Peatross v. Liberty Mut. Pers. Ins. Co.
| Decision Date | 22 November 2022 |
| Docket Number | 22-1022 |
| Parties | YOLANDA PEATROSS, Plaintiff-Appellant, v. LIBERTY MUTUAL PERSONAL INSURANCE COMPANY, Defendant-Appellee. |
| Court | U.S. Court of Appeals — Sixth Circuit |
NOT RECOMMENDED FOR PUBLICATION
ON APPEAL FROM THE UNITED STATES DISTRICT COURT FOR THE EASTERN DISTRICT OF MICHIGAN
Before: COLE, CLAY and MATHIS, Circuit Judges.
In May 2019, shortly after purchasing a new home, Yolanda Peatross applied for home insurance with Liberty Mutual Personal Insurance Company. Peatross's policy application indicated that there were no overdue property taxes associated with her new home. Based on the information in the application, Liberty issued Peatross a policy. Unbeknownst to Peatross, however, the seller had failed to pay property taxes on the home for the previous three years. In December 2019, Peatross's home caught fire, and she filed a claim with Liberty to cover the loss. During Liberty's claim investigation, it discovered the overdue taxes. Considering Peatross's failure to disclose the overdue taxes to be a material misrepresentation in the application, Liberty rescinded the policy, refunded Peatross's premiums, and denied Peatross coverage for her loss.
Peatross filed suit, alleging breach of contract for the denial of coverage. Her arguments relied heavily on her interpretation of a statutory provision found in Chapter 21 of the Michigan Insurance Code, also known as the Essential Insurance Act ("the Act"). The district court disagreed with Peatross's interpretation of the Act and determined that Liberty properly rescinded the policy. In doing so, the district court granted Liberty's motion for summary judgment and denied Peatross's motion for summary judgment. Because Peatross's interpretation of the Act is incorrect and Liberty established the necessary elements to justify rescission, we AFFIRM.
On May 30, 2019, Yolanda Peatross purchased a home in Detroit via quit-claim deed. That same day, Peatross applied for home insurance with Liberty Mutual Personal Insurance Company ("Liberty"). Liberty agent Kevin Gonzalez assisted Peatross in completing the insurance application over the phone. The application involved two parts: the primary application titled "Your Home Insurance Application," and a supplemental application titled "Michigan Property Supplemental Application." The supplemental application included two questions about property taxes. The first asked, "At this time, are the real property taxes on the dwelling to be insured delinquent?" On Peatross's application, the answer box indicating "No" was selected. The second question asked, "If yes, have the real property taxes on this dwelling been delinquent for two or more years?" Based on the answer to the prior question, the answer boxes to this question on Peatross's application were blank.
The parties dispute precisely how Gonzalez asked the first property tax question. Peatross maintains that the agent asked her whether the taxes were up to date, to which she replied, "to my knowledge, they are." (Peatross Dep. Tr., R. 24-8, PageID 378, 46:4-6.) Gonzalez stated that while he does not remember his exact conversation with Peatross, he would have read the question as it appears on the application.
Following the phone call, Liberty sent Peatross an email requesting her signature to complete the application. The parties disagree about what exactly Peatross received: Peatross says she only received the signature pages in this email, while Liberty contends that Peatross received the entire application. Notwithstanding these conflicting reports, the "Your Home Insurance Application" signature page included an Applicant Authorization and Acknowledgment clause and the following disclaimer: "By signing below I acknowledge that I have read and understand the Applicant Authorization and Acknowledgement as well as validated information on all pages of the application." The "Michigan Property Supplemental Application" signature page included the following statement:
I have read and understand all of the above questions. I confirm that the facts stated in my application are true and request the company to issue the insurance, and any renewals, based on these facts. I understand that misrepresentation of information in my application could void some or all of my coverage.
Peatross e-signed both portions of the application. Based on the information in her application, Liberty issued Peatross a home insurance policy.
On December 27, 2019, a fire occurred at Peatross's home and Peatross filed a claim with Liberty to cover the loss. While investigating the claim, Liberty discovered that the property taxes associated with Peatross's home were delinquent for the years 2016, 2017, and 2018. Even though Peatross was unaware of the overdue taxes at the time of her application, Liberty still considered the failure to provide accurate information a material misrepresentation and grounds to rescind Peatross's policy. Liberty explained that had it known about the overdue taxes, the policy would not have been issued in the first instance. As a result, Liberty considered the policy "null and void as of its effective date."
