Smith v. Globe Life Ins. Co.

Decision Date13 July 1999
Docket NumberDocket No. 110065, Calendar No. 7.
PartiesDebra L. SMITH, personal representative of the estate of Robert A. Smith, deceased, Plaintiff-Appellee, v. GLOBE LIFE INSURANCE COMPANY, Defendant-Appellant.
CourtMichigan Supreme Court

Murray, Pawlowski & Flakne, L.L.P. (by Susan B. Flakne), Grand Rapids, for plaintiff-appellee.

Honigman, Miller, Schwartz & Cohn (by Sandra L. Jasinski), Lansing, for defendant-appellant.

Butzel, Long (by David H. Oermann and Norman A. Yatooma), Birmingham, for Life Insurance Association of Michigan.

Opinion

YOUNG, J.

This case involves a dispute regarding defendant insurer's avoidance of a credit life and disability insurance policy on the ground that the insured made misrepresentations concerning his health on the application.

We granted leave in this case to determine whether defendant Globe Life Insurance Company is entitled to summary disposition with regard to plaintiff Debra L. Smith's complaint alleging: (1) breach of contract involving the credit life and disability insurance policy, and (2) violations of the Michigan Consumer Protection Act (MCPA), M.C.L. ž 445.901 et seq.; MSA 19.418(1) et seq., concerning the manner in which defendant represented the benefits and conditions of the policy in question.

Reversing the Court of Appeals in part, we conclude that defendant is entitled to summary disposition regarding plaintiff's breach of contract claim. Defendant's evidence established that plaintiff's deceased father, Robert Smith, made material misrepresentations in his insurance application. Contrary to the Court of Appeals conclusion, there is no genuine issue of material fact regarding the application's authenticity. In addition, defendant was not required to establish that it issued the insurance policy in reliance on Smith's misrepresentations.

However, we agree with the Court of Appeals that defendant is not entitled to summary disposition regarding its alleged violations of the Michigan Consumer Protection Act. Although ž 4(1)(a) of the act generally exempts from the MCPA transactions that are "specifically authorized" by law, ž 4(2) provides an exception to that exemption by permitting certain private actions to be brought pursuant to ž 11. That exception is applicable to plaintiff's claim.

Accordingly, we affirm in part and reverse in part the judgment of the Court of Appeals.

I. Factual and Procedural Background

On December 4, 1992, plaintiff's deceased father, Robert Smith, bought a new truck financed through Ford Motor Credit Company (FMCC). At the time, Smith was forty-seven years old and employed full-time. As part of his financing package, he purchased a combined credit life and disability policy issued by defendant. Only the credit life insurance policy is at issue here. The certificate of insurance provided the following eligibility requirements:

Who is eligible for life insurance: On the Date of Debt you and any Co-Debtor must each: (i) owe the Debt; (ii) be fully capable of being actively at work for wages or profit at least 30 hours per week; and (iii) be less than 71 years old. At the end of the Term of Insurance, you and any Co-Debtor must each be less than 71 years old.

On Smith's application for insurance, slash marks had been made in boxes labeled "NO" as responses to the following inquiries:

1. Have you been medically diagnosed as having and are you receiving treatment for:
a. Any condition of the heart, brain, liver, kidney, lungs, cancer or any malignant growth?
b. Diabetes, high blood pressure, circulatory disorders, neurological disorders, mental disorders or disorders of the back or neck?

Above Smith's signature, the application also warned:

Answer all questions honestly and truthfully, misrepresentation is a basis for denial of benefits. Any underwriting decision based on this evidence of insurability shall be made within 60 days from the date of this application.

The credit life insurance policy provided in relevant part that defendant would be responsible for the balance due on the FMCC loan if Smith died while the policy was in force.

Smith had made two payments on the FMCC loan when he suffered a fatal heart attack on January 27, 1993. As personal representative of her father's estate, plaintiff notified defendant of Smith's death and made a claim for benefits pursuant to the certificate of insurance. Defendant denied coverage, asserting that the policy was void because Smith had misrepresented his state of health on the application. Defendant rescinded the policy, returning premiums paid for the policy to the car dealership.

After defendant denied the claim, plaintiff filed a complaint alleging breach of contract and violations of the Michigan Consumer Protection Act.1 Relying on conditions of coverage provided in the certificate of insurance quoted above, count I alleged that defendant was aware that decedent met the conditions and denied his claim in bad faith. Count II alleged that defendant misrepresented the advantages, benefits, terms, and conditions of the insurance policy in violation of the MCPA.

