                              STATE OF MICHIGAN

                              COURT OF APPEALS



ARTHUR THOMPSON and SHARON                                       UNPUBLISHED
THOMPSON,                                                        April 10, 2018

                 Plaintiffs-Garnishee Plaintiffs-
                 Appellees,

v                                                                No. 337368
                                                                 Jackson Circuit Court
FLOYD JUDE LIVING TRUST,                                         LC No. 13-003289-NO

                 Defendant,
and

FREMONT INSURANCE COMPANY,

                 Garnishee Defendant-Appellant.


Before: GADOLA, P.J., and K. F. KELLY and RIORDAN, JJ.

PER CURIAM.

        Garnishee defendant, Fremont Insurance Company (Fremont), appeals as of right the trial
court’s order denying Fremont’s motion for summary disposition and granting plaintiffs Arthur
and Sharon Thompson’s motion for summary disposition pursuant to MCR 2.116(C)(10). We
reverse and remand for proceedings consistent with this opinion.

                                              I. FACTS

        This case arises from an injury that occurred at a home owned by defendant Floyd Jude
Living Trust (the Trust) in Napoleon, Michigan. In 1977, Floyd Jude and his wife, Rebecca
Jude, purchased the home in question. In 1991, Floyd and Rebecca Jude conveyed the home to
plaintiffs.1 On June 23, 2008, plaintiffs conveyed the home by quitclaim deed to the Trust. In
July 2008, Floyd Jude was living in the home and purchased a homeowners insurance policy
regarding the property from Fremont. The application submitted by Floyd Jude did not identify



1
    Plaintiff Arthur Thompson is the stepson of Floyd Jude.


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the property as being owned by the Trust. Fremont issued the policy designating Floyd Jude as
the insured.

        In 2010, Floyd Jude’s son, Floyd Allen Jude, moved into the home to care for his father.
Later, Betty Henderson2 also moved into the home to help care for Floyd Jude. In 2011 or 2012,
Floyd Jude entered a nursing home due to his health, and on May 20, 2012, he died. In
approximately June 2012, Fremont sent documentation to Floyd Jude regarding the renewal of
the homeowners’ insurance policy. Henderson, who ultimately was appointed as the personal
representative of Floyd Jude’s estate, paid the renewal policy premium with a check from Floyd
Jude’s bank account. The parties do not dispute that at this point, Henderson did not advise
Fremont that Floyd Jude had died.

       At some point between May 20, 2012 and July 21, 2012, both Floyd Allen Jude and
Henderson moved out of the home. On July 21, 2012, Floyd Jude’s relatives, including plaintiff
Arthur Thompson, gathered at the home to divide Jude’s personal property. While checking to
ensure that a door was locked, Arthur fell through exterior stairs and was injured.

     On November 11, 2012, Fremont learned of the death of Floyd Jude and cancelled the
homeowners insurance policy. Fremont refunded one-half the six months’ premium payment.

        In October 2013, plaintiffs initiated an action against Betty Henderson, as personal
representative of the Estate of Floyd Jude, seeking compensation for Arthur’s injury. The trial
court thereafter granted plaintiffs’ motion to amend their complaint to substitute the Trust as
defendant, and dismissed Betty Henderson, as personal representative of the Estate of Floyd
Jude, as a party.

        The parties thereafter settled the lawsuit for $100,000, and the trial court entered a
judgment against the Trust for that amount. Plaintiffs then sought to garnish Fremont for the
judgment amount. Fremont moved for summary disposition pursuant to MCR 2.116(C)(10),
arguing that it was not obligated to pay the settlement amount because the Trust was not an
insured under the policy and that the home was not an “insured location” under the policy.
Plaintiffs also moved for summary disposition pursuant to MCR 2.116(C)(10), arguing that
Fremont had failed to provide a reservation of rights letter to either the Estate, the Trust, or to
plaintiffs, and therefore Fremont had waived or was estopped from raising any defenses to
coverage.

        The trial court granted plaintiffs’ motion and denied Fremont’s motion. The trial court
held that Fremont was precluded from denying coverage by waiver and estoppel because
Fremont had renewed the policy without any inquiry as to Floyd Jude’s status, Fremont did not
return the full overpaid policy premiums, and Fremont did not send a reservation of rights letter
to the Estate of Floyd Jude (the Estate). The trial court reformed the insurance policy so that the
renewal policy effectively formed a contract between Fremont and the Estate. Fremont now
appeals to this Court.


