Opinion ID: 2978372
Heading Depth: 1
Heading Rank: 3

Heading: analysis

Text: This court has jurisdiction under 28 U.S.C. § 1291 and Federal Rule of Appellate Procedure 4(a)(1)(A). A federal court exercising diversity jurisdiction applies the law of the forum state. Uhl v. Komatsu Forklift Co., Ltd., 512 F.3d 294, 302 (6th Cir. 2008). We review the district court’s grant of summary judgment de novo. Holloway v. Brush, 220 F.3d 767, 772 (6th Cir. 2000). Rule 56 of the Federal Rules of Civil Procedure states that summary judgment is appropriate “if the pleadings, the discovery and disclosure materials on file, and any affidavits show that there is no genuine issue as to any material fact and that the movant is entitled to judgment as a matter of law.” The moving party must inform the district court “of the basis for its motion, and identifying those portions of ‘the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any’ which it believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp. v. Cartrett, 477 U.S. 317, 323 (1986) (quoting Fed. R. Civ. P. 56(c)). The nonmoving party must then “set forth specific facts showing there is a genuine issue for trial.” United States v. Ninety Three Firearms, 330 F.3d 414, 427 (6th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986)). “In considering a motion for summary judgment, the district court must construe all reasonable inferences in favor of the nonmoving party.” Vill. of Oakwood v. State Bank and Trust Co., 539 F.3d 373, 377 (6th Cir. 2008). 5 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 A. Material Misrepresentations On appeal, Huda asserts that he made no material misrepresentations because he did not sign the “Undisclosed Driver” section of the application. Huda further claims that even if he did make a material misrepresentation, Integon is estopped from rescinding the policy because: 1) Integon made a unilateral mistake by accepting the application for insurance (and the ensuing premiums) without following-up on Huda’s failure to sign the “Undisclosed Driver” section, and 2) Integon had knowledge of the misrepresentation due to its possession of Huda’s homeowners insurance policy, which indicated that he lived with his wife. Applying well-settled Michigan law “that where an insured makes a material misrepresentation in the application for insurance, including no-fault insurance, the insurer is entitled to rescind the policy and declare it void ab initio,” Michigan courts have grappled with what constitutes a misrepresentation. Lake States Ins. Co. v. Wilson, 586 N.W. 2d 113, 115 (Mich. Ct. App. 1998); see also Old Line Ins. Co. of Am. v. Garcia, 411 F.3d 605, 611 (6th Cir. 2005). For example, in Lake States Insurance, 586 N.W. 2d at 114, an insurance representative typed the plaintiff’s application and the plaintiff signed the application without reading it. The Michigan Court of Appeals held that the insured’s failure to list each driver residing in her household constituted a misrepresentation. Id. at 115-16. Similarly, in Montgomery v. Fidelity & Guaranty Life Insurance Co., 713 N.W. 2d 801 (Mich. Ct. App. 2005), the Michigan Court of Appeals allowed the defendant insurance company to void a life insurance policy due to a misrepresentation of the insured decedent’s tobacco use. The wife of the decedent argued that the insurance agent was “the one who 6 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 actually completed the application and that neither she nor the decedent read the application before signing.” Id. at 804. The court, however, held that [w]hether it was plaintiff, the decedent, or the agent who misrepresented the decedent’s tobacco use on the application is not material because plaintiff and the decedent signed the authorization, stating that they had read the questions and answers in the application and that the information provided was complete, true, and correctly recorded. It is well-established that failure to read an agreement is not a valid defense to enforcement of a contract. A contracting party has a duty to examine a contract and know what the party has signed, and the other contracting party cannot be made to suffer for neglect of that duty. Id. (internal citations omitted); see also Rory v. Cont’l Ins. Co., 703 N.W. 2d 23, 42 n.82 (Mich. 2005); Lash v. Allstate Ins. Co., 532 N.W. 2d 869, 872 (Mich, Ct. App. 1995) (holding that an insurance contract can be rescinded due to an intentional or innocent misrepresentation). In Jones v. Allstate Life Insurance Co., No. 93-1102, 1994 WL 28575, at  (6th Cir. Jan 31, 1994) (unpublished disposition), this court reached a similar conclusion. Jones involved an insurance agent who “read questions from the insurance application out loud [to the applicants] and filled in the answers herself.” Id. at . The agent then “handed the completed form to Mr. and Mrs. Jones and asked them to sign it.” Id. Mrs. Jones said that “they did so without reading it and that they were not given a copy when they left the office.”4 Id. During the meeting, the agent failed to ask Mr. Jones his height and weight, yet the completed application contained incorrect data in 4 A copy of the application was incorporated into the policy documents eventually received by the Joneses. 