Title: THISHA COHEN V AUTO CLUB INSUR ASSN

State: michigan

Issuer: Michigan Supreme Court

Document:

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Michigan Supreme Court 
Lansing, Michigan 48909 
C hief Justice 
Justices 
Maura D. Corrigan  
Michael F. Cavanagh 
Elizabeth A. Weaver 
Marilyn Kelly 
Clifford W. Taylor 
Robert P. Young, Jr. 
Opinion 
Stephen J. Markman 
FILED JANUARY 17, 2001  
THISHA COHEN,  
Plaintiff/Counter­
Defendant/Appellee,  
v  
No. 116473  
AUTO CLUB INSURANCE  
ASSOCIATION,  
Defendant/Counter- 
Plaintiff/Appellant.  
PER CURIAM  
The defendant insurance company sold the plaintiff a  
policy that included a clause voiding the policy in the event  
the plaintiff misrepresented a material fact.  The insurer  
later denied coverage on the basis of that clause, but the  
circuit court and Court of Appeals ruled that the clause was  
unlawful.  We reverse in part the judgments of the circuit  
court and the Court of Appeals and remand this case to the  
circuit court.  
I  
In December 1993, plaintiff Thisha Cohen was involved in  
a motor vehicle accident in the city of Detroit.1
 She  
describes her injuries as “severe and debilitating,” and says  
that they have resulted in “a serious impairment of a body  
function.” She alleges economic and noneconomic damages.  
At the time of the accident, Ms. Cohen was insured by  
defendant Auto Club Insurance Association (ACIA). The driver  
of the other vehicle was an uninsured motorist.  
Ms. Cohen’s policy included uninsured motorist coverage,  
as well as a provision allowing such claims to be submitted to  
arbitration.2  However, ACIA refused to provide coverage and  
refused to participate in arbitration.  The basis of ACIA’s  
refusal was its conclusion that Ms. Cohen had submitted false  
documentation regarding her wage loss.3  
In denying coverage, ACIA relied on a policy clause that  
voids the entire policy if the insured misrepresents a  
material fact relating to a claim. The clause states:  
This entire Policy is void if an insured  
person 
has 
intentionally 
concealed 
or  
misrepresented any material fact or circumstance 
relating to:  
1 Various dates appear in the file.  It appears, though, 
that the accident occurred on December 16, 1993.  
2 The materials at hand do not include the full policy or 
the page on which its arbitration clause appears.  However, 
there is no dispute that Ms. Cohen’s uninsured motorist clause 
would be arbitrable, absent the present controversy.  
3 The details are not important, but the dispute centers 
on when she left her job, and on whether she left because of 
a physical inability to perform its duties (entitling her to 
wage-loss benefits) or was fired for insubordination.  
2  
 
 
a. 
this insurance; 
b. 
the Application for it; 
c. 
or any claim made under it.  
Faced with ACIA’s refusals, Ms. Cohen filed suit in  
circuit court.  She asked for an order compelling ACIA to  
submit her uninsured motorist claim to arbitration.4  
In a motion for summary disposition, Ms. Cohen denied any  
misconduct.  For purposes of the motion, she further argued  
that the alleged misrepresentation should have no bearing on  
her claim.  She said that “no portion of the Uninsured  
Motorist Claim seeks wage loss benefits” and that she “seeks  
an uninsured motorist arbitration to ascertain to what pain  
and suffering damage she is entitled.” 
Thus, “every  
allegation of fraud is totally irrelevant to the uninsured  
motorist arbitration.”  Further, she argued that a no-fault  
policy can be rescinded only for misrepresentation in the  
course of applying for the policy.  
Responding to the motion, ACIA asked that summary  
disposition be entered in its favor. 
It observed that  
uninsured motorist coverage is contractual, and is not  
required by statute.  Thus, there is no basis in law for  
failing to enforce the policy clause.  
The circuit court ruled that “the insurance policy can  
only be void if there’s a material misrepresentation in the  
4 ACIA filed a counterclaim in which it alleged breach of 
contract and fraud.  It sought an order requiring Ms. Cohen to 
return insurance benefits that ACIA already had paid to her.  
3  
 
