Spectrum Health Hospitals v. Auto-Owners Insurance Company, 330914

Background

Angela Grant was injured in a March 2014 car accident while driving a 1994 Buick registered to her husband, Arthur Grant. Arthur and Angela lived together but had recently been separated; Arthur had temporarily lived with his mother, Vera Herington.
Herington added Arthur as a rated driver and the 1994 Buick to her Auto-Owners policy on January 4, 2014, purchasing PIP coverage for the vehicle; Arthur and Angela did not maintain their own no-fault insurance.
Auto-Owners denied Angela’s PIP claim, asserting its policy was not the priority insurer under MCL 500.3114 because neither Arthur nor Angela were named insureds or domiciled in Herington’s household at the time of the accident.
Plaintiffs (medical providers) sued Auto-Owners for unpaid PIP benefits and sought, alternatively, reformation of the Auto-Owners policy to add Arthur as a named insured so Angela could recover; MACP earlier denied assignment because the vehicle was uninsured.
The trial court granted summary disposition to Auto-Owners and refused to reform the policy; the Court of Appeals affirmed, holding Angela had no PIP entitlement under the Auto-Owners policy and reformation and other equitable remedies were not justified.

Issues

Issue	Plaintiff's Argument	Defendant's Argument	Held
Whether Angela is entitled to PIP under Herington’s policy (priority under MCL 500.3114)	Angela (via plaintiffs) argued the policy covered the Buick and thus Auto-Owners is liable for PIP	Auto-Owners argued neither Arthur nor Angela were named insureds or household relatives of Herington, so policy is not priority insurer	Held: Angela not entitled; she was not a named insured nor domiciled relative, so Auto-Owners not primary under MCL 500.3114
Whether policy should be reformed to add Arthur as a named insured	Plaintiffs asked court to reform the contract to reflect parties’ intent so Arthur (and thereby Angela) would be insured	Auto-Owners argued reformation is unjustified and plaintiffs lack standing; no mutual mistake or fraud shown	Held: Reformation denied—plaintiffs failed to prove clear & convincing grounds; plaintiffs lack standing as nonparties; reformation inappropriate here
Whether Auto-Owners’ issuance of coverage despite Herington’s lack of insurable interest requires equitable relief (public-policy/Corwin argument)	Plaintiffs relied on Corwin to argue courts should reform policies that defeat the No-Fault Act’s intent when named insured lacks insurable interest	Auto-Owners distinguished Corwin: there was no scheme to subvert the no-fault act and Grants knew the vehicle was uninsured and had no contractual relationship with insurer	Held: Corwin distinguished; no public-policy violation here and remedy for lack of insurable interest is voiding that coverage, not reforming to add owner
Whether Angela (and providers) are barred from recovery because vehicle owner failed to maintain security (MCL 500.3113(b))	Plaintiffs did not contest that Arthur/Angela lacked security but sought relief via reformation	Auto-Owners invoked MCL 500.3113(b) and the statutory priority scheme to bar recovery	Held: Because owner/operator failed to maintain required security, Angela is excluded from PIP under MCL 500.3113(b) and plaintiffs cannot recover

Key Cases Cited

Corwin v. Auto Club Ins. Ass’n, 296 Mich. App. 242 (reformation ordered where insurer’s scheme frustrated no-fault act and insured believed he purchased coverage)
Chiropractors Rehab. Grp., P.C. v. State Farm Mut. Auto. Ins. Co., 313 Mich. App. 113 (plaintiff providers’ rights depend on injured person’s entitlement to PIP)
Belcher v. Aetna Cas. & Surety Co., 409 Mich. 231 (§3114 is both a priority and entitlement provision)
Casey v. Auto-Owners Ins. Co., 273 Mich. App. 388 (reformation principles; equitable relief only on clear-and-convincing proof)
Morrison v. Secura Ins. Co., 286 Mich. App. 569 (insurable-interest requirement for valid automobile insurance policy)