Supreme Court sends another policy "reformation" claim back to the Court of Appeals
Titan Insurance Company sued Auto-Owners, Nicole Falls, and others, arguing that it should be able to re-write its insurance contract after its insured injured an innocent driver. Auto-Owners was a party to the suit because reforming the Titan policy would make Auto-Owners owe more under its UnderInsured Motorist Coverage.
In the Court of Appeals, the unanimous panel applied long-existing law to hold that Titan could not re-write its policy. The Court held that when its insured disclosed that she was married (and had health insurance through her husband) the insured was not guilty of a material misrepresentation or fraud for failing to list her husband on the application [which she denied even seeing] as a resident driver. Since Titan knew of the husband, his identity as a potential insured was "readily ascertainable" and the burden of coverage should fall on Titan rather than an innocent victim.
The Supreme Court's Republican majority recently overturned this longstanding Michigan precedent, and held in another Titan case that the insurer could, in fact, reduce its coverage to the legal minimum ($20,000.00), without regard to whether it had exercised reasonable diligence in identifying eligible insured drivers. It sent Falls' case back to the Court of Appeals to reconsider its opinion in light of the recent holding.