Rescission Appropriate When Insured Lies on Application
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Post 4827
Progressive Michigan Insurance Company (Progressive) appealed the order denying its motion for summary disposition and ordering reformation of plaintiff's, Janice Sherman's, automobile insurance policy even when reformation was not requested by Sherman.
In Janice Sherman v. Progressive Michigan Insurance Company and JOHN DOE, No. 364393, Court of Appeals of Michigan (June 20, 2024) the Court of Appeals explained the importance of the equitable remedy of rescission.
BACKGROUND FACTS
On November 12, 2020, Sherman applied to Progressive for a no-fault insurance policy for two vehicles-a 2006 Cadillac DTS sedan and a 1993 Chrysler New Yorker sedan. In the application, she identified her address as 16845 Tremlett Drive, Clinton Township, MI 48035, and confirmed that the vehicles were garaged at this address. The application also failed to disclose the total number of resident relatives, 14 years of age or older, and "all regular drivers" of her vehicles then residing in her household.
Progressive's litigation underwriting specialist, Janeen Copic, submitted an affidavit stating that Progressive would have charged a 7.7% higher premium had Sherman accurately disclosed the number of drivers and resident-relatives at the reported address, and a 75.5% increased premium had Sherman disclosed her permanent Detroit residence.
THE ACCIDENT
On July 14, 2021, Sherman was a passenger in one of the vehicles when it was hit from behind by John Doe. She was injured in this accident and asked Progressive for personal protection insurance (PIP) benefits. Progressive refused while rescinding the policy ab initio because of misrepresentations in her application. Sherman lied about the location where the cars were garaged and other individuals resided with her who she did not list on her application. Progressive estimated that, had Sherman included this additional information, it would have increased her premium by 83.2%.
THE SUIT
Sherman then sued Doe and Progressive claiming it unlawfully refused to pay PIP benefits and had breached her insurance contract. Sherman claimed the remedy should be tailored to the equities of the situation and needed to produce a fair result for all parties. The trial ordered that the policy be reformed to reflect the "insurance premium that [Progressive] believes it would have been entitled to had the insured listed Detroit as the residence.".
SUMMARY DISPOSITION
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.
An insurer has a reasonable right to expect honesty in the application for insurance. Indeed, it is well settled that an insurer is entitled to rescind a policy ab initio on the basis of a material misrepresentation made in an application for no-fault insurance. A misrepresentation is material if the insurer would have rejected the risk or charged an increased premium and would not have issued the same contract had it been given the correct information.
Even if fraud is not established rescission 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.
There was no reason in law or policy for the burden of such a risk to be placed on the insurer in preference to the insured who made the intentional material misrepresentations. The trial court's balance of the equities should have revealed misconduct by Sherman, but none by Progressive.
The Court of Appeals concluded that the trial court erred by failing to recognize this distinction. By ordering the policy reformed, the trial court placed the financial burden of paying PIP benefits on Progressive, notwithstanding the fact that Sherman obtained those very same benefits by way of fraud. The trial court erred when it ordered reformation, rather than rescission and its order was reversed.
ZALMA OPINION
Rescission is an ancient equitable remedy that exists because it would be unfair to allow one party to a contract to profit from fraud in the obtaining of a contract of insurance. Sherman lied in the application requesting an offer of insurance about the location and available drivers which, had she told the truth, would have resulted in much higher premiums. The trial court trying to be fair wrongfully refused rescission but used another equitable remedy: reformation to require the victim of Sherman's fraud, Progressive, with the medical expenses. Neither Ms. Sherman nor anyone should be allowed to profit from their fraud.
(c) 2024 Barry Zalma & ClaimSchool, Inc.
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The Need For and Application of a Motion in Limine
Post 5153
Lawyers Present & Argue Motions in Limine to Control Trial Excess
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In United States Of America v. Scharmaine Lawson Baker, Criminal Action No. 24-99, USDC, E.D. Louisiana (July 7, 2025) Scharmaine Lawson Baker was charged with six counts of health care fraud. She pled not guilty, and her trial was scheduled.
BACKGROUND
Government’s Omnibus Motion in Limine
The Government filed an omnibus motion in limine which included several requests to exclude certain types of evidence and arguments.
Exclusion of Evidence and Argument Related to Specific Instances of “Good Deeds” and “Law-Abidingness”
The Government argued that such evidence is irrelevant and improper character evidence.
The Court granted the motion, stating that the defendant’s character is not an essential element of the charges.
Testimony About Defendant’s Own ...
Act as Your Own Lawyer and Failure is Almost Certain
No Suit Can be Maintained if Claims are Facially Implausible
Post 5152
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In Gabaryaahla Israel and Akiva Israel, Beneficiaries v. Caliber Home Loans, Inc., et al., No. CIV-24-1255-D, United States District Court, W.D. Oklahoma (July 11, 2025) Wells Fargo Bank, N.A.’s Moved to Dismiss Plaintiffs’ Complaint for Fraud, Quiet Title, Injunctive Relief, Breach of Contract, Declaratory Judgment, Damages, Racketeer Influenced Corrupt Organizations Act (RICO) Violations, and Trover and Midfirst Bank’s Rule 12(b)(6) Motion to Dismiss.
Plaintiffs, who are self-represented, failed to respond to the motions to dismiss within 21 days as required by LCvR7.1(g) (establishing a 21-day deadline, and noting that any motion that is not opposed within 21 days may, in the discretion of the court, be deemed confessed.
BACKGROUND:
The plaintiffs brought this action against the ...
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Workers’ Compensation Insurer Sues to Collect Premiums Avoided by Fraud
It’s Fraud to Lie on Application for Insurance
Post 5121
In The Commissioners Of The State Insurance Fund v. Capcon Construction Industries Corp., Capcon Construction Supply Corp., Jab Masonry Corp., Agra Masonry Inc., Agra Industries Usa Corp, A&A Masonry Corp., Alexander Shvartsberg, Darren Caputo, Maryann Furman, 2025 NY Slip Op 32359(U), Index No. 452680/2024, Motion Seq. No. 002, Supreme Court, New York County (July 2, 2025) the court dealt with a fraudulent application for workers’ compensation insurance.
BACKGROUND
On March 3, 2015, A&A Masonry Corp. applied for workers’ compensation insurance coverage from the New York State Insurance Fund (SIF).
On January 15, 2016, Agra Masonry Inc. was incorporated with Maryann Furman as the sole shareholder and President.
On January 4, 2018, SIF canceled ...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
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Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
Professional Health Care Services Exclusion Effective
Post 5073
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This opinion is the recommendation of a Magistrate Judge to the District Court Judge and involves Travelers Casualty Insurance Company and its duty to defend the New Mexico Bone and Joint Institute (NMBJI) and its physicians in a medical negligence lawsuit brought by Tervon Dorsey.
In Travelers Casualty Insurance Company Of America v. New Mexico Bone And Joint Institute, P.C.; American Foundation Of Lower Extremity Surgery And Research, Inc., a New Mexico Corporation; Riley Rampton, DPM; Loren K. Spencer, DPM; Tervon Dorsey, individually; Kimberly Dorsey, individually; and Kate Ferlic as Guardian Ad Litem for K.D. and J.D., minors, No. 2:24-cv-0027 MV/DLM, United States District Court, D. New Mexico (May 8, 2025) the Magistrate Judge Recommended:
Insurance Coverage Dispute:
Travelers issued a Commercial General Liability ...