2
    Betty Henderson is the stepdaughter of Floyd Jude, and the sister of Arthur Thompson.


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                                       II. DISCUSSION

     On appeal, Fremont contends that the trial court erred in granting plaintiffs’ motion for
summary disposition. We agree.

        We review de novo questions of contractual interpretation, Titan Ins Co v Hyten, 491
Mich 547, 553; 817 NW2d 562 (2012), including the proper interpretation and application of
insurance policies. Cohen v Auto Club Ins Ass’n, 463 Mich 525, 528; 620 NW2d 840 (2001).
This Court also reviews issues of equity de novo. Casey v Auto Owners Ins Co, 273 Mich App
388, 394; 729 NW2d 277 (2007). We also review de novo the grant or denial of summary
disposition. Hoffner v Lanctoe, 492 Mich 450, 459; 821 NW2d 88 (2012). In reviewing the
grant or denial of a motion for summary disposition under MCR 2.116(C)(10), this Court
reviews the record in the same manner as the trial court, considering the pleadings, affidavits,
depositions, admissions, and any other evidence in favor of the party opposing the motion.
Maiden v Rozwood, 461 Mich 109, 120; 597 NW2d 817 (1999). A motion for summary
disposition under MCR 2.116(C)(10) tests the factual sufficiency of a claim, and is appropriately
granted when, except as to the amount of damages, there is no genuine issue as to any material
fact, and the moving party is entitled to judgment as a matter of law. Joseph v Auto Club Ins
Ass’n, 491 Mich 200, 206; 815 NW2d 412 (2012).

        An insurance policy is an agreement between its parties. Tenneco, Inc v Amerisure Mut
Ins Co, 281 Mich App 429, 444; 761 NW2d 846 (2008). Each policy renewal is considered a
new contract. See Russell v State Farm Mut Auto Ins Co, 47 Mich App 677, 680; 209 NW2d
815 (1973). “The primary goal in the interpretation of an insurance policy is to honor the intent
of the parties.” Tenneco, Inc, 281 Mich App at 444. Our Supreme Court has summarized the
principles of insurance policy construction as follows:

               First, an insurance contract must be enforced in accordance with its terms.
       Upjohn Co v New Hampshire Ins Co, 438 Mich 197, 207; 476 NW2d 392 (1991).
       A court must not hold an insurance company liable for a risk that it did not
       assume. Auto-Owners Ins Co v Churchman, 440 Mich 560, 567; 489 NW2d 431
       (1992). Second, a court should not create ambiguity in an insurance policy where
       the terms of the contract are clear and precise. Id. Thus, the terms of a contract
       must be enforced as written when there is no ambiguity. Stine v Continental
       Casualty Co, 419 Mich 89, 114; 349 NW2d 127 (1984).

               While we construe the contract in favor of the insured if an ambiguity is
       found, Auto Club Ins Ass’n v DeLaGarza, 433 Mich 208, 214; 444 NW2d 803
       (1989), this does not mean that the plain meaning of a word or phrase should be
       perverted, or that a word or phrase, the meaning of which is specific and well
       recognized, should be given some alien construction merely for the purpose of
       benefitting an insured. Upjohn Co, supra at 208 n 8. The fact that a policy does
       not define a relevant term does not render the policy ambiguous. Auto Club
       Group Ins Co v Marzonie, 447 Mich 624, 631; 527 NW2d 760 (1994). Rather,
       reviewing courts must interpret the terms of the contract in accordance with their
       commonly used meanings. Group Ins Co of Michigan v Czopek, 440 Mich 590,


                                               -3-
       596; 489 NW2d 444 (1992). [Henderson v State Farm Fire and Cas Co, 460
       Mich 348, 354-355; 596 NW2d 190 (1999).]

        To determine whether an insured is entitled to coverage under an insurance policy, a trial
court must determine if the policy provides coverage to the insured, and, if so, whether any
exclusion negates that coverage. Heniser v Frankenmuth Mut Ins Co, 449 Mich 155, 172; 534
NW2d 502 (1995). The insured has the burden of establishing that his or her claim falls within
the terms of the insurance policy. Id.

       In this case, the policy at issue included the following definitions:

       In this policy, “you” and “your” refer to the “named insured” shown in the
       Declarations and the spouse if a resident of the same household.

                                              * * *

       3. “insured” means you and residents of your household who are:

               a. your relatives; or

               b. other persons under the age of 21 and in the care of any person named
               above.

                                              * * *

       4. “Insured location” means:

               a. the residence premises;

               b. the part of other premises, other structures and grounds used by you as a
               residence and:

                       (1) which is shown in the Declarations; or

                       (2) which is acquired by you during the policy period for your use
                       as a residence;

               c. any premises used by you in connection with a premises in 4a or 4b
               above;

               d. any part of a premises:

                       (1) not owned by an insured; and

                       (2) where an insured is temporarily residing;

                                                  * * *

       8. “residence premises” means:

                                                -4-
               a. the one family dwelling, other structures, and grounds; or

               b. that part of any other building;

               where you reside and which is shown as the “residence premises” in the
               Declarations.

               “Residence premises” also means a two to four family dwelling where you
               reside in at least one of the family units and which is shown as the
               “residence premises” in the Declarations.

       The policy also stated as follows regarding the effect of the death of the insured:

       9. Death. If any person named in the Declarations or the spouse, if a resident of
       the same household, dies:

               (a) we insure the legal representative of the deceased but only with respect
               to the premises and property of the deceased covered under the policy at
               the time of death;

               (b) insured includes:

                       (1) any member of your household who is an insured at the time of
                       your death, but only while a resident of the residence premises; and

                       (2) with respect to your property, the person having proper
                       temporary custody of the property until appointment and
                       qualification of a legal representative.

       As noted, the fundamental inquiry in any lawsuit for payment under an insurance policy
is whether that insurance policy provides coverage to the insured in question. See Heniser, 449
Mich at 172. Here, the parties do not dispute that the policy issued by Fremont in June 2012
named Floyd Jude as the insured, and that Floyd Jude was deceased at the time of the policy
renewal. Considering that Jude was deceased, he lacked the ability to enter into a new contract
with Fremont in July 2012.

        The trial court determined, however, that Fremont was precluded from denying coverage
because (1) Fremont renewed the policy without ascertaining whether Floyd Jude was alive, and
when Fremont discovered that Floyd Jude was deceased, it returned only half of the policy
premium, (2) Fremont failed to send a reservation of rights letter to the personal representative of
the Estate, (3) Fremont thereby waived any rights and is estopped from asserting any rights, and
(4) the contract was thus reformed as a contract between Fremont and the Estate as of June 2012.

        Fremont first argues that the trial court erred by determining that it was obligated to
ascertain whether Floyd Jude was still alive at the time the policy was renewed in June 2012.
We agree. In Michigan, an insurer has no duty to investigate or to verify the representations
made by a potential insured. Titan Ins Co, 491 Mich at 570. To require an insurer to
affirmatively investigate the veracity of representations made to it by potential insureds would be

                                                 -5-
to hold an insurer to a different and higher standard than that of other contracting parties. Id. at
571. In this case, when Henderson renewed the policy by writing a check from Floyd Jude’s
bank account and did not advise Fremont that the insured was deceased, Fremont was not
obligated to inquire regarding whether Floyd Jude was still living. We also decline to impute
knowledge to an insurer not supported by the record. See McGrath v Allstate Ins Co, 290 Mich
App 434, 448; 802 NW2d 619 (2010), in which this Court declined to impute to the insurer the
knowledge that the insured was no longer living at the residence even though the daughter of the
insured notified the insurer that the bills should be sent to a new address.

        Fremont next argues that the trial court erred in determining that because Fremont failed
to send a reservation of rights letter to the personal representative of the Estate, waiver and
estoppel precluded Fremont from asserting any defenses to coverage. We agree. Generally,
when an insurer denies coverage to its insured and states its defenses, it then has waived or is
estopped from asserting new defenses. Kirschner v Process Design Assoc, Inc, 459 Mich 587,
593; 592 NW2d 707 (1999). When an insurer undertakes the defense of its insured, it must give
reasonable notice to its insured if it is doing so under a reservation of rights, and failure to notify
the insured waives or serves to estop the insurer from asserting those rights in the future. Id.,
citing Meirthew v Last, 376 Mich 33, 39; 135 NW2d 353 (1965).

