If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

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S T A T E O F M I C H I G A N

v

No. 364393

Washtenaw Circuit Court

PROGRESSIVE MICHIGAN INSURANCE

COMPANY,

LC No. 22-000075-NI

Before: CAMERON, P.J., and N. P. HOOD and YOUNG, JJ.

CAMERON, P.J.

In this interlocutory appeal arising under Michigan’s no-fault act, MCL 500.3101 et seq.,

defendant, Progressive Michigan Insurance Company (Progressive), appeals by leave granted

order denying its motion for summary disposition under MCR 2.116(C)(10) (no genuine question

of material fact) and ordering reformation of plaintiff’s, Janice Sherman’s, automobile insurance

policy.

We clarify that, in these cases, courts should examine the conduct of the parties to

2023 (Docket No. 364393).

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reformation of the policy, and remand to the trial court for further proceedings consistent with this

opinion.

On November 12, 2020, Sherman applied to Progressive for a no-fault insurance policy for

two vehicles—a 2006 Cadillac DTS sedan and a 1993 Chrysler New Yorker sedan. In the

application, she identified her address as 16845 Tremlett Drive, Clinton Township, MI 48035, and

confirmed that the vehicles were garaged at this address. The application required Sherman to

protection insurance (PIP) benefits. Progressive notified Sherman that it was denying coverage

and rescinding the policy ab initio because of misrepresentations in her application. According to

Progressive, Sherman garaged her vehicles at 12525 Gunston Street, Detroit, MI 48205, not

Tremlett Drive. Additionally, Sherman had other individuals residing with her who she did not

list on her application. Progressive estimated that, had Sherman included this additional

information, it would have increased her premium by 83.2%. Progressive refunded the $1,491.54

of previously paid premiums to Sherman’s credit card.

Sherman then filed the complaint in this case. In addition to her claim against Doe,

Sherman alleged that Progressive unlawfully refused to pay PIP benefits and had breached her

situation and needed to produce a fair result for all parties. The trial court denied the motion for

summary disposition and ordered that the policy be reformed to reflect the “insurance premium

that [Progressive] believes it would have been entitled to had the insured listed Detroit as the

residence.” This appeal followed.

Progressive argues the trial court erred when it denied its motion for summary disposition.

According to Progressive, summary disposition is appropriate in light of Sherman’s fraud, and that

rescission is the appropriate remedy. We agree.

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A trial court’s determination on a motion for summary disposition is reviewed de novo.

Ormsby v Capital Welding, Inc, 471 Mich 45, 52; 684 NW2d 320 (2004). When reviewing a

and also whether a trial court properly applied equitable principles. 21st Century Premier Ins Co

v Zufelt, 315 Mich App 437, 443; 889 NW2d 759 (2016). “Finally, the application of an equitable

doctrine such as rescission is also reviewed de novo.” Wilmore-Moody v Zakir, 511 Mich 76, 83;

999 NW2d 1 (2023).

“The purpose of the Michigan no-fault act is to broadly provide coverage for those injured

in motor vehicle accidents without regard to fault.” Iqbal v Bristol West Ins Group, 278 Mich App

31, 37; 748 NW2d 574 (2008). “[T]he no-fault act requires registrants and operators of motor

vehicles to maintain compulsory no-fault insurance.” Wilmore-Moody, 511 Mich at 83, citing

MCL 500.3101(1). MCL 500.3105(1) requires insurers to pay PIP benefits to those whom they

insure who are accidentally injured in the “use of a motor vehicle as a motor vehicle[.]”

But, “an insurer has a reasonable right to expect honesty in the application for insurance[.]”

