Court Opinion

ID: 9730187
Source: CourtListenerOpinion
Date Created: 2023-08-26 15:04:22.715223+00
Date Added: 2024-06-11T18:26:04.740739
License: Public Domain

V. J. Brennan, J.
(dissenting). I respectfully dissent. Defendant Citizens Insurance Company of America seeks reversal of the trial court’s grant of a summary judgment in favor of plaintiff under GCR 1963, 117.2(3). Summary judgment under GCR 1963, 117.2(3) should only be granted where there is no genuine issue as to any material fact. The court must be satisfied that it is impossible for the claim or defense to be supported at trial because of some deficiency which cannot be overcome. Rizzo v Kretschmer, 389 Mich 363, 372; 207 NW2d 316 (1973). It is my opinion that it was proper for the trial court to entertain a motion for summary judgment as the question to be resolved was strictly a question of law and no factual dispute existed.
The crux of the instant case is whether the misrepresentation by plaintiff in his application for automobile insurance will justify a determination that his automobile insurance policy was void ab initio. This Court has thrice considered the issue in factual situations similar to that of the case at bar. In State Farm Mutual Automobile Ins Co v Kurylowicz, 67 Mich App 568; 242 NW2d 530 (1976), lv den 397 Mich 827 (1976), (a case which accrued prior to the enactment of the "no-fault act”) while applying for automobile insurance, the defendant indicated that his driver’s license had not been suspended or revoked at any time during the five years preceding his application. In fact, *482during the five-year period, the defendant’s license had been suspended for one month. After plaintiff issued defendant’s policy, defendant was involved in an automobile accident in which one person was killed and five other persons were injured. Two months later, defendant was involved in another accident. On August 23, 1971, State Farm declared a rescission of the policy retroactive to May 10, 1971, alleging as grounds that the defendant had misrepresented material facts in his application concerning previous revocation or suspension of his driver’s license. Id., p 570. After examining the public policy behind the statutes regulating automobile liability insurance in Michigan and similar cases in other jurisdictions, the Court held that the misrepresentation of an insured would not prevent recovery against the insurer by third parties who had been injured by the insured. Id., p 578. The Court also held that where an automobile liability insurer retains premiums, notwithstanding grounds for cancellation reasonably discoverable by the insurer during the 55-day statutory period as prescribed by the statute in effect at the time, MCL 500.3220; MSA 24.13220, the insurer will be estopped to assert that grounds for rescission exist thereafter. Id., p 579.
The Court’s decision in Kurylowicz was followed in Frankenmuth Mutual Ins Co v Latham, 103 Mich App 66; 302 NW2d 329 (1981). In Frankenmuth, defendant made misrepresentations in his application for automobile insurance. He represented that he was not under any suspension or revocation of driving privileges in Ohio or in any other state. This was not the case as Latham had driving infractions which would have been material to Frankenmuth’s decision to issue insurance coverage. Approximately two and one-half months *483after the policy was issued, an automobile owned and operated by Latham struck and injured a pedestrian. The Court, citing Kurylowicz, found that the trial court correctly held that the policy was in full force and effect at the time of the accident.
In State Farm Mutual Automobile Ins Co v Allen, 50 Mich App 71; 212 NW2d 821 (1973), this Court reached a result contrary to the holdings in Kurylowicz and Latham, supra. However, Allen did not involve a misrepresentation by the insured. Rather, it involved the forgery of the insured’s name on the insurance application. See Kurylowicz, supra, p 578. The instant case differs from Kurylowicz, Frankenmuth, and Allen, supra, because plaintiff, the insured party, is not a third party seeking to recover the benefits of the policies. However, it is my opinion that the public policy reasons and legal rationale applied by this Court in Kurylowicz and Frankenmuth apply with equal force to the factual situation present in the instant case.
