Court Opinion

ID: 4586031
Source: CourtListenerOpinion
Date Created: 2020-11-13 10:04:18.037422+00
Date Added: 2024-06-11T13:48:01.091713
License: Public Domain

If this opinion indicates that it is “FOR PUBLICATION,” it is subject to
                 revision until final publication in the Michigan Appeals Reports.

                          STATE OF MICHIGAN

                             COURT OF APPEALS

ISHA SIMPSON and RICHARD BOYD,                                     UNPUBLISHED
                                                                   November 12, 2020
               Plaintiffs-Appellants,

v                                                                  Nos. 348279; 348977
                                                                   Wayne Circuit Court
AMERIPRISE INSURANCE COMPANY, APRIL                                LC No. 17-010369-NF
BRIGHTWELL, RONDREA GLASS, and JOHN
DOE,

               Defendants,

and

IDS PROPERTY CASUALTY INSURANCE
COMPANY,

               Defendant-Appellee.

Before: BOONSTRA, P.J., and CAVANAGH and BORRELLO, JJ.

PER CURIAM.

        In Docket No. 348279, plaintiffs Isha Simpson (Simpson) and Richard Boyd (Boyd) appeal
by right the trial court’s order granting summary disposition under MCR 2.116(C)(10) in favor of
defendant IDS Property Casualty Insurance Company (IDS).1 In Docket No. 348977, plaintiffs
appeal by right the trial court’s order granting IDS’s motion for attorney’s fees and costs under

1
  Defendants April Brightwell and Rondrea Glass were dismissed from the case by stipulation of
the parties. The disposition of the claims against defendants Ameriprise Insurance Company
(which claims appear to have been initially dismissed by stipulation of the parties but reasserted
by way of an amended complaint) and John Doe is unclear from the record provided to this Court.
No defendants other than IDS are parties to this appeal.

                                               -1-
both MCL 500.3148(2) (no-fault attorney’s fees) and MCR 2.403(O)(11) (case evaluation
sanctions). These appeals were consolidated by this Court.2 We affirm in both appeals.

                   I. PERTINENT FACTS AND PROCEDURAL HISTORY

        On February 22, 2017, Simpson and Boyd were involved in a motor vehicle accident.
Boyd was driving a vehicle co-owned by Simpson and Aquanetta Terry (Terry), and Simpson was
a passenger in the vehicle. The vehicle was insured under a no-fault policy issued by IDS jointly
to Simpson and Terry. It is undisputed that at the time Simpson and Terry applied for insurance,
as well as at the time of the accident, Simpson and Terry resided at separate addresses; Simpson
lived in Redford and Terry lived in Detroit. Despite the separate addresses, the IDS insurance
application listed only the Redford address. The application was signed by both plaintiffs. Boyd
did not have a valid driver’s license at the time of the accident.

         After plaintiffs filed this action against IDS to recover no-fault personal protection
insurance (PIP) benefits, IDS informed Simpson that it had rescinded the no-fault policy at issue,
effective September 30, 2016, because its investigation had revealed that the insured vehicle was
titled in the name of both Simpson and Terry, that Simpson and Terry were not related, and that
Terry had never resided at the Redford address. IDS refunded premiums that Simpson had paid
under the policy. IDS thereafter filed a motion for summary disposition under MCR 2.116(C)(10),
arguing that it was entitled to rescind the no-fault policy because Simpson and Terry had
misrepresented on the insurance application that they resided together and because, had the they
been truthful, IDS would not have issued the policy. The trial court agreed and granted IDS’s
motion. Thereafter, IDS moved for attorney’s fees under MCL 500.3148(2) and for case
evaluation sanctions under MCR 2.403. The trial court awarded IDS attorney’s fees of $69,580
and costs of $140 against Simpson under both MCL 500.3148 and MCR 2.403, and awarded IDS
attorney’s fees of $5,000 against Boyd under MCR 2.403.

       These appeals followed. After the appeals were consolidated, IDS moved this Court to
hold the consolidated appeals in abeyance until our Supreme Court either denied leave or granted
leave to appeal and issued a final decision in Northland Radiology, Inv v USAA Cas Ins Co,
unpublished per curiam opinion of the Court of Appeals, issued June 18, 2020 (Docket No.
346345). The plaintiffs in Northland Radiology are healthcare providers to which Simpson had
assigned her right to seek benefits under the no-fault act. Id., unpub op at 2. The Northland
Radiology panel affirmed the trial court’s order granting summary disposition in favor of IDS,
thereby allowing IDS to rescind the policy. Id. This Court denied defendant’s motion.3

2
 Simpson v Ameriprise Ins Co, unpublished order of the Court of Appeals, entered May 21, 2019
(Docket Nos. 348279, 348977).
3
 Simpson v Ameriprise Ins Co, unpublished order of the Court of Appeals, entered October 19,
2020 (Docket Nos. 348279, 348977).

                                               -2-
                                     II. DOCKET NO. 348279

       In Docket No. 348279, plaintiffs argue that the trial court erred by granting IDS’s motion
for summary disposition under MCR 2.116(C)(10) and allowing IDS to rescind the no-fault policy.
We disagree.

        We review de novo a trial court’s decision on a motion for summary disposition. El-Khalil
v Oakwood Healthcare, Inc, 504 Mich. 152, 159; 934 NW2d 665 (2019). A party seeking summary
disposition under MCR 2.116(C)(10) must “specifically identify the issues as to which the moving
party believes there is no genuine issue as to any material fact,” and support the motion with
“[a]ffidavits, depositions, admissions, or other documentary evidence.” MCR 2.116(G)(3)(b) and
(4); see also Lowery v LMPS & LMPJ, Inc, 500 Mich. 1, 7; 890 NW2d 344 (2016).

               A motion under MCR 2.116(C)(10) . . . tests the factual sufficiency of a
       claim. Johnson v VanderKooi, 502 Mich. 751, 761; 918 NW2d 785 (2018). When
       considering such a motion, a trial court must consider all evidence submitted by the
       parties in the light most favorable to the party opposing the motion. Id. A motion
       under MCR 2.116(C)(10) may only be granted when there is no genuine issue of
       material fact. [Lowrey, 500 Mich. at 5]. “A genuine issue of material fact exists
       when the record leaves open an issue upon which reasonable minds might differ.”
       Johnson, 502 Mich. at 761 (quotation marks, citation, and brackets omitted). [El-
       Khalil, 504 Mich. at 160.]

        IDS rescinded the no-fault policy on the basis of the policy’s antifraud clause, which states
in relevant part:

               We do not provide coverage for any insured or person making claim under
       this policy who, whether before or after a loss, has:

              1.     Intentionally concealed or misrepresented any material fact or
       circumstance;

               2.      Engaged in fraudulent conduct; or

               3.      Made false statements

       relating to this insurance and/or in connection with any accident or loss for which
       coverage is sought under this policy.

        Recently, in Meemic Ins Co v Fortson, ___ Mich ___, ___; ___ NW2d ___ (2020) (Docket
No. 158302), our Supreme Court addressed an insurer’s ability to rescind a no-fault policy on the
basis of fraud. The Court considered whether the plaintiff insurance company’s reliance on a
policy’s antifraud clause was valid in the context of the mandatory coverage required by the no-
fault act, and held that “such contractual provisions are valid when based on a defense to
mandatory coverage provided in the no-fault act itself or on a common-law defense that has not
been abrogated by the act.” Id. at ___; slip op at 1-2. The Court explained that the no-fault act
“governs the coverage that it mandates,” id. at ___; slip op at 6, but that “to the extent that common-

                                                 -3-
law defenses remain in force and effect,” they can be applicable under certain circumstances to
claims involving mandatory coverage, id. at ___; slip op at 9. The Court further stated:

               The caselaw [in Michigan] establishes that contractual terms are governed
       by the no-fault act, yet at the same time we have held that common-law defenses
       not abrogated by the no-fault act remain available in claims for mandatory
       coverage. The upshot is that insurers can avail themselves of both statutory
       defenses and common-law defenses that the no-fault act has not displaced. [Id. at
       ___; slip op at 10.]