        However, “[t]he application of waiver and estoppel is limited, and, usually, the doctrines
will not be applied to broaden the coverage of a policy to protect the insured against risks that
were not included in the policy or that were expressly excluded from the policy.” Kirschner, 459
Mich at 593-594. Equitable estoppel does not operate “to bring into existence a contract not
made by the parties, [or] to create a liability contrary to the express provisions of the contract the
parties did make.” Ruddock v Detroit Life Ins Co, 209 Mich 638, 653; 177 NW 242 (1920).
        In this case, any duty owed by Fremont was to its insured.3 Because the insured named
in the policy, Floyd Jude, was deceased at the time the policy was renewed, the contract was not
valid. Fremont did not contract with either the Estate or the Trust, and we will not use the
doctrine of equitable estoppel to create liability for which the parties did not contract, as the
record contains nothing to support policy coverage to either the Estate or the Trust. Ruddock,
209 Mich at 654.




3
  We note that Fremont initially defended the Estate, apparently without sending a reservation of
rights letter, and was successful in having the Estate dismissed from the action. Plaintiffs
thereafter amended their lawsuit to name the Trust as defendant instead of the Estate. Fremont
did not undertake to defend the Trust. Any obligation owed by Fremont, however, is to its
insured, Floyd Jude, and not some other entity. Similarly, while an insurance company seeking
rescission of a contract must generally return the paid premiums or seek a declaration of rights in
the trial court while retaining the premiums, see Burton v Wolverine Mut Ins Co, 213 Mich App
514, 520; 540 NW2d 480 (1995), Fremont’s alleged retention of a portion of the policy
premiums and failure to seek a declaration of rights would affect only its obligation to an
insured.


                                                 -6-
        Fremont next argues that the trial court erred by reforming the policy to make the Estate
the insured. Again, we agree. Where a contract does not express the intent of the contracting
parties, “[a] court of equity has power to reform the contract to make it conform to the agreement
actually made.” Casey, 273 Mich App at 398 (quotation marks and citation omitted). A party
seeking reformation of a contract must demonstrate by clear and convincing evidence that a
mutual mistake of fact or a mistake by one party and fraud by the other caused a failure of the
instrument to reflect the true intent of the parties. Id. A mutual mistake of law does not support
a claim for reformation. Id. Moreover, third parties generally lack standing to seek reformation
of a contract. Mate v Wolverine Mut Ins Co, 233 Mich App 14, 24; 592 NW2d 379 (1999).

        In this case, the reformation was improperly granted. As a third party, the Trust was not
entitled to reformation of a contract. See id. Moreover, in this case there was no evidence of a
mutual mistake of fact or a mistake by one party and fraud by the other. See Casey, 273 Mich
App at 398. To the extent that Henderson mistakenly believed that she could renew the policy
by paying the policy premium, this was not a mutual mistake, as Fremont’s mistake was in
believing Jude was still alive and that it was issuing a renewal policy to Jude. Reformation was
also inappropriate on the grounds of fraud because the record does not indicate that Fremont
engaged in fraudulent activity toward Jude, the Trust, or the Estate. Accordingly, the trial court
erred when it reformed the policy.

       We therefore reject the conclusion that the renewal between Fremont and the deceased
Floyd Jude formed a contract between Fremont and another entity, such as the Estate.4 The
renewal policy named only Jude as the named insured, and there is no evidence that Fremont
contracted with another party. Concluding otherwise would allow any person who paid to renew
a deceased person’s insurance policy to claim that the policy was transferred to some other entity
upon payment. We decline to interpret an insurance policy to produce absurd or unreasonable
conditions or results. Hastings Mut Ins v Safety King Inc, 286 Mich App 287, 297; 778 NW2d
275 (2009).

        The Trust was not an insured under a policy issued by Fremont. Fremont therefore was
not obligated to provide coverage to the Trust for plaintiffs’ judgment and Fremont was entitled
to summary disposition of plaintiffs’ claims.5




4
 We also note that even if there had been a contract between Fremont and the Estate, that would
not impute liability by Fremont to the Trust.
5
  Having concluded that Fremont is entitled to summary disposition on this ground, we decline to
reach Fremont’s additional contention that the trial court erred in granting plaintiffs summary
disposition because under the policy the premises in question was not an “insured location.”


                                               -7-
        Reversed and remanded for proceedings consistent with this opinion. We do not retain
jurisdiction.



                                                        /s/ Michael F. Gadola
                                                        /s/ Kirsten Frank Kelly
                                                        /s/ Michael J. Riordan




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