Insurer’s claim for reimbursement of money paid to a mortgagee under a standard mortgage clause; Foremost Ins. Co. v. Allstate Ins. Co.; Wells Fargo Bank, NA v. Null; Subrogation; Citizens State Bank of Clare v. State Mut. Rodded Fire Ins. Co. of MI; Deny defined; Distinguishing Marketos v. American Employers Ins. Co.; Insurance policy interpretation; Klapp v. United Ins. Group Agency, Inc.; Using a dictionary to define terms not defined in the policy; Citizen Ins. Co. v. Pro-Seal Serv. Group, Inc.

Concluding that the policy at issue only contemplated subrogation rights when a claim was denied, the court held that defendant-insured (Jones) was not contractually obligated to reimburse plaintiff-insurer (Meemic) for the payment it made to her mortgagee (nonparty-CitiMortgage). Thus, it reversed summary disposition for Meemic as to recoupment of the $53,356.49 payment, and remanded. After a fire damaged the insured property, Meemic rescinded and voided the policy from its inception on the basis of a material misrepresentation by Jones. After it rescinded the policy, it sent CitiMortgage the payment. It later filed this suit, seeking to recover that payment from Jones, as well as an advance payment it had made to her. She argued that the trial court erred in granting Meemic summary disposition on the basis it was entitled to reimbursement of the $53,356.49 payment. The court agreed. The policy’s plain language provided “that ‘any action or neglect’ by Jones (the named insured) would not prohibit recovery by” the mortgagee. This standard mortgage clause “created a separate, independent contract between Meemic and CitiMortgage.” As a result, its “rescission of Jones’s policy based on the acts of Jones at the time she procured the policy did not affect Meemic’s independent contract with CitiMortgage.” As to whether Meemic had subrogation rights even though the policy between it and Jones was rescinded, the contract’s plain language provided “that, if Meemic paid CitiMortgage ‘for any loss’ and denied payment to Jones, Meemic would have rights of subrogation.” She contended that, because Meemic rescinded the policy, instead of simply denying her claim, it was not entitled to subrogation. Turning to a dictionary to define the undefined term “deny,” the court concluded that “the contract only granted Meemic the right of subrogation if it paid CitiMortgage and refused to pay Jones’s claim under the policy—as opposed to entirely annulling Jones’s rights under” it. Meemic decided to do more than refuse to pay Jones’s claim – it “voided the policy ab initio due to Jones’s material misrepresentation.” Citizens State Bank did not, as Meemic contended, hold that an insurer “is entitled to subrogation even after it elects to rescind an insurance policy due to the insured’s misrepresentations at the time the policy is procured.” Further, the policy language here was narrower than in that case.