The Court added:

               It would make little sense to say that an insurer can invoke common-law
       defenses when sued but cannot place those defenses in its contract. By the same
       token, we have never indicated that an insurer’s contract can go beyond either the
       statutory or common-law defenses and thereby limit mandatory coverage to a
       greater extent than either the statute or the common law. To allow such provisions
       would reduce the scope of the mandatory coverage required by the no-fault act, as
       supplemented by the common law. It would, in short, vitiate the act. This result is
       plainly prohibited by our longstanding caselaw that forbids parties from
       contracting to vitiate an insured’s duty to promptly pay benefits as required by the
       no-fault act. See, e.g., Cruz v State Farm Mut Auto Ins Co, 466 Mich. 588, 598;
       648 NW2d 591 (2002) (holding that when a contractual provision “contravenes the
       requirements of the no-fault act by imposing some greater obligation upon one or
       another of the parties, [it] is, to that extent, invalid”). For these reasons, a provision
       in an insurance policy purporting to set forth defenses to mandatory coverage is
       only valid and enforceable to the extent it contains statutory defenses or common-
       law defenses that have not been abrogated. [Id. at ___; slip op at 10-11 (emphasis
       added).]

        Therefore, when “assessing [an insurer’s] defense through the lens of [an] antifraud
provision in [a] policy,” the dispositive question is whether the defense is available under the no-
fault act or is a common-law defense that has not been abrogated. Id. at ___; slip op at 11, 13 n
11. In Meemic, our Supreme Court, citing its earlier decision in Titan Ins Co v Hyten, 491 Mich.
547; 817 NW2d 562 (2012), recognized that an insurer may avail itself of several common-law
doctrines of fraud in an effort to seek rescission of a contract, so long as the fraud related to the
inception of the contract; in other words, the contract must have been obtained as result of the
fraud or misrepresentation. Id. at ___; slip op at 13-14, quoting Dobbs, Remedies (2d ed., abrg.),
§ 9.5, p. 716. (“At common law, the defrauded party could only seek rescission, or avoidance of
the transaction, if the fraud related to the inducement to or inception of the contract.”).4

4
  In Titan, 491 Mich. at 555, the Supreme Court explained that there are three “interrelated but
distinct” common-law doctrines that all fall under the umbrella of fraud: actionable fraud or

                                                  -4-
        Simpson is a named insured under the no-fault policy, and her coverage is therefore
mandatory under MCL 500.3114(1).5 To the extent that IDS sought to rescind its no-fault policy
on the basis of the antifraud provision, the antifraud provision is enforceable because the alleged
fraud related to the procurement of the policy and consequently is based on a type of common-law
fraud that would allow for rescission. Meemic, ___ Mich at ___; slip op at 1-2, 8, 10, 13-15; Bazzi,
502 Mich. at 400-401, 406.

         Plaintiffs argue on appeal that the trial court erred by concluding that there was no genuine
issue of material fact concerning whether Simpson and Terry had engaged in fraud in the
procurement of the no-fault policy, such that IDS was entitled to rescind the policy. In support of
its claim that Simpson and Terry engaged in fraud, IDS argued that the insurance application listed
both Simpson and Terry, represented that they both lived at the same address in Redford, Michigan,

fraudulent misrepresentation, innocent misrepresentation, and silent fraud.          With respect to
actionable fraud:
       [t]he general rule is that to constitute actionable fraud it must appear: (1) That
       defendant made a material representation; (2) that it was false; (3) that when he
       made it he knew that it was false, or made it recklessly, without any knowledge of
       its truth and as a positive assertion; (4) that he made it with the intention that it
       should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6)
       that he thereby suffered injury. Each of these facts must be proved with a
       reasonable degree of certainty, and all of them must be found to exist; the absence
       of any one of them is fatal to a recovery. [Titan, 491 Mich. at 555 (citations
       omitted).]