Peatross filed a claim against Liberty alleging breach of contract for its denial of coverage and requesting appraisal for the fire loss. On June 9, 2021, Liberty and Peatross filed cross- motions for summary judgment. Liberty argued that rescission was appropriate under Michigan law. Peatross disagreed, arguing that Liberty could not establish reliance, an element essential to justify rescission. Peatross's argument relied heavily on an interpretation of an exception to the definition of "eligible person" found in Chapter 21 of the Michigan Insurance Code.
The district court granted Liberty's motion and denied Peatross's motion. The district court determined that there was a material misrepresentation on the application and that Liberty relied on this misrepresentation in issuing the policy. The district court disagreed with Peatross's proposed interpretation of the statute. Relying upon our holding in McLiechy v. Bristol West Insurance Company, 474 F.3d 897, 898-900 (6th Cir. 2007), the district court also noted that even if it were to agree with Peatross's reading of the statute, the Sixth Circuit has held that there is no private cause of action for alleged violations of Chapter 21 of the Michigan Insurance Code. Peatross appealed.
This court reviews the district court's decisions on the motions for summary judgment de novo. Wallace v. Midwest Fin. &Mortg. Servs., Inc., 714 F.3d 414, 418 (6th Cir. 2013). Relevant here, this court also reviews issues of statutory and contract interpretation de novo. Vander Boegh v. EnergySolutions, Inc., 772 F.3d 1056, 1059 (6th Cir. 2014) (statutory interpretation); Meridian Leasing, Inc. v. Associated Aviation Underwriters, Inc., 409 F.3d 342, 346 (6th Cir. 2005) (contract interpretation).
"It is the well settled law of [Michigan] that where an insured makes a material misrepresentation in the application for insurance, including no-fault insurance, the insurer is entitled to rescind the policy and declare it void ab initio." Lake States Ins. Co. v. Wilson, 586 N.W.2d 113, 115 (Mich. Ct. App. 1998) (citing Lash v. Allstate Ins. Co., 532 N.W.2d 869 (Mich. Ct. App. 1995)).
"Rescission is justified in cases of innocent misrepresentation if a party relies upon the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if he were not held accountable for his misrepresentation." Lash, 532 N.W.2d at 872 (citing Britton v. Parkin, 438 N.W.2d 919, 920-21 (Mich. Ct. App. 1989)). With respect to insurance applications, "[r]eliance may exist when the misrepresentation relates to the insurer's guidelines for determining eligibility for coverage." Lake States, 586 N.W.2d at 115 (citation omitted). Liberty's rescission was permissible for several reasons.
First, Peatross made a material misrepresentation on her application. A misrepresentation is material if the insurer would have rejected the application or charged a higher premium had they been provided with the correct information. Oade v. Jackson Nat'l Life Ins. Co., 632 N.W.2d 126, 131 (Mich. 2001). Peatross's application for home insurance indicated that the taxes on the home were not delinquent. But the property taxes were overdue for 2016, 2017, and 2018 at the time of the application. Liberty's rescission letter indicated, and Liberty's designee, Nicholas Marrangoni, affirmed, that had Liberty known of the delinquent taxes at the time of application, the policy would not have been issued. Under Michigan law, because Liberty would have rejected Peatross's policy if provided with the correct information, Peatross's misrepresentation relating to property taxes was material. See also Hatcher v. Nationwide Prop. &Cas. Ins. Co., 610 Fed.Appx. 507, 510 (6th Cir. 2015) ().
To that end, Peatross's arguments that she did not make a misrepresentation in the application are not supported by Michigan law. To start, it is immaterial whether the agent or Peatross selected "No" to the property tax question on the application. In Lake States, an insured testified that the insurance company's agent typed the application on her behalf, which the insured then signed without reading. 586 N.W.2d at 114. The Lake States court still imputed the misrepresentations to the insured because "her signature [on the application] indicated that she warranted the answers to be true and complete in every respect." Id. at 116. Similarly, in Montgomery v. Fidelity &Guaranty Life Insurance Co., 713...
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