application for no-fault insurance.” 
The court granted  
summary disposition in favor of Ms. Cohen, and ordered that  
her uninsured motorist claim be submitted to arbitration.5  
The Court of Appeals granted leave to appeal,6 and later  
issued a judgment in which it affirmed the circuit court order  
that 
sent 
Ms. 
Cohen’s 
uninsured 
motorist 
claim 
to  
arbitration.7  238 Mich App 602; 606 NW2d 664 (1999).8  
ACIA has applied to this Court for leave to appeal.  
II  
This 
case 
involves 
issues 
concerning 
the 
proper  
interpretation 
and 
application of a contract of insurance, and  
we review such questions de novo.  Morley v Automobile Club of  
Michigan, 458 Mich 459, 465; 581 NW2d 237 (1998).  It also  
presents issues of statutory construction, which likewise are  
reviewed de novo. Brown v Michigan Health Care Corp, 463 Mich  
368, 374; 617 NW2d 301 (2000).  
5  The court also directed that ACIA’s counterclaim be  
heard at the same arbitration.  
6 Unpublished order entered February 17, 1998 (Docket No. 
207022).  
7 
 The Court of Appeals also reversed in part, finding 
error in the circuit court’s decision to order arbitration of  
ACIA’s counterclaim for fraud.  The Court of Appeals remanded 
the case to circuit court for further proceedings with regard 
to the counterclaim.  
8 
 Reh den, unpublished order entered February 16, 2000 
(Docket No. 207022).  
4  
 
III  
The Court of Appeals affirmed on the authority of MCL  
257.520(f)(1); MSA 9.2220(f)(1), which provides in part that  
“[e]very motor vehicle liability policy shall be subject to  
the following provisions”:  
The liability of the insurance carrier with 
respect to the insurance required by this chapter 
shall become absolute whenever injury or damage 
covered by said motor vehicle liability policy 
occurs; said policy may not be cancelled or  
annulled as to such liability by any agreement 
between the insurance carrier and the insured after  
the occurrence of the injury or damage; no  
statement made by the insured or on his behalf and 
no violation of said policy shall defeat or void 
said policy, and except as hereinafter provided, no 
fraud, misrepresentation, assumption of liability 
or other act of the insured in obtaining or 
retaining such policy, or in adjusting a claim 
under such policy, and no failure of the insured to 
give any notice, forward any paper or otherwise 
cooperate 
with 
the 
insurance 
carrier, 
shall  
constitute a defense as against such judgment 
creditor.  
The Court of Appeals concluded that the disputed clause  
of the policy violated the statutory mandate that “no  
statement made by the insured or on his behalf and no  
violation of said policy shall defeat or void said policy.”  
MCL 257.520(f)(1); MSA 9.2220(f)(1).  Acknowledging that an  
insurer can declare a policy void ab initio if the insured  
obtains the policy through intentional misrepresentation of a  
material fact in the application process, the Court of Appeals  
contrasted the present case, in which the policy was obtained  
without initial untruth. 238 Mich App 607.  
5  
 
