MEMBERSELECT INSURANCE COMPANY v. KENNETH FLESHER, JOHN DOE, NICHOLAS FETZER, PROGRESSIVE MARATHON INSURANCE COMPANY, and KELLY FETZER
No. 348571
STATE OF MICHIGAN COURT OF APPEALS
April 23, 2020
If this opinion indicates that it is “FOR PUBLICATION,” it is subject to revision until final publication in the Michigan Appeals Reports.
S T A T E O F M I C H I G A N
C O U R T O F A P P E A L S
MEMBERSELECT INSURANCE COMPANY,
Plaintiff-Appellant,
v
KENNETH FLESHER, JOHN DOE, an unknown individual, NICHOLAS FETZER, PROGRESSIVE MARATHON INSURANCE COMPANY, and KELLY FETZER,
Defendants-Appellees.
FOR PUBLICATION
April 23, 2020
9:00 a.m.
No. 348571
Genessee Circuit Court
LC No. 17-109828-CZ
Before: BOONSTRA, P.J., and RIORDAN and REDFORD, JJ.
Plaintiff 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, Kenneth Flesher (Flesher) was operating his motorcycle when struck by a motor vehicle in a hit-and-run accident. At some point following the accident, Flesher came to
believe that the vehicle was a GMC Yukon.2 The parties agree that Nicholas Fetzer (Nicholas)3 owned the Yukon in question. Flesher brought suit against Nicholas alleging negligence.4 MemberSelect Insurance Company (MemberSelect), which insured the Yukon under an insurance policy identifying Nicholas’s mother, Kelly Fetzer (Kelly), as the principal named insured, assigned counsel to represent Nicholas in that action, but also 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 insured it himself. Nicholas stated that Kelly paid the monthly premiums to
MemberSelect
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, noted that there was “admissible evidence that strongly implies that [the Yukon was not] the vehicle involved in the accident,” and found 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 (2009). Summary disposition is proper under
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. Morrison, 286 Mich. App. at 572, citing Allstate Ins. Co. v.
State Farm Mut. Auto. Ins. Co., 230 Mich. App. 434, 439 (1998); see also Clevenger
v. Allstate Ins. Co., 443 Mich. 646 (1993). This requirement is not set forth
statutorily in either the insurance code of 1956,
438. An insurance policy is void if there is no insurable interest. Corwin v. DaimlerChrysler Ins. Co., 296 Mich. App. 242, 258 (2012).
Before examining the contours of what may comprise an “insurable interest,” we first look at the genesis of the public policy itself. As this Court has 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 (footnotes omitted).]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 (footnotes omitted).]
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.’ ” The Allstate Court
reasoned that “[t]hese public policy concerns are not implicated in the case of liability insurance,
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. 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. 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. Nonetheless, Allstate was obliged to apply the insurable interest requirement in the automobile liability insurance context before it “with Clevenger as our only guide” and “because Clevenger supports such a requirement.” Id. at 439-440. Allstate thus recognized, as do we, that Clevenger appears to hold that the insurable interest requirement applies in this automobile liability insurance context. Id. at 440.8 Unless and until the Supreme Court says otherwise, we are therefore bound by Clevenger and Allstate.
Given the resulting apparent applicability of the insurable interest requirement in this automobile liability insurance context, we must next examine the current state of the caselaw in an effort to ascertain the contours of what may comprise an “insurable interest.” As noted, the “insurable interest” requirement seems to have been initially applied in the automobile liability insurance context in Clevenger, a case in which the insured had sold a vehicle, had transferred title to the purchaser, and had allowed the purchaser to drive the vehicle home with the insured’s license plate, registration, and certificate of insurance. Along the way, the purchaser was involved in an automobile accident. Among the issues addressed by our Supreme Court was whether, notwithstanding that she was no longer the titleholder of the vehicle, the seller still had an insurable interest in the vehicle at the time of the accident, such that the seller’s insurer still had a duty to
anyone in her position, could possibly be tempted by the transfer of ownership to commit any illegal or unethical act in order to collect proceeds from the insurance policy at issue. The “insurable interest” requirement arose in the context of insurance policies payable to the insured. In such a circumstance, it is obvious how an insured with “nothing to lose” might be tempted to commit socially intolerable acts for financial gain. But the nature of the no-fault insurance at issue here is radically different. Because the insurance here is less likely to be exploitable as a “wager policy,” the basis for the “insurable interest” requirement is weakened. [Morrison, 286 Mich. App. at 574.]
defend and indemnify under
In Allstate, this Court again considered a situation in which the seller of a vehicle had transferred title to the buyer, but in that case had removed his license plate, registration, and certificate of insurance from the vehicle before turning over possession to the buyer. The Court noted that, in doing so, the seller in that case “did exactly what the Supreme Court [in Clevenger] suggested a seller do.” Id., 230 Mich. App. at 440. Therefore, the Court held, the seller was not only no longer the owner of the vehicle but was also no longer the registrant of the vehicle. Having no remaining interest in the vehicle, the seller therefore had no insurable interest and the policy was void.
