Progressive properly rescinded coverage for a Michigan driver who made misrepresentations on her insurance application, the Michigan Supreme Court ruled.
The case involved Janice Sherman, who sought personal protection insurance benefits from Progressive after a July 2021 auto accident.
During the claim review, Progressive found that Sherman misstated where she garaged her vehicles and who lived with her at the time of the crash.
Those details mattered to pricing. Progressive said Sherman’s premium would have increased by 83% if she had disclosed the information correctly.
Progressive denied coverage based on the misrepresentations. The insurer said it had rescinded Sherman’s policy and returned about $1,500 in premiums she had paid.
Sherman sued, arguing that Progressive unlawfully refused to pay PIP benefits and breached the insurance contract. She asked the court for a remedy based on the equities of the situation, arguing the policy should be reformed instead of rescinded.
A trial court sided with Sherman. It ordered the policy reformed to reflect the premium Progressive said it would have charged if Sherman had submitted an accurate application.
Under that order, Sherman had to repay the refunded $1,500 premium and pay an additional $1,126, equal to a 75% premium increase.
Progressive appealed. The Michigan Court of Appeals vacated the trial court’s ruling, finding that Sherman’s misconduct, not Progressive’s conduct, created the dispute.
The court said Sherman should bear the financial risk of her own misrepresentations. Progressive had the right to rescind the policy and deny coverage.
Sherman then appealed to the Michigan Supreme Court, which affirmed the Court of Appeals.
The Supreme Court noted that Michigan’s no-fault law generally requires insurers to pay PIP benefits to insureds regardless of fault in an accident.
Still, the justices said Progressive had a reasonable right to expect honest information on the insurance application.
If Sherman had provided accurate details, Progressive would have issued a different contract. That point drove the outcome. The justices said the trial court erred when it denied Progressive rescission. The trial court should have examined Progressive’s conduct tied to the policy’s procurement, not created a pricing fix after the fact.
Justice Brian K. Zahra wrote that the record contained no allegation of wrongdoing or inequitable conduct by Progressive. He said Progressive made no mistake, committed no fraud, and materially relied on Sherman’s misrepresentations when issuing the policy.
The record contains no allegation of wrongdoing or inequitable conduct on Progressive’s part. Clearly then, Progressive is entitled to rescission, given that Progressive made no mistake, committed no fraud, and materially relied on Sherman’s misrepresentations when issuing her an insurance policy.
Justice Brian K. Zahra
According to Beinsure analysts, the ruling gives Michigan auto insurers a firmer position when application fraud changes underwriting and pricing. It also narrows the path for policyholders seeking reformation after material misstatements. Tough result, but clean doctrine.
The court stressed that rescission does not automatically follow every fraud allegation. In this case, though, the misconduct ran one way. The justices found no plausible basis for a result favoring Sherman.
For insurers, the ruling confirms a basic underwriting point: when a policyholder’s false application details materially affect the contract, rescission remains available.
For policyholders, garaging location and household composition aren’t paperwork trivia. They change the premium, and sometimes the claim outcome.
