Titan Ins. Co. v. Hyten, 142774
Decision Date | 15 June 2012 |
Docket Number | No. 142774,142774 |
Parties | TITAN INSURANCE COMPANY, Plaintiff-Appellant, v. McKINLEY HYTEN, HOWARD HOLMES, and MARTHA HOLMES, Defendants-Appellees, and FARM BUREAU INSURANCE COMPANY, Intervening Defendant-Appellee. |
Court | Michigan Supreme Court |
Michigan Supreme Court
Lansing, Michigan
Chief Justice:
Robert P. Young, Jr.
Justices:
Michael F. Cavanagh
Marilyn Kelly
Stephen J. Markman
Diane M. Hathaway
Mary Beth Kelly
Brian K. Zahra
BEFORE THE ENTIRE BENCH
We granted leave to appeal to address whether an insurance carrier may avail itself of traditional legal and equitable remedies to avoid liability under an insurance policy on the ground of fraud in the application for insurance, when the fraud was easilyascertainable and the claimant is a third party. In accordance with this Court's precedent in Keys v Pace, 358 Mich 74; 99 NW2d 547 (1959), we answer this question in the affirmative. There being nothing in the law to warrant the establishment of an "easily ascertainable" rule, we overrule State Farm Mut Auto Ins Co v Kurylowicz, 67 Mich App 568; 242 NW2d 530 (1976), and its progeny1 and reverse the judgment of the Court of Appeals.
McKinley Hyten obtained a provisional driver's license in April 2004. In January 2007, Hyten's driver's license was suspended by the Secretary of State because of multiple moving violations and two minor traffic accidents. In light of what she perceived as assurances from her probation officer, Hyten anticipated that her license would be restored at a district court hearing scheduled for August 24, 2007.
That same year, Hyten's mother, Anne Johnson, inherited a motor vehicle that she "earmarked" for Hyten. Given the anticipated restoration of Hyten's driver's license, Johnson sought to obtain automobile insurance for Hyten. Johnson telephoned an independent insurance agent who, after being told that Hyten's license had been suspended, informed Johnson that Hyten could not be insured until her license had been restored. Nonetheless, an application for insurance from Titan Insurance Company wasfilled out on Hyten's behalf and postdated to August 24, 2007, and on August 22, 2007, Hyten signed the application for insurance. The application form asked, "Does the applicant's household have any unlicensed drivers or any drivers with a suspended or revoked driver's license?" In response to this question, the "No" box was checked. The form stated that Titan could review Hyten's driving record, but also stated that Titan could rely on the applicant's representations. On August 24, 2007, the policy became effective and provided personal protection insurance coverage for bodily injury of $100,000 per person/$300,000 per occurrence.
At the August 24, 2007, hearing, Hyten's driver's license was not restored, and it was not restored until September 20, 2007. Titan was not informed of this fact. Subsequently, in February 2008, Hyten was driving the insured vehicle and collided with the vehicle of Howard and Martha Holmes, causing injuries to them. In the process of investigating the accident, Titan learned that Hyten did not have a valid driver's license when the policy was issued. In anticipation that the Holmeses would be filing claims against Hyten for their injuries, Titan filed the instant action seeking a declaratory judgment. Titan averred that had it been informed that Hyten's license had been suspended, it would never have accepted the risk and would not have issued the insurance policy. Given Hyten's fraudulent conduct in her application for insurance, Titan sought a declaration that, should the Holmeses prevail in their action, Titan was not obligated to indemnify Hyten.2
Farm Bureau Insurance Company, the Holmeses' insurer, intervened as a defendant, and Titan, Farm Bureau, and Hyten each filed cross-motions for summary disposition. Relying on Court of Appeals decisions holding that an insurer may not avoid liability under an insurance policy for fraud that was easily ascertainable, and concluding that whether a person possesses a valid driver's license is easily ascertainable, the trial court granted Farm Bureau's and Hyten's motions for summary disposition. The Court of Appeals affirmed on the basis of Kurylowicz, asserting that once an insurable event has occurred and a third party (the Holmeses here) possesses a claim against an insured arising out of that event, an insurer is not entitled to reform the policy to the third-party's detriment when the fraud by the insured was easily ascertainable. Titan Ins Co v Hyten, 291 Mich App 445; 805 NW2d 503 (2011) (Hyten I). Titan filed an application for leave to appeal in this Court, which we granted. Titan Ins Co v Hyten, 490 Mich 868 (2011) (Hyten II).3
This Court reviews de novo a trial court's decision on a motion for summary disposition. Shepherd Montessori Ctr Milan v Ann Arbor Charter Twp, 486 Mich 311, 317; 783 NW2d 695 (2010). In addition, the proper interpretation of a statute is a question of law that this Court reviews de novo. Eggleston v Bio-Med Applications of ($20,000 per person/$40,000 per occurrence), MCL 257.501 et seq., for which Titan acknowledged responsibility.Detroit, Inc, 468 Mich 29, 32; 658 NW2d 139 (2003). The proper interpretation of a contract is also a question of law that this Court reviews de novo. Rory v Continental Ins Co, 473 Mich 457, 464; 703 NW 2d 23 (2005).
Thus, when a provision in an insurance policy is mandated by statute, the rights and limitations of the coverage are governed by that statute. See Rohlman, 442 Mich at 524-525 ( ). On the other hand, when a provision in an insurance policy is not mandated by statute, the rights and limitations of the coverage are entirely contractual and construed without reference to the statute. See Rory, 473 Mich at 465-466 ( ).
In addition, because insurance policies are contracts, common-law defenses may be invoked to avoid enforcement of an insurance policy, unless those defenses are prohibited by statute. See id. at 470. Rory noted that common-law defenses include duress, waiver, estoppel, fraud, and unconscionability. Id. at 470 n 23. In this case, Titan asserts the defense of fraud to avoid liability under the insurance policy entered into with Hyten.
Silent fraud has also long been recognized in Michigan. This doctrine holds that when there is a legal or equitable duty of disclosure, "[a] fraud arising from the suppression of the truth is as prejudicial as that which springs from the assertion of a falsehood, and courts have not hesitated to sustain recoveries where the truth has been suppressed with the intent to defraud." Tompkins v Hollister, 60 Mich 470, 483; 27 NW 651 (1886) (citations omitted); see also United States Fidelity, 412 Mich at 125.
As is evident, although the doctrines of actionable fraud, innocent misrepresentation, and silent fraud each contain separate elements, none of these doctrines requires that the party asserting fraud prove that the fraud could...
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