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Auto-Owners Ins Co v Michigan Commissioner of Insurance; (COA-PUB, 4/8/1985; RB #849)


Michigan Court of Appeals; Docket No. 73340; Published  
Judges Danhof, Holbrook, and Simon; 2-1 (with J. Holbrook Dissenting)  
Official Michigan Reporter Citation: 141 Mich App 776; Link to Opinion alt   

Not Applicable

Cancellation and Rescission of Insurance Policies
Cancellation of Auto Liability Policies (MCL 500.3204, et seq.)
Uniform Trade Practices Act (UTPA – MCL 500.2001, et seq.)    

This 2-1 decision by Chief Judge Danhof arises out of the same transaction as reported in Darnell v Auto-Owners (Item No. 831). The major issues presented in this litigation deal with the right of the Michigan Insurance Commissioner to order reinstatement of insurance policies which were declared void ab initio by the insurer. In its holding, the majority ruled as follows:

First, the court agreed with other recent decisions of the Court of Appeals that an insurer may rescind an insurance policy and declare it void ab initio, where such policy was procured through the insured's intentional misrepresentation of a material fact in the application for insurance.

Second, the right of an insurer to declare a policy void ab initio does not require that the misrepresentation causally relate to the injury or loss.

Third, the Insurance Commissioner has no right to order reinstatement of a rescinded insurance policy under Chapter 32 of the Insurance Code. The Code does grant authority to the Commissioner of Insurance to order reinstatement of a policy which was canceled without complying with the provisions of the Code. However, this power does not extend to rescinded policies. The court left unresolved whether or not the Commissioner could order reinstatement of a policy which was rescinded in violation of the Unfair Trade Practices Act However, no such violation occurred in this case. Judge Holbrook dissented. He would find that the Commissioner of Insurance does have authority to order reinstatement of rescinded insurance policies by implication.

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