Regarding innocent misrepresentation and silent fraud, our Supreme Court has explained that

       by a long line of cases, that if there was in fact a misrepresentation, though made
       innocently, and its deceptive influence was effective, the consequences to the
       plaintiff being as serious as though it had proceeded from a vicious purpose, he
       would have a right of action for the damages caused thereby either at law or in
       equity.

               Silent fraud has also long been recognized in Michigan. This doctrine holds
       that when there is a legal or equitable duty of disclosure, “[a] fraud arising from the
       suppression of the truth is as prejudicial as that which springs from the assertion of
       a falsehood, and courts have not hesitated to sustain recoveries where the truth has
       been suppressed with the intent to defraud.” [Titan, 491 Mich. at 556 (citations
       omitted).]
5
 Coverage with respect to Boyd, on the other hand, is not mandatory under MCR 500.3114(1).
There is no indication in the record that Boyd was a spouse of a named insured, or a relative
domiciled in the same household. During his deposition, Boyd described his relationship with
Simpson as that of “friend[s].”

                                                 -5-
and did not indicate that Terry actually lived at a separate address in Detroit. The application asked
the applicant to “[l]ist all drivers in your household, unless they have their own car and insurance”
and listed Simpson as Driver 1 and Terry as Driver 2. Both Simpson and Terry signed the
application, under the following statement:

               I have read and completed this application for insurance and declare to the
       best of my knowledge and belief all of the foregoing statements are true, and that
       these statements are offered as an inducement to the company to approve the policy
       for which I am applying.

In their depositions, both Simpson and Terry conceded that Terry had never lived at the Redford
address.

         The insurance application and Simpson’s and Terry’s deposition testimony establish that
there was no genuine issue of material fact that Simpson and Terry did in fact misrepresent to IDS
that Terry also lived at the Redford address, even if this representation was innocent. Titan, 491
Mich. at 555-556. In their response to IDS’s motion, plaintiffs did not present documentary
evidence to create genuine issue of material fact on this point. See Lowrey, 500 Mich. at 7
(recognizing that a nonmoving party is not permitted to simply rely on the allegations or denials
in their pleadings, but must go “beyond the pleadings” and put forth specific facts that establish a
genuine issue of material fact exists for trial). Although plaintiffs claimed, given the fact that the
application did not specifically ask for each of their addresses, that there was no evidence that
Simpson and Terry intentionally made false and material misrepresentations, the fact remains that
the application listed both Simpson and Terry as applicants and listed the Redford address as their
only address. Both Simpson and Terry testified that Terry resided at another address in Detroit,
and it is undisputed that Terry’s address was not provided to IDS, even though the application
requested that Simpson and Terry list all drivers “in your household.” Moreover, the undisputed
testimony from an underwriter for IDS was that IDS would not have issued the joint no-fault policy
if it had known that Simpson and Terry did not live in the same household. Therefore, the trial
court did not err by concluding that there was no genuine issue of material fact concerning whether
Simpson and Terry had engaged in fraud in the procurement of the no-fault policy. Titan, 491
Mich. at 555-556.

        Plaintiffs also argue that, at a minimum, the trial court erred by rescinding the policy with
respect to Simpson, who actually did reside at the Redford address listed on the application. We
disagree. Simpson and Terry both signed the application, which misrepresented that both women
lived at the Redford address. Simpson did not misrepresent her own address, but did misrepresent
that Terry was a member of her household and lived at that address. We conclude that the trial
court did not err by concluding that the policy could be rescinded with regard to both Simpson and
Terry.

                                                 -6-
        For these reasons, we affirm the trial court’s order granting IDS’s motion for summary
disposition and allowing IDS to rescind its no-fault policy.6 See Bazzi, 502 Mich. at 412
(recognizing that an insurance policy procured by fraud on the part of the insured “is void ab initio
due to the fraudulent manner in which it was acquired.”).7

                                       III. DOCKET NO. 348977

       In Docket No. 348977, plaintiffs challenge the trial court’s awards of attorney’s fees to
IDS under the no-fault act and as a sanction for rejecting the case evaluation award. We affirm
both awards.

