Maxman v. Farmers Ins. Exchange

• Decision Date: 08 August 1978
• Docket Number: Docket No. 77-2794
• Citation: 270 N.W.2d 534,85 Mich.App. 115
• Parties: Ida MAXMAN and Sydney Maxman, Plaintiffs-Appellants, v. FARMERS INSURANCE EXCHANGE, a California Ins. Corporation, Defendant-Appellee. 85 Mich.App. 115, 270 N.W.2d 534
• Court: Court of Appeal of Michigan — District of US

Page 534

270 N.W.2d 534

Ida MAXMAN and Sydney Maxman, Plaintiffs-Appellants, v. FARMERS INSURANCE EXCHANGE, a California Ins. Corporation,

Defendant-Appellee.

Docket No. 77-2794.

85 Mich.App. 115, 270 N.W.2d 534

Court of Appeals of Michigan.

Aug. 8, 1978.

Released for Publication Oct. 20, 1978.

[85 MICHAPP 118] Hopping & Boyer, P. C. by Donald M. Churilla, Sterling Heights, for plaintiffs-appellants.

Harvey, Kruse & Westen, P. C. by James N. Martin, Detroit, for defendant-appellee.

Before T. M. BURNS, P. J., and KAUFMAN and BASHARA, JJ.

T. M. BURNS, Judge.

The question in this case is whether plaintiff Ida Maxman, ¹ injured when the car she was driving was struck in the rear, may maintain an action against the insurer of the other driver based on misrepresentation of authority. To see how this question arises, it is necessary to set out a detailed statement of facts.

James Lihov, Farmers Insurance Exchange's insured, and plaintiff were involved in an automobile accident on February 10, 1969. The Lihov car struck plaintiff's vehicle from the rear. There has never been any question of Lihov's responsibility for the accident, the only question was the amount of plaintiff's loss.

Plaintiff retained counsel the day after the accident and the attorneys immediately notified Mr. Lihov and the present defendant. From that point on, plaintiff's attorney dealt only with representatives of Farmers. Settlement negotiations were [85 MICHAPP 119] begun immediately and continued until shortly before suit was filed against Mr. Lihov.

Mr. Lihov died six days after the accident from causes unrelated to the accident. Neither plaintiff nor defendant knew of this fact until after Lihov's estate had been closed and the period for reopening it for presentation of a claim under the Probate Code had passed. Although the suit against Mr. Lihov was begun within the three-year statute of limitations, it was found to be time barred by the trial court under the Probate Code. This Court affirmed, Maxman v. Goldsmith, 55 Mich.App. 656, 223 N.W.2d 113 (1974) and plaintiff abandoned the Supreme Court appeal to start this suit, 394 Mich. 758 (1975).

In the present case, plaintiff filed a two-count complaint naming Farmers as the defendant. The trial court again granted summary judgment, although the basis of the motion is not readily apparent, counsel and court both having failed to specify the subrule which was being relied upon, GCR 1963, 117.2(1) or (3).

Only the first count is being pursued in this appeal. Plaintiff has alleged that Farmers misrepresented its authority to settle plaintiff's original claim against Lihov, after Lihov's death and after his estate had been closed and the time for reopening it had passed. It is this representation of authority, where none existed, which plaintiff claims has caused her injury. She is not alleging that defendant is directly liable for the automobile accident, although this will be the measure of damages in the misrepresentation action, nor is she claiming, at this point, that the defendant concealed Lihov's death. The suit is based solely on a misrepresentation of Farmers' authority to settle a claim where no authority existed.

[85 MICHAPP 120] The trial court granted summary judgment to Farmers after receiving briefs and hearing arguments. The basis of the motion is not readily apparent. ² Judge Bashara has written to affirm the summary judgment on the basis of GCR 1963, 117.2(3), no issue of material fact. We cannot agree.

Certain evidentiary facts are not disputed. Farmers acted for Lihov only under his policy of insurance, not as a volunteer. Neither Farmers nor plaintiff knew of Lihov's death until no suit against him or his estate could be maintained. No representative of Farmers ever expressly stated that Lihov was still alive after his death. However, it also appears to be undisputed that the settlement negotiations continued past the point that the company could be held liable on its contract of insurance with Lihov or his estate.

But these evidentiary facts are not the material facts spoken of in the court rule. See, Simerka v. Pridemore, 380 Mich. 250, 275, 156 N.W.2d 509 (1968) (opinion of Souris, J.). One authority has stated the proposition thusly,

"Whether or not the evidentiary facts are disputed, if the factfinder can go either way on a material fact, summary judgment grounded on no genuine issue of fact is improper."

Bashara, The Elusive Summary Judgment Rule: [85 MICHAPP 121] Sifting Through the Maze, 1976 Det.Col. of Law Rev. 397, 419.

