Michigan Court of Appeals; Docket #359818; Unpublished
Judges Kelly, Boonstra, and Swartzle; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Fraud/Misrepresentation
Issues Regarding Affirmative Defenses
SUMMARY:
In this unanimous, unpublished, per curiam decision, the Court of Appeals vacated the trial court’s summary disposition order dismissing Plaintiff Diana Richardson’s (as personal representative of the Estate of Naomi Richardson) action for No-Fault PIP benefits against Defendant Integon National Insurance Company (“Integon”), and remanded for consideration of whether Integon should be permitted to amend its affirmative defenses to allege fraud against Richardson with the required specificity applicable to fraud. The Court of Appeals held that Integon failed to set forth specific facts regarding Richardson’s alleged fraud in its affirmative defenses, as is required by Glasker-Davis v Auvenshire, 333 Mich App 222 (2020), but that it should be allowed to move to amend its affirmative defenses.
Naomi Richardson was injured in a motor vehicle accident, after which she applied for PIP benefits with her No-Fault insurer, Integon. Integon paid Richardson’s benefits for a period, but suspended payment based on the results of a defense medical examination (“DME”). This prompted Richardson to file suit against Integon, but in her deposition, Richardson testified that she sometimes used her personal vehicle to deliver groceries as part of her employment with a grocery-delivery service. Based on this testimony, Integon moved for summary disposition, asserting that it was entitled to void Richardson’s policy ab initio because she stated in her original application for insurance that she did not use her vehicle for business. In response, Richardson claimed, among other things, that Integon should be precluded from raising rescission as a defense because it initially denied her claim solely because of the DME. Moreover, Richardson argued that Integon did not set forth specific facts regarding Richardson’s alleged fraud in its affirmative defenses—as is required under Glasker-Davis—and that Integon’s “delayed assertion of its right to rescind the policy prejudiced Richardson, who incurred medical costs of over $200,000 while believing that Integon’s sole basis for denying coverage was the DME and that her policy would otherwise remain in effect.” Ultimately, the trial court granted Integon’s motion for summary disposition, finding that Richardson’s misrepresentation was material and that ‘rescission is an equitable remedy that is allowed.’
The Court of Appeals vacated the trial court’s summary disposition order, holding that, under Glasker-Davis, Integon was required to set forth specific facts in support of an affirmative defense of fraud, which it failed to do. The Court acknowledged, however, that Integon could not have set forth specific facts regarding Richardson’s fraud in its original answer because it did not actually learn of Richardson’s fraud until discovery. Thus, the Court remanded to the trial court to allow Integon to move to amend its affirmative defenses, but also to allow plaintiff to respond to Integon’s motion to amend, because there was evidence to suggest that Integon should have moved to amend its affirmative defenses sooner.
“As a result, upon learning that Richardson made a material misrepresentation in her insurance application, Integon should have promptly moved to amend its affirmative defenses to set forth the requisite specific facts constituting its defense of rescission on the basis of that misrepresentation. But the record does not indicate, nor does Integon assert, that Integon ever moved to amend its affirmative defenses for that purpose. And, there is no indication that Integon otherwise notified Richardson of its intent to rescind her policy over her misrepresentation before it moved for summary disposition on that basis, after discovery, and several months after Richardson first disclosed her misrepresentation at her deposition. We further note that Integon does not dispute plaintiff’s assertion that Richardson was not so specifically notified.6 As plaintiff points out, well after Richardson’s disclosure, Integon, in responding to plaintiff’s interrogatories asking Integon to state fully its basis for its nonpayment of PIP benefits, referred to the DME report as the basis for suspending Richardson’s benefits, but did not mention that it was also electing to rescind the policy on the basis of Richardson’s misrepresentation regarding the use of her vehicle.7
On this record, we hold that Integon failed to adequately assert, with requisite factual specificity, its affirmative defense of rescission based on Richardson’s material misrepresentation in its responsive pleading, as originally filed or amended.
However, this does not mean that Integon necessarily waived that defense, because, as noted, a defendant may move to amend its affirmative defenses at any time, and leave should be freely granted unless doing so would prejudice the opposing party. See Glasker-Davis, 333 Mich App at 230. Therefore, as in Glasker-Davis, we conclude that it is appropriate to vacate the trial court’s order granting summary disposition and remand this case to the trial court to allow Integon to move to amend its affirmative defenses, and plaintiff to respond to the motion, in order for the court to decide the matter of amendment and waiver in the first instance. See id. at 231-233.”