Case Name: KASSAB v. MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION
Court: Michigan Supreme Court
Jurisdiction: Michigan
Decision Date: 1992-09-30
Citations: 441 Mich. 433
Docket Number: Docket No. 90387
Parties: KASSAB v MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION
Judges: Levin, Brickley, Riley, and Griffin, JJ., concurred.
Reporter: Michigan Reports
Volume: 441
Pages: 433–489

Head Matter:
KASSAB v MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION
Docket No. 90387.
Argued March 3, 1992
(Calendar No. 3).
Decided September 30, 1992.
Rehearing denied post, 1202.
Manual Kassab brought an action in the Wayne Circuit Court against Michigan Basic Property Insurance Association, the insurer of his business, and Metropolitan Adjustment & Investigation Company and John D. Honeyman, an attorney, both hired by Michigan Basic to investigate a claim of fire damage to the business. Kassab alleged breach of contract, fraudulent misrepresentation, and discrimination based on national origin in violation of the Civil Rights Act in denying him coverage. Thereafter, the complaint was amended, adding a count of innocent misrepresentation with respect to the insurer and omitting the charges of fraud and misrepresentation with respect to Metropolitan Adjustment and Honeyman. The court, Charles S. Farmer, J., denied the defendants’ motions for summary disposition of the claims of breach of contract, fraud and misrepresentation, innocent misrepresentation, and discrimination. The Court of Appeals, Murphy and T. M. Burns, JJ. (Danhof, C.J., concurring in part and dissenting in part), reversed with regard to the breach of contract claim, affirmed with regard to the fraud and misrepresentation claim, and found a cause of action for discrimination under the Civil Rights Act (Docket No. 112542). The defendants appeal.
In an opinion per curiam, signed by Justices Levin, Brickley, Riley and Griffin, the Supreme Court held:
The judgment of the Court of Appeals regarding the plaintiff’s civil rights claim is reversed; the claim regarding fraud and misrepresentation is affirmed and remanded to the circuit court for further proceedings.
1. The gist of the plaintiff’s claim is breach of contract. Because access to insurance coverage was not denied, it is beyond the legislative purpose to provide a civil rights action under the public accommodations section of the Civil Rights Act for breach of contract in claims processing. Upon the issuance of a policy of insurance, the services owed by an insurer to an insured are no longer services made available to the public. The rights and obligations of the contracting parties are then private. While an insured is not separated from the public upon entering into insuring agreements embodied in a policy of insurance, the obligations of the insurer are owed to a particular contracting party/insured. The rights and obligations of the contracting parties are specific to the contract and to the persons involved.
References
Am Jur 2d, Civil Rights § 4.
See the Index to Annotations under Contracts; Discrimination; Insurance and Insurance Companies.
2. The plaintiff’s complaint stated circumstances constituting fraud with particularity and, thus, stated a cause of action, requiring remand for trial on that claim. Read as a whole, the complaint alleges that false representations were made to the plaintiff before he entered into the contract of insurance with Michigan Basic, and thus that when Michigan Basic entered into the contract of insurance with him and represented that it intended to pay and would pay for fire damage, the representation was false, and that Michigan Basic knew when it made the representation that it was false. The representation is within the so-called bad-faith exception to fraudulent misrepresentation. While the plaintiff may have difficulty in establishing the allegations, they state a cause of action.
Justice Levin, writing separately, stated that, read together, the Civil Rights Act and the Uniform Trade Practices Act were not intended to provide a civil rights action for mental distress and anguish with respect to unfair claims processing, alleged to have been based on national origin, and for the payment of attorney fees in addition to the twelve percent interest for delay in payment provided in the utpa.
While the Unfair Trade Practices Act proscribes civil rights discrimination in refusing to insure, refusing to continue to insure, or limiting the amount for coverage or charging different rates, it does not allude to civil rights discrimination in claims processing. It provides a remedy only for delay in paying contracted-for benefits of twelve percent interest. There is no provision for payment of damages for emotional or mental distress, anguish, or attorney fees.
Affirmed in part, reversed in part and remanded.
Justice Mallett, dissenting, stated that the trial court appropriately denied the defendants’ motion for summary disposition pursuant to MCR 2.116(C)(8) with regard to the fraud and misrepresentation and discrimination claims.
Michigan Basic is a business whose goods and services are extended, offered, sold, or otherwise made available to the public and, thus, is a place of public accommodation as defined by the Civil Rights Act. The allegations that the defendants engaged discriminatory practices are encompassed by the Civil Rights Act, and thus the defendants’ motion for summary disposition was properly denied. The preamble to and §§ 102, 301 and 302 of the Civil Rights Act clearly express the legislative intent to eliminate the effects of offensive or demeaning stereotypes, prejudices, or biases, and guarantee to all citizens equal access to businesses such as the defendants’. Adjustment of claims is a necessary part of the contractual good Michigan Basic is legislatively mandated to offer. Discrimination in any phase of a contractual relationship is unacceptable.
The utpa prohibits an insurer from refusing to insure because of race, color, creed, marital status, sex, or national origin. While it provides an adequate framework for redress of the plaintiff’s complaint, there is no apparent incompatibility between it and the Civil Rights Act. Thus, both are applicable in this case. If the Legislature intended the utpa to be the exclusive regulatory scheme to address discriminatory practices in the insurance industry, it could have so provided.
General allegations of fraud without averment of specific facts are insufficient to state a cause of action. Fraud must be proved by satisfactory and convincing evidence. A cause of action for fraud or misrepresentation may fail if the alleged representation involves a promise to do a future act, because such a promise is not fraudulent misrepresentation, but is contractual in nature. However, in this case, the plaintiff’s allegations comply with recognized bad-faith exception to the future-act rule. Thus, the denial of the defendant’s motion for summary disposition was proper.
Chief Justice Cavanagh, dissenting, stated that although the language of the Civil Rights Act is extremely broad, it is not ambiguous or uncertain as applied to this case. It cannot be disputed that the right to enjoy insurance services free of discrimination, including the right to purchase a policy and to enjoy all the benefits due under it, fall within the scope of the act. It is clear, without the need for further inquiry, that by alleging that Basic evaluated and rejected his claim, not on its merits but on the basis of his national origin, the plaintiff properly stated a legal cause of action under the Civil Rights Act, at least with regard to Michigan Basic, sufficient to survive a motion for summary disposition under MCR 2.116(C)(8).
The plaintiff’s discrimination claim rests on a statutory basis separate and distinct from the legal basis of a contractual claim. The allegation is not that the denial of benefits by the defendants was in violation of the insurance contract or that the insurer intended to defraud the plaintiff at the time the contract was entered into; rather, it is that the act of denying benefits was decisively motivated by animus against the plaintiff because of his national origin. If a breach of contract allegedly motivated by racial or ethnic animus were held to be actionable only as a breach of contract, and not independently as an abhorrent act of invidious discrimination, the unique harm inflicted would be denied, and the very reason for civil rights laws prohibiting such discrimination would be called into question. The fact that a potential contractual claim is suggested by the facts alleged in a given case is irrelevant to the legal viability of a statutory discrimination claim.
The Uniform Trade Practices Act addresses to some extent discrimination in the insurance business, but nothing in the act purports to indicate that it provides the sole or exclusive remedy for discrimination in the insurance industry or that it precludes application of the Civil Rights Act. There is no conflict between the acts. Rather, both statutes apply where discrimination by an insurer is alleged, and they appear to complement each other most effectively. Thus, the Uniform Trade Practices Act does not bar the plaintiff’s legal cause of action in this case.
Metropolitan Adjustment and Honeyman are "persons” as defined by § 103(f) of the Civil Rights Act. Section 302 provides that a "person” may not deny an individual the full and equal enjoyment of the services of any business defined as covered by the act. Thus, "person” under § 302 appears to cover any third parties who might interfere with and effectively deny an individual’s ability to obtain equal enjoyment of a service offered by a covered business, even if the business itself is innocent of any discriminatory intent, and even if the third parties themselves are not engaged in offering any service to the public. Whether Metropolitan’s or Honeyman’s alleged discriminatory animus actually caused the ultimate denial of the plaintiff’s claim is a factual question, but the allegations against them state a legal cause of action under the Civil Rights Act sufficient to survive a motion under MCR 2.116(C)(8).
Justice Boyle, dissenting, stated that the first amended complaint does not meet the requirements of MCR 2.112(B)(1) regarding pleading of fraud. Generally, an action for fraudulent misrepresentation must be predicated upon a statement relating to a past or an existing fact. Future promises are contractual and do not constitute fraud. To fall within the bad-faith exception, evidence of fraudulent intent must relate to the conduct of an actor at the very time of making a representation or almost immediately thereafter. In the present case, the plaintiff failed to allege any factual evidence to support a bad-faith claim. His complaint merely lists the definition of fraud and misrepresentation. To argue that the complaint stated circumstances constituting fraud with particularity writes MCR 2.112(B)(1) out of the Michigan Court Rules and eliminates the general rule prohibiting fraud actions in future-promise cases except in extremely limited circumstances.
185 Mich App 206; 460 NW2d 300 (1990) affirmed in part and reversed in part.
Insurance — Civil Rights — Claims Processing — Breach of Contract.
A breach by an insurer of contractual obligations in processing a claim by an insured is not within the scope of the Civil Rights Act (MCL 37.2302; MSA 3.548[302]).
Barr & Associates (by Charles J. Barr) for the plaintiff.
Dykema Gossett (by Donald S. Young and Kathleen McCree Lewis) and Patterson, Phifer & Phillips, P.C. (by Kurt D. Meyer), for the defendants.
Amici Curiae:
Zagaroli, Colpean & Venuto, P.C. (by Frank R. Venuto), for Michigan Association of Insurance Companies.
Monica Farris Linkner and Charles P. Burbach and Bendure & Thomas (by Mark R. Bendure and Sidney A. Klingler) for the Michigan Trial Lawyers Association.

Opinion:
Per Curiam:.
The principal question presented is whether Manual A. Kassab may maintain a civil rights action against Michigan Basic Property Insurance Association and others for unfair claims processing following a fire that destroyed business property insured by Michigan Basic. Another question is whether Kassab's complaint adequately pleaded and stated a cause of action that Michigan Basic made false representations to him that it intended to pay for the fire damage.
i
Kassab was the owner of premises on West Seven Mile Road in Detroit where he conducted business as Seven Mile Auto Electric for a number of years. He purchased a standard fire insurance policy from Michigan Basic with policy limits of $50,000 on the building and $25,000 on contents. The policy was in effect on August 30, 1986, when a fire occurred. He reported the loss and claimed damages in excess of the policy limits. Michigan Basic hired Metropolitan Adjustment & Investigation Company and John D. Honeyman to investigate the claim. On their recommendation, Michigan Basic denied the claim.
More than one year after the claim was denied, Kassab filed a multicount complaint seeking damages against Michigan Basic, Metropolitan Adjustment, and Honeyman. The circuit court denied summary disposition. A divided panel of the Court of Appeals affirmed the denial of summary disposition of the civil rights and fraud and misrepresentation claims, but reversed with respect to the contract claim, holding that it was barred by a one-year statute of limitation.
We reverse the judgment of the Court of Appeals on the civil rights claim, but affirm on the fraud and misrepresentation claim and remand to the circuit court for further proceedings on the fraud and misrepresentation claim._
II
Kassab's complaint alleges that Michigan Basic did not pay his fire-loss claim because he is "Chaldean by national origin." Kassab relies on the section of the Civil Rights Act providing that a person shall not "[d]eny an individual the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of a place of public accommodation or public service because of religion, race, color, national origin, age, sex, or marital status."
The focus, we agree with Michigan Basic, of that section of the Civil Rights Act is primarily on denial of access to a place of public accommodations or public services. Michigan Basic did not deny Kassab access to insurance; it insured Kassab for fire loss.
We do not agree with the dissent that "it would make a mockery of the act's purposes" to recognize that the act might provide a civil rights remedy for refusal to insure, but not a civil rights remedy for discrimination in the "handling and adjustment of claims under a policy."
The dissent's argument assumes that the Legislature intended to provide a civil rights remedy for breach of a commercial contract, and not only a civil rights remedy for refusal to contract. Adoption of the dissent's approach might well result in the addition of a civil rights count in many actions for breach of contract where it has not in the past been commonplace to do so.
hi
Acknowledging that an insurer may be a "[p]lace of public accommodation" within the meaning of that term because it is a "business . . . whose . . . services . . . are extended, offered, sold, or otherwise made available to the public," the gist of Kassab's claim is breach of contract. Because access to insurance coverage was not denied, the majority of the Court is of the opinion that it is beyond the legislative purpose to provide a civil rights action under the public accommodations section of the act for breach of contract in claims processing. Upon the issuance of a policy of insurance, the services owed by an insurer to an insured are no longer "services . . . made available to the public." The rights and obligations of the contracting parties are then private. While an insured is not separated from the "public" upon entering into insuring agreements embodied in a policy of insurance, the obligations of the insurer are owed to a particular contracting party/insured. The rights and obligations of the contracting parties are specific to the contract and to the persons involved.
No Michigan case is dispositive of the issue. The cases cited by the dissent do not bear directly on the issue whether performance under a contract is within the scope of the civil rights act. _
Under the most reasonable construction of the scope of the Civil Rights Act, Kassab's claim for breach of contractual obligations in claims processing cannot be maintained.
iv
We are persuaded that Kassab's complaint stated the circumstances constituting fraud with particularity, that the complaint stated a cause of action, and remand for trial on that claim.
The elements constituting actionable fraud or misrepresentation are well settled:
The general rule is that to constitute actionable fraud it must appear: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury. [Hi-Way Motor Co v Int'l Harvester Co, 398 Mich 330, 336; 247 NW2d 813 (1976), quoting Candler v Heigho, 208 Mich 115, 121; 175 NW 141 (1919).]
Kassab's first amended complaint alleged that he, as the insured, and Michigan Basic, as the insurer, had entered into a contract of fire insurance, that a fire loss occurred which he duly reported to Michigan Basic, that Michigan Basic made representations to Kassab that it intended to pay and would pay for fire damage to his business property, that the representations were false, that Michigan Basic made the representations knowing they were false or with reckless disregard for their truthfulness, that the representations were made with the intention that Kassab would rely thereon, and that he relied on those representations "in obtaining fire protection for his property."
Read as a whole, the complaint alleges that false representations were made to Kassab before he entered into the contract of insurance with Michigan Basic, and thus that when Michigan Basic entered into the contract of insurance with Kassab and represented that it intended to pay and would pay for fire damage, the representation was false and Michigan Basic knew when it made the representation that it was false. The allegation that Michigan Basic knew when it made the representation that it was false is within the so-called " 'bad faith' exception to fraudulent misrepresentation" referred to in our colleague's opinion. While Kassab may have difficulty in establishing the allegations, they do state a cause of action.
We reverse the judgment of the Court of Appeals on the civil rights claim, but affirm on the fraud and misrepresentation claim and remand to the circuit court for further proceedings on the fraud and misrepresentation claim.
Levin, Brickley, Riley, and Griffin, JJ., concurred.
Levin, J.
(separate opinion). The essence of Kassab's claim is that Michigan Basic did not process his fire-loss claim in good faith. Kassab asks that this Court recognize a civil rights action against insurers for mental distress and anguish resulting from unfair claims processing because of religion, race, color, national origin, age, sex, or marital status.
In the sixteen years since the enactment in 1976 of the Civil Rights Act and the Uniform Trade Practices Act as an amendment to the Insurance Code, insureds claiming unfair claims processing have been confined to the statutory remedy set forth in the utpa, which provides in general that an insurer must pay twelve percent interest when benefits are not paid on a timely basis.
I have joined in the majority opinion which holds that it is beyond the legislative purpose to provide a civil rights action under the public accommodation section of the act for breach of contract in claims processing. I write separately to explain why I am of the opinion that that is the correct result reading the Civil Rights Act and the Uniform Trade Practices Act together.
A
An earlier effort to recover damages for mental distress and anguish claimed to have been occasioned by unfair claims processing was unsuccessful. In Kewin v Massachusetts Mutual Life Ins Co, 409 Mich 401; 295 NW2d 50 (1980), the jury found that the insurer was obliged to pay $16,500 under a disability insurance contract, and additionally awarded $75,000 for mental or emotional distress and $50,000 exemplary damages. This Court, in setting aside the $75,000 and $50,000 awards, said that breach of an "insurance contract, as with almost any agreement, results in some annoyance and vexation," and held that an insurer's failure to pay did not give rise to a right to recover damages for mental distress, mental anguish, or exemplary damages.
B
The utpa provides that it constitutes an unfair act or practice in the business of insurance to refuse to insure, to refuse to continue to insure, or to limit the amount of coverage available to an individual because of religion, race, color, national origin, age, sex, or marital status, except that marital status may be used to classify individuals for the purpose of insuring family units, and except, as to age, if there is a reasonable relationship between the age of the individual and the extent of the risk.
The act further proscribes "[c]harging a different rate for the same coverage" on the basis of sex, marital status, or age "unless the rate differential is based on sound actuarial principles, a reasonable classification system, and is related to the actual and credible loss statistics or reasonably anticipated experience in the case of new coverages."
While the utpa so expressly proscribes civil rights discrimination in refusing to insure, refusing to continue to insure, or limiting the amount of coverage or charging different rates, it does not allude to civil rights discrimination in claims processing.
The only remedy provided by the utpa for delay in paying contracted-for benefits is recovery of twelve percent interest. There is no provision for payment of damages for emotional or mental distress or anguish or attorney fees.
c
The parties have called our attention to one case where it was sought to maintain an action against an insurer for violation of a civil rights act. In Thompson v IDS Life Ins Co, 274 Or 649; 549 P2d 510 (1976), the Oregon Supreme Court held that its public accommodations act did not cover the sale of insurance and that a female plaintiff could not maintain an action against an insurer under that act for refusal to sell a policy of insurance on the same terms the insurer would sell such a policy to a male. The court observed that the public accommodations act prohibits all discrimination, while the insurance laws prohibit only unfair discrimination. The court was of the view that it should construe the laws to avoid conflict in their administration.
The dissent states that "whatever conflicts were perceived by the Oregon court to exist in Oregon law plainly do not exist between Michigan's utpa and Civil Rights Act with regard to this case." The dissent unduly minimizes the potential for conflict. While the utpa specifically permits discrimination on the basis of sex, marital status, or age in some particulars, there are no exceptions for discrimination on the basis of religion, race, color, or national origin.
Adoption of the view set forth in the dissent would open the door to civil rights actions claiming that the pricing and other policies of insurers discriminate on the basis of religion, race, color or national origin, and also to civil rights actions claiming that pricing and other policies, other than those specifically excepted in the utpa, discriminate on the basis of age, sex, or marital status.
D
Reading the Civil Rights Act and the Uniform Trade Practices Act together, I am persuaded that the Legislature did not intend to provide a civil rights action for mental distress and anguish with respect to unfair claims processing, alleged to have been based on national origin, and for the payment of attorney fees in addition to the twelve percent interest for delay in payment provided in the utpa.
185 Mich App 206; 460 NW2d 300 (1990).
MCL 500.2806; MSA 24.12806.
MCL 37.2101 et seq.; MSA 3.548(101) et seq.
MCL 37.2302(a); MSA 3.548(302)(a).
Other provisions of the act preclude an employer (MCL 37.2202; MSA 3.548[202]) from discharging, and a labor organization (MCL 37.2204; MSA 3.548[204]) or educational institution (MCL 37.2402; MSA 3.548[402]) from expelling, an individual. See also MCL 37.2501 et seq.; MSA 3.548(501) et seq., barring discrimination in respect to housing.
The cases cited by the dissent concern denials of access to services or goods on the discriminatory basis of the plaintiff's membership in an identified class. Findling v T P Operating Co, 139 Mich App 30; 361 NW2d 376 (1984); Cheeseman v American Multi-Cinema, Inc, 108 Mich App 428, 431; 310 NW2d 408 (1981) (the plaintiffs had no cause of action for being denied access to the defendants' accommodations on the basis of their youth because of the construction of the "except where permitted by law" language of the public accommodations provision); Civil Rights Dep't ex rel Forton v Waterford Twp Dep't of Parks & Recreation, 425 Mich 173; 387 NW2d 821 (1986) (remanded to determine whether the gender classification of an elementary school basketball program survives intermediate level scrutiny).
Cavanagh, C.J., post, p 464.
The argument also assumes that the Civil Rights Act provides a remedy for refusal to insure, and that the Uniform Trade Practices Act (MCL 500.2001; MSA 24.12001) does not provide the sole remedy for refusal to insure.
We recognize that the remedies provided by the utpa probably do not include a private cause of action for damages. See Bell v League Life Ins Co, 149 Mich App 481; 387 NW2d 154 (1986). See also Safie, Inc v Nationwide Ins, 146 Mich App 483; 381 NW2d 747 (1985), and Barker v Underwriters at Lloyd's, London, 564 F Supp 352 (ED Mich, 1983).
See South Dakota Div of Human Rights v Prudential Ins Co, 273 NW2d 111, 113 (SD, 1978), stating that "solicitation and selling through individual agents dealing with selected groups and selected risks on matters of private contract does not constitute a public accommodation."
Michigan Basic is not an ordinary insurer. It was established pursuant to statute (MCL 500.2920; MSA 24.12920) to provide a source of insurance for persons who otherwise might not be able to obtain insurance. It may be that it does not "solicit" in the usual sense.
MCL 37.2301(a); MSA 3.548(301)(a).
Even if Kassab's allegations of discriminatory servicing of the insurance policy are true, Michigan Basic will prevail if the contract defense of arson is successfully asserted. To invoke the Civil Rights Act in these circumstances is to broaden the scope of that act beyond its intent to prohibit businesses from discriminatory dealings with the public.
Discriminatory dealings with the public would include such conduct as refusal of access to a public accommodation, Bolden v Grand Rapids Operating Corp, 239 Mich 318; 214 NW 241 (1927), or refusal to transact business, People v Bob-Lo Excursion Co, 317 Mich 686; 27 NW2d 139 (1947); Ledsinger v Burmeister, 114 Mich App 12; 318 NW2d 558 (1982).
The cases cited by the dissent identify the general purpose and construction of the Civil Rights Act. Miller v C A Muer Corp, 420 Mich 355, 363; 362 NW2d 650 (1984) (the Michigan Civil Rights Act "seeks to eliminate the effects of offensive or demeaning stereotypes, prejudices, and biases"); Holmes v Haughton Elevator Co, 75 Mich App 198, 200; 255 NW2d 6 (1977) (the Civil Rights Act is remedial and to be liberally construed).
Cf. Ledsinger, n 10 supra. Ledsinger is not illustrative of the scope of the public accommodations provisions of the Civil Rights Act. There, an owner of a retail store refused to transact business with the plaintiff because of his race. The Court held that the plaintiff's complaint alleged two violations of the Civil Rights Act: (1) that the defendant ultimately denied the plaintiff the sale of goods because of the plaintiff's race, and (2) that a statement by the defendant constituted a publication that full and equal enjoyment of the goods sold at the defendant's establishment would be withheld on the basis of race.
In allegations of fraud or mistake, the circumstances constituting fraud or mistake must be stated with particularity. [MCR 2.112(B)(1).]
Boyle, J., post, p 489.
This interlocutory appeal has been pending in our state's court system since March, 1988 — since November, 1990 in our Court. Thus, we conclude that this matter should not be put over to the October, 1992, term of Court.
See Boscaglia v Michigan Bell Telephone Co, 420 Mich 308; 362 NW2d 642 (1984). And, in addition, to provide for payment of attorney fees. MCL 37.2801 and 37.2802; MSA 3.548(801) and 3.548(802).
MCL 500.2006; MSA 24.12006.
Id., pp 417, 419, and 421.
MCL 500.2027(c); MSA 24.12027(c).
In South Dakota Div of Human Rights v Prudential Ins Co, 273 NW2d 111 (SD, 1978), the claim was that the exclusion of benefits to unmarried persons for pregnancy and pregnancy-related disabilities under a group health insurance plan constituted illegal discrimination on the basis of sex.
Cavanagh, C.J., post, p 477, n 18.