A recent Michigan Supreme Court decision – Sherman v Progressive Michigan Insurance Company – confirms something most drivers don’t realize until it’s too late: Your insurance company may be able to cancel your policy after an accident – and deny all benefits – based on your application.
What Happened in the Case
The plaintiff was injured in a crash and sought no-fault (PIP) benefits from her own insurer. Instead of paying, the insurance company:
- Investigated her application
- Found discrepancies
- Voided the policy entirely (rescission)
- Refunded her premiums
The issues?
- The cars were not actually kept where she said they were
- She did not list all household residents
Those details would have increased her premium by over 80%.
The Court’s Decision
The Michigan Supreme Court ruled in favor of the insurance company and allowed the policy to be wiped out entirely. Key points:
- The inaccuracies were “material” (they affected pricing/risk)
- It did not matter whether the mistake was intentional
- The insurer was entitled to treat the policy as if it never existed
What This Means (and Why It’s Dangerous)
This case gives insurers a powerful playbook. After a serious accident, they can:
- Pull your original application
- Compare it to your actual living situation
- Look for any discrepancy
- Argue the policy should be rescinded
If they succeed:
- No PIP benefits
- No medical coverage
- No wage loss
- You may be left personally responsible for massive bills
The Reality: People Don’t Fill These Out Carefully
Let’s be honest, most people:
- Don’t remember every question on their application
- Let an agent fill things out quickly
- Use a mailing address instead of where the car is actually kept
- Don’t realize who counts as a “household resident”
And sometimes, the answers aren’t even written by the insured. But under this decision, the insured still owns those answers.
Where We See These Cases Go Wrong
The most common “gotcha” issues:
- Where the vehicle is actually garaged overnight
- Who is considered part of your household
- Who regularly drives the vehicle
- Using a lower-rate address (even temporarily)
- Applications completed quickly over the phone or online
Important: Rescission Is NOT Automatic
Even though the insurance company won in this case, the Court also made something very important clear: Rescission is an equitable remedy – it depends on the facts. That means:
- Courts are supposed to balance fairness (“the equities”)
- Not every mistake should result in losing coverage
- Each case depends on its specific circumstances
When Rescission Can Be Challenged
There may be strong defenses if:
- The application was filled out by the agent, not you
- The questions were ambiguous or unclear
- The insurer knew or should have known the true facts
- There are innocent third parties involved
- The insurer is using technicalities after a catastrophic loss
What You Should Do Right Now
Before anything happens:
- Review your current policy and application
- Make sure your address and garaging location are accurate
- Confirm all household members/drivers are disclosed
- Fix anything that looks even slightly off After a claim or denial:
- Do not assume the insurance company is right
- Do not accept a denial without review
- Get legal advice immediately
Bottom Line
This case is a warning: Insurance companies don’t just evaluate your claim – they investigate your application. And if they find something they can use, they may try to erase your coverage entirely.
If Your Claim Has Been Denied
If your no-fault benefits were denied or your policy was rescinded:
- You may still have a case
- The insurer may be overreaching
- The facts – and how they’re presented – matter
We regularly handle these disputes and know how insurers approach them.
Contact Olsman MacKenzie Peacock, P.C. for a free consultation to evaluate your situation.