                 A. AWARD OF ATTORNEY’S FEES UNDER MCL 500.3148(2)

       Plaintiffs argue that the trial court erred by ruling that IDS was entitled to an award of
attorney’s fees against Simpson under MCL 500.3148(2), because, once the policy was rescinded,
IDS was no longer legally entitled to such an award. We disagree.

        For an issue to be preserved, it must be raised, considered, and addressed by the trial court.
Jawad A Shah, MD, PC v State Farm Mut Auto Ins Co, 324 Mich. App. 182, 192; 920 NW2d 148
(2018). Although plaintiffs generally opposed IDS’s request for attorney’s fees and costs under
MCL 500.3148(2), they did not argue that IDS was not legally entitled to attorney’s fees under
MCL 500.3148(2) because, once the no-fault policy was rescinded, there could not be any “claim”
for IDS to defend against within the meaning of the statute. Accordingly, this appellate argument
is unpreserved. However, because the issue is one of law and the facts necessary for its resolution
have been presented, we will consider it. Jawad A Shah, MD, 324 Mich. App. at 192-193.

       This Court ordinarily reviews a trial court’s decision whether to award attorney’s fees
under MCL 500.3148(2) for an abuse of discretion, its factual findings for clear error, and
questions of law de novo, see Gentris v State Farm Mut Auto Ins Co, 297 Mich. App. 354, 361; 824
NW2d 609 (2012). However, we review unpreserved claims of error for plain error affecting
substantial rights. Cove Creek Condo Ass’n v Vistal Land & Home Development, LLC, ___ Mich
App ___, ___; ___ NW2d ___ (2019) (Docket Nos. 342372 & 343144); slip op at 8, lv pending;
Hogg v Four Lakes Ass’n, Inc, 307 Mich. App. 402, 406; 861 NW2d 341 (2014). Id. We review
de novo questions of statutory interpretation. Ally Fin, Inc v State Treasurer, 502 Mich. 484, 491;
918 NW2d 662 (2018).

                  When interpreting unambiguous statutory language, the statute must be
          enforced as written. No further judicial construction is required or permitted. Our
          goal is to give effect to the Legislature’s intent, focusing first on the statute’s plain
          language. We must examine the statute as a whole, reading individual words and
          phrases in the context of the entire legislative scheme. In doing so, we consider the

6
 In light of this decision, it is unnecessary to consider IDS’s reliance on the doctrine of collateral
estoppel as an alternative basis for affirming the trial court’s order.
7
    Plaintiffs do not challenge the trial court’s balancing of the equities under Bazzi.

                                                    -7-
       entire text, in view of its structure and of the physical and logical relation of its
       many parts. [Id. at 493 (citations, quotation marks, and alteration omitted).]

       Plaintiffs argue that IDS was not required to defend against a fraudulent or excessive
“claim” under MCR 500.3148(2), and therefore was not entitled to an award of attorney’s fees.
We disagree.

       At the time the trial court entered its order awarding attorney’s fees and costs on April 26,
2019, MCL 500.3148(2)8 provided:

               An insurer may be allowed by a court an award of a reasonable sum against
       a claimant as an attorney’s fee for the insurer’s attorney in defense against a claim
       that was in some respect fraudulent or so excessive as to have no reasonable
       foundation. To the extent that personal or property protection insurance benefits
       are then due or thereafter come due to the claimant because of loss resulting from
       the injury on which the claim is based, such a fee may be treated as an offset against
       such benefits; also, judgment may be entered against the claimant for any amount
       of a fee awarded against him and not offset in this way or otherwise paid.
       [Emphasis added.]

In Gentris, 297 Mich. App. at 361-362, this Court acknowledged that MCL 500.3148(2) is
permissive, and “does not mandate that the court award attorney’s fees on a finding of fraud or
excessiveness[.]”