Clevenger and Allstate thus both addressed the insurable interest issue in the context of an
owner or registrant of a motor vehicle. The reason they did so is that “owners and registrants have
an insurable interest in their motor vehicles because the no-fault act requires owners and registrants
to carry no-fault insurance and
This brings us to Morrison, which (unlike Clevenger and Allstate) is somewhat more factually akin to the situation before us in that the named insured was the mother of the vehicle’s adult driver. And at the time of the accident, like here, the son was the titleholder of the vehicle, the mother having transferred title to him shortly before the accident. But, unlike in this case, the mother was both the owner and the registrant of the vehicle at the time the policy was issued.10
This Court noted that the mother “did have an ‘insurable interest’ at the time the insurance policy was bought and paid for, the insured-against risk did not change, the basis for the ‘insurable interest’ requirement is weak,[11] and the public policy favoring family units is strong.” Morrison, 286 Mich. App. at 575. The Court further noted that “[t]he caselaw we have found on the genesis and development of the ‘insurable interest’ requirement shows that public policy forbids the issuance of an insurance policy where the insured lacks an insurable interest,” and that “[p]ublic policy does not appear to require an otherwise valid insurance policy to become void automatically.” Id. at 573-574 (emphasis in original). Based on these considerations, the Court
held that it did not need to decide whether the mother
Important to our consideration of the contours of an “insurable interest” is Morrison’s statement that “an insurable interest need not be in the nature of ownership, but rather can be any kind of benefit from the thing so insured or any kind of loss that would be suffered by its damage or destruction.” Morrison, 286 Mich. App. at 572-573, citing Crossman v. Am. Ins. Co., 198 Mich. 304, 308-311 (1917). See also Corwin, 296 Mich. App. at 257, citing Morrison. Moreover, “[a]n insurable interest in property is broadly defined as being present when the person has an interest in property, as to the existence of which the person will gain benefits, or as to the destruction of which the person will suffer loss.” Madar v. League Gen. Ins. Co., 152 Mich. App. 734, 738 (1986), citing Crossman v. American Ins. Co., 198 Mich. 304, 308–309 (1917).13
As mentioned, this Court has on several occasions also noted that “[a] person obviously has an insurable interest in his own health and well-being.” Corwin, at 257 (citation omitted). And in Allstate, we also noted that “the no-fault automobile liability insurance required in Michigan is not simply for the benefit of the policy holder or other insured. Rather, it is intended ‘to protect the members of the public at large from the ravages of automobile accidents.’ ” Allstate, 230 Mich. App. at 439, quoting Clevenger, 443 Mich. at 651. Therefore, Allstate observed that “in the case of automobile liability insurance, the insurable interest appears to lie, at least to some degree, with an injured party rather than an insured.” Id.
Although none of these cases decided the issue that confronts us in this case, they persuade us that we should leave intact the trial court’s determination that Kelly had an insurable interest in this case. To begin with, the Morrison Court recognized that “[f]amily members share large portions of their lives and properties in ways they do not share with strangers” and that “[p]ublic policy clearly recognizes that the family unit is, and always has been, entitled to a special status in the law.” Id. at 574-575. Morrison also noted, as did Allstate, that in the context of a no-fault
automobile liability policy, “the basis for the ‘insurable interest’ requirement is weak,” and further stated:
Parents who provide vehicles for their children are obviously interested in something other than personal pecuniary gain, and they are understandably concerned—not to mention of the view that it is a significant life event—when those children are finally “on their own.” Furthermore, no-fault insurance is fundamentally not something from which one could profit anyway, its goal being indemnification rather than compensation. Considering, additionally, parents’ natural interest in the well-being—physical, emotional, and financial—of their children, we would, at a minimum, conclude that the trial court’s conclusion is worthy of serious consideration in an appropriate case. [Id. at 573 n 4.]
We conclude, reaching the issue that this Court declined to reach in Morrison, that Kelly had a sufficient interest in the well-being of her adult child that we should not void her insurance policy on public policy grounds. An insurable interest may be found, at least in some instances, in “the property, or the life insured” by an insurance policy. Crossman, 198 Mich. at 308. Although, unlike the adult child in Morrison, Nicholas does not live with Kelly (and in fact has several children of his own), we do not believe that is so dispositive a factor as to divest Kelly of an insurable interest; our courts have long noted that even a de minimis insurable interest may be insured, see Morrison, 286 Mich. App. at 572 n 2, citing Hill v. Lafayette Ins. Co., 2 Mich. 476, 484- 485 (1853). We conclude that the interest of a parent in an adult child’s welfare, including such aspects as being covered for potential injury, being protected from financial ruin from injuring another, even the avoidance of civil infraction or other legal penalties for driving while uninsured, is sufficient to avoid temptations and social ills of “wager policies.” Allstate, 230 Mich. App. at 438-439.
Moreover, although in the context of the no-fault act specifically, rather than in the context of applying a public-policy doctrine that existed before the act was enacted, our Supreme Court has recently held that a registrant or owner of a vehicle may satisfy his or her statutory obligation to “maintain” the security required by the no-fault act when “someone other than that owner or registrant purchased no-fault insurance for that vehicle.” Dye v. Esurance Prop. & Cas. Ins. Co., 504 Mich. 167, 193 (2019). The Dye Court stated that “determining whether no-fault benefits are available to an injured person does not depend on ‘who’ purchased, obtained, or otherwise procured no-fault insurance.” Id. at 181.
While Dye concerned itself with the interpretation of specific provisions of the no-fault act,
see
public-policy grounds.14
We would, however, be delighted if our Supreme Court would take the opportunity in this or some other case to clarify the insurable interest requirement, its applicability in the context of automobile liability insurance, and the continued viability of Clevenger in that regard.15Affirmed.
/s/ Mark T. Boonstra
/s/ Michael J. Riordan
/s/ James Robert Redford
Notes
Furthermore, and even more significantly, the purpose behind the “insurable interest” requirement is not present here: we cannot imagine how [the insured], or
We base our interpretation of Clevenger on the fact that (1) the Supreme Court addressed the defendant‘s “insurable interest” argument on the merits, rather than simply stating that there is no such requirement for automobile liability insurance, and (2) the Supreme Court only addressed the question whether the named insured, Williams, had an insurable interest, when it was clear that Preece had an insurable interest. [Allstate, 230 Mich. App. at 438 (footnote omitted).]