Michigan Court of Appeals; Docket No. 164094; Published
Judges Griffin, Sawyer, and Corwin; Unanimous; Opinion by Judge Sawyer
Official Michigan Reporter Citation: 213 Mich App 514; Link to Opinion 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
Fraud/Misrepresentation
Private Contract (Meaning and Intent)
CASE SUMMARY:
In this unanimous published Opinion by Judge Sawyer, the Court of Appeals affirmed the lower court and held that the defendant insurance company was not entitled to rescind plaintiffs no-fault policy ab initio as a result of a misrepresentation in the application for insurance coverage regarding plaintiffs driving record, where the defendant discovered the misrepresentation prior to the accident and sent plaintiff a notice of cancellation which indicated that coverage would be cancelled on a specific date, i.e., November 17,1986. Plaintiff was involved in an accident on November 8,1986, and promptly gave notice to the defendant insurance company. Defendant then attempted to rescind the coverage and declare the policy void ab initio. In rejecting this tactic, the court held that defendant had waived its right to rescission because it chose, upon learning of the rescission, to continue the policy until a specific cancellation date. Plaintiff had a right to rely upon coverage lasting until that date. Defendant cannot, upon learning of an accident prior to the cancellation date, attempt to rescind the coverage. In so holding, the court stated:
"While we certainly do not wish to reward plaintiffs for misrepresentation in the application for insurance, it was defendant who chose the remedy. We would not interfere with defendant's right to rescind the policy ab initio had it chosen to do so upon discovery of the material misrepresentation, regardless whether that discovery occurred before or after the loss. However, in the case at bar, defendant did discover the misrepresentation prior to the loss and chose to issue a cancellation rather than a rescission The remedy which defendant seeks to be entitled to is untenable. Defendant wishes to, upon the discovery of a misrepresentation in the application, have the right to collect a premium and provide coverage so long as there are no losses, wherein they are entitled to choose rescission instead and deny coverage. In short, defendant wishes to be able to earn a premium without having to provide coverage. That, however desirable it may be to defendant, is not an available option. Rather it must either rescind the policy upon discovery of the misrepresentation and refund the premium or cancel the policy, retaining the premium earned until the effective date of the cancellation and provide coverage until the effective date of the cancellation. But it cannot have its premium and deny coverage too."
