Hmeidan v. State Farm Mut. Auto. Ins. Co.

UNPUBLISHED

Wayne Circuit Court LC No. 15-007238-NF

Before: Borrello, P.J., and Jansen and Boonstra, JJ.

PER CURIAM

In this no-fault action, plaintiff appeals as of right an order granting summary disposition in favor of defendant, Progressive Michigan Insurance Company, also known as Progressive Casualty Insurance Company (Progressive). Plaintiff argues on appeal that the trial court erred by granting summary disposition of his claim for first-party no-fault benefits (PIP benefits) against Progressive because it applied the wrong version of MCL 500.3113(a) to determine that plaintiff

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was precluded from recovering benefits. On cross-appeal, Progressive contends that plaintiff's request for relief should be denied because summary disposition was appropriate regardless of which version of the statute is applied. We agree with plaintiff that the trial court erred by failing to apply the version of MCL 500.3113(a) in effect at the time of plaintiff's accident, and that summary disposition should not have been granted in favor of Progressive because a question of fact remained as to whether plaintiff unlawfully took the motorcycle involved in the accident so as to preclude him from no-fault benefits under MCL 500.3113(a), as amended by 1986 PA 93. We therefore vacate the trial court's order granting summary disposition in favor of Progressive, and remand for further proceedings consistent with this opinion.

Plaintiff and Progressive also challenge the trial court's order granting summary disposition in favor of defendant, State Farm Mutual Automobile Insurance Company (State Farm). Plaintiff's principal arguments are that the trial court erred by concluding that (1) State Farm's insured, plaintiff's mother Aida Hmeidan, made a material misrepresentation regarding her address when she applied for the subject State Farm policy, and (2) the equities favored allowing State Farm to rescind the policy. Progressive joins plaintiff's arguments on appeal. We decline to address the first of these issues, but agree that the trial court abused its discretion in balancing the equities and determining that rescission was appropriate. We therefore vacate the trial court's order granting summary disposition in favor of State Farm, and remand for further consideration of the equities involved in this case. On remand, the trial court is directed to consider the nonexclusive list of factors adopted in Pioneer State Mut Ins Co v Wright, 331 Mich.App. 396, 411; 952 N.W.2d 586 (2020), to the extent they apply to this case, as well as any other relevant factors consistent with this opinion.

I. BACKGROUND

On September 1, 2012, plaintiff was injured while driving a Kawasaki motorcycle that he was considering purchasing from Hussein Deliken. Although the motorcycle's ignition had been tampered with, and it was running without a key, plaintiff testified that he did not notice the damage before he took it for a test drive with Deliken's permission. Plaintiff lost control of the motorcycle when another vehicle failed to stop at a stop sign and cut into plaintiff's lane of traffic. After the motorcycle struck the unknown vehicle, the driver of the vehicle immediately fled the scene. Plaintiff learned after the accident that the motorcycle was stolen and did not belong to Deliken. At the time of the accident, plaintiff did not own or insure any vehicles. He subsequently sought PIP benefits from State Farm as a resident relative of his mother, Aida, or Progressive, as the insurer of the true owner of the motorcycle.

This case was previously before this Court on appeal from the trial court's determination that State Farm was not in the order of priority for plaintiff's PIP benefits and that Progressive was the highest-priority insurer. The trial court reasoned that State Farm was not liable for plaintiff's benefits under MCL 500.3114(5)(c), which refers to the "motor vehicle insurer of the operator of the motorcycle involved in the accident," because plaintiff did not own or insure a motor vehicle. Hmeidan v State Farm Mut Auto Ins Co, 326 Mich.App. 467, 474-475; 928 N.W.2d 258 (2018). This Court concluded that the trial court misinterpreted and misapplied MCL 500.3114(5)(c), reasoning that the statute's use of the phrase "the motor vehicle insurer of the operator of the motorcycle" was intended to distinguish between a motorcycle insurance policy and a motor vehicle insurance policy. Id. at 480-481. Additionally, the Court explained that plaintiff may have

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had a motor vehicle insurer for purposes of MCL 300.5114(5)(c), despite not personally owning or insuring a motor vehicle, because a question of fact remained as to whether State Farm's policy extended coverage to plaintiff as Aida's resident relative. Id. at 481-482.

