Carrier claims garaging fraud
The insured allegedly misrepresented the address on an auto insurance policy application, but the insurer lost the bid to rescind the policy.
A federal district court in Michigan has refused to allow an auto insurer to rescind a policy and deny coverage to a claim based on its contention that the insured misrepresented her home address in her insurance application to pay lower premiums.
On January 30, 2015, Angela Hudson obtained an auto insurance policy from Progressive Marathon Insurance Company for her 2009 Buick Enclave. On September 28, 2015, Hudson added Amen Patterson and his 2005 Ford F-150 pickup truck to her Progressive policy. In December 2016, Patterson’s 2005 Ford F-150 was replaced on the policy by his newly acquired 2016 Ford F-150.
On January 31, 2017, Patterson was injured in a motor vehicle accident while driving his 2016 Ford F-150 pickup truck. After his accident, Patterson made a claim on the Progressive policy for first-party no-fault insurance benefits.
Progressive denied the claim, explaining in its denial letter that it discovered that the vehicles listed on the policy were garaged at multiple locations and not at the address identified in the insurance application. According to Progressive, this constituted a misrepresentation or concealment of a material fact at the inception of the policy that warranted denial of Patterson’s claim. Patterson sued the insurer, asserting claims for breach of the policy and seeking to recover first-party no-fault insurance benefits.
Identifying the garaging address
Progressive moved for summary judgment, arguing that Patterson and Hudson misrepresented, in her initial insurance application and subsequently upon the renewal of the policy, the location where the vehicles would be garaged. Specifically, Progressive contended that Hudson falsely listed her former address of 20855 Lahser Road, #815, Southfield, Michigan 48033 on her insurance application as the address where her vehicle would be garaged. In reality, she actually resided with Patterson at two other addresses throughout the duration of the policy: 19931 Marlowe Street, Detroit, Michigan 48235 and 16159 Gilchrest Street, Detroit, Michigan 38235.
Progressive contended that the summary judgment evidence established that neither Patterson nor Hudson actually resided at the Southfield address at the inception of the policy and that none of their vehicles were actually ever garaged at the Southfield address.
Progressive further argued that Patterson and Hudson had intentionally misrepresented their addresses and the locations at which their vehicles would be garaged to obtain insurance coverage and lower insurance premiums. And, Progressive maintained that it would not have issued the policy to Hudson or agreed to provide coverage for Patterson’s vehicle had either of the other two addresses been identified as the location where the vehicles would be garaged. Progressive asserted that these facts entitled it to rescind the policy and deny coverage for Patterson’s claims as a matter of law.
Among other things, Patterson argued that Progressive failed to establish as a matter of law the existence of fraud or misrepresentation of material fact in connection with Hudson’s insurance application.
The verdict
The district court denied Progressive’s motion, explaining in its decision that, under Michigan law, a material misrepresentation made in an application for no-fault insurance entitled the insurer to rescind the policy ab initio (declare it void from the start of the policy).
The district court then ruled, however, that Progressive failed to establish that it was entitled to rescind the policy and deny coverage for Patterson’s claim as a matter of law.
“Setting aside the issues of whether or not Ms. Hudson actually made a false representation in her insurance application or whether such representation [was attributable to Mr. Patterson],” the district court said, Progressive failed to establish “that any alleged misrepresentation of the garaging address was material.”
Under Michigan law, the district court continued, a fact or representation in an application for insurance was “material where communication of it would have had the effect of substantially increasing the chances of loss insured against so as to bring about a rejection of the risk or the charging of an increased premium.”
The district court observed that Progressive contended that it would not have issued and renewed the policy but for Hudson’s representation that she resided at the Southfield address and the vehicles covered by the policy would be garaged at that location. However, Progressive presented “no evidence to support this contention” and failed to establish “that such a representation was material to its decision to issue and renew the policy.”
According to the district court, Progressive presented “no evidence that it would not have issued the policy had Ms. Hudson used a different address in her application, or that it would have rescinded coverage had she updated her address to a different location.”
Similarly, the court added, Progressive provided no evidentiary support for its position that:
- Patterson and Hudson represented they resided at the Southfield address to obtain lower insurance premium rates;
- It actually relied on Patterson’s or Hudson’s representations concerning the garaging address in determining the premium amounts to be paid by Hudson; or
- The premium amounts would, in fact, have been higher had Hudson used a different address in her application.
The district court ruled that, based on the record, Progressive failed to establish that there were no genuine issues of material fact with respect to its rescission defense. Therefore, it concluded, Progressive was not entitled to summary judgment on Patterson’s claim.
The case is Patterson v. Progressive Marathon Ins. Co., No. 18-10415 (E.D. Mich. Jan. 8, 2019).
Steven A. Meyerowitz, Esq., (smeyerowitz@meyerowitzcommunications.com) is the director of FC&S Expert Coverage Interpretation, the editor-in-chief of the Insurance Coverage Law Report, and the founder and president of Meyerowitz Communications Inc. This story is reprinted with permission from FC&S Expert Coverage Interpretation, the industry’s only comprehensive digital resource designed for insurance coverage law professionals.
Related: