An insurance broker transacts insurance with—but not on behalfof—an insurer, while an agent transacts insurance with and onbehalf of both the insurer and the insured.

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In Estate of Morse ex rel. Morse v. Titan Insurance Co., aMichigan appellate court was asked to determine the capacity ofAdrian Insurance Agency when it obtained automobile insurance forCharlotte Morse with Titan Insurance Co. The trial court ruled thatAdrian was an agent of Titan and reformed a policy to place it ineffect at the time Morse was injured rather than the date stated onthe policy.

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On Nov. 19, 2004, Morse went to Adrian to insure a 1996 FordTaurus. She obtained insurance under a Titan policy and paid thepremium for six months of full coverage on Nov. 19, 2004. TheAdrian agent, however, prepared the application for insurance withan effective date of Nov. 25, 2004. Titan, in turn, issued a policyeffective on the date Adrian requested.

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Morse drove the Taurus before the policy date and was rear-endedby another driver on Nov. 24, 2004. She suffered serious injuriesin the accident, which left her a quadriplegic and eventually ledto her death. Titan denied liability for any type of coverage orbenefits arising from the accident because the policy did notbecome effective until Nov. 25, 2004. Morse sued Adrian, AutoOwners, Titan and the driver of the vehicle that had rear-endedher. She claimed breach of contract as well as an equitable claimseeking reformation of the insurance contract.

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During litigation, Morse died and her estate substituted asplaintiff. The matter proceeded to trial against Titan only, withthe sole question submitted to the jury being when the insurancepolicy issued by Titan went into effect.

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The jury determined the liability policy issued by Titan wentinto effect on Nov. 19, 2004. The trial court entered a judgment infavor of the plaintiff and against Titan, reforming the insurancecontract nunc pro tunc to make Nov. 19, 2004, the effectivecoverage date. The parties agreed to waive jury trial on the issueof damages and allow the court to enter a final judgment based uponthe plaintiff's offers of proof. The judgment was entered on April2, 2012, in the plaintiff's favor for $1,154,244.43.

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Michigan courts can reform a contract that does not express thetrue intent of the parties as a result of fraud, mistake, accidentor surprise, but reformation will generally not be granted for amistake of law. Reformation is only appropriate if the evidence ofthe mistake is so clear as to establish the fact beyond trivialobjections. The burden of proof is upon the party seekingreformation.

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The policy was between Titan and Morse. Titan had no contactwith Morse, so would have no reason to intend that the policybecome effective on any other date. There is thus no mutual mistakebetween the two parties named in the contract.

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A duly authorized agent has the power to act and bind theprincipal as if the principal acted. To establish that a mutualmistake was possible, the plaintiff must first determine thatAdrian was the agent of both the plaintiff (the insured) and theinsurer (Titan).

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The appellate court concluded Adrian was the agent forplaintiff, not Titan, in submitting the application for insurance.The judgment was reversed and Titan owed nothing. Adrian, the agentfor the plaintiff, wisely settled to avoid trial on its allegederror to acquire insurance effective on the date the premium waspaid.

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Case Notes

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During the course of the litigation, Charlotte Morse settled herclaim with Adrian Ins. Agency, and summary disposition was grantedin favor of Auto Owners based upon the trial court finding thatbecause no insurance existed on the Taurus at the time of theaccident, Morse was not entitled to personal injury protectionbenefits due to an exclusion in Auto Owner's policies and underrelevant statutory provisions.

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