Michigan Court of Appeals; Docket #359339; Unpublished
Judges Gleicher, Markey, and Rick; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order in favor of Wolverine Mutual Insurance Company (“Wolverine”), in Wolverine’s action seeking a declaratory judgment confirming the rescission of a policy it issued to Mathew Van Dyken. The Court of Appeals held, first, that Wolverine was entitled to rescind Van Dyken’s policy based on a material misrepresentation Van Dyken made on his original application for coverage. The Court of Appeals held, second, that it was not appropriate to consider whether Wolverine’s decision to rescind Van Dyken’s policy was consistent with Wolverine’s internal underwriting rules. The Court of Appeals held, third, that Van Dyken’s medical providers were not “innocent third parties” to the rescinded contract, such as would require a balancing of the equities in order to determine whether the rescission extended to them.
In September 2018, Mathew Van Dyken, with the help of an independent insurance agent, filled out an application for no-fault insurance with Wolverine. Upon reviewing the application, a Wolverine employee noticed that four questions on the application were left unanswered, including one which asked whether Van Dyken had been arrested or convicted for anything other than a traffic violation in the five years prior to the application. The Wolverine employee emailed the independent insurance agent to inquire about the unanswered questions, and the agent informed the Wolverine employee that the answer to all the unanswered questions was, “no.” Wolverine proceeded to issue a policy to Van Dyken, two years after which—in August 2020—Van Dyken was injured in a motor vehicle accident. Van Dyken and his medical providers eventually sought payment for Van Dyken’s accident-related medical bills from Wolverine, and Wolverine began investigating Van Dyken’s claim. During the investigation, Wolverine discovered that Van Dyken pled guilty to receiving and concealing a stolen motor vehicle in 2015, prompting it to notify Van Dyken that it was rescinding his policy. Wolverine then filed an action against Van Dyken and his providers, seeking a declaratory judgment ‘confirming the rescission of the auto insurance policy in this matter.’ Wolverine and Van Dyken’s providers filed competing motions for summary disposition, with Wolverine arguing that Van Dyken made a material misrepresentation on the application which entitled it to rescission, and Van Dyken’s providers arguing that Van Dyken’s misrepresentation was not ‘material’ based on Wolverine’s own, internal underwriting guidelines. Van Dyken’s providers noted that the guidelines defined ‘ineligible risks’ as “a person ‘[c]onvicted of a ‘Major Violation[,]’” e.g., ‘[a] felony involving the use of a motor vehicle.’ They argued that Van Dyken’s conviction was for receiving and concealing a motor vehicle—not “using” a motor vehicle—and thus not a valid basis for rescission based on Wolverine’s own underwriting guidelines. Alternatively, they argued that they were “innocent third parties” to the contract between Van Dyken and Wolverine and that the equities did not weigh in favor of rescission as to them. After a hearing on the motions, the trial court rejected both the providers’ arguments and granted summary disposition in Wolverine’s favor.
The Court of Appeals affirmed the trial court’s summary disposition order in favor of Wolverine, holding, first, that Van Dyken made a material misrepresentation on his application. At the outset of its analysis, the Court noted the elements of common-law fraud:
“(1) the alleged fraudulent party made a material representation; (2) the representation was false; (3) the person making the representation knew it was false or acted recklessly in making the statement; (4) the person intended that the opposing party should act upon the representation; (5) the opposing party acted in reliance; and so (6) suffered injury.”
The Court then determined that Van Dyken’s misrepresentation satisfied all the elements: for instance, Wolverine established that the misrepresentation was material by presenting testimony from its vice president of claims, who testified that Wolverine would not have issued the policy had it known about Van Dyken’s criminal history; the misrepresentation was made by an independent insurance agent responding on Van Dyken’s behalf; and Van Dyken knew that he had been convicted of a crime in the five years prior to the application.
“An insurance company cannot be held liable for a risk it did not assume. Frankenmuth Mut Ins Co v Masters, 460 Mich 105, 111; 595 NW2d 832 (1999). The risk assumed must be determined from the contract. In relation to an insurance policy, the contract is composed of the policy application, the declarations page, and the policy itself. Dancey v Travelers Prop Cas Co of America, 288 Mich App 1, 8; 792 NW2d 372 (2010). It does not include an insurer’s underwriting rules. Wolverine’s policy application asked various questions to determine the applicant’s eligibility for coverage and to assess risk factors relevant to determining the rate to be charged. By falsely representing that he had not been convicted of any crimes, Van Dyken prevented Wolverine from assessing eligibility and risk. As such, his misrepresentation was material.”
The Court of Appeals held, second, that it would not be appropriate to determine whether Wolverine’s decision to deny coverage was consistent with its own, internal underwriting guidelines. The Court noted that “[t]here is no support in caselaw for tethering review of a rescission decision to an insurer’s underwriting guidelines,” and “[t]here is no legal support for treating underwriting guidelines as part of an insurance contract.
“From the beginning of this action, the providers’ only response in the face of Van Dyken’s material misrepresentation has been that Van Dyken’s conviction did not involve the ‘use’ of a motor vehicle and therefore would not have been grounds to deny coverage pursuant to Wolverine’s underwriting rules. There is no support in caselaw for tethering review of a rescission decision to an insurer’s underwriting guidelines. There is no legal support for treating underwriting guidelines as part of an insurance contract. The providers have made no legal argument for extending the law in this manner. A party cannot ‘ ‘simply . . . announce a position or assert an error and then leave it up to this Court to discover and rationalize the basis for his claims, or unravel and elaborate for him his arguments, and then search for authority either to sustain or reject his position.’ ’ Wilson v Taylor, 457 Mich 232, 243; 577 NW2d 100 (1998), quoting Mitcham v Detroit, 355 Mich 182, 203; 94 NW2d 388 (1959). This is especially true when raising a novel legal argument. Accordingly, we need not resolve whether a receiving and concealing conviction could be deemed a major violation under Wolverine’s underwriting guidelines. We also need not address whether Wolverine’s exempt status plays any role in this case."
The Court of Appeals held, third, that Van Dyken’s providers were not “innocent third parties” to Van Dyken’s fraud, so the balancing of equities test established by the Michigan Supreme Court in Bazzi v Sentinel Ins Co was not available to them. The Court determined, instead, that the providers were “assignees of the insured and stand in his shoes.”