MemberSelect Ins. Co. v. Flesher

332 Mich.App. 216

956 N.W.2d 535

MEMBERSELECT INSURANCE COMPANY, Plaintiff-Appellant,

v.Kenneth FLESHER, John Doe, an unknown individual, Nicholas Fetzer, Progressive Marathon Insurance Company, and Kelly Fetzer, Defendants-Appellees.

No. 348571

Court of Appeals of Michigan.

Submitted March 5, 2020, at Lansing.

Decided April 23, 2020, 9:00 a.m.

Ruggirello, Velardo, Novara, Ver Beek, Burke & Reizin, PC (by Darwin L. Burke, Jr., Farmington Hills) for MemberSelect Insurance Company.

Secrest Wardle (by Drew W. Broaddus, Grand Rapids, and Devon R. Glass ) for Progressive Marathon Insurance Company.

Before: Boonstra, P.J., and Riordan and Redford, JJ.

Boonstra, P.J. Plaintiff, MemberSelect Insurance Company (MemberSelect), appeals by right the trial court's order denying its motion for summary disposition.¹ We affirm.

I. PERTINENT FACTS AND PROCEDURAL HISTORY

On July 4, 2016, defendant Kenneth Flesher (Flesher) was operating his motorcycle when he was struck by a motor vehicle in a hit-and-run accident. At some point following the accident, Flesher came to believe that the vehicle that hit him was a GMC Yukon.² The parties agree that defendant Nicholas Fetzer (Nicholas)³ owned the Yukon in question. Flesher brought suit against Nicholas alleging negligence.⁴ MemberSelect, which insured the Yukon under an insurance policy identifying Nicholas's mother, defendant Kelly Fetzer (Kelly), as the principal named insured, assigned counsel to represent Nicholas in that action. MemberSelect brought this separate action for declaratory relief, seeking a declaration that Kelly had no insurable interest in the Yukon and that the policy covering it was therefore void. The trial court consolidated the two cases for purposes of discovery.

Kelly testified at her deposition that Nicholas had asked her to add the Yukon to her policy. She further testified that Nicholas had told her that it was too expensive for him to insure the Yukon under his own name. According to Kelly, she never rode in the vehicle and had no plans to ride in it in the future. Nicholas was 33 years old at the time of the accident and did not live with Kelly.

Nicholas testified that he owned the Yukon and had asked Kelly to insure it under her policy. He testified that he did so because the monthly premium payment would be significantly cheaper than if he had insured it himself. Nicholas stated that Kelly paid the monthly premiums to MemberSelect and that he reimbursed her for the Yukon's share of those premiums.

Following discovery, motions for summary disposition were filed in both the negligence action and this declaratory action. In the negligence action, Nicholas and MemberSelect argued that Flesher had not raised a genuine issue of material fact regarding whether the Yukon was involved in the accident. In the declaratory action, MemberSelect argued that Kelly had no insurable interest at the time the policy was issued and that the policy was therefore void.

The trial court held a hearing on the motions. It first addressed the motion in the negligence action, noting that there was "admissible evidence that strongly implies that [the Yukon was not] the vehicle involved in the accident" and finding that Flesher had failed to respond with evidence that raised a genuine issue of material fact on that issue. The trial court therefore granted the motion for summary disposition filed by Nicholas and MemberSelect.⁵

Counsel for MemberSelect then argued that notwithstanding the trial court's ruling in the negligence action, the issue in the declaratory action was not moot. Addressing that issue, the trial court held that Kelly had an insurable interest:

[B]ased on the rest of the filings and the Court's reading of the cases cited, I do find that there was an insurable interest. I did—there's no requirement that the insured actually own or be the registrant of a vehicle in order to have an insurable interest.

In this case, it was the mother of defendant Fetzer, and the cases have acknowledged that there is a—I'm not or—let me try to find the exact language in terms of the family—the interest of the family. Hold on, the familial relationship. That she has an interest in her son's well-being both physically and financially.

So, I would deny your motion to dismiss on the grounds that you've requested it, finding that there is an insurable interest by the mother.

Counsel for MemberSelect declined the trial court's subsequent offer to revisit his position regarding the issue of mootness. The trial court thereafter entered an order denying MemberSelect's motion and resolving the declaratory action, which, as discussed, functionally decided the case. This appeal followed.