        In Covenant Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich. 191, 195; 895 NW2d
490 (2017), our Supreme Court considered whether the no-fault act provides a medical provider
with a statutory cause of action against a no-fault insurer to recover PIP benefits. The plaintiff, a
medical provider, argued that MCL 500.3112 provided it with standing to pursue a direct cause of
action against the no-fault insurer. Covenant, 500 Mich. at 208. In its analysis of MCL 500.3112,
the Court, in a footnote, referred to the dictionary definition of the word “claim,” which is not
defined in the no-fault act, and stated:

       Because the no-fault act does not define “claim,” we may consult a dictionary
       definition. . . . The relevant dictionary definitions of “claim” include “a demand
       for something due or believed to be due” and “a right to something.” Merriam–
       Webster’s Collegiate Dictionary (11th ed.). Therefore, to have a “claim” under the
       no-fault act, a provider must have a right to payment of PIP benefits from a no-fault
       insurer. [Covenant, 500 Mich. at 211 n 31 (citation omitted).]

The Court concluded that MCL 500.3112 “allows insurers to pay a provider of no-fault services
directly ‘for the benefit of’ the insured, [but] it does not establish a concomitant claim enforceable
by an insured’s benefactors.” Id. at 213-214. Here plaintiffs argue that the term “claim” in
MCL 500.3148(2) should be construed in the same manner as the term was construed in

8
  The statute was amended by 2019 PA 21, effective June 11, 2019. The amendment is not relevant
to this appeal.

                                                 -8-
MCL 500.3112 and that, applying this definition, IDS was not defending against a “claim” within
the meaning of MCL 500.3148(2). They reason as follows: because the trial court determined that
IDS was entitled to rescind the no-fault policy, the policy was therefore void ab initio, which, from
a legal standpoint, means that it never existed. If no contract ever existed, then plaintiffs never
had the right to receive PIP benefits from IDS, and could not have made a “claim” under the no-
fault policy against which IDS was required to defend. See Covenant, 500 Mich. at 211 n 31;
MCL 500.3148(2).

        While plaintiffs’ argument is inventive, Michigan law does not support it. In Bazzi, 502
Mich. at 409-410, our Supreme Court held that rescission is an equitable remedy and that the actual
rescission of a policy does not occur automatically or by operation of law, but instead is left to the
discretion of the trial court. See also Meemic, ___ Mich at ___; slip op at ___ n 19; Bazzi, 502
Mich. at 409 (discussing the need for a trial court to balance the equities before applying the remedy
of rescission). Therefore, until a trial court enters an order rescinding a policy, the policy remains
in effect. During the 21-month period in which this action was pending, Simpson and Boyd were
able to, and did, file claims for payment of PIP benefits under the policy, and IDS defended against
those claims. Covenant, 502 Mich. at 211 n 31. The plain language of MCL 500.3148(2) allows
an insurer to seek an award of attorney’s fees for fraudulent or excessive claims in such a situation.9

                             B. CASE EVALUATION SANCTIONS

        Plaintiffs also argue that the trial court erred by awarding IDS case evaluation sanctions
against both Simpson and Boyd and by declining to apply the interest-of-justice exception under
MCR 2.403(O)(11). We disagree.

        We review de novo a trial court’s decision whether a party is entitled to case evaluation
sanctions under MCR 2.403(O). Smith v Khouri, 481 Mich. 519, 526; 751 NW2d 472 (2008)
(opinion by TAYLOR, C.J.). We review for an abuse of discretion a trial court’s decision whether
to invoke the interest-of-justice exception of MCR 2.403(O)(11). Sabbagh v Hamilton
Psychological Servs, PLC, 329 Mich. App. 324, 364; 941 NW2d 685 (2019). We review for clear
error any findings of fact that form the foundation for the trial court’s ruling. Id.

       MCR 2.403 provides, in pertinent part:

               (O) Rejecting Party’s Liability for Costs.

