Court Opinion

ID: 4021741
Source: CourtListenerOpinion
Date Created: 2016-08-04 07:05:33.008091+00
Date Added: 2024-06-11T14:08:11.349139
License: Public Domain

STATE OF MICHIGAN

                            COURT OF APPEALS

ROBERT MILLER and DIANE MILLER,                                       UNPUBLISHED
                                                                      August 2, 2016
               Plaintiffs-Appellants/Cross-
               Appellees,

v                                                                     No. 325885
                                                                      Tuscola Circuit Court
FARM BUREAU MUTUAL INSURANCE                                          LC No. 12-027312-CK
COMPANY OF MICHIGAN,

               Defendant-Appellee/Cross-
               Appellant.

Before: JANSEN, P.J., and SERVITTO and M. J. KELLY, JJ.

JANSEN, P.J. (concurring in part and dissenting in part).

        I concur with the majority in all respects except with regard to its determination that the
trial court properly granted reformation of the insurance contract. I do not believe that the
circumstances of this case warrant reformation on the basis of a mutual mistake. Therefore, I
would reverse the trial court’s order granting plaintiffs’ motion for reformation of the insurance
contract and remand for further proceedings.

       “Michigan courts sitting in equity have long had the power to reform an instrument that
does not express the true intent of the parties as a result of fraud, mistake, accident, or surprise.”
Johnson Family Ltd Partnership v White Pine Wireless, LLC, 281 Mich. App. 364, 371-372; 761
NW2d 353 (2008).

       Courts will reform an instrument to reflect the parties’ actual intent where there is
       clear evidence that both parties reached an agreement, but as the result of mutual
       mistake, or mistake on one side and fraud on the other, the instrument does not
       express the true intent of the parties. [Olsen v Porter, 213 Mich. App. 25, 29; 539
       NW2d 523 (1995).]

In other words, “[t]o obtain reformation, a plaintiff must prove a mutual mistake of fact, or
mistake on one side and fraud on the other, by clear and convincing evidence.” Casey v Auto-
Owners Ins Co, 273 Mich. App. 388, 398; 729 NW2d 277 (2006). A unilateral mistake by itself is
not sufficient for the court to grant reformation. Id. Similarly, “[a] mistake in law—a mistake
by one side or the other regarding the legal effect of an agreement—is not a basis for
reformation.” Id. A party seeking reformation on the basis of a mutual mistake must prove the
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mistake by clear and satisfactory evidence. Johnson, 281 Mich. App. at 379. A mutual mistake
may be a mistake of law or a mistake of fact. Id. A mistake of fact is “an erroneous belief,
which is shared and relied on by both parties, about a material fact that affects the substance of
the transaction.” Ford Motor Co v Woodhaven, 475 Mich. 425, 442; 716 NW2d 247 (2006).
“[M]istakes of law are divided into two classes: mistakes regarding the legal effect of the
contract actually made and mistakes in reducing the instrument to writing.” Johnson, 281 Mich
App at 379-380.

               In the former, * * * the contract actually entered into will seldom, if ever,
       be relieved against unless there are other equitable legal features calling for the
       interposition of the court; but in the second class, where the mistake is not in the
       contract itself, but terms are used in or omitted from the instrument which give it
       a legal effect not intended by the parties, and different from the contract actually
       made, equity will always grant relief unless barred on some other ground, by
       correcting the mistake so as to produce a conformity of the instrument to the
       agreement. [Id. at 380 (citations and quotation marks omitted).]

        I believe that the trial court improperly granted plaintiffs’ request to reform the insurance
contract to list Diane as a named insured because plaintiffs failed to establish a mutual mistake.
Instead, the evidence establishes that the parties intended for the insurance policy to cover Diane,
and the insurance policy covered Diane for over five years. The insurance policy listed Robert
as the named insured. The insurance policy provided, in relevant part, that an “insured person”
under the policy included the named insured, as well as residents of the named insured’s
household, including the named insured’s spouse. The policy also provided, in relevant part:

              We cover personal property owned by an insured while it is anywhere in
       the world. After a covered loss and at your request, we will cover personal
       property owned by:

              1. others while the property is on the part of the residence premises
       occupied by an insured;

Accordingly, defendant contended that Diane’s personal property was not covered by the
insurance policy at the time of the fire because she was not an insured person. This was because
she was neither a named insured nor a member of the named insured household, and her property
was not on the residence premises occupied by the named insured. In addition, the policy only
provided for dwelling, loss of use, and landscaping coverage for the “residence premises” in
which the named insured resides. Defendant contended that because Robert did not reside at the
home, it was not a residence premises for the purpose of coverage under the policy. Defendant
therefore argued that the damage to the house was not covered.