As indicated, MCL 257.520(f)(1); MSA 9.2220(f)(1) states  
requirements 
for 
a 
“motor vehicle liability policy.”  However,  
the analysis of the Court of Appeals omits MCL 257.520(g); MSA  
9.2220(g), which limits that crucial term:  
Any policy which grants the coverage required 
for a motor vehicle liability policy may also grant 
any lawful coverage in excess of or in addition to 
the 
coverage specified 
for 
a 
motor 
vehicle  
liability policy and such excess or additional 
coverage shall not be subject to the provisions of 
this chapter.  With respect to a policy which  
grants such excess or additional coverage the term  
“motor vehicle liability policy” shall apply only  
to that part of the coverage which is required by  
this section.” [Emphasis supplied.]  
That concluding phrase (“the coverage which is required by  
this section”) means a policy of liability insurance as  
specified in the earlier subsections of MCL 257.520; MSA  
9.2220.  
The effect of MCL 257.520(g); MSA 9.2220(g), therefore,  
is to render MCL 257.520(f)(1); MSA 9.2220(f)(1), upon which  
the Court of Appeals relied, inapplicable to the present case.  
Ms. Cohen seeks arbitration of her uninsured motorist claim,  
which all agree is optional coverage not required by statute.9  
Because the term “motor vehicle liability policy” does not  
apply to that portion of her ACIA policy, MCL 257.520(f)(1);  
MSA 9.2220(f)(1), has no bearing on this matter.  
9 Morley, 458 Mich 461.  
6  
IV  
The Court of Appeals also noted that wage-loss benefits  
are an element of "personal protection insurance" (PIP or  
first-party) benefits, and must be included in any no-fault  
policy.  MCL 500.3105, 500.3107; MSA 24.3105, 24.13107.  
Rohlman v Hawkeye-Security Ins Co, 442 Mich 520, 524-525; 502  
NW2d 310 (1993).  The Court cited Husted v Auto-Owners Ins Co,  
459 Mich 500, 512; 591 NW2d 642 (1999), where we explained  
that “a policy exclusion that conflicts with the mandatory  
coverage requirements of the no-fault act is void as contrary  
to public policy.” 238 Mich App 607-608.  
Continuing, 
the 
Court 
of 
Appeals 
rejected 
ACIA's 
argument  
that, because uninsured-motorist coverage is optional, the  
disputed clause can be effective in that context.  In this  
regard, the Court observed that the disputed clause voided all  
coverages, including those that are not optional.  238 Mich  
App 608.  
The Legislature requires a Michigan motorist to maintain  
a no-fault policy that includes certain elements mandated by  
law.  Those required coverages are the bedrock of the no-fault  
system and, as we have held on many occasions, are not subject  
to removal by policy language that conflicts with the statute.  
Once again, however, we observe that the present case concerns  
uninsured-motorist coverage that is not required by statute.  
In this regard, it is instructive to consider the full  
paragraph 
of 
Husted, 
from which the previously quoted sentence  
7  
 
 
 
is drawn:  
[T]he language of the no-fault act indicates  
that it does not require residual liability 
insurance to cover an insured’s operation of any  
vehicle.
 In other words, such coverage is not 
mandatory under the no-fault act.  This Court has  
indicated that a policy exclusion that conflicts 
with the mandatory coverage requirements of the no­
fault act is void as contrary to public policy. 
Citizens Ins Co of America v Federated Mut Ins Co, 
448 Mich 225, 232; 531 NW2d 138 (1995).  However, 
because the no-fault act does not mandate residual  
liability coverage for an insured’s operation of 
any vehicle, it would not void an otherwise valid 
and unambiguous exclusion, like the business-use 
exclusion at issue here. 
[459 Mich 511-512  
(emphasis in original).]  
In the present case, we believe that the proper  
application of these principles is evident. Ms. Cohen seeks  
uninsured-motorist 
benefits.  
ACIA 
denied 
those 
benefits 
under  
a clause that, if applicable to this case, voids the entire  
policy.  Mindful of the great protection that the Legislature  
and this Court have provided for the no-fault benefits  
required by statute, we need not decide today the full extent  
to which the disputed clause, if applicable, could void the  
policy.  We need only decide whether it can void uninsured­
motorist coverage.  It can. 
A contractual provision that  
plainly governs the facts alleged to exist in this case is  
enforceable to the extent that it is not contrary to law.  
Citizens Ins Co of America v Federated Mut Ins Co, 448 Mich  
225, 234; 531 NW2d 138 (1995).10  
10 Citizens concerned the allocation of responsibility 
between a car rental company and its customer.  With regard to 
that issue, Citizens is now controlled by State Farm Mut  
8  
 
 
 
V  
For these reasons, we reverse in part the judgments of  
the circuit court and the Court of Appeals,11 and we remand  
this case to the circuit court for further proceedings that  
are consistent with this opinion. MCR 7.302(F)(1).  
CORRIGAN, C.J., and CAVANAGH, WEAVER, KELLY, TAYLOR, and  
MARKMAN, JJ., concurred.  
YOUNG, J., took no part in the decision of this case.  
Automobile Ins Co v Enterprise Leasing Co, 452 Mich 25; 549 
NW2d 345 (1996).  
11 We “reverse in part” because the second question in 
this case-
--whether ACIA’s counterclaim should be sent to  
arbitration-
--is not before us.  
1