Opinion ID: 848901
Heading Depth: 2
Heading Rank: 2

Heading: commitment superseded by policy

Text: Because the policy took effect, there are two contracts, the commitment and the policy. Under the commitment, plaintiff was required to disclose the known tax lien, even though it was recorded. However, under the policy, plaintiff was not required to disclose the known tax lien because it was recorded. Therefore, the issue is which of these two contracts is controlling. The issuance of the commitment preceded the issuance of the policy. Accordingly, [t]he problem at hand can best be analyzed as a case of contract substitution. It is hornbook law that parties to a contract are not forever locked into its terms. They are at all times free to alter, amend, or modify their agreement. Moreover, the parties may execute a substituted agreement which totally supersedes the terms of the original. [ Lawyers Title Ins. Corp. v. First Federal Savings Bank & Trust, 744 F.Supp. 778, 783 (E.D.Mich., 1990).] In this case, the subsequently issued policy contains an explicit statement of intent to abrogate the antecedent commitment. This intent is evidenced by the integration clause of the policy that provides in paragraph 15(a) that the policy represents the entire policy and contract between the insured and the Company. Further, paragraph 15(b) of the policy provides that [a]ny claim of loss or damage... which arises out of the status of the title to the estate or interest covered hereby or by any action asserting such claim, shall be restricted to this policy. It is clear from these provisions that the policy was intended to supersede the commitment. As the Court of Appeals dissenting judge asserted on remand: I do not agree with the majority's conclusion that the integration clause, and therefore the condition of the exclusion that requires that the lien not be of record to be excluded, can be ignored because the policy is null and void based on a clause in the title commitment. The insurance company issued a policy that purported to contain the entire agreement of the parties, and which purported to insure for this lien; plaintiff was entitled to rely on the policy's representation that it embodied the entire agreement of the parties. The terms of the policy therefore control, and the inconsistent provision of the earlier title commitment cannot be relied on to void coverage because the policy itself grants coverage, and does not exclude it where the undisclosed lien is of record. [Slip op. at 3.] Because an integration clause nullifies all antecedent agreements, UAW-GM v. KSL Recreation Corp., 228 Mich.App. 486, 499, 579 N.W.2d 411; 228 Mich.App. 486, 579 N.W.2d 411 (1998), citing Corbin, Contracts, § 578, p. 404, [15] when the terms of a commitment and a subsequently enacted policy conflict and the policy contains an integration clause, the terms of the policy must control. Lawyers Title, supra at 783. As observed in UAW-GM, supra at 495, 579 N.W.2d 411: This conclusion accords respect to the rules that the parties themselves have set forth to resolve controversies arising under the contract. The parties are bound by the contract because they have chosen to be so bound. The Court of Appeals majority, on remand, itself recognized that, if the policy had become effective, the integration clause would have protected plaintiff. [16] See slip op. at 3. Because we conclude that the policy did become effective, and because the policy contains an integration clause, we conclude that the policy supersedes and operates to abrogate the commitment. Therefore, the commitment and its provision requiring the disclosure of known recorded liens did not continue in effect after the formation of the integrated policy agreement. Accordingly, we must examine the language of the policy to determine whether plaintiff's failure to disclose the known recorded tax lien excludes him from coverage. [17] The policy simply does not require the disclosure of known recorded liens. Therefore, plaintiff is not excluded from coverage under § 3(b) of the policy for failing to disclose the known lien.