               (1) If a party has rejected an evaluation and the action proceeds to verdict,
       that party must pay the opposing party’s actual costs unless the verdict is more
       favorable to the rejecting party than the case evaluation. However, if the opposing

9
  We also reject plaintiffs’ contention that Esurance Prop & Cas Ins Co v Mich Assigned Claims
Plan, ___ Mich App ___, ___; ___ NW2d ___ (2019) (Docket No. 344715), lv pending, supports
their argument. Although this Court in Esurance recognized the legal principle that a rescinded
insurance policy is considered void ab initio, we did not address the specific question presented in
this appeal, i.e., whether a no-fault insurer is required to defend against a claim within the meaning
of MCL 500.3148(2) before the no-fault policy was rescinded.

                                                 -9-
       party has also rejected the evaluation, a party is entitled to costs only if the verdict
       is more favorable to that party than the case evaluation.

                                               * * *

               (6) For the purpose of this rule, actual costs are

               (a) those costs taxable in any civil action, and

               (b) a reasonable attorney fee based on a reasonable hourly or daily rate as
       determined by the trial judge for services necessitated by the rejection of the case
       evaluation, which may include legal services provided by attorneys representing
       themselves or the entity for whom they work, including the time and labor of any
       legal assistant as defined by MCR 2.626.

                                               * * *

              (11) If the “verdict” is the result of a motion as provided by subrule
       (O)(2)(c), the court may, in the interest of justice, refuse to award actual costs.[10]

        The parties do not dispute that plaintiffs rejected a unanimous case evaluation award and
that the dismissal of their action with prejudice was less favorable than that award. See
MCR 2.403(O)(2)(c), (4)(a), and (7). Therefore, plaintiffs do not dispute that IDS qualified for
the recovery of case evaluation sanctions. Instead, plaintiffs argue that the trial court should have
exercised its discretion and applied the interest-of-justice exception of MCR 2.403(O)(11) to
decline an award of sanctions. We disagree that the trial court abused its discretion.

        In Haliw v Sterling Hts (On Remand), 266 Mich. App. 444, 447; 702 NW2d 637 (2005), this
Court stated that “Subsection 11 is an exception to the mandatory rule set forth in
MCR 2.403(O)(1) that a party who rejects a case evaluation “ ‘must pay the opposing party’s
actual costs unless the verdict is more favorable to the rejecting party than the case evaluation.’ ”
This Court cautioned, however, that “[t]he term ‘interest of justice’ in MCR 2.403(O)(11) must
not be too broadly applied so as to swallow the general rule of subsection 1 and must not be too
narrowly construed so as to abrogate the exception.” Id. at 448. In Haliw, this Court considered
Luidens v 63rd Dist Court, 219 Mich. App. 24, 36; 555 NW2d 709 (1996), in which this Court had
interpreted the offer-of-judgment rule in MCR 2.405 in analyzing the applicability of the interest-
of-justice exception. Referring to Luidens, this Court stated that that

       factors normally present in litigation, such as a refusal to settle being viewed as
       “reasonable,” or that the rejecting party’s claims are “not frivolous,” or that
       disparity of economic status exists between the parties, are insufficient “without
       more” to justify not imposing sanctions in the “interest of justice.” [Luidens, 219
       Mich App] at 33-34, 37. Rather, the unusual circumstances necessary to invoke the

10
  MCR 2.403 was amended, effective May 1, 2019. The amendments are not relevant to this
appeal.

                                                -10-
        “interest of justice” exception may occur where a legal issue of first impression is
        presented, id at 35, or “where the law is unsettled and substantial damages are at
        issue, where a party is indigent and an issue merits decision by a trier of fact, or
        where the effect on third persons may be significant . . . .” [Haliw, 266 Mich. App.
        at 448, quoting Nostrant v Chez Ami, Inc, 207 Mich. App. 334, 343; 525 NW2d 470
        (1994) (HARRISON, J., concurring in result only).]

