Background
Toneysha Sanders applied to Citizens United