        The November 17, 2003 application reflects that Robert was listed as the first named
insured, and there are no additional named insured parties. Diane signed the application as the
applicant in two different places. The majority concludes that the fact that Diane signed as the
applicant indicates a mutual mistake regarding whether she was a named insured. However, the
parties may have decided to list Robert as the only named insured for a number of reasons, and
there is no indication in the document that the failure to name Diane as a named insured

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constituted a mutual mistake. Instead, the application reflects that the parties intended for both
Robert and Diane to be covered under the policy, but also intended for Robert to be the only
named insured.1 Subsequent communications between defendant and plaintiffs over the next
several years listed Robert as the only named insured. There is no indication that plaintiffs ever
raised the issue that Robert was the only named insured listed on the documents they received
from defendant, which further shows that there was no mistake of fact or law.

        The majority concludes that Diane’s affidavit also provides evidence of a mutual mistake,
but Diane’s affidavit supports defendant’s argument that the insurance agreement reflected the
parties’ intent. Diane stated in her affidavit that she went to the local Farm Bureau office in
2003 in order to apply for a policy to cover her home. She stated that she advised Soper that she
“wanted complete coverage for [her] husband and [her] home and belongings.” She further
stated, “I made clear my intentions to Mr. Soper to obtain coverage for both the home and
personal property for both my husband and myself.” According to Diane, Soper informed her
that the policy “would provide complete coverage for our home and our personal property.” The
insurance policy did just that. Diane was completely covered as the spouse of the named insured
at the time the insurance policy went into effect. In fact, Diane remained covered until Robert
moved out of the home five years later. Therefore, defendant issued the policy the parties agreed
to at the time they entered into the insurance agreement. Although Diane was not covered after
Robert moved out of the home, this subsequent change of circumstances does not establish that
the instrument did not express the true intent of the parties at the time they entered into the
agreement. Furthermore, Diane’s unilateral mistake regarding the legal effect of the insurance
agreement does not constitute a mutual mistake warranting reformation. Instead, Diane’s
affidavit evidences the parties’ mutual intent for the policy to cover Diane, and the insurance
agreement reflected that agreement because Diane was covered under the policy at the time it
was executed.

        I also do not believe that Diane’s statements in her affidavit regarding her discussion with
Soper in 2009 establish a mutual mistake at the time the parties entered into the insurance
agreement. Diane stated in her affidavit that she went to Soper’s office in January 2009 or
February 2009 following her separation from Robert in order to make a premium payment. She
asked his support staff if she was still covered under the policy even though her husband was no
longer living with her in their home, and Soper replied that she was completely covered.
However, Soper’s statements to Diane over five years after defendant issued the insurance policy
are of no moment because they do not establish a mutual mistake of fact or law at the time the
insurance agreement was entered into. See Lenawee Co Bd of Health v Messerly, 417 Mich. 17,

1
  Plaintiffs point out in their brief on cross-appeal that defendant produced two versions of the
application, including one in which Diane was listed as a qualifying named insured or spouse,
and one in which her name was crossed out. Regardless of when or why the altered version of
the application was created, the application listed Diane as a qualifying named insured or spouse,
which is consistent with the remainder of the application listing Robert as the only named
insured. Furthermore, the section at issue involved whether the named insured or spouse
qualified for various credits and did not determine which persons were insured under the policy.

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24; 331 NW2d 203 (1982) (“The erroneous belief of one or both of the parties must relate to a
fact in existence at the time the contract is executed.”). Instead, plaintiffs contend that Diane
intended for her and Robert to be covered by the policy, and Diane was covered by the policy
after it went into effect. Therefore, I do not believe that plaintiffs established a mutual mistake
by clear and satisfactory evidence.

       Accordingly, I would reverse the order granting plaintiffs’ motion for reformation of the
insurance contract and remand for further proceedings.

                                                            /s/ Kathleen Jansen

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