Kuebler v. Equitable Life Assur. Soc. of the U.S.

• Decision Date: 17 September 1996
• Docket Number: No. 167729,167729
• Citation: 219 Mich.App. 1,555 N.W.2d 496
• Parties: Henry E. KUEBLER and Randall G. Garcia, Plaintiffs-Appellants, v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES and Michael Ayotte, Defendants-Appellees.
• Court: Court of Appeal of Michigan — District of US

Page 496

555 N.W.2d 496

219 Mich.App. 1

Henry E. KUEBLER and Randall G. Garcia, Plaintiffs-Appellants, v. EQUITABLE LIFE ASSURANCE SOCIETY OF the UNITED STATES and Michael Ayotte, Defendants-Appellees.

No. 167729.

Court of Appeals of Michigan.

Submitted Oct. 11, 1995, at Detroit.

Decided Sept. 17, 1996, at 9:20 A.M.

Released for Publication Nov. 22, 1996.

Hackett & Maxwell, P.C. by Phillip B. Maxwell, Pontiac, for Henry E. Kuebler and Randall G. Garcia.

Miller, Canfield, Paddock and Stone, P.L.C. by Gilbert E. Gove and Ellen M. Tickner, Detroit, for Equitable Life Assurance Society of the United States.

MacAloon & Feldman by Barry M. Feldman, Birmingham, for Michael Ayotte.

Before: MICHAEL J. KELLY, P.J., and O'CONNELL and J.R. GIDDINGS, ^* JJ.

J.R. GIDDINGS, Judge.

Plaintiffs appeal as of right the August 11, 1993, grant of defendants' joint motion for summary disposition in this insurance contract case. Plaintiffs had purchased whole life insurance policies mistakenly believing that the premiums would be fully paid in three years when in fact the policies were not vanishing premium policies, because the premiums would continue to be due for life. Plaintiffs contended their misunderstanding was caused by the misrepresentations of defendant Michael Ayotte, an agent for defendant Equitable Life Assurance Society of the United States.

On May 21, 1983, plaintiffs, who were business partners, applied for whole life insurance policies from defendant Equitable through agent Ayotte. Before and after the application was made, Ayotte made oral and written representations to plaintiffs that the policy premiums would be fully paid after three years. Equitable issued Garcia's policy on June 3, 1985, and issued Kuebler's policy on July 26, 1985. Each policy jacket stated "Premiums payable for life." Plaintiff Garcia called Ayotte to question him about this language and Ayotte allegedly assured him that this did not conflict with what had been explained.

The policy included a ten-day "free look" that allowed the applicant to review the policy and return it for a full refund. Neither plaintiff rejected the policy and both paid premiums for the following three years. When Equitable continued to bill plaintiffs after three years, plaintiffs contacted Ayotte, who asked for and collected the policies on May 23, 1988. Ayotte was to confer with Equitable. He finally returned the policies in 1991.

On April 5, 1991, plaintiffs filed a complaint alleging fraud and an alternative count alleging mistake. With regard to both counts, plaintiffs requested reformation of the insurance policies to conform to the premium period Ayotte had represented. On May 21, 1993, plaintiffs filed a motion seeking leave to amend their complaint. Plaintiffs sought to add counts of promissory estoppel and innocent misrepresentation and requested damages on the innocent misrepresentation count.

On June 3, 1993, defendants filed a joint motion for summary disposition under MCR 2.116(C)(7), (8), and (10). The trial court heard arguments on both motions on July 19, 1993. On the C(7) statute of limitations question, the trial court ruled in defendant's favor, finding that Ayotte, as a licensed insurance agent, fell within the special statute of limitations for professional malpractice. Regarding the C(8) motion, the court ruled that the insurance antidiscrimination statute prevented reformation of the contract. With regard to the C(10) motion, which addressed the question of Ayotte's alleged fraud as Equitable's representative, the trial court found that the policy language informed plaintiffs that Ayotte could not alter the policy and that the policy itself adequately informed them of its terms. The court did not rule on the motion to amend.

I

Plaintiffs claim that the trial court erred in ruling that the two-year professional malpractice statute of limitations barred plaintiffs' claims. Plaintiffs say Ayotte was not a professional within the meaning of the statute, the claims were for fraud, not malpractice, and in any event the claims did not accrue until May of 1991 when the policies were returned by Ayotte and when Ayotte stopped rendering services to plaintiffs.

Defendants respond that insurance agents must be licensed by the state, must pass an examination to be licensed, and must fulfill continuing education requirements set by the state. They therefore assert that such agents are state-licensed professionals and fall within the statute of limitations governing claims for licensed professionals.

