Definition of Owner [§3101(2)(h)]
In this unanimous, unpublished, per curiam decision (Cameron, concurring in part and dissenting in part), the Court of Appeals vacated the trial court’s summary disposition order dismissing Plaintiff Harris Cheema’s first-party action against Defendants Progressive Marathon Insurance Company (“Progressive”) and State Farm Mutual Automobile Insurance Company (“State Farm”). The Court of Appeals held, first, that there must be a balancing of the equities to determine whether Progressive could rescind the policy it issued to Cheema’s company, Overland Transportation, LLC (“Overland”), based on a (perhaps innocent) misrepresentation Cheema made on his original application for coverage. The Court of Appeals held, second, that a question of fact existed as to whether a mutual rescission of the Progressive policy occurred by virtue of the fact that Cheema used the refunded premiums to pay Overland’s business expenses. The Court of Appeals held, third, that under the circumstances in this case, Progressive was not barred by the election of remedies doctrine from rescinding the policy after first choosing to cancel it. The Court of Appeals held, fourth, that a question of fact existed as to whether Cheema and Overland were co-owners of the vehicle Cheema was driving at the time of his injury, such that, if Progressive properly rescinded the policy it issued to Overland which covered the vehicle, Cheema would have been required to personally maintain no-fault coverage on the vehicle under MCL 500.3101(3)(l).
Overland is a medical transportation company solely owned by Harris Cheema, who also worked as one of its drivers. In 2018, Cheema procured insurance for Overland’s vehicles from Progressive through independent insurance agency, Golden Insurance Agency, LLC (“Golden”). There was conflicting testimony as to how Cheema described the nature of Overland’s business to Sam Saeidi, the Golden agent who facilitated Cheema’s purchase of the Progressive policy for Overland and completed Cheema’s application for coverage. Saeidi testified that he asked Cheema whether Overland was engaged in ‘transportation for hire’ but that Cheema responded in the negative, asserting instead that Overland provided a courtesy shuttle only. Cheema testified that he described the nature of Overland’s business to Saeidi ‘in detail,’ including telling Saeidi that Overland billed and received payment for its services from health insurers and workers’ compensation insurers. Cheema denied ever telling Saeidi that Overland offered courtesy services only, but he did admit to thinking that Overland was not engaged in ‘transportation for hire’ because Overland did not bill the people it transported directly.
Based on the information exchange between Saeidi and Cheema, Saeidi completed the application for insurance, answering, “No” to the question, “Does the insured ever transport passengers for hire?” Believing that Saeidi correctly filled out the application based on the information Cheema gave him, Cheema signed it. Progressive ended up issuing the policy to Overland, and shortly thereafter, Cheema was involved in a crash while operating one of the vehicles covered under the policy to run personal errands. Cheema subsequently filed an application for no-fault PIP benefits under the Progressive policy, and Progressive, in turn, sent Cheema a notice of cancellation of the policy, stating that it was cancelling the policy because it did not ‘have a program for passenger transportation for a fee in [Michigan].’ Approximately three months after the effective date of cancellation, Cheema filed a first-party action against Progressive, and approximately one month after Cheema filed suit, Progressive sent Cheema a letter informing him that it was rescinding the policy and declaring it void based on Cheema’s misrepresentation about the nature of Overland’s business. Cheema then amended his complaint to include a claim against State Farm—the insurer of a domiciled relative—and both Progressive and State Farm moved for summary disposition. Progressive argued that it was entitled to rescission because Cheema committed fraud in procuring the policy, and State Farm argued that Cheema was a co-owner of the vehicle he was operating at the time of his injury, and that if Progressive was entitled to rescind the policy, Cheema would be ineligible for PIP benefits because he failed to maintain insurance on the vehicle for purposes of MCL 500.3101(3)(l). The trial court granted both insurers’ motions.
The Court of Appeals reversed both summary disposition orders, holding, first, that even if Cheema’s misrepresentation regarding Overland’s business was innocent, the proper course of action was to balance the equities to determine whether they weighed in favor of rescission. The Court noted that rescission is justified in cases of innocent misrepresentation “if [the insurer] relies upon the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if he were not held accountable for his misrepresentation.” Further factual development was required, therefore, to determine the extent of Progressive’s reliance on the misrepresentation.
