Michigan Court of Appeals; Docket No. 336128
Judges Gleicher, Boonstra and Tukel; Unanimous; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
CASE SUMMARY:
In this per curiam opinion interpreting a no-fault insurance contract, the Michigan Court of Appeals reversed the circuit court after finding that plaintiff accepted the rescission of her policy when she cashed her premium refund check. The Court held that the trial court erred when it did not recognize the return of plaintiff’s monetary consideration as a restoration of the status quo. Therefore, plaintiff was not entitled to summary disposition.
Plaintiff, Maria Enriquez, visited Fiesta Auto Insurance Agency and applied for a no-fault policy from defendant, Everest National Insurance Company. The policy mandated disclosure of all household members age 14 and over as potential drivers. The policy further stated that the requested information would affect the insured’s monthly premium rate, and naming all eligible drivers was a prerequisite to procuring a policy. Despite living with both her boyfriend and 15-year-old daughter, plaintiff only listed herself as a driver. In a separate section of the policy, plaintiff then affirmed that she had listed all potential household drivers by checking “yes” on an applicant questionnaire.” Of note, there was no option for plaintiff to check “no” to truthfully indicate that she had omitted the other two potential household drivers. Plaintiff concluded her application by signing the following attestation:
I agree that if I intentionally conceal or misrepresent a material fact or circumstance relating to the insurance, the policy shall be null and void. . . . I certify that all household members age 14 or older, including but not limited to spouse(s), roommate(s), children, family members and wards have been listed as potential drivers. . . . I understand that my total policy premium could be affected by this information.
Plaintiff and her adult daughter were involved in a motor vehicle accident six days later. Both made requests for no-fault benefits and later filed suit when defendant did not pay in a timely fashion. During depositions, plaintiff admitted that she lived with her boyfriend and 15-year-old daughter at all relevant times. Defendant then moved for summary disposition, citing misrepresentation on the application.
The third-party claims administrator notified plaintiff that her no-fault policy was rescinded and nullified “as if it never existed” because plaintiff did not list her teenaged daughter as a potential driver. Defendant subsequently mailed plaintiff a check for $650.88—a refund of the policy premium—along with notification of the cancellation of her policy. Plaintiff’s adult daughter received similar notice regarding her claim. Plaintiff cashed the check 15 days after receipt of the rescission notification but before defendant replied to her oppositional brief. “Accordingly, defendant added to its argument that plaintiff accepted and ratified the rescission and was therefore estopped from contesting the rescission.”
The circuit court denied defendant’s motion because (1) plaintiff could not speak English, and (2) the questionnaire did not allow an applicant to reply “no” when asked whether she listed all potential drivers on the application, giving her “no way . . . to truthfully answer the question.” Defendant appealed.
The Court held that the circuit court should have dismissed both plaintiff’s and her adult daughter’s lawsuits when plaintiff accepted rescission of her insurance policy. The Court relied on language from the Michigan Supreme Court to support its holding.
To rescind a contract is not merely to terminate it, but to abrogate and undo it from the beginning; that is, not merely to release the parties from further obligation to each other in respect to the subject of the contract, but to annul the contract and restore the parties to the relative positions which they would have occupied if no such contract had ever been made. Rescission necessarily involves a repudiation of the contract and a refusal of the moving party to be further bound by it. But this by itself would constitute no more than a breach of the contract or a refusal of performance, while the idea of rescission involves the additional and distinguishing element of a restoration of the status quo.” Wall v Zynda, 283 Mich 260, 264 (1938).
The Court reasoned that acceptance of the other party’s return of consideration, i.e., cashing the refunded premium check, created “a “mutual agreement” or mutual “assent” to rescind the contract and excuses all the duties and rights flowing from that contract.” The endorsement and cashing of a check represent one party’s acceptance of the other party’s terms.
Everest mailed the rescission notice and premium refund check to [plaintiff’s] attorney. This return of consideration restored the status quo. . . . [Defendant’s] rescission of the insurance contract serves to eliminate [derivative] claims as well, despite that [plaintiff’s adult daughter and intervening plaintiffs] made no misrepresentation to the insurance company.
The Court of Appeals ultimately held that circuit court erred in failing to consider this argument when it denied Everest’s motion for summary disposition. As the contract was legally rescinded, plaintiffs no longer had any ground to pursue suits against Everest.