When this Court reviews a motion for summary disposition under MCR 2.116(C)(7), it accepts the allegations in a well-pleaded complaint as true and construes them in the plaintiff's favor. Kassab v. Michigan Basic Property Ins. Ass'n, 185 Mich.App. 206, 210, 460 N.W.2d 300 (1990). This Court reviews questions of law de novo. In re Lafayette Towers, 200 Mich.App. 269, 273, 503 N.W.2d 740 (1993). Chapter 58 of the Revised Judicature Act, M.C.L. § 600.5801 et seq.; M.S.A. § 27A.5801 et seq., governs the times for pursuing various causes of action. The burden of establishing the bar imposed by a statute of limitations is normally on the party asserting the defense. Blaha v. A.H. Robins & Co., 536 F.Supp. 344, 345 (W.D.Mich.1982), aff'd. 708 F.2d 238 (CA6, 1983).

Generally, two years is the limit for malpractice actions. M.C.L. § 600.5805(4); M.S.A. § 27A.5805(4). Alternatives include M.C.L. § 600.5805(8); M.S.A. § 27A.5805(8), which provides a three-year period to "recover damages ... for injury to a person or property," M.C.L. § 600.5807(8); M.S.A. § 27A.5807(8), which provides a six-year limitation period for breach of contract, and M.C.L. § 600.5813; M.S.A. § 27A.5813, which provides a six-year period for all personal actions not otherwise provided for in the statutes. Plaintiffs argue that the last six-year limitation should have been applied because the gravamen of their complaint was an action for fraud. See Kwasny v. Driessen, 42 Mich.App. 442, 446, 202 N.W.2d 443 (1972).

When a complaint alleges all the necessary elements of fraud as well as malpractice, the statute of limitations governing fraud actions will apply to the fraud count. Brownell v. Garber, 199 Mich.App. 519, 533, 503 N.W.2d 81 (1993). The elements of fraud include:

(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. [Id., quoting Scott v. Harper Recreation, Inc, 192 MichApp 137, 144; 480 NW2d 270 (1991).]

Plaintiffs specifically pleaded each of these elements in their complaint. Therefore, a six-year statute of limitations applied to plaintiffs' fraud count and the trial court's dismissal under MCR 2.116(C)(7) was error. Given that the statute of limitations for fraud controls, there is no need to address whether an insurance agent is a "professional" within the meaning of the statute.

Plaintiffs sought to have the trial court consider their motion to amend the complaint. The trial court never directly ruled with regard to the motion, but it implicitly denied the motion by granting the defendants' summary disposition motion as the final order in the case. Because we reverse the court's grant of summary disposition, we direct on remand that the trial court permit the plaintiffs to amend their complaint. MCR 2.118(A)(2); Taylor v. Detroit, 182 Mich.App. 583, 586, 452 N.W.2d 826 (1989). See also M.C.L. § 600.2301; M.S.A. § 27A.2301.

II

The trial court also erred in granting defendant Equitable's motion for summary disposition brought under MCR 2.116(C)(10) with respect to the fraud count. The trial court found that the fraud claim was precluded by the general policy provision as well as the following language in the policy applications: "No agent ... has authority to modify this Agreement or the Temporary Insurance Agreement, nor to waive any of The Equitable's rights or requirements." That conclusion was in error.

Two of the cases relied on by Equitable and cited by the trial court do not support this position. One, Cleaver v. Traders' Ins. Co. 65 Mich. 527, 32 N.W. 660 (1887), does not pertain because it does not involve a claim of fraud. Another case cited by the trial court, Drogula v. Federal Life Ins. Co, 248 Mich. 645, 227 N.W. 692 (1929), is distinguishable. Unlike this case, the claimant in Drogula never bothered to read the insurance policy.

The question whether an insurance contract can be reformed on the basis of an insurance agent's fraud was addressed in Bleam v. Sterling Ins. Co., 360 Mich. 208, 103 N.W.2d 466 (1960). The Michigan Supreme Court outlined the circumstances at page 211:

The application for insurance, signed by plaintiff ... contained the following:

"15. Do you understand and agree that no insurance will be effected until a policy is issued to you? Yes.

"16. Do you hereby apply to Sterling Insurance Company for this policy to be issued solely and entirely in reliance upon the written answers to the foregoing questions, which you agree are true and correct to the best of your knowledge and belief, and do you agree that the company is not bound by any statement made by or to any agent unless written herein ...? Yes."

Plaintiff and wife admitted, on trial, that Mr. Gurwin had read to them the above provision in the receipt as to when insurance would go into effect and also quoted questions 15 and 16 contained in the application. They testified that plaintiff then questioned Mr. Gurwin in that connection, as to whether those provisions were not inconsistent with Gurwin's statement, and that the latter told them not to worry about that and assured them that the plaintiff was covered for accidents as of that...