7 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 answer to each question. The insured decedent’s wife suggested that the agent “must have made the data up in order to bring Mr. Jones within Allstate’s risk limits.”5 Id. Despite plaintiff’s claim that “neither she nor her husband made any oral misstatement” to the agent regarding Mr. Jones’ weight, this court held that “both Mr. and Mrs. Jones signed the application and declared, in doing so, that the representations contained in the application were truthful to the best of their knowledge.” Id. at . As a result, the information contained in the application was imputed to the applicants. Id.; see also Clark v. John Hancock Mut. Life Ins. Co., 447 N.W. 2d 783, 784 (Mich. Ct. App. 1989) (holding that life insurance applicant who misunderstood oral questions and then signed the insurance questionnaire without reading it “made a false representation on the application”). Huda attempts to distinguish his case on the basis that Integon never provided him with the second page of the application, which requested that he “[l]ist all persons of eligible driving age or permit age.” (ROA at 338.) However, it is undisputed that Huda saw page three, which contains the “Undisclosed Driver” section, including the statement that all drivers are listed, although he declined to sign this section. More important, Huda signed the fifth and final page containing the “Applicant’s Certification.” (Id. at 341.) In that section, Huda certified that “all answers to all 5 Other allegations supported this hypothesis. According to Mrs. Jones, when the agent asked if Mr. Jones had smoked in the past twelve months he answered, truthfully “that he had smoked in the past twelve months, but had not smoked since July.” Jones v. Allstate Life Ins. Co., 1994 WL 28575, at  (6th Cir. Jan 31, 1994) (unpublished disposition). The agent said she “would write ‘no’ in response to this question.” Id. Further, in the months before her interaction with the Joneses, the agent in question received an “advance notice of termination” due to insufficient sales and later “felt pressured to increase her sales and . . . ultimately quit her job with Allstate due, in part, to this pressure.” Id. at . 8 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 questions in this application are true and correct” and “that ALL persons of eligible driving age or permit age who live with me, as well as reside in my household, are shown above.” (Id.) Despite signing this section, Huda does not claim to have mentioned, or attempted to obtain insurance for, Huda, Jr. Therefore, we do not see the significance of Huda’s failure to receive page two. The district court correctly concluded that as a matter law Huda made a material misrepresentation when providing and confirming information in his application for auto insurance with Integon.6 Huda, however, argues that Integon should not be permitted to void the policy even if the application contained a material misrepresentation. First, he claims that the “lack of signature [in the ‘Undisclosed Driver’ section] should have prompted Integon to reject the Application, or, at a minimum, require an explanation.” (Appellant’s Br. at 12.) According to Huda, Integon’s failure to do so amounted to a unilateral mistake, which was not sufficient to modify the policy to reincorporate the “Undisclosed Driver” section. Further, because Integon did not seek an explanation, Huda claims the company waived its right to enforce the “Undisclosed Driver” section. Huda’s failure to sign the “Undisclosed Driver” section does not, however, invalidate the remainder of the contract or require a modification of the contract in order for Integon to invoke its power to void the contract under the “Certification” section signed by Huda. That section separately 6 Though it is not disputed here, Huda’s misrepresentation was material because, had Integon known Huda had a seventeen-year-old son in the house, the premium it charged for Huda’s auto policy would have increased by more than 100 percent. (See ROA at 264.) See also Old Line Ins. Co. of Am. v. Garcia, 411 F.3d 605, 611 (6th Cir. 2005) (“A misrepresentation is material if the insurer would have charged a higher premium or not accepted the risk had it known the true facts.”); Montgomery v. Fidelity & Guar. Life Ins. Co., 713 N.W. 2d 801, 804 (Mich. Ct. App. 2005) (explaining that “a misrepresentation on an insurance application is material if, given the correct information, the insurer would have rejected the risk or charged an increased premium”). 9 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 provides that all persons of driving or permit age are listed in the application, that the insured will continue to advise Integon of household members of driving age, and that Integon may declare the policy null and void if the insured does not comply with these requirements. Additionally, because “conduct that does not express any intent to relinquish a known right is not a waiver, and a waiver cannot be inferred by mere silence,” Integon’s action (or inaction) in failing to require that Huda sign the “Undisclosed Driver” section cannot be a waiver of the rights retained by the “Certification” section. See Moore v. First Sec. Cas. Co., 568 N.W.2d 841, 844 (Mich. Ct. App. 1997). Huda also argues that the doctrine of estoppel applies because: 1) Integon induced Huda to believe Integon would provide coverage; 2) Huda justifiably relied on this belief; and 3) Huda was prejudiced as a result of that reliance. See, e.g., Conagra, Inc. v. Farmers State Bank, 602 N.W. 2d 390, 405 (Mich. Ct. App. 1998) (outlining the elements of an equitable estoppel claim). Huda alleges that “had Integon refused coverage because the applicable section was not signed, Huda would have disclosed the other drivers in the family or procured other insurance.” (Appellant’s Br. at 16-17.) Huda’s equitable estoppel argument, like his waiver argument, fails to account for his endorsement of the “Applicant’s Certification,” through which he certified that all persons of eligible driving or permit age in the household were shown in the application. Having signed this “Certification” Huda cannot have justifiably relied on Integon’s issuance of the policy as an acceptance of the risk Huda failed to disclose. Huda could only rely on Integon’s provision of the coverage for which he applied. That coverage clearly reserved the right to void the policy under these circumstances. 