Opinion ID: 824706
Heading Depth: 2
Heading Rank: 4

Heading: kurylowicz rejected

Text: Not only did Kurylowicz clearly err by disregarding Keys,7 it also clearly erred by concluding that its purported justifications for the “easily ascertainable” rule warranted departing from the common-law rule articulated in Keys. First, Kurylowicz justified the “easily ascertainable” rule on the basis of its understanding of the “public policy” of Michigan. In light of the Legislature’s then recent passage of the no-fault act, MCL 500.3101 et seq., Kurylowicz reasoned that the policy of the State of Michigan regarding automobile liability insurance and compensation for accident victims emerges crystal clear. It is the policy of this state that persons who suffer loss due to the tragedy of automobile accidents in this state shall have a source and a means of recovery. Given this policy, it is questionable whether a policy of automobile liability insurance can ever be held void ab initio after injury covered by the policy occurs. [Kurylowicz, 67 Mich App at 574.] This “public policy” rationale does not compel the adoption of the “easily ascertainable” rule. In reaching its conclusion, Kurylowicz effectively replaced the actual provisions of the no-fault act with a generalized summation of the act’s “policy.” Where, for example, in Kurylowicz’s statement of public policy is there any recognition of the Legislature’s 7 Although Keys was raised by the parties, although Keys governed the precise issue before it, and although this Court’s unanimous opinion in Keys had never been overruled, Kurylowicz, nonetheless, ignored its authority because “no Michigan appellate court has seen fit to cite [Keys] since it was released in 1959.” Kurylowicz, 67 Mich App at 572. 15 explicit mandate that, with respect to insurance required by the act, “no fraud, misrepresentation, . . . or other act of the insured in obtaining or retaining such policy . . . shall constitute a defense” to the payment of benefits? MCL 257.520(f)(1). We believe that the policy of the no-fault act is better understood in terms of its actual provisions than in terms of a judicial effort to identify some overarching public policy and effectively subordinate the specific details, procedures, and requirements of the act to that public policy. In other words, it is the policy of this state that all the provisions of the nofault act be respected, and Kurylowicz’s efforts to elevate some of its provisions and some of its goals above other provisions and other goals was simply a means of disregarding the stated intentions of the Legislature. The no-fault act, as with most legislative enactments of its breadth, was the product of compromise, negotiation, and give-and-take bargaining, and to allow a court of this state to undo those processes by identifying an allpurpose public policy that supposedly summarizes the act and into which every provision must be subsumed, is to allow the court to act beyond its authority by exercising what is tantamount to legislative power. Third-party victims of automobile accidents have a variety of means of recourse under the no-fault act, and it is to those means that such persons must look, not to a judicial articulation of policy that has no specific foundation in the act itself and was designed to modify and supplant the details of what was actually enacted into law by the Legislature. Second, it is claimed that the “easily ascertainable” rule complements MCL 500.3220, which provides: Subject to the following provisions no insurer licensed to write automobile liability coverage, after a policy has been in effect 55 days or if the policy is a renewal, effective immediately, shall cancel a policy of 16 automobile liability insurance except for any 1 or more of the following reasons: (a) That during the 55 days following the date of original issue thereof the risk is unacceptable to the insurer. (b) That the named insured or any other operator, either resident of the same household or who customarily operates an automobile insured under the policy has had his operator’s license suspended during the policy period and the revocation or suspension has become final. The Court of Appeals panel below reasoned that MCL 500.3220(a) contemplates that no-fault insurers may cancel coverage within 55 days of a policy’s issuance if “the risk is unacceptable to the insurer.” Alternatively phrased, an insurer may make its own risk assessment, without statutorily imposed restrictions. However, the Legislature limited to 55 days the period in which an insurer can make its risk assessment. We conclude that MCL 500.3220(a) evidences the intent to afford no-fault insurers a definite window of time in which to investigate an insured for the purpose of assessing risk. Stated differently, MCL 500.3220(a) envisions that no-fault insurers will either perform an investigation to determine whether to accept a new risk or forfeit the opportunity to later decide that an insured’s driving record or other characteristic should require cancellation of the policy. [Hyten I, 291 Mich App at 460-461.] We agree with the Court of Appeals that MCL 500.3220(a) shows an intent to allow insurers only a limited period during which to reassess the risk after the formation of a policy and when the risk is deemed unacceptable to “cancel” the policy. However, we disagree that when an insurer elects not to reassess the risk and later uncovers fraud, it is somehow precluded from pursuing traditional legal and equitable remedies in response.8 8 The flaw in the Court of Appeals’ reasoning is further highlighted by the fact that it would apparently hold that MCL 500.3220, despite nothing even approximating such language, envisions that insurers will investigate an insured, but will only do so when the claimant is a third party and not when the claimant is the insured. See Hammoud, 222 Mich App 485. How does any of this policy reasonably derive from the actual statute in controversy? 