“The evidence permitted an inference that Saeidi may have led Cheema to believe that that was an accurate understanding of the phrase when completing the application. Although a finder of fact could disbelieve Cheema’s evidence, this Court cannot make credibility determinations, Foreman, 266 Mich App at 136, and is required to view the evidence in a light most favorable to the nonmoving party when reviewing a motion for summary disposition, El-Khalil, 504 Mich at 160. Furthermore, ‘whether an insured has committed fraud is [generally] a question of fact for a jury to determine.’ See Meemic Ins Co v Fortson, 324 Mich App 467, 473; 922 NW2d 154 (2018). See also Shelton, 318 Mich App at 657 (stating that it is an element of fraud that the person making the misrepresentation knew that his or her representation was false). However, ‘[r]escission is justified in cases of innocent misrepresentation if a party relies upon the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if he were not held accountable for his misrepresentation.’ Lash v Allstate Ins Co, 210 Mich App 98, 103; 532 NW2d 869 (1995); see Webb v Progressive Marathon Ins Co, 335 Mich App 503, 509; 967 NW2d 841 (2021). An innocent misrepresentation is a proper basis upon which to grant rescission ‘without regard to the intentional nature of the misrepresentation, as long as it is relied upon by the insurer.’ 21st Century Premier Ins Co v Zufelt, 315 Mich App 437, 446; 889 NW2d 759 (2016) (quotation marks and citation omitted). Nonetheless, even if the misrepresentation had been innocently made, the case must still be remanded for a balancing of the equities for the reasons explained below.”
The Court of Appeals held, second, that a question of fact existed as to whether Cheema assented to the policy’s rescission—“mutual rescission”—by using the refunded premiums to pay Overland’s business expenses. The Court noted that Progressive refunded the premiums via electronic transfer—as opposed to sending “Overland a check with unambiguous conditions on the acceptance of the funds”—and thus failed to “put Cheema on notice that, by accepting and retaining the refunded premiums, Cheema would be agreeing to the rescission of the policy on behalf of Overland.” In further support of its holding, the Court noted that, far from accepting the rescission, Cheema clearly disputed it: he contacted a lawyer and he called Golden to express his disagreement with Progressive’s decision, believing Golden was the proper entity to contact. He also sued Progressive for unpaid benefits before Progressive rescinded the policy, suggesting that he “did not accept the notion that the policy was fraudulently procured.”
“The facts of the instant case are distinguishable from the facts in Puffer. In this case, Progressive sent a letter to Overland stating that it was exercising the right of rescission. Progressive separately refunded the premiums by electronic transfer. Progressive did not send Overland a check with unambiguous conditions on the acceptance of the funds. Indeed, it did not even refer to the refunded premiums in its letter asserting the right to rescind. Accordingly, Progressive did not put Cheema on notice that, by accepting and retaining the refunded premiums, Cheema would be agreeing to the rescission of the policy on behalf of Overland. Consequently, the evidence did not show that Cheema necessarily agreed to particular terms and conditions by the use of the refunded premiums, as occurred in Puffer. Instead, the trial court had to examine the evidence and determine whether there was a factual dispute about whether Overland accepted the rescission though its actions.
We find there is a factual dispute that exists here. A reasonable finder of fact could conclude that when Cheema spent the refunded premiums, he impliedly accepted Progressive’s decision to rescind on behalf of Overland. But there was also evidence that Cheema did not accept the rescission. Cheema testified that he did not agree with Progressive’s decision to rescind and presented evidence that he contacted his lawyer about it. He also called Golden Insurance to express his disagreement under the assumption that Golden Insurance was the proper party to correct the dispute. It was also noteworthy that Cheema had already sued Progressive for unpaid benefits under the policy before Progressive rescinded the policy. The evidence that Cheema took steps to dispute the rescission and had already sued Progressive to collect benefits under the policy is evidence from which a reasonable jury could find that Cheema did not accept the notion that the policy was fraudulently procured. Under these circumstances, a reasonable finder of fact could conclude that Cheema’s decision to spend the refunded premiums did not imply that he accepted Progressive’s attempted rescission on behalf of Overland. See Young, 234 Mich at 700-701.”
The Court of Appeals then turned to one of Cheema’s arguments on appeal: that the election of remedies doctrine barred Progressive from rescinding the policy after cancelling it initially. The Court disagreed, observing, preliminarily, that in order for Cheema to successfully invoke the election of remedies doctrine, Progressive must have known that it had two or more remedies—cancelation or rescission—available to it at the time it elected to cancel the policy. Based on the timeline of Progressive’s investigation, the Court held that Progressive did not know that rescission was available to it as a remedy at the time it cancelled the policy. Thus, the election of remedies doctrine did not apply.