In its motion for summary disposition, defendant claimed it would not have insured Smith had it been aware of his true medical background. In support of its motion, defendant submitted: (1) a copy of Smith's application revealing negative responses to the aforementioned health inquiries, (2) medical records establishing Smith had been diagnosed with coronary heart disease in 1986 and was being treated for this condition at the time of his death, (3) interrogatory responses establishing Smith was an insulin-dependent diabetic, and (4) an affidavit by a former underwriter who claimed defendant would have denied the certificate of insurance had it been aware of Smith's condition at the time he applied for coverage.

Opposing the motion, plaintiff submitted an affidavit and claimed: (1) the slash marks through the "NO" responses were not in Smith's handwriting, and (2) defendant failed to proffer evidence establishing that it had received the insurance application when the insurance policy was issued. Plaintiff also claimed that she was not bound by any statements made in the application and that defendant was precluded from admitting the application into evidence because the application was not attached to plaintiff's certificate of insurance.

The trial court granted the motion for summary disposition pursuant to MCR 2.116(C)(10). It concluded: (1) an insurer is not obligated to attach the application to the certificate of insurance, (2) Smith had not truthfully answered the application inquiries, and (3) the signature appeared authentic. The trial court noted that there was a question whether Smith authored the slash marks through the "NO" boxes on the application. However, the court concluded that the issue was "largely beside the point" because the answers appeared to be "adoptively [Smith's]."

Addressing the MCPA claims, the trial court concluded that the MCPA does not apply to activity regulated by the State Commissioner of Insurance, citing Kekel v. Allstate Ins. Co., 144 Mich.App. 379, 375 N.W.2d 455 (1985). Accordingly, the trial court dismissed plaintiff's complaint.

The Court of Appeals reversed. 223 Mich.App. 264, 266, 565 N.W.2d 877 (1997). It concluded that there was no genuine issue of material fact regarding the authenticity of Smith's signature. However, the Court held that a factual question existed regarding whether Smith had authored the slash marks through the "NO" boxes and whether defendant had received and relied on the application when issuing the policy.

Addressing whether defendant was exempt from the alleged violations of the MCPA, the Court of Appeals considered ž 4(1)(a) of the act which provides:

This act does not apply to ... the following:
(a) A transaction or conduct specifically authorized under laws administered by a regulatory board or officer acting under statutory authority of this state or the United States. [MCL 445.904(1)(a); MSA 19.419(4)(1)(a).]

It concluded that a "common-sense reading" of the language reveals that the Legislature did not intend to exempt illegal conduct. Id. at 281, 565 N.W.2d 877, citing Attorney General v. Diamond Mortgage Co., 414 Mich. 603, 327 N.W.2d 805 (1982). Concluding that Kekel erroneously interpreted ž 4(1)(a), the Court of Appeals held, as a matter of law, that defendant was not entitled to summary disposition. Id. at 282-283, 565 N.W.2d 877.

The Court also concluded that Kekel erroneously interpreted ž 4(2) of the MCPA, which reads:

Except for the purposes of an action filed by a person under [MCL 445.911; MSA 19.418(11) ], this act does not apply to an unfair, unconscionable, or deceptive method, act, or practice that is made unlawful by:
(a) Chapter 20 of the insurance code of 1956, Act No. 218 of the Public Acts of 1956, as amended, being sections 500.2001 to 500.2093 of the Michigan Compiled Laws. [MCL 445.904(2)(a); MSA 19.418(4)(2)(a).]

The Court reasoned that, while ž 4(2)(a) generally exempts from the MCPA deceptive acts made unlawful by chapter 20 of the Insurance Code, the first phrase of ž 4(2) expressly permits private actions to be brought pursuant to ž 11.

II. Analysis

A motion for summary disposition under MCR 2.116(C)(10), which tests the factual support of a claim, is subject to de novo review. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998).

This Court in Quinto v. Cross & Peters Co., 451 Mich. 358, 362-363, 547 N.W.2d 314 (1996), set forth the following standards for reviewing motions for summary disposition brought under MCR 2.116(C)(10):

In reviewing a motion for summary disposition brought under MCR 2.116(C)(10), a trial court considers affidavits, pleadings, depositions, admissions, and documentary evidence filed in the action or submitted by the parties, MCR 2.116(G)(5), in the light most favorable to the party
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