Opinion ID: 849098
Heading Depth: 1
Heading Rank: 2

Heading: materiality requirement

Text: MCL 500.2218(1) provides: No misrepresentation shall avoid any contract of insurance or defeat recovery thereunder unless the misrepresentation was material. No misrepresentation shall be deemed material unless knowledge by the insurer of the facts misrepresented would have led to a refusal by the insurer to make the contract. The Court of Appeals relied on its prior decision in Zulcosky v. Farm Bureau Life Ins. Co., supra, for the proposition that a change in facts is material only where the correct information would cause the insurer to reject the applicant altogether. Zulcosky would not find materiality where the correct information would merely prompt the insurer to offer a policy at a higher premium. However, this is contrary to the binding precedent of this Court. Our decision in Keys v. Pace, 358 Mich. 74, 82, 99 N.W.2d 547 (1959), made clear that a fact or representation in an application is material where communication of it would have had the effect of substantially increasing the chances of loss insured against so as to bring about a rejection of the risk or the charging of an increased premium. Keys, in turn, is consistent with the plain language of M.C.L. § 500.2218(1), which defines materiality in terms of the insurer's refusal to make the contract (emphasis added), not a contract. In this case, the undisputed evidence presented to the trial court made clear that the correct information would have led the insurer to charge an increased premium, hence a different contract. Indeed, defendant's underwriter stated in her affidavit that defendant may have been willing to offer a more expensive `rated' insurance contract at approximately double the premium cost that Mr. Oade had paid for the `standard' insurance policy in this instance. Thus, the Court of Appeals erred in focusing on whether defendant would have issued any contract of insurance to Mr. Oade. The proper materiality question under the statute is whether the contract issued, at the specific premium rate agreed upon, would have been issued notwithstanding the misrepresented facts. The Court of Appeals contrary decision in Zulcosky is overruled . Because there is no genuine issue of material fact on the issue of materiality, defendant is entitled to summary disposition under MCR 2.116(C)(10).
Contrary to the dissent, we conclude that it is altogether irrelevant that plaintiff's health did not change during the prepolicy period. The dissent, in concluding that the case presents a question of material fact, asserts that plaintiff offered evidence that he had not suffered a heart attack. It further asserts that plaintiff's personal physician affirmed that decedent's health did not change in anyway [sic] between the date he applied for the insurance policy and when it was delivered. Post at 135. On the basis of this evidence, the dissent concludes that the fact issue concerning the materiality of decedent's misrepresentations should be resolved by the trier of fact. Post at 137. However, the focus of inquiry under the statutory materiality test is whether a reasonable underwriter would have regarded Mr. Oade's updated answers regarding his hospitalization for chest pains as sufficient grounds for rejecting the risk or charging an increased premium, not whether the status of Mr. Oade's health had changed. Because there is no dispute that defendant would have, at minimum, issued an insurance policy at a higher premium rate, no reasonable jury could conclude that it would have issued the same contract. To create an issue of fact on the materiality question, plaintiffs were free to bring forth evidence drawing into question the testimony of defendant's underwriter. Because plaintiffs did not do so, the trial court properly granted summary disposition to defendant under MCR 2.116(C)(10).
While we agree with the Court of Appeals that M.C.L. § 500.2218 applies here, we conclude that Mr. Oade's misrepresentations were material, thereby entitling defendant to avoid the insurance contract. Accordingly, we reverse the Court of Appeals decision and reinstate summary disposition in favor of defendant.