Mendelson Orthopedics PC v. Everest National Insurance Co.

          Wayne Circuit Court LC No. 15-014600-NF

          Before: Redford, P.J., and Markey and K. F. Kelly, JJ.

          Per Curiam.

         Intervening plaintiff, Donald DeVore, appeals as of right from the trial court's orders granting summary disposition in favor of defendant, Everest National Insurance Company (Everest), and defendant, Michigan Automobile Insurance Placement Facility (MAIPF). We reverse both rulings and remand for further proceeding consistent with this opinion.

         I. BACKGROUND

         While driving a motor vehicle owned by Cracynthia Havlicsek in Birmingham, Michigan on June 2, 2015, intervening plaintiff, Larry Morgan, and DeVore, his passenger, were rear ended by another driver. Both Morgan and DeVore suffered injuries. Havlicsek had recently obtained an auto insurance policy issued by Everest on her vehicle. Everest paid some but not all of Morgan's and DeVore's medical bills. Everest covered Morgan's and DeVore's claims for personal protection insurance (PIP) benefits from June 2, 2015 until December 31, 2015, when it terminated each of their benefits based on the results of independent medical examinations.

         Plaintiffs, Mendelson Orthopedics, PC (Mendelson) and Synergy Spine and Orthopedic Center, LLC (SSOC) sued Everest to recover payments for medical services rendered to Morgan related to the injuries he suffered in the June 2, 2015 accident. Pursuant to the parties' stipulation, the trial court permitted Mendelson and SSOC to amend their complaint to add the Michigan Assigned Claims Plan (MACP) as a defendant. Morgan and DeVore sued Everest in a separate action in Oakland County, but on September 2, 2016, they moved to intervene in this action. The trial court granted their motion and ordered them to dismiss their pending lawsuit against Everest without prejudice. In their intervening complaint, Morgan and DeVore alleged claims against Everest and the MAIPF. They alleged that Everest insured the vehicle in which they were injured and that they were entitled to PIP benefits under the policy which Everest refused to pay. They also alleged claims against the MAIPF that it had the obligation to immediately assign their benefits claims to an insurer to immediately provide them PIP benefits. Everest defended Morgan's and DeVore's claims on the ground that it rescinded Havlicsek's policy because she misrepresented material facts in her insurance application. The MAIPF denied having any obligations to provide Morgan and DeVore PIP benefits. Among the affirmative defenses, it stated that Morgan and DeVore failed to provide proof of loss as required under the no-fault act and failed to provide notice of their claims within the time permitted for filing an action for PIP benefits.

         Everest moved for summary disposition under MCR 2.116(C)(10) of Morgan's and DeVore's claims for PIP benefits on the ground that it rescinded Havlicsek's insurance policy because she misrepresented her address on the policy application. Everest explained that it learned of Havlicsek's misrepresentation in August and September 2016, about one year and three months after the accident, during depositions of Havlicsek's mother and DeVore. Everest argued that Michigan law permitted its rescission of Havlicsek's policy because misrepresentations in the application justified rescission and declaration that the policy was void ab initio. Everest contended that its rescission of Havlicsek's policy precluded all plaintiffs from seeking coverage under the policy. Everest argued that, even though Morgan and DeVore may have been innocent of fraud, rescission of Havlicsek's policy precluded them from any recovery of benefits from it.

         In opposition to Everest's motion, Morgan and DeVore argued that, because they were innocent third parties and Everest failed to raise the alleged misrepresentation in its reservation of rights letters to them, and only raised the fraud defense after the no-fault act's one-year limitation period expired, their ability to seek benefits from the MAIPF would be substantially prejudiced if Everest was not equitably estopped from asserting rescission as a bar to their innocent third-party claims. Morgan and DeVore asserted that Everest could not raise the fraud defense to deny them PIP benefits and that Havlicsek's misrepresentations did not automatically permit Everest to rescind the policy as to all parties. They contended that the trial court should consider whether Everest had a right to the equitable remedy of rescission under the circumstances.

         The trial court ruled that Everest had the absolute right to rescind the policy for material misrepresentation. The trial court held that no genuine issue of material fact existed regarding that a material misrepresentation had been made by Havlicsek in her application for insurance. The trial court, therefore, granted Everest summary disposition. However, the trial court dismissed Everest without prejudice subject to the case being reinstated if our Supreme Court reversed this Court's decision in Bazzi v Sentinel Ins Co, 315 Mich.App. 763, 770; 891 N.W.2d 13 (2016).

         The MAIPF moved under MCR 2.116(C)(8) and (10) for summary disposition of DeVore's claims on the grounds that he never submitted an application for benefits or notice of a claim until more than one year after his June 2, 2015 accident which resulted in his ineligibility for no-fault benefits under MCL 500.3172 and MCL 500.3174. The MAIPF argued that DeVore lacked eligibility because he failed to provide his first notice of his claim within one year after his accident, and first gave it notice of his claim by filing his suit against it on September 19, 2016, one year and three months after his accident, which absolutely barred his claims. DeVore opposed the MAIPF's motion by arguing that Jesperson v Auto Club Ins Ass'n, 499 Mich. 29, 39; 878 N.W.2d 799 (2016), clarified that the one-year time limit for submitting a claim is extended under MCL 500.3145(1) when previous payments have been made to or for the benefit of an injured person by an insurer. DeVore explained that Everest rescinded Havlicsek's policy months after the one-year anniversary of his accident which triggered his suit against the MAIPF. He argued that his suit against the MAIPF, nevertheless, fell within one year after the last payment made by Everest. He argued that he complied with the no-fault act's notice requirement set forth in MCL 500.1374 in conjunction with MCL 500.3145(1). The trial court disagreed and granted the MAIPF's motion. DeVore now appeals both orders.

         II. STANDARDS OF REVIEW

         We review de novo the trial court's decisions on motions for summary disposition under MCR 2.116(C)(10). Latham v Barton Malow Co, 480 Mich. 105, 111; 746 N.W.2d 868 (2008). A motion brought pursuant to MCR 2.116(C)(10) tests the factual support of a plaintiff's claim and is reviewed "by considering the pleadings, admissions, and other evidence submitted by the parties in the light most favorable to the nonmoving party. Summary disposition is appropriate if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law." Id. A genuine issue of material fact exists "when reasonable minds could differ on an issue after viewing the record in the light most favorable to the nonmoving party." Allison v AEW Capital Mgt, LLP, 481 Mich. 419, 425; 751 N.W.2d 8 (2008). We review de novo questions of statutory interpretation and the proper interpretation of a contract. Titan Ins Co v Hyten, 491 Mich. 547, 553; 817 N.W.2d 562 (2012). We also review de novo motions for summary disposition under MCR 2.116(C)(8). Bedford v Witte, 318 Mich.App. 60, 64; 896 N.W.2d 69 (2016). A motion under MCR 2.116(C)(8) tests whether the opposing party has failed to state a claim on which relief can be granted. Id. "When deciding a motion under (C)(8), this Court accepts all well-pleaded factual allegations as true and construes them in the light most ...