Kassab v. Michigan Basic Property Ins. Ass'n

• Decision Date: 30 September 1992
• Docket Number: No. 3,M,Docket No. 90387,3
• Citation: 441 Mich. 433,491 N.W.2d 545
• Parties: , 61 USLW 2212 Manual A. KASSAB, Plaintiff-Appellee, v. MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION, Metropolitan Adjustment & Investigation Company, and John D. Honeyman, jointly and severally, Defendants-Appellants. Calenderarch Term 1992.
• Court: Michigan Supreme Court

Page 545

491 N.W.2d 545

441 Mich. 433, 61 USLW 2212

Manual A. KASSAB, Plaintiff-Appellee, v. MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION, Metropolitan

Adjustment & Investigation Company, and John D.

Honeyman, jointly and severally,

Defendants-Appellants.

Docket No. 90387.

Calender No. 3, March Term 1992.

Supreme Court of Michigan.

Argued March 3, 1992.

Decided Sept. 30, 1992.

Barr and Associates, Charles J. Barr, Detroit, for plaintiff-appellee.

Dykema Gossett by Donald S. Young and Kathleen McCree Lewis, Patterson Phifer & Phillips, P.C. by Kurt D. Meyer, Detroit, for defendants-appellants.

Zagaroli, Colpean & Venuto, PC by Frank R. Venuto, Lansing, amicus curiae, for Michigan Ass'n of Ins. Companies.

Michigan Trial Lawyers Ass'n by Monica Farris Linkner, Berkley, Co-Chairperson, Amicus Curiae Committee.

Michigan Trial Lawyers Ass'n by Charles P. Burbach, Southfield, Co-Chairperson, Amicus Curiae Committee.

Michigan Trial Lawyers Ass'n by Mark R. Bendure, Sidney A. Klingler, Detroit, for amicus curiae.

Before the entire bench.

PER CURIAM.

The principal question presented is whether Manual A. Kassab may maintain a civil rights action against Michigan Basic Property Insurance Association and others for unfair claims processing following a fire that destroyed business property insured by Michigan Basic. Anotherquestion is whether Kassab's complaint adequately pleaded and stated a cause of action that Michigan Basic made false representations to him that it intended to pay for the fire damage.

I

Kassab was the owner of premises on West Seven Mile Road in Detroit where he conducted business as Seven Mile Auto Electric for a number of years. He purchased a standard fire insurance policy from Michigan Basic with policy limits of $50,000 on the building and $25,000 on contents. The policy was in effect on August 30, 1986, when a fire occurred. He reported the loss and claimed damages in excess of the policy limits. Michigan Basic hired Metropolitan Adjustment & Investigation Company and John D. Honeyman to investigate the claim. On their recommendation, Michigan Basic denied the claim.

More than one year after the claim was denied, Kassab filed a multicount complaint seeking damages against Michigan Basic, Metropolitan Adjustment, and Honeyman. The circuit court denied summary disposition. A divided panel of the Court of Appeals ¹ affirmed the denial of summary disposition of the civil rights and fraud and misrepresentation claims, but reversed with respect to the contract claim, holding that it was barred by a one-year statute of limitation. ²

We reverse the judgment of the Court of Appeals on the civil rights claim, but affirm on the fraud and misrepresentation claim and remand to the circuit court for further proceedings on the fraud and misrepresentation claim.

II

Kassab's complaint alleges that Michigan Basic did not pay his fire-loss claim because he is "Chaldean by national origin." Kassab relies on the section of the Civil Rights Act ³ providing that a person shall not "[d]eny an individual the full and equal enjoyment of the goods, services, facilities, privileges, advantages, or accommodations of a place of public accommodation or public service because of religion, race, color, national origin, age, sex, or marital status." ⁴

The focus, we agree with Michigan Basic, of that section of the Civil Rights Act is primarily on denial of access to a place of public accommodations or public services. ⁵ Michigan Basic did not deny Kassab access to insurance; it insured Kassab for fire loss.