Michigan’s so-called "no-fault insurance act” is a compulsory insurance statute, the purpose of which is to ensure compensation to persons injured in automobile accidents. Hill v Aetna Life & Casualty Co, 79 Mich App 725, 728; 263 NW2d 27 (1977); Pollock v Frankenmuth Mutual Ins Co, 79 Mich App 218, 222; 261 NW2d 554 (1977). This Court, expounding upon this statutory purpose, stated as follows:
"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 *484initio after injury covered by the policy occurs. Generally, it is held that:
" 'The liability of the insurer with respect to insurance required by the act becomes absolute whenever injury or damage covered by such policy occurs * * * no statement made by the insured or on his behalf and no violation of the policy provisions may be used to defeat or avoid the policy.’ 1 Long, The Law of Liability Insurance, § 3.25, pp 3-83 — 3-84. See Detroit Automobile Inter-Ins Exchange v Ayvazian, 62 Mich App 94; 233 NW2d 200 (1975).” Kurylowicz, supra, p 574.
While the Court did not decide the question of whether a policy of automobile liability insurance can ever be held void ab initio after an injury covered by the policy occurs, its discussion is instructive as to that panel’s position on that issue. Further, it should be noted that the second paragraph of the passage quoted above was quoted with approval by another panel in Latham, supra.
Not only does it appear that allowing an insurance company to rescind a policy of automobile liability insurance ab initio would run contrary to the stated policy of the Michigan insurance legislation, it also appears to be incompatible with the compulsory nature of the no-fault insurance act. The act requires that the owner or registrant of a motor vehicle maintain security, usually in the form of insurance, for payment of benefits of personal protection insurance, MCL 500.3101(1); MSA 24.13101(1). The operation of a vehicle which is not so insured constitutes a misdemeanor, punishable by fine and/or imprisonment, MCL 500.3102(2); MSA 24.13102(2). In addition to the possible criminal charge, the owner of a vehicle which is not insured is not entitled to recover personal protection insurance benefits. MCL 500.3113(b); MSA 24.13113(b).
*485The Michigan Legislature was cognizant of the hardships a compulsory insurance scheme could bring to bear on persons whose insurance coverage was to be terminated for some reason. To ameliorate these hardships, the Legislature provided that notice must be given before a policy could be terminated. MCL 500.3224(3); MSA 24.13224(3). The purpose of this notice period is to allow an insured to obtain other insurance prior to the termination of his coverage. Termination ab initio runs contrary to the statutory purpose as it leaves the insured without insurance from the time he obtained his initial policy and does not allow that person a reasonable time to obtain other insurance. Other portions of the Insurance Code also indicate that rescission ab initio is not a remedy available to insurers under the compulsory insurance scheme of this state.
Examination of the portions of the Insurance Code dealing with termination of insurance coverage indicates that the statutes were drafted in such a manner as to prohibit an insurer from terminating personal injury protection prior to giving prospective notice to its insured. MCL 500.3220; MSA 24.13220 states as follows:
"Sec. 3220. 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 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 *486policy period and the revocation or suspension has become final.”
This section of the Insurance Code is augmented by MCL 500.3224; MSA 24.13224 which states:
"Sec. 3224. (1) The cancellation of a policy of insurance within the 55-day period enumerated in subdivision (a) of section 3220 shall not be subject to appeal by the insured. Failure to disclose the cancellation by any insured upon any application for insurance shall not be grounds to deny coverage on the basis of fraud by an insurer who may have accepted the risk thereafter.
"(2) For the provisions of this chapter only, no cancellation shall be effective unless a written notice of cancellation is mailed by certified mail, return receipt requested, to the insured at the last address known to the insurer either through its records, the personal records of the agent who wrote the policy, or as supplied by the insured.
"(3) The notice shall be mailed at least 20 days prior to the effective date of cancellation. For the purpose of this chapter only, delivery of such written notice by the insurer shall be the equivalent of mailing. The notice shall contain the reasons for the cancellation and shall state in bold type that the insured has the statutory right within 7 days from the date of mailing to appeal to the department. The commissioner shall approve the form of the cancellation notice.”