On remand, the parties switched gears and focused on Aida's representations when she applied for the State Farm insurance policy. In particular, despite testimony indicating that Aida resided in two different locations—one in Detroit and one in Melvindale—she only disclosed her Melvindale address when she applied for insurance. She also failed to disclose information about other drivers in her households and their driving records.

State Farm moved for summary disposition under MCR 2.116(C)(10) on the basis of Aida's fraud in procuring the State Farm policy and plaintiff's own misrepresentations in the instant proceedings. Progressive also moved for summary disposition under MCR 2.116(C)(10), arguing that MCL 500.3113(a) precluded plaintiff from recovering benefits because he was injured while driving a stolen motorcycle. The trial court granted both motions for summary disposition.^[1]

II. STANDARDS OF REVIEW

A trial court's summary disposition ruling is reviewed de novo. El-Khalil v Oakwood Healthcare, Inc, 504 Mich. 152, 159; 934 N.W.2d 665 (2019). MCR 2.116(C)(10) tests the factual sufficiency of a claim. Id. at 160. "A trial court may grant a motion for summary disposition under MCR 2.116(C)(10) when the affidavits or other documentary evidence, viewed in the light most favorable to the nonmoving party, show that there is no genuine issue as to any material fact and the moving party is therefore entitled to judgment as a matter of law." Lowrey v LMPS & LMPJ, Inc, 500 Mich. 1, 5; 890 N.W.2d 344 (2016). "A genuine issue of material fact exists when the record leaves open an issue upon which reasonable minds might differ." El-Khalil, 504 Mich. at 160 (quotation marks and citation omitted). "Moreover, a court may not make findings of fact; if the evidence before it is conflicting, summary disposition is improper." Patrick v Turkelson, 322 Mich.App. 595, 605; 913 N.W.2d 369 (2018) (quotation marks and citation omitted; emphasis omitted).

This Court reviews a trial court's decision regarding rescission for an abuse of discretion. Pioneer State Mut Ins Co, 331 Mich.App. at 405. "An abuse of discretion occurs when the decision falls outside the range of reasonable and principled outcomes," or "when the trial court makes an error of law." Id.

III. AIDA'S MISREPRESENTATIONS REGARDING HER ADDRESS

Plaintiff and Progressive first argue that a question of fact exists regarding Aida's residence such that the trial court erred by finding that she made a material misrepresentation that could warrant rescission of the State Farm policy. The trial court determined that Aida made material misrepresentations in her application by indicating that she lived in Melvindale without

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mentioning her Detroit residence and by failing to disclose plaintiffs poor driving record when asked about the records of members of her household. On appeal, plaintiff focuses solely on the issue of Aida's residence, without addressing the second misrepresentation cited by the trial court, and Progressive merely joins plaintiffs argument. Because plaintiff has not disputed the full basis for the trial court's ruling, this Court need not even consider granting appellate relief regarding this issue. Derderian v Genesys Health Care Sys, 263 Mich.App. 364, 381; 689 N.W.2d 145 (2004). To do so would be an exercise in futility because, assuming this Court agreed that issues of fact remained with respect to whether Aida misrepresented her address, reversal would not be appropriate because an additional, unchallenged ground for rescission would still remain. We therefore decline to address this issue any further.

IV. BALANCING THE EQUITIES

Plaintiff and Progressive next argue that the trial court did not properly balance the equities between plaintiff and State Farm, and erred by determining that rescission was warranted. We agree.

As an equitable remedy, the right to rescind a contract is not an absolute right, but rather, rests in the discretion of the trial court. Bazzi v Sentinel Ins Co, 502 Mich. 390, 409; 919 N.W.2d 20 (2018). Thus, when a party seeks rescission, the trial court must "balance the equities" to determine whether rescission is appropriate in the context of two innocent parties. Id. at 410 (quotation marks omitted). "Just as the intervening interest of an innocent third party does not altogether bar rescission as an equitable remedy, neither does fraud in the application for insurance imbue an insurer with an absolute right to rescission of the policy with respect to third parties." Id. at 411. "Equitable remedies are adaptive to the circumstances of each case, and an absolute approach would unduly hamper and...