claim against this insurer. Accordingly, we
reverse the circuit court’s denial of Farm Bureau’s summary disposition motion and remand for
further proceedings consistent with this opinion. We do not retain jurisdiction.
/s/ Kurtis T. Wilder
/s/ Stephen L. Borrello
/s/ Elizabeth L. Gleicher
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