II. STANDARD OF REVIEW

"We review de novo a trial court's decision on a motion for summary disposition." Moser v. Detroit , 284 Mich. App. 536, 538, 772 N.W.2d 823 (2009). Summary disposition is proper under MCR 2.116(C)(10) if "there is no genuine issue as to any material fact, and the moving party is entitled to judgment ... as a matter of law." We consider the affidavits, pleadings, depositions, admissions, and other documentary evidence in the light most favorable to the nonmoving party. Liparoto Constr., Inc. v. Gen. Shale Brick, Inc. , 284 Mich. App. 25, 29, 772 N.W.2d 801 (2009). All reasonable inferences are to be drawn in favor of the nonmovant. Dextrom v. Wexford Co. , 287 Mich. App. 406, 415, 789 N.W.2d 211 (2010). Whether a party has an insurable interest to support the existence of a valid automobile liability insurance policy is also a question of law that we review de novo.

Morrison v. Secura Ins. , 286 Mich. App. 569, 572, 781 N.W.2d 151 (2009).

III. ANALYSIS

MemberSelect argues that the trial court erred by finding that Kelly had an insurable interest. We disagree.

Michigan law requires that a named insured have an insurable interest to support a valid automobile liability insurance policy. Id. , citing Allstate Ins. Co. v. State Farm Mut. Auto. Ins. Co. , 230 Mich. App. 434, 439, 584 N.W.2d 355 (1998) ; see also Clevenger v. Allstate Ins. Co. , 443 Mich. 646, 656, 660-662, 505 N.W.2d 553 (1993). This requirement is not set forth statutorily in either the Insurance Code, MCL 500.100 et seq. ; the Michigan Vehicle Code, MCL 257.1 et seq. ; or the no-fault insurance act, MCL 500.3101 et seq. Rather, it "arises out of long-standing public policy." Morrison , 286 Mich. App. at 572, 781 N.W.2d 151, citing Allstate , 230 Mich. App. at 438, 584 N.W.2d 355. An insurance policy is void if there is no insurable interest. Corwin v. DaimlerChrysler Ins. Co. , 296 Mich. App. 242, 258, 819 N.W.2d 68 (2012).

Before examining the contours of what may constitute an "insurable interest," we first look at the genesis of the public policy itself. As this Court observed,

Specifically, it arises out of the venerable public policy against "wager policies"; which, as eloquently explained by Justice COOLEY , are insurance policies in which the insured has no interest, and they are held to be void because such policies present insureds with unacceptable temptation to commit wrongful acts to obtain payment. O'Hara v. Carpenter, 23 Mich. 410, 416-417 (1871). Thus, "fundamental principles of insurance" require the insured to "have an insurable interest before he can insure: a policy issued when there is no such interest is void, and it is immaterial that it is taken in good faith and with full knowledge." Agricultural Ins. Co. v. Montague, 38 Mich. 548, 551 (1878). [ Morrison , 286 Mich. App. at 572, 781 N.W.2d 151.]^{[6 ]}

As this Court further stated in Allstate :

[T]he "insurable interest" doctrine seems to find its origin in public policy concerns. Among those concerns is a desire to prohibit the use of insurance as a form of wagering, and a desire to prevent the creation of socially undesirable interests, such as where a creditor buys insurance on the life of a debtor for an amount greatly exceeding the amount of the debt, such that the creditor "might be [tempted] to bring the debtor's life to an unnatural end." Lakin v. Postal Life & Casualty Ins. Co., 316 S.W.2d 542, 551 (Mo., 1958). [ Allstate , 230 Mich. App. at 438-439, 584 N.W.2d 355 (citations omitted; alteration in original).]

In other words, the requirement that an insured possess an insurable interest to obtain a valid insurance policy is based on a desire to avoid a situation in which an insured can receive a payout under a policy despite not actually having lost anything (and possibly with an incentive to act wrongfully to cause the payout). Given that this is the genesis of the public policy requiring an "insurable interest," we note, as did this Court in Allstate , that "[t]here is a legitimate question whether [automobile] liability insurance requires an ‘insurable interest.’ " Id. at 438, 584 N.W.2d 355. The Allstate Court reasoned that "[t]hese public policy concerns are not implicated in the case of liability insurance, because the holder of the insurance cannot collect cash on the policy." Id. See also Morrison , 286 Mich. App. at 574, 781 N.W.2d 151.⁷

Nonetheless, this Court noted in Allstate that our Supreme Court in Clevenger "appears [to have] held that an insurable interest is necessary to support a valid automobile liability insurance policy. It also appears that the Supreme Court held that the insurable interest must belong to a ‘named insured.’ " Allstate , 230 Mich. App. at 437-438, 584 N.W.2d 355. Allstate noted that Clevenger "did not discuss the underlying rationale for the insurable interest requirement, nor did it cite any authority on the topic." Id. at 437, 584 N.W.2d 355. Moreover, Allstate noted that while it "recognized that many jurisdictions observe such a requirement," it had "failed to discover any underlying rationale for application of the insurable interest requirement to liability insurance[.]" Id. at 439, 584 N.W.2d 355. Nonetheless, Allstate was obliged to apply the insurable-interest requirement in the context of automobile...