Defendant appeals as of right a judgment awarding plaintiff $199,399.79 for her claim for insurance proceeds related to the loss of her home because of a fire. We reverse and remand for a new trial.
I. BASIC FACTS
Plaintiff owned a modular home located in Sumpter Township, Michigan. Plaintiffs property was covered for fire loss under an insurance policy issued by defendant. The policy, however, contained a provision that excluded any losses that were caused by “[a]n action by or at the direction of any insured committed with
This entire policy is void if, whether before, during or after a loss, any insured has:
a. intentionally concealed or misrepresented any material fact or circumstance;
b. engaged in fraudulent conduct; or
c. made false statements;
relating to this insurance.
On December 23, 2007, while plaintiff was not home, a neighbor saw a car pull into plaintiffs driveway and leave after approximately 10 minutes. Shortly thereafter, the neighbor saw that the home was on fire and called the fire department. A fire investigator testified that it was his opinion that the fire was intentionally set by an amateur. Defendant formally denied the claim in a letter on August 26, 2008. Defendant explained in the letter that it had determined that the fire occurred as a result of arson with plaintiffs knowledge or consent and that plaintiff made material misrepresentations during defendant’s investigation of her claim.
Plaintiff thereafter filed a complaint against defendant, alleging breach of contract. Defendant filed affirmative defenses, which included the following: plaintiff had committed acts of fraud and material misrepresentation, the loss was the result of arson committed by or at the direction of plaintiff, and plaintiff misrepresented material facts and concealed information.
In October 2009, defendant filed a motion for summary disposition, which was granted.
At trial, the trial court, despite defendant’s objections, repeatedly instructed the jury that defendant had the burden of proving its affirmative defenses by clear and convincing evidence. During the preliminary instructions, the trial court stated:
On the following propositions defendant has the burden of proof:
One, that the fire was intentionally set.
Two, that the plaintiff made misrepresentations with the intent to defraud.
And [three], that plaintiff failed to mitigate her damages.
On these listed propositions, the defendant must prove them by clear and convincing evidence.
This means that the defendant must do more than merely persuade you that the proposition is properly [sic] true. To be clear and convincing[,] the evidence must be strong enough to cause you to have a clear and firm belief that the proposition is true.
This instruction was also repeated to the jury after the proofs were concluded and before the jury began its deliberations. Additionally, the trial court stated the following:
The defendant Home-Owners claims that the plaintiff attempted to defraud it.To establish fraud the defendant has the burden of proving each of the following elements by clear and convincing evidence.
A, plaintiff made a representation of material facts.
B, the representation of material facts that plaintiff made was false when made.
C, plaintiff knew that the representations were false when she made them.
D, plaintiff made the representations with the intent that the defendant rely upon the representations.
Your verdict will be for the defendant on the defense of fraud if you decide that defendant has proved each of these elements by clear and convincing evidence.
The trial court provided a similar instruction for the intentional-act exclusion: “Defendant Home-Owners has the burden of proving the application of [the intentional-act] exclusion by clear and convincing evidence.”
After deliberating, the jury returned a verdict in favor of plaintiff, and defendant’s appeal followed.
II. ANALYSIS
Defendant argues that the trial court instructed the jury on an incorrect burden of proof with regard to defendant’s position that the contract precluded plaintiff from recovering any benefits. We agree.
Defendant preserved this issue by objecting to the jury instruction in the trial court. Jimkoski v Shupe,
At issue is the provision in the insurance contract that would exempt plaintiffs loss from coverage and the provision that would void the contract in its entirety. The provisions are as follows:
We do not cover loss to covered property caused directly or indirectly by any of the following, whether or not any other cause or event contributes concurrently or in any sequence to the loss:
(9) An action by or at the direction of any insured committed with the intent to cause a loss.
This entire policy is void if, whether before, during or after a loss, any insured has:
a. intentionally concealed or misrepresented any material fact or circumstance;
b. engaged in fraudulent conduct; or
c. made false statements;
relating to this insurance.
When it instructed the jury, the trial court required that, in order for defendant to prevail on the basis of any of these contractual provisions, defendant had to establish the presence of such a defense through clear and convincing evidence. This was erroneous.
This case involves the application of express provisions of a contract. The fact that one of the contract’s provisions contains aspects of fraud is no reason, in and of itself, to place a higher burden of proof on the defense than on any other affirmative defense. While “fraud” is one of the traditional defenses to a contract, Majestic Golf, LLC v Lake Walden Country Club, Inc,
This Court in Mina v Gen Star Indemnity Co,
Plaintiff claims that Mina has no precedential value and, thus, should not be followed. However, this is incorrect. The Court of Appeals’ judgment in Mina was reversed in part on other grounds by our Supreme Court, Mina,
Plaintiff also claims that our Supreme Court’s decision in Campbell is not binding because more recent Supreme Court opinions have stated conflicting views. Specifically, plaintiff relies on Grimshaw v Aske,
In addition, while the trial court articulated reasons, albeit erroneous ones, for requiring defendant to prove fraud by clear and convincing evidence, the trial court provided no rationale for requiring this elevated evidentiary burden on all of defendant’s affirmative defenses. As discussed already, the insurance policy also precluded coverage for any loss if the arson was at the direction of plaintiff. In this case, defendant asserted that plaintiff was responsible for the intentional fire. Our Supreme Court has held that, even though an assertion relates to the alleged commission of a criminal act by a plaintiff, an insurer defendant is only required to prove by a preponderance of the evidence that the plaintiff committed the act. Sacred Heart Aid Society v Aetna Cas & Surety Co,
For all of the foregoing reasons, we hold that the trial court erred by requiring defendant to prove its affirmative defenses by clear and convincing evidence.
Reversed and remanded for a new trial. We do not retain jurisdiction. Defendant, as the prevailing party, may tax costs pursuant to MCR 7.219.
Notes
Defendant argued that plaintiff had made material misrepresentations in the course of her claim and that she was judicially estopped from claiming more than $1,800 in personal property loss because that is the amount she claimed in her bankruptcy filing. The trial court granted the motion on the ground that plaintiff had made false statements related to the loss.
We further note that plaintiff and the trial court placed too much reliance on SJI2d 128.01, which states, in part, “To establish fraud, plaintiff has the burden of proving each of the following elements by clear and convincing evidence!.]” As noted already, this evidentiary requirement is for actions for fraud. The usage note for this instruction reinforces this premise by stating: “This instruction is intended to be used in a tort action for damages for fraud. It is not designed for use in other types of cases.” (Emphasis added.)