Michigan Court of Appeals; Docket #222646; Unpublished
Judges Hood, Whitbeck and Meter; unanimous; per curiam
Official Michigan Reporter Citation: Not applicable, Link to Opinion 
STATUTORY INDEXING:
12% Interest Penalty on Overdue Benefits – Nature and Scope [3142(2) (3)]
Requirement That Benefits Were Overdue [3148(1)]
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
CASE SUMMARY:
In this unanimous unpublished per curiam opinion, the Court of Appeals affirmed the trial court grant of summary disposition in favor of the plaintiffs, holding that Pioneer could not seek to rescind its insurance policy after the accident, when before the accident, Pioneer elected to cancel the policy with an effective cancellation date that was after the date of the accident.
In this case, plaintiffs purchased an automobile insurance policy covering themselves on several vehicles, including a 1997 Dodge Ram. When they applied for coverage in October, 1997, they did not mention to the agent that their son was living with them and driving their vehicles at the time. When the insurance company learned that plaintiffs’ son lived with them, they obtained a motor vehicle report and learned that he had nine points on his driver’s license. Despite this knowledge, the insurance company issued an insurance policy covering the plaintiffs and their son with an effective date of October 9, 1997. However, on November 20, 1997, because of the driving record of plaintiffs’ son, the defendant issued a cancellation notice effective December 15, 1997. On November 19, 1997, the son was involved in an accident while driving the pickup truck. After becoming aware of the accident, Pioneer sought to rescind plaintiff’s policy ab initio and return their premium.
The Court of Appeals, in upholding the trial court decision granting summary disposition in favor of the plaintiffs, held that Pioneer had the option to rescind plaintiffs’ policy ab initio, once it determined that misrepresentation had occurred. Instead, Pioneer chose to cancel the policy and to keep plaintiffs’ premium payment. Since the accident occurred during the covered period, before the cancellation notice was to take effect, the court held that the defendant had already chosen its remedy by cancelling the policy and could not later attempt to rescind it.
The Court of Appeals also addressed the issue of an award of actual attorney fees. Pursuant to 3148(1), an attorney is entitled to a reasonable fee in representing a plaintiff in an action for personal injury protection benefits which are overdue. The Court of Appeals found the facts in the instant case so similar to another previous decision in Burton v Wolverine Mutual Insurance Company, 213 Mich App 514 (1995) [Item No. 1817], and the attempts by Pioneer to draw distinctions between the situation in the present case and in Burton were so untenable under the rationale of Burton, that it could not conclude the trial court clearly erred in awarding attorney fees.
Finally, the Court of Appeals upheld the award of penalty interest under 3142. The court noted that a finding of unreasonableness is not required regarding the interest penalty. An insurer’s good faith in withholding payment of benefits is relevant in awarding attorney fees under the Act, but it is irrelevant to liability under the penalty interest statute.
