Michigan Supreme Court; Docket No. 107351; Published
Published Opinion by Justice Cavanagh, 5-2 (with Justices Weaver and Taylor Dissenting)
Official Michigan Reporter Citation: 458 Mich 288; Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
Equitable Estoppel
CASE SUMMARY:
In this 5-2 Opinion by Justice Cavanagh, the Michigan Supreme Court reversed summary disposition in favor of defendant Auto-Owners Insurance Company which had denied plaintiff’s claim for no-fault benefits on the basis that plaintiff’s policy had automatically expired at the end of its six month term because of plaintiff’s failure to pay his insurance premium on time. The majority concluded that the doctrine of equitable estoppel bars defendant from enforcing the automatic non-renewal provisions of the insurance contract where the defendant had repeatedly accepted plaintiff’s late payments and continually renewed the plaintiff’s policy. In this case, a pattern had developed over six years where the plaintiff’s insurance policy was automatically renewed, although he frequently made late payments. When plaintiff was more than one month late, defendant would send a notice that cancellation would occur unless there was a payment by a certain date. Plaintiff would pay before the indicated date and defendant would then send a "Notice of Reinstatement" which would indicate that the policy was now in effect. The same scenario occurred shortly before the accident which is the subject of this case. The defendant generated a non-renewal notice which was sent to plaintiff. Approximately three weeks thereafter, defendant sent a cancellation notice for failure to timely pay his premium. Plaintiff then cured the late payment and received a notice of reinstatement. Plaintiff claimed that the last piece of correspondence he received from defendant was in fact his notice of reinstatement. Thereafter, plaintiff was involved in a catastrophic accident.
The Supreme Court held that the doctrine of equitable estoppel prevents the defendant from denying coverage to plaintiff. The court noted that for equitable estoppel to apply, plaintiff must establish that defendant's acts or representations induced plaintiff to believe that the policy was in effect at the time of the accident, that the plaintiff justifiably relied on the belief, and that the plaintiff was prejudiced as a result of this belief. In finding an equitable estoppel, the court stated:
"In this case, ... plaintiff was sent several late payment notices and notices of cancellation. In each instance, plaintiff paid the premium before the date on which the cancellation became effective, and plaintiff was sent a notice of renewal. Despite this poor payment history, plaintiff's policy was consistently renewed at the end of each six month period. Indeed, the record, when read in a light most favorable to plaintiff, reflects that the defendant never intended to allow the policy to automatically lapse as a result of late payment of premiums. . . . Thus, the defendant, through its consistent acceptance of plaintiff's late payments and its previous reluctance to enforce the automatic non-renewal provision, induced in the mind of the insured an honest belief that the terms and conditions of the policy, declaring a forfeiture in the event of non-payment.. .[would] not be enforced, but that payment [would] be accepted on a subsequent day or in a different manner.... Plaintiff was justified in believing that defendant would accept his late premiums and, consistent with its prior practice, defendant would then renew the contract for another six month term."
The court then stated that there were questions of fact as to whether the plaintiff relied upon the reinstatement notice in not seeking insurance coverage elsewhere. In this regard, the court stated:
". . .we believe questions of fact exist whether plaintiff reasonably relied on the reinstatement notice and not seeking insurance coverage elsewhere. The series of notices of non-renewal, cancellation and renewal allows plaintiff to argue that defendant is estopped from arguing that it properly notified plaintiff of non-renewal under the terms of the policy. Plaintiff has alleged facts sufficient to prevent summary disposition in favor of defendant on this issue; however, plaintiff must still prove his case for estoppel before the trier of fact."
Accordingly, the case was reversed and remanded for further proceedings.
