No-fault policy rescission; Innocent misrepresentation; Sherman v Progressive MI Ins Co; Material misrepresentation; Reliance; Vehicle ownership & registration; MCL 257.37(a); Equitable remedy of rescission

The court held that there was no genuine issue of material fact that defendant-insured (Toneysha) made a material misrepresentation in her insurance application and that plaintiff-insurer (CURE) relied on it, making rescission potentially available under an innocent-misrepresentation theory. Toneysha sought coverage for two leased vehicles and answered “Yes” when asked whether each vehicle was solely owned by and registered to her. After an accident, CURE learned that her fiancé, nonparty-H, was also listed as a co-owner and coregistrant. CURE presented documentary evidence showing that both had applied for title and registration as lessees, and Toneysha admitted that the vehicles were registered in both names. CURE’s underwriting manager testified that it does not insure vehicles with nonrelative, nonresident co-owners and that it would have declined the policy had the information been disclosed. Thus, CURE established both materiality and reliance. The trial court nevertheless found a factual dispute based on the possibility that Toneysha was confused about whether a coregistrant or lessee was an owner. The court determined that this reasoning applied the wrong standard. Under innocent misrepresentation, the insurer need not prove that the insured knew the statement was false or intended to deceive. Even if Toneysha was confused, “it would not change the nature of her innocent misrepresentation.” The nonmoving parties also produced no evidence disputing H’s co-ownership. The court therefore concluded that “[t]here was no genuine issue of material fact that Toneysha made a material misrepresentation in her application for insurance and that CURE relied on that misrepresentation to issue Toneysha a policy.” Because rescission is an equitable remedy, however, that determination did not automatically require rescission. Reversed and remanded.