In making its ruling, the trial court noted that MCL 500.3224(3); MSA 24.13224(3) mandates that notice shall be given of cancellation and such shall be mailed at least 20 days prior to the effective date of cancellation. The court went on to state that "Citizens did not cancel in accordance with the statutory requirements and therefore the policy was in effect on the date of plaintiff’s injury”. Citizens argues that the statutes cited by plaintiff and the trial judge are inapplicable since they *487relate to cancellations and not rescission ab initio. This argument has been rejected by this Court. In Kurylowicz, supra, pp 577-578, the Court stated:
"State Farm argues that the statutes cited by the trial judge and by the defendants are inapplicable since they relate to cancellations and not rescission ab initio. Such a construction would require that we hold, in effect, that although an insurer may not cancel a policy of automobile liability insurance based on fraud subsequent to the payment of a claim under the policy, it may nevertheless treat the policy as void ab initio and avoid liability on the policy altogether. We do not think that the Legislature intended such an absurd consequence.”
Another factor which should be considered is that Citizens had the information necessary to obtain plaintiff’s driving record for approximately 20 days prior to the accident. Citizens ordered plaintiff’s driving record approximately two weeks after receipt of the application. After receiving the record, Citizens did not review it until October 5, 1981. This indicates that Citizens had an opportunity to discover plaintiff’s driving record but neglected to do so promptly.
It should be noted that other jurisdictions have held that an insurer may not rescind an automobile insurance policy ab initio. In Pearce v Southern Guaranty Ins Co, 246 Ga 33; 268 SE2d 623 (1980), the Georgia Supreme Court held that "an automobile insurance policy providing basic third-party liability insurance and basic personal injury protection benefits (no-fault) issued pursuant to Georgia law cannot be voided retrospectively under Code Ann, § 56-2409”. 246 Ga 39. Pearce involved a factual situation where the insured misrepresented his driving record to the insurer in order to procure no-fault insurance. Approxi*488mately one month after obtaining the insurance, the insured was involved in an automobile accident in which he and a passenger were killed and the occupants of the other vehicle sustained personal injuries. An action for declaratory judgment was filed in the federal district court, the result of which was appealed to the United States Court of Appeals for the Fifth Circuit. The Federal Appeals Court certified the following question for the Supreme Court of Georgia:
"After the effective date of the Georgia No-Fault Act (Georgia Motor Vehicle Reparations Act, Georgia Laws 1974, pp 113, et seq., Ga Code Ann, chap 56-34B), can an automobile insurance policy providing basic third-party liability insurance and basic personal injury protection benefits, issued to a Georgia resident, be voided ab initio based upon misrepresentations made in the application for the insurance, as provided by Ga Code Ann, § 56-2409, after an automobile accident giving rise to a claimed loss?” 246 Ga 35.
In response to the question, the Georgia Supreme Court held that an automobile insurance policy providing basic third-party liability insurance and basic personal injury protection benefits (no-fault) issued pursuant to Georgia law cannot be voided retrospectively. 246 Ga 39. See, also, Anno: Rescission or avoidance, for fraud or misrepresentation, of compulsory, ñnancial responsibility, or assigned risk automobile insurance, 83 ALR2d 1104; Sentry Indemnity Co v Sharif, 156 Ga App 828; 280 SE2d 354 (1980), aff’d 248 Ga 395; 282 SE2d 907 (1981).
At its core, the instant case turns on whether a person who makes misrepresentations on an application for automobile insurance should be allowed to recover benefits through the policy which he has obtained through those misrepresentations. While the courts are loathe to reward a wrongdoer *489for his wrongful acts, such concerns are sometimes secondary to the policy implications of not granting the requested relief. Though in the instant case there is indication that plaintiff intentionally misled the insurer while applying for the benefits, it is very conceivable that in many cases a person would make an innocent misrepresentation on such an application which could be used to deny him coverage in the event of an accident. Further, it is the policy behind our compulsory insurance scheme that "persons who suffer loss due to the tragedy of automobile accidents in this state shall have a source and a means of recovery”. Kurylowicz, supra, p 574. On the basis of this policy and what has been stated above, I would affirm the trial court’s order granting plaintiff’s motion for summary judgment.