Insured Commits Fraud and Loses Coverage
In a published Michigan Court of Appeals case, the Court of Appeals considered whether rescission of Plaintiff’s automobile insurance policy was appropriate due to his fraudulent misrepresentation when he purchased the policy.
In Michigan, the purpose of the Michigan no-fault act is to broadly provide coverage for people injured in auto accidents without regard to fault. An insurer has a reasonable right to expect honesty in the application for insurance. It is established law in the state of Michigan that an insurer is entitled to rescind a policy based on a material misrepresentation made in an application for no-fault insurance. A misrepresentation is material if the contract details would have changed or not been offered if the correct information had been given initially. The Court of Appeals stated that rescission should only be granted in cases where the result would be just and appropriate.
In this case, Plaintiff applied for a no-fault insurance policy with Progressive on November 12, 2020. In that application, she misstated the address where her vehicles were garaged. Plaintiff further did not disclose the total number of resident relatives and “all regular drivers” of her vehicles then residing in her household. When Plaintiff was in an accident in 2021, she turned to Progressive for personal protection insurance (PIP) benefits. Progressive notified her they were denying coverage and rescinding the policy due to material misrepresentations in her initial application.
The Trial Court decided to reform the policy to “reflect the insurance premium that Progressive believed it was entitled to had the Plaintiff been truthful on her application. The Trial Court declined to permit Progressive from rescinding (cancelling) its policy.
The Court of Appeals held that innocent insurers should not bear the burden of an insured’s fraud. The Appellate Court reversed the Trial Court’s decision to reform the policy and sent the case back to the Trial Court for entry of an Order permitting Progressive to rescind (cancel) its policy. This was due to Plaintiff’s material misrepresentations in her application for automobile insurance coverage.
Read entire case at:
Janis Sherman v Progressive Michigan Insurance Company
About Alexander & Angelas, P.C.
Attorney Peter A. Angelas represents defendants in civil liability litigation across Michigan and Northern Ohio. His practice areas include insurance defense litigation, premises liability, motor carrier (trucking) defense, corporate and commercial litigation, construction defect litigation, auto negligence, insurance coverage disputes, emergency casualty response services, alternative dispute resolution, subrogation claims, workers’ compensation, employment law, and liquor liability.
Mr. Angelas practices in all state and federal courts in Michigan, including Wayne County (Detroit), Macomb County (Mount Clemens), Oakland County (Pontiac), Washtenaw County (Ann Arbor), and Genesee County (Flint). Legal services are also provided in Northern Ohio.
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