10 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 Finally, Huda claims that Integon should be estopped from avoiding the policy because it “knew, or in the exercise of reasonable diligence, should have known that there were other eligible drivers in Huda’s household.” (Appellant’s Br. at 11.) According to Huda, the homeowners policy he provided to Integon – which listed his wife, Kishwar Huda, as a named insured – effectively put the company on notice of other drivers. Huda’s argument is based on a series of Michigan cases in which the court of appeals held that once an insurer identifies a material misrepresentation “the critical issue necessarily becomes whether the fraud could have been ascertained easily by the insurer at the time the contract of insurance was entered into.” Farmers Ins. Exch. v. Anderson, 520 N.W. 2d 686, 689 (Mich. Ct. App. 1994). The court created this exception because it thought “it unwise to permit an insurer to deny coverage on the basis of fraud after it has collected premiums, when it easily could have ascertained the fraud . . . .” Id.; see also Lake States Ins. Co., 586 N.W. 2d at 116 (noting that since it was clear the defendant made misrepresentations in her application, the issue was whether the misrepresentations could have been “ascertained easily” by Lake States).7 7 The doctrine’s origins are contained in Keys v. Pace, 99 N.W. 2d 547, 552-53 (Mich. Ct. App. 1959), which explained, The short answer to the arguments of waiver and estoppel is that a litigant cannot be held estopped to assert a defense, or to have waived his right thereto, because of facts he does not know, unless, as a matter of judicial policy, we are ready to say he ‘should’ know them. This we can always do, of course, but there is nothing before us as a matter of fact or of sound policy, to warrant imposition of such knowledge. This is not to say, of course, that one may wilfully close his eyes to that which others clearly see. But nothing of the sort is here before us. In fact, when actual knowledge was gained, the insurer was not slow to act, cancelling the policy ab initio and withdrawing its legal representation of the insured. Such action was well justified. 11 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 Assuming a person’s coverage under a homeowners policy means that the person is of driving age, Huda’s provision of an insurance policy with his wife’s name does not mean that Integon knew or should have known that Huda had a son of driving age. Huda essentially argues that his failure to inform Integon about one driver in his household is excused by his failure to inform Integon about another driver and his provision of documentation indicating the existence of that driver. While Huda points to a clue that could have led Integon to investigate Mrs. Huda’s presence in the Huda household, he provides no indication of how the company would have had any knowledge of the existence of Huda, Jr. In Farmers Insurance Exchange v. Anderson, 520 N.W. 2d 686 (Mich. Ct. App. 1994), the insurance applicant failed to mention her son would be driving the car. The Michigan Court of Appeals held that because the son’s name was “nowhere to be found on the application for insurance . . . the trial court properly concluded that it would have been virtually impossible for Farmers to know that it should obtain [the son’s] driving record, because it had no reason to believe that he would be operating the subject vehicle.” Id. at 689; see also Manier v. MIC Gen. Ins. Corp., 760 N.W. 2d 293, 296 (Mich. Ct. App. 2008) (concluding that defendant insurance company could not have “easily ascertained” the insured party’s misrepresentation that her son lived with her). Similarly, in this case, Huda’s failure to mention Huda, Jr. anywhere on the application for insurance is not overcome by his submission of documentation with Mrs. Huda’s name on it. B. Ambiguity Huda also claims that a portion of the insurance application – which is part of the overall insurance contract – is ambiguous, and that we must interpret the ambiguous provision in favor of 12 Huda v. Integon Nat’l Ins. Co. Case. 08-2193 the insured and strictly against the insurer. Taylor v. Blue Cross/Blue Shield of Mich., 517 N.W. 2d 864, 868 (Mich. Ct. App. 1994). The asserted ambiguity results from a comparison of the second and fourth paragraphs of the “Undisclosed Driver” section. The undersigned further agrees that this endorsement will serve as a rejection of all Coverages, which are not required by Michigan law, while any vehicle covered under this policy is being driven, operated, maintained, manipulated, serviced, or used in any manner by an unlisted driver who resides in the named insured’s household.