We do not agree with the dissent that "it would make a mockery of the act's purposes" to recognize that the act might provide a civil rights remedy for refusal to insure, but not a civil rights remedy for discrimination in the "handling and adjustment of claims under a policy." ⁶ The dissent's argument assumes that the Legislature intended to provide a civil rights remedy for breach of a commercial contract, and not only a civil rights remedy for refusal to contract. Adoption of the dissent's approach might well result in the addition of a civil rights count in many actions for breach of contract where it has not in the past been commonplace to do so. ⁷

III

Acknowledging that an insurer may ⁸ be a "[p]lace of public accommodation" within the meaning of that term because it is a "business ... whose ... services ... are extended, offered, sold, or otherwise made available to the public," ⁹ the gist of Kassab's claim is breach of contract. Because access to insurance coverage was not denied, the majority of the Court is of the opinion that it is beyond the legislative purpose to provide a civil rights action under the public accommodations section of the act for breach of contract in claims processing. Upon the issuance of a policy of insurance, the services owed by an insurer to an insured are no longer "services ... made available to the public." The rights and obligations of the contracting parties are then private. While an insured is not separated from the "public" upon entering into insuring agreements embodied in a policy of insurance, the obligations of the insurer are owed to a particular contracting party/insured. The rights and obligations of the contracting parties are specific to the contract and to the persons involved. ¹⁰

No Michigan case is dispositive of the issue. The cases cited by the dissent do not bear directly on the issue whether performance under a contract is within the scope of the civil rights act. ¹¹

Under the most reasonable construction of the scope of the Civil Rights Act, Kassab's claim for breach of contractual obligations in claims processing cannot be maintained.

IV

We are persuaded that Kassab's complaint stated the circumstances constituting fraud with particularity, that the complaint stated a cause of action, and remand for trial on that claim. ¹²

The elements constituting actionable fraud or misrepresentation are well settled:

"The general rule is that to constitute actionable fraud it must appear: (1) That defendant made a material representation; (2) that it was false; (3) that when he made it he knew that it was false, or made it recklessly, without any knowledge of its truth and as a positive assertion; (4) that he made it with the intention that it should be acted upon by plaintiff; (5) that plaintiff acted in reliance upon it; and (6) that he thereby suffered injury." Hi-Way Motor Co. v. Int'l Harvester Co., 398 Mich. 330, 336, 247 N.W.2d 813 (1976), quoting Candler v. Heigho, 208 Mich. 115, 121, 175 N.W. 141 (1919).

Kassab's first amended complaint alleged that he, as the insured, and Michigan Basic, as the insurer, had entered into a contract of fire insurance, that a fire loss occurred which he duly reported to Michigan Basic, that Michigan Basic made representations to Kassab that it intended to pay and would pay for fire damage to his business property, that the representations were false, that Michigan Basic made the representations knowing they were false or with reckless disregard for their truthfulness, that the representations were made with the intention that Kassab would rely thereon, and that he relied on those representations "in obtaining fire protection for his property."

Read as a whole, the complaint alleges that false representations were made to Kassab before he entered into the contract of insurance with Michigan Basic, and thus that when Michigan Basic entered into the contract of insurance with Kassab and represented that it intended to pay and would pay for fire damage, the representation was false and Michigan Basic knew when it made the representation that it was false. The allegation that Michigan Basic knew when it made the representation that it was false is within the so-called " 'bad faith' exception to fraudulent misrepresentation" referred to in our colleague's opinion. ¹³ While Kassab may have difficulty in establishing the allegations, they do state a cause of action.

We reverse the judgment of the Court of Appeals on the civil rights claim, but affirm on the fraud and misrepresentation claim and remand to the circuit court for further proceedings on the fraud and misrepresentation claim. ¹⁴

LEVIN, Justice (separate opinion).

The essence of Kassab's claim is that Michigan Basic did not process his fire-loss claim in good faith. Kassab asks that this Court recognize a civil rights action against insurers for mental distress and anguish ¹ resulting from unfair claims processing because of religion, race, color, national origin, age, sex, or marital status.

In the sixteen years since the enactment in 1976 of the Civil Rights Act and the Uniform Trade Practices Act as an amendment to the Insurance Code, insureds claiming unfair claims processing have been confined to the statutory remedy set forth in the UTPA, ² which provides in general that an insurer must pay twelve percent interest when benefits are not paid on a timely basis.

I have joined in the majority opinion which holds that it is beyond the legislative purpose to provide a civil rights action under the public accommodation section of the act for breach of contract in claims processing. I write separately to explain why I am of the opinion that that is the correct result reading the Civil Rights Act and the Uniform Trade Practices Act together.

A

An earlier effort to recover damages for mental distress and anguish claimed to have been occasioned by unfair claims processing was unsuccessful. In Kewin v. Massachusetts Mut. Life Ins. Co., 409 Mich. 401, 295 N.W.2d 50 (1980), the jury found that the insurer was obliged to pay $16,500 under a disability insurance contract, and additionally awarded $75,000 for mental or emotional distress and $50,000 exemplary damages. This Court, in setting aside the $75,000 and $50,000 awards, said that breach of an "insurance contract, as with almost any agreement, results in some annoyance and vexation," and held...