Michigan Court of Appeals; Docket No. 155676; Published
Judges Michael J. Kelly, Brennan, and Fullerton; Per Curiam
Official Michigan Reporter Citation: 209 Mich App 61; Link to Opinion
In this published per curiam Opinion, the Court of Appeals reversed the trial court's ruling that plaintiffs insured was entitled to coverage for third-party residual liability where the insured had made an intentional misrepresentation in order to procure the policy.
On March 1,1991, at approximately 2:30 a.m., Clyde Earl Anderson was driving his vehicle and involved in a collision with another vehicle that resulted in the deaths of two people. The policy on his vehicle, issued by Aetna Insurance Company, had expired two and one-half hours earlier, at midnight on February 28, 1991. Later on the day of the accident, March 1, 1991, defendant went to an insurance agency and applied for coverage through plaintiff Auto Owners. On the application for coverage, Anderson indicated that he had not been involved in any accident in the last three years. The policy was issued by Auto Owners, effective as of 12:01 a.m. on March 1,1991.
Suit was filed against Anderson by the estates of the auto accident victim which was tendered to Auto Owners for defense and coverage. Auto Owners then filed a declaratory judgment action seeking a ruling that it was entitled to rescind and declare void ab initio the insurance policy issued to Anderson because of the material misrepresentation that he had not been involved in an automobile accident within the last three years. The trial court denied Auto Owners' motion for summary disposition and ruled that Anderson was entitled to coverage under its policy.
The Court of Appeals noted that an automobile insurer is permitted to rescind automobile insurance coverage when the policy was procured through the insured's intentional misrepresentation. However, rescission is not available when innocent third parties are injured while a policy is in effect. In the case at bar, however, the coverage was not in effect at the time the accident occurred and, therefore, could be subsequently rescinded. The Court of Appeals held in this regard as follows:
"We believe that a distinction exists between a material misrepresentation by an insured regarding a loss which has already occurred in order to purchase insurance coverage for that loss, and a material misrepresentation regarding some other fact which may have led the insurer not to issue a policy if it had been known. We fail to see any reason in law or policy for plaintiff to be the source of recovery in this case where the policy came into effect after the accident had already occurred. Unlike previous cases before this court in which the automobile insurance policy existed at the actual time of the loss, the loss in the case occurred prior to the time the insurance policy came into effect on the automobile."
Accordingly, the Court of Appeals reversed the trial court's denial of summary disposition for the insurer and held that the insurer was entitled to rescind the subject policy.