        Although this Court has stated that “sufficiently unusual circumstances” to warrant
application of the interest-of-justice exception may exist when there is a “significant financial
disparity” between the parties, see Sabbagh, 329 Mich. App. at 367, citing Harbour Correctional
Med Servs, Inc, 266 Mich. App. 452, 466; 702 NW2d 671 (2004), we have noted that a mere
“disparity of income” between parties is “too common” to fit within the interest-of-justice
exception. Luidens, 219 Mich. App. at 34-35. This Court has stated:

                There is almost always some degree of disparity of economic standing
        between the parties. MCR 2.405’s purpose of encouraging settlement will be
        undermined if the economic position of the parties is used to determine whether
        attorney fees will be awarded. Parties’ economic standing should not determine
        whether they face the risk of costs and attorney fees in rejecting an offer of
        judgment; nor should parties be able to engage in litigation with governmental or
        larger corporate entities secure in the knowledge that they need not weigh the same
        considerations as parties suing entities that are less financially endowed. [Id. at
        34.]

In other words, although not dispositive in and of itself, a party’s indigency is a factor a court may
consider in determining whether to apply the interest-of-justice exception, along with other factors
such as the presence of a legal issue of first impression, an unsettled area of the law, or a significant
effect on third parties. Haliw, 266 Mich. App. at 448.

       In this case, plaintiffs argue that the trial court abused its discretion by declining to apply
the interest-of-justice exception because (1) it misstated pertinent facts concerning whether
Simpson and Terry had misrepresented to IDS where the insured vehicles were kept, and (2) the
law was unsettled in the area of the availability of the defense of rescission in this context. We
disagree.

        In granting IDS’s motion for an award of attorney’s fees under MCL 500.3148(2), the trial
court stated:

        So with respect to Isha Simpson, because the Court found there was fraud in
        connection with the application and misrepresentations, and intentional
        misrepresentations about where the vehicle was garaged for the sole purpose of
        obtaining a lower premium I think that triggers a right on the part of the insurance
        company to seek attorney fees under [MCL 500.3148(2)]. So I would award
        attorney fees against Ms. Simpson under [MCL 500.3148(2)].

This conclusion was supported by Simpson’s deposition testimony that Simpson and Terry used
Simpson’s address because Simpson lived in Redford, and they hoped to secure a lower premium

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by avoiding rates charged in Detroit, and was not clearly erroneous. Gentris, 297 Mich. App. at
361. Moreover, the trial court rendered this conclusion in the context of finding that Simpson’s
claim was “in some respect fraudulent” as contemplated by MCL 500.3148(2), not in the context
of determining whether to apply the interest-of-justice exception to refuse to award case evaluation
sanctions. The trial court made no similar statements when making its award of case evaluation
sanctions. Accordingly, plaintiffs’ argument lacks merit.

         Plaintiffs’ argument that the law was unsettled with respect to whether IDS could rescind
its policy on the basis of fraud is also not convincing. While Meemic clarified that an insurer may
only rely on an antifraud clause that is consistent with the common law or statutory authority, our
Supreme Court had already confirmed in Bazzi that an insurer has the option of seeking to rescind
a no-fault policy on the basis of fraud in the procurement. Bazzi in turn relied upon Titan, 491
Mich. at 555-556, 558, in which our Supreme Court recognized that an insurer may seek the remedy
of rescission on the basis of fraud in the procurement of a contract. Contrary to plaintiffs’
contention, the law was not unsettled in this area.

        In their reply brief, plaintiffs argue for the first time that a significant financial disparity
exists between plaintiffs and IDS. Issues raised for the first time in appellate reply briefs are not
properly before this Court. See Blazer Foods, Inc v Restaurant Props, Inc, 259 Mich. App. 241,
252; 673 NW2d 805 (2003). Further, as stated, financial disparity alone is not an unusual
circumstance that warrants application of the exception. Luidens, 219 Mich. App. at 34-35. The
trial court did not abuse its discretion by declining to apply the interest-of-justice exception so as
not to award case evaluation sanctions. Sabbagh, 329 Mich. App. at 364.

       Affirmed in both appeals.

                                                               /s/ Mark T. Boonstra
                                                               /s/ Mark J. Cavanagh
                                                               /s/ Stephen L. Borrello

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