954 N.W.2d 115
Mich.2020Background
- In 2009 Justin Fortson suffered severe brain injury and required long‑term attendant care; his parents (Richard and Louise) were named insureds on a Meemic no‑fault policy and Justin was an insured resident relative.
- From 2009–2014 the parents billed Meemic for full‑time attendant care; Meemic paid but later investigation (begun 2013) showed Justin spent substantial time in jail and in rehab while bills were submitted.
- The policy’s antifraud clause stated the “entire policy is void if any insured person has intentionally concealed or misrepresented any material fact relating to this insurance, the application, or any claim.”
- Meemic terminated PIP benefits, sued to void the policy, stop future payments, and seek reimbursement; the Fortsons counterclaimed for benefits. Trial court ultimately granted summary disposition to Meemic; Court of Appeals reversed.
- Michigan Supreme Court affirmed the Court of Appeals’ result (vacating the COA opinion) and held the antifraud clause was unenforceable as applied because it was neither a statutory defense nor an unabrogated common‑law fraud defense (rescission applies only in limited circumstances).
Issues
| Issue | Meemic’s Argument | Fortsons’ Argument | Held |
|---|---|---|---|
| Whether an insurer may enforce a contractual antifraud clause to void coverage for statutorily mandated PIP benefits when the alleged fraud occurred after procurement | The policy expressly permits voiding the entire policy for any insured’s material misrepresentation; Meemic can enforce that contractual defense to stop PIP payments | A clause that defeats statutorily mandated PIP benefits conflicts with the no‑fault act and is unenforceable, especially where fraud did not induce procurement | The clause is unenforceable as applied because it is not grounded in the no‑fault statute and is not a common‑law fraud defense that would permit rescission in these facts |
| Whether common‑law fraud (rescission) supports a contractual right to void for postprocurement fraud | The contractual remedy is analogous to rescission and therefore available | The fraud here did not induce the contract nor amount to a substantial breach or an essential nonperformance that would justify rescission | Rescission (the closest common‑law analogue) is limited to fraud affecting contract inception or to cases of substantial/essential nonperformance; it does not support Meemic’s broad postprocurement voiding here |
| Whether the now‑abolished innocent‑third‑party rule prevents voiding benefits to an innocent claimant | Meemic: the innocent‑third‑party rule no longer bars insurers (Bazzi and Titan) | Fortsons: Justin is an innocent beneficiary and mandatory PIP protections should apply | The Court treated the innocent‑third‑party doctrine as irrelevant because Meemic relied on neither a statutory defense nor an applicable common‑law rescission theory |
| Whether MCL 500.3220 (statutory cancellation limits) bars enforcement of the antifraud clause | Meemic did not rely on MCL 500.3220; argued contractual remedy governs | Fortsons (and concurrence): statutory cancellation rules and public‑policy concerns bar the insurer from voiding mandatory coverage | Majority: MCL 500.3220 was inapplicable to the primary analysis and does not abrogate common‑law rescission; concurrence relied on it but the majority rejected that route |
Key Cases Cited
- Bazzi v. Sentinel Ins. Co., 502 Mich 390 (2018) (common‑law fraudulent‑procurement defense may be raised against no‑fault PIP claims)
- Titan Ins. Co. v. Hyten, 491 Mich 547 (2012) (common‑law contract defenses remain available to insurers unless clearly abrogated by statute)
- Cruz v. State Farm Mut. Auto Ins. Co., 466 Mich 588 (2002) (policy provisions are permissible when they facilitate the act’s goals and harmonize with the no‑fault scheme)
- Rohlman v. Hawkeye‑Security Ins. Co., 442 Mich 520 (1993) (statute governs mandatory no‑fault coverages; policy controls optional coverages)
- Marquis v. Hartford Accident & Indem., 444 Mich 638 (1994) (common‑law mitigation rule applies to no‑fault work‑loss benefits)
- Rory v. Continental Ins. Co., 473 Mich 457 (2005) (unambiguous contract provisions are enforced unless they violate law or traditional contract defenses)