Montgomery v. Fidelity & Guaranty Life Insurance Company, No. 260493 (MI 12/1/2005)

• Decision Date: 01 December 2005
• Docket Number: No. 260493.,260493.
• Parties: CYNTHIA R. MONTGOMERY, Plaintiff-Appellant, v. FIDELITY & GUARANTY LIFE INSURANCE COMPANY, Defendant-Appellee, and AARON T. BINDER, d/b/a AMERICAN CLASSIC AGENCY, Defendant.
• Court: Michigan Supreme Court

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CYNTHIA R. MONTGOMERY, Plaintiff-Appellant, v. FIDELITY & GUARANTY LIFE INSURANCE COMPANY, Defendant-Appellee, and AARON T. BINDER, d/b/a AMERICAN CLASSIC AGENCY, Defendant.

No. 260493.

Court of Appeals of Michigan.

September 20, 2005.

December 1, 2005 at 9:05 a.m.

Appeal from Oakland Circuit Court, LC No. 2004-056217-CK.

Before: Hoekstra, P.J., and Gage and Wilder, JJ.

PER CURIAM.

Plaintiff appeals as of right the trial court's order granting summary disposition in favor of defendant, Fidelity & Guaranty Life Insurance Company.¹ We affirm.

In April 2002, plaintiff and her decedent husband applied for a life insurance policy with defendant. Although the decedent had a significant cigarette-smoking habit, the application reflects that he had not used tobacco within the previous five years. After defendant accepted their application, it issued a policy² and collected their premiums. In May 2002, the decedent was killed in an automobile accident. Shortly after the decedent died, plaintiff received the policy and filed a claim for death benefits. When defendant reviewed the clinical notes from the decedent's doctor visits and the toxicology report from the decedent's autopsy, it discovered that the decedent had been a smoker and denied the claim. Defendant also refunded the premiums and rescinded the life insurance contract because it found that plaintiff and the decedent had made a material misrepresentation—that the decedent did not use tobacco—on the life insurance application.

Plaintiff argues that the trial court erred in granting defendant summary disposition because there is an issue of fact regarding whether plaintiff or the decedent made a material misrepresentation on the insurance application. We review de novo a trial court's decision on a motion for summary disposition. Rose v Nat'l Auction Group, Inc, 466 Mich 453, 461; 646 NW2d 455 (2002). When reviewing a decision on a motion for summary disposition pursuant to MCR 2.116(C)(10), "we consider the affidavits, pleadings, depositions, admissions, and other documentary evidence submitted by the parties in the light most favorable to the party opposing the motion." Id. Summary disposition is appropriately granted, "if there is no genuine issue regarding any material fact and the moving party is entitled to judgment as a matter of law." Id.

MCL 500.2218 provides that an insurer may rescind an insurance policy if it discovers that an insured made a material misrepresentation on his application for insurance and that the misrepresentation affected either the acceptance of the risk or the hazard assumed by the insurer.³ See Oade v Jackson Nat Life Ins Co of Michigan, 465 Mich 244, 252-253; 632 NW2d 126 (2001). The term "acceptance of the risk" refers to the time at which the contract was made and the insurance concept of risk. Wickersham v John Hancock Mut Life Ins Co, 413 Mich 57, 63; 318 NW2d 456 (1982). An insurer's evaluation of the likelihood of a factor increasing the risk of loss affects its decision to enter into a contract. Id. A representation on an insurance application is material if the insurer would have rejected the risk or charged an increased premium. Oade, supra at 254. Because defendant's underwriter stated in his affidavit that defendant would not have issued the policy if it had been aware of the decedent's smoking habit, the misrepresentation about the decedent's smoking habit was material. If a misrepresentation is material, Michigan law does not require that a causal connection exist between the misrepresentation and the cause of death. Wickersham v John Hancock Mut Life Ins Co, 413 Mich 57, 67; 318 NW2d 456 (1982).

Plaintiff asserts that the agent is the one who actually completed the application and that neither she nor the decedent read the application before signing. Plaintiff's argument is misplaced. Whether 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. Snyder v Wolverine Mutual Motor Ins Co, 231 Mich 692, 694; 204 NW 706 (1925); Marlo Beauty Supply, Inc v Farmers Ins Group of Cos, 227 Mich App 309, 324; 575 NW2d 324 (1998), mod on other grounds Harts v Farmers Ins Exchange, 461 Mich 1, 597 NW2d 47 (1999). A contracting party has a duty to examine a contract and know what he signed, and the other contracting party cannot be made to suffer for such neglect. Komraus Plumbing & Heating, Inc v Cadillac Sands Motel, Inc, 387 Mich 285, 291; 195 NW2d 865 (1972), applying Liska v Lodge, 112 Mich 635, 637-638; 71 NW 171 (1897). Regardless of who actually completed the...