Bazzi v Sentinel Ins Co, 502 Mich 390, 407; 919 NW2d 20 (2018). “Indeed, it is well settled that

There are three types of misrepresentations which may entitled an insurer to rescind a

policy: “[A]ctionable fraud, also known as fraudulent misrepresentation; innocent

misrepresentation; and silent fraud, also known as fraudulent concealment.” Titan Ins Co v Hyten,

491 Mich 547, 555; 817 NW2d 562 (2012).

Rescission “does not ‘function by automatic operation of the law.’ ” Wilmore-Moody, 511

should be ‘granted only in the sound discretion of the court.’ ” Wilmore-Moody, 511 Mich at 85,

quoting Lenawee Co Bd of Health v Messerly, 417 Mich 17, 31; 331 NW2d 203 (1982). Put

differently, “[e]quitable relief by way of cancellation is not strictly a matter of right, but rather a

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For example, we have deemed reformation “the appropriate remedy when an insurance

contract violates the law or public policy.” Progressive Marathon Ins Co v Pena, 345 Mich App

270, 276; 5 NW3d 367 (2023). Similarly, reformation is possible if a party can “prove a mutual

mistake of fact, or mistake on one side and fraud on the other, by clear and convincing evidence.”

Casey v Auto Owners Ins Co, 273 Mich App 388, 398; 729 NW2d 277 (2006). This Court has

also held that reformation is available for contracts if the writing “fails to express the intentions of

the parties . . . as the result of accident, inadvertence, mistake, fraud, or inequitable conduct, or

both fraud and mistake, fraud or inequitable conduct being on one side and mistake on the other.”

Najor v Wayne Nat’l Life Ins Co, 23 Mich App 260, 272; 178 NW2d 504 (1970), quoting 45 Am

Jur, Reformation of Instruments, § 45, p 609

In this case, Progressive moved for summary disposition on the basis of Sherman’s alleged

fraud. While we reject Progressive’s argument for fraudulent misrepresentation, we agree there is

no genuine question of fact of innocent misrepresentation. Indeed, rescission “is justified without

regard to the intentional nature of the misrepresentation, as long as it is relied upon by the insurer.”

misrepresentation intended to deceive or that the other party knew the representation was false.”

M&D, Inc, 231 Mich App at 28.

Progressive’s litigation underwriting specialist, Janeen Copic, submitted an affidavit

stating that Progressive would have charged a 7.7% higher premium had Sherman accurately

disclosed the number of drivers and resident-relatives at the reported address, and a 75.5%

increased premium had Sherman disclosed her permanent Detroit residence. Progressive relied on

Sherman’s misrepresentations, as stated in Copic’s affidavit, to determine a lower premium for

coverage than what Progressive would otherwise have charged. Sherman does not dispute this

reliance. Thus, there is no genuine issue of material fact that Sherman made an innocent

misrepresentation, and that Progressive would have issued a different contract but for this

Security Ins Co v Comm’r of Ins, 133 Mich App 38, 40; 348 NW2d 34 (1984), this Court

considered a situation in which the insured made intentional misrepresentations in his application

Auto-Owners Ins Co v Mich Comm’r of Ins, 141 Mich App 776, 780; 369 NW2d 896 (1985);

Cunningham v Citizens Ins Co of America, 133 Mich App 471, 478; 350 NW2d 283 (1984).

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for insurance. The insurer rescinded the policy ab initio on the basis of these representations. Id.

In examining the rescission, we noted there was “no reason in law or policy for the burden of such

a risk to be placed on the insurer in preference to the insured who made the intentional material

misrepresentations.” Id. at 43. Accordingly, we upheld the trial court’s order upholding the

rescission. Id. at 45.

proposition that innocent insurers should not bear the burden of an insured’s fraud. By ordering

the policy reformed, the trial court placed the financial burden of paying PIP benefits on

Progressive, notwithstanding the fact that Sherman obtained those very same benefits by way of

fraud. Therefore, the trial court erred when it ordered reformation, rather than rescission.

Reversed and remanded to the trial court for further proceedings consistent with this

opinion. We do not retain jurisdiction.

/s/ Thomas C. Cameron

/s/ Noah P. Hood

/s/ Adrienne N. Young