“In this case, the election of remedies doctrine is inapplicable. The accident occurred in April 2018. In May 2018, Progressive learned that Cheema had used the vehicle that was involved in the accident for patient transportation. A Progressive representative contacted Saeidi, who indicated that Overland transported patients to physical therapy but that Overland did not get paid for its services. In June 2018, Cheema was informed that his insurance policy would be cancelled on July 14, 2018, but Progressive continued its investigation into whether Cheema was entitled to benefits under the policy. On July 20, 2018, Cheema submitted to an examination under oath and testified that Overland had consistently received payments for transporting patients. In August 2018, Progressive contacted Saeidi again. Saeidi indicated that Cheema had reported that he billed Medicare and Medicaid for Overland’s services. In November 2018, Progressive rescinded the insurance policy. Thus, the record reflects that Progressive did not know that it had two remedies when it issued the cancellation. Indeed, there is no evidence that Progressive was aware that Overland had consistently billed for its services until Cheema submitted to an examination under oath in July 2018. The election of remedies doctrine is inapplicable.
Moreover, we question whether the election of remedies doctrine would apply under the circumstances of this case. The purpose of the election of remedies doctrine is to ‘prevent double redress for a single injury.’ Riverview Coop, Inc, 417 Mich at 312. In this case, there is no danger of Progressive obtaining double recovery because Progressive returned Overland’s premium. Additionally, contrary to Cheema’s arguments on appeal, the facts in this case are distinguishable from the facts in Burton v Wolverine Mut Ins Co, 213 Mich App 514; 540 NW2d 480 (1995). Indeed, unlike the insurer in Burton, Progressive did not cancel the policy before the motor vehicle accident in this case occurred. Id. at 517.”
Lastly, the Court of Appeals turned to State Farm’s motion for summary disposition, in which State Farm argued that Cheema was a constructive owner of the vehicle he was operating at the time of his injury, and that if Progressive was entitled to rescind the policy, Cheema would be ineligible for PIP benefits altogether—and specifically from State Farm, the insurer next in the line of priority—because he failed to maintain insurance on the vehicle for purposes of MCL 500.3101(3)(l). The Court of Appeals held that a question of fact existed as to whether Cheema was an owner of the vehicle, and that a reasonable finder of fact could conclude that Cheema did not have more than incidental use of the Odyssey with Overland’s permission—a separate entity, even though Cheema was its sole owner.
“Cheema testified that he had control over the Odyssey, but he also testified that Overland’s three vans were used exclusively for Overland’s business. He stated that he routinely directed his drivers to the locations where they had to transport patients. He further testified that there were other vehicles for his personal transportation needs, which included a Toyota titled in his name. Cheema admitted that he sometimes used Overland’s vehicles to run errands before or after transporting a passenger, but he also stated that he paid himself whenever he acted as a driver for Overland.
Cheema’s testimony permitted an inference that, Cheema did not have unfettered use of the Odyssey for purposes outside of Overland’s business and that he respected the limitations on that use. In the absence of evidence that Cheema routinely misused his status as the owner of Overland to treat Overland’s vehicles as personal vehicles, a reasonable finder of fact could conclude from Cheema’s testimony that he did not have more than incidental use of the Odyssey with the permission of his employer, Overland. See Ardt, 233 Mich App at 690-691. Stated another way, a reasonable finder of fact could conclude that Cheema respected the limitations on his use of the Odyssey imposed by Overland’s policies and, therefore, was not an owner within the meaning of MCL 500.3101(3)(l)(i).”
Judge Cameron concurred with the majority’s holdings regarding rescission and the common-law doctrine of remedies, but he disagreed with the majority’s holding regarding whether Cheema was a constructive owner of the vehicle. Judge Cameron argued that the evidence established that Cheema exercised “unfettered access and control over the [vehicle],” and was thus a constructive owner.
“In this case, Cheema established Overland in 2017, and Overland’s address was the same address as Cheema’s address. Cheema was the sole owner of the company, and he alone controlled the company’s operations. The Odyssey was garaged at Cheema’s residence, and Cheema possessed the only keys to the vehicle. Cheema testified that he controlled who drove the vehicle and that he and his brother maintained it. Although Cheema initially denied that he used the Odyssey for anything other than business, he later admitted that he ‘[m]ostly’ used it for business and acknowledged that he would ‘sometimes . . . drive the vehicle [to] do errands and stuff.’ Tellingly, at the time of the accident, Cheema was in the process of completing a personal errand. Although Cheema sometimes transported patients, he testified that he was not paid per hour like his other employees. Rather, Cheema paid himself a salary of $4,000 per month. Based on this undisputed evidence, which establishes that Cheema exercised unfettered access and control over the Odyssey, I would conclude that Cheema was a constructive owner of the Odyssey.”