Even given the undisputed evidentiary facts, if plaintiff has stated a cause of action there are material issues of fact in dispute: Was there a representation of authority? Did this deceive plaintiffs? Was the misrepresentation the proximate cause of plaintiff's loss? These questions are not answered by merely concluding that Farmers' adjuster never expressly stated that Mr. Lihov was still alive.

The crux of this case is whether plaintiff has pled facts upon which the court will recognize a right to recover. In other words, by pleading that Farmers represented it had authority to settle plaintiff's claim against Mr. Lihov or his estate, where in fact no such authority existed, has plaintiff stated a cause of action for misrepresentation? The answer lies in an examination of the relationship between Lihov, Farmers and plaintiff and the substantive law of the tort of misrepresentation.

Agency in its broadest sense includes every relation in which one person acts for or represents another by his authority. Saums v. Parfet, 270 Mich. 165, 171, 258 N.W. 235 (1935); Stephenson v. Golden, 279 Mich. 710, 734-735, 276 N.W. 849 (1937). In dealing with plaintiffs, Farmers was acting on behalf of Mr. Lihov, not as a volunteer but because of a contract of insurance. Farmers was contractually given power, but not the duty, to make any compromise within the policy limits and authority to conduct negotiations toward that end.

The relationship admittedly does not fit neatly into the definition ³ of agency with all its ramifications.[85 MICHAPP 122] The insurance company also furthers its own interest by settling claims as quickly and inexpensively as possible. But, the overriding concern in the relationship is for the insured not the company as witnessed by those cases imposing liability on the insurer for failing to make a good faith effort to settle the claim within the policy limits. City of Wakefield v. Globe Indemnity Co., 246 Mich. 645, 225 N.W. 643 (1929); Citizens Mutual Insurance v. Nationwide Insurance, 29 Mich.App. 91, 185 N.W.2d 99 (1970). See also, 40 A.L.R.2d 168. We conclude, therefore, that as to third parties injured by the insured, the insurer acts as the insured's agent in negotiating possible settlements.

An agent is liable to third parties for misrepresenting his authority to act on behalf of a principal where no such authority exists in fact. 2 Restatement Agency 2d, § 330, pp. 86-87.

There is no requirement that misrepresentation of authority be treated any differently than any other tortious misrepresentation. In Michigan, any representation which is false in fact and actually deceives the other and is relied on by him to his damage is actionable, regardless of whether the person making the representations acted in good faith in making them, where the loss of the party deceived inures to the benefit of the other. Phillips v. General Adjustment Bureau, 12 Mich.App. 16, 162 N.W.2d 301 (1968). The misrepresentation may consist of mere silence. Michigan National Bank v. Marston, 29 Mich.App. 99, 185 N.W.2d 47 (1970). The rules stated in these two cases apply to the situation raised in plaintiff's complaint.

[85 MICHAPP 123] Under the rules stated in Phillips, plaintiff has stated a cause of action sufficient to avoid summary judgment. The loss that plaintiff did not recover against Lihov inured to the benefit of Farmers. Plaintiff has pled facts to fulfill the other requirements. Whether a jury will conclude that the misrepresentations alleged were the cause of plaintiff's failure to recover in the first suit is not a question we should be called upon to answer at the present time.

The trial court erred in granting summary judgment.

Reversed and remanded for further proceedings not inconsistent with this opinion. Costs to appellant.

BASHARA, Judge, dissenting.

I must respectfully dissent. In so doing, an exposition of the facts as they are revealed to me becomes necessary.

More than nine years ago plaintiffs allegedly sustained personal injuries from an automobile accident involving defendant's insured. After receiving notice of the accident from plaintiffs' counsel, defendant retained an independent claims adjuster to handle the claim. During the next year-and-a-half, in developing the information pertinent to the accident, he made numerous contacts with plaintiffs' counsel.

When the adjuster attempted to contact the insured, he discovered that the insured had died six days after the accident from unrelated causes. Further investigation disclosed that the insured's estate had been closed approximately six months prior to the adjuster's discovery of his death.

This information was communicated by the adjuster[85 MICHAPP 124] to defendant and plaintiffs' counsel. Settlement negotiations were then terminated, defendant maintaining that plaintiffs' cause of action against the insured was barred by the Probate Code. ¹ Approximately a year later plaintiffs initiated suit against the insured. Defendant entered an appearance on behalf of the insured through its attorneys and moved to quash service of process and strike plaintiffs' complaints against the insured and his special administrator. The motions were granted and affirmed on appeal to this Court. ²

An independent action was instituted by plaintiffs against defendant, and it is that litigation that we are called upon to review. Essentially, plaintiffs'...