Michigan Court of Appeals; Docket # 344229; Unpublished
Judges Meter, Jansen, and Kelly; per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order dismissing the plaintiff’s first-party action to recover no-fault PIP benefits, as well as the trial court’s rescission of the plaintiff’s automobile insurance policy on the basis that the plaintiff made a material misrepresentation in her application. The plaintiff failed to list her two sons as “potential drivers” in her application, which reduced her monthly premium payments considerably. The Court of Appeals agreed with the trial court that the plaintiff’s omission constituted a material misrepresentation and that even though the misrepresentation was made innocently, the proper remedy was rescission of the policy, not reformation. Ultimately, as a result, the plaintiff could not claim no-fault PIP benefits from Everest for the injuries she sustained in a motor vehicle collision one month after her policy was issued.
The plaintiff, Lisa Marie Duker, applied for automobile insurance from Everest and was instructed on the application to list all members of her household over the age of 14 as “potential drivers.” The plaintiff did not list her two sons, both of which were over the age of 14, and later in the policy, checked the “yes” box next to a question that asked, “Have you identified on this application all members of your household who are over the age of 14?” Everest issued the policy with premium payments of $1,266, and one month later, the plaintiff was injured in a serious automobile collision. Shortly after the collision, she filed a first-party claim against Everest for no-fault PIP benefits and uninsured motorist coverage.
Everest moved for summary disposition, arguing that the policy ought to be rescinded because the plaintiff made material misrepresentations in her application that resulted in a lower premium. Had she disclosed her two sons, Everest noted, the premium would have increased by at least $2,104. The plaintiff argued, conversely, that reformation of the policy was the proper remedy, and that “the most equitable result would be for her to retroactively pay the higher premium instead of losing coverage.” The trial court granted Everest’s motion, finding that rescission was the appropriate remedy, even though the plaintiff’s misrepresentation was made innocently.
The Court of Appeals affirmed the trial court’s summary disposition order, finding that the insurance application was unambiguous and that the plaintiff was required to disclose all members of her household over the age of 14, regardless of whether they would be driving the insured vehicles. The Court of Appeals also affirmed the trial court’s holding that even innocent misrepresentations entitle an insurance company to rescind a no-fault policy in certain circumstances.
“It is well-settled that a material misrepresentation made in an application for no-fault insurance entitles the insurer to rescind the policy.” Lash v Allstate Ins Co, 210 Mich App 98, 103; 532 NW2d 869 (1995). Even when the misrepresentation was made innocently, recession is justified when “a party relies on the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if [she] were not held accountable for [her] misrepresentation.” Id. Materiality does not depend on a connection between the misrepresentation and the accident that occurred. Auto-Owners Ins Co v Mich Comm’r of Ins, 141 Mich App 776, 781; 369 NW2d 896 (1985). It depends, instead, on “the misrepresentation as it relates to the procurement of the policy of insurance.” Id. A misrepresentation is material when “reasonably careful and intelligent underwriters would have regarded the fact or matter, communicated at the time of effecting the insurance, as substantially increasing the chances of loss insured against so as to bring about a rejection of the risk or the charging of an increased premium.” Id. (internal citation and quotation marks omitted).
Plaintiff does not dispute that she misrepresented her sons’ residency in her home on the insurance application. Plaintiff, however, argues that the contract should not be rescinded because she did so innocently, particularly because she was guided through the insurance application by an agent. We fail to see the importance of this distinction. Plaintiff provided the information to her agent and, in any event, signed the application, certifying that she disclosed any household members above the age of 14. It is not a defense that the insurance agent completed the application and that plaintiff did not read the application. See Montgomery v Fidelity & Guaranty Life Ins Co, 269 Mich App 126, 129-130; 713 NW2d 810 (2005).
Moreover, there is no question that the misrepresentation was material. A representative of Everest’s third-party underwriter affirmed by affidavit that he had examined plaintiff’s application and that, if plaintiff had disclosed her two sons, the policy’s premium would have increased by approximately $2,104. See Auto-Owners Ins Co, 141 Mich App at 781.