17 Risk assessment and the uncovering of fraud are distinct insurance processes and are not logically interrelated in a manner that would reasonably suggest that any statute addressing one of these processes necessarily addresses the other. Nor within MCL 500.3220(a), in particular, are these processes joined together by any specific language. MCL 500.3220 limits an insurer’s ability to “cancel” an insurance policy after it has been in effect for 55 days. In contract law, “cancellation” has acquired a peculiar and appropriate meaning in the law.9 “When a policy is cancelled, it is terminated as of the cancellation date and is effective up to such date[.]” United Security Ins Co v Ins Comm’r, 133 Mich App 38, 42; 348 NW2d 34 (1984) (citation and quotation marks omitted). Other remedies have also acquired their own peculiar and appropriate meanings in the law, including “rescission” and “reformation.” See, e.g., Lash v Allstate Ins Co, 210 Mich App 98, 102; 532 NW2d 869 (1995); Mate v Wolverine Mut Ins Co, 233 Mich App 14, 24; 592 NW2d 379 (1998). Each is conceptually different in its nature and in its breadth from the others, and to interpret “cancellation” as encompassing a broader range of contractual remedies is simply without basis in the statute.10 9 See MCL 8.3a (“All words and phrases shall be construed and understood according to the common and approved usage of the language; but technical words and phrases, and such as may have acquired a peculiar and appropriate meaning in the law, shall be construed and understood according to such peculiar and appropriate meaning.”). 10 Accord United Sec Ins Co, 133 Mich App at 42 (holding that under MCL 500.3024, “[r]escission is insufficiently similar to cancellation to support the conclusion that the Legislature’s enactment of a statute controlling cancellation of an automobile insurance policy without mentioning rescission demonstrates the Legislature’s intent to preclude rescission”). 18 Third, it is contended that the “easily ascertainable” rule is required for the protection of third parties.11 However, there is simply no basis in the law to support the proposition that public policy requires a private business in these circumstances to maintain a source of funds for the benefit of a third party with whom it has no contractual relationship.12 While perhaps authority exists in the Legislature to enact such a law, see, e.g., MCL 500.3172 (pertaining to the Michigan Assigned Claims Facility), this authority has not been exercised by the Legislature in this instance. The no-fault act seeks to protect third parties in a variety of ways, including through tort actions, but it states nothing about altering the common law that enables insurers to obtain traditional forms of relief when they have been the victims of fraud. We are not oblivious to the fact that adoption of the “easily ascertainable” rule might in some cases protect a potential source of monetary recovery for persons bringing tort claims, but this does not by itself justify a rule that alters first principles of contract formation, redefines the common-law concept of fraud, reduces disincentives for insurance fraud, and transfers legal responsibility from 11 Ohio Farmers Ins Co, 179 Mich App at 364-365 (“[B]asic public policy considerations require that, once an innocent third party is injured in an accident in which coverage is in effect on the automobile, an insurer will be estopped from asserting rescission as a basis upon which it may limit its liability to the statutory minimum.”); Kurylowicz, 67 Mich App at 576 (holding that the insurer’s duty to undertake a reasonable investigation “directly inures to the benefit of third persons injured by the insured”), quoting Barrera, 71 Cal 2d at 663. 12 See Terrien v Zwit, 467 Mich 56, 66; 648 NW2d 602 (2002) (“In defining ‘public policy,’ it is clear to us that this term must be more than a different nomenclature for describing the personal preferences of individual judges, for the proper exercise of the judicial power is to determine from objective legal resources what policy is, and not to simply assert what such policy ought to be on the basis of the subjective views of individual judges.”). 19 parties that have acted fraudulently to parties that have not. Absent insurance, the operator of the motor vehicle is personally liable for tort liability. By requiring an insurer to indemnify an insured despite fraud in obtaining an insurance policy, the “easily ascertainable” rule relieves the insured of what would otherwise be the insured’s personal obligation in the face of his or her own misconduct. As between the fraudulent insured and the insurer, there can be no question that the former should bear the burden of his or her fraud.13 Having concluded that the purported justifications do not support the “easily ascertainable” rule, we overrule Kurylowicz and its progeny, there being nothing in the law to warrant the establishment or imposition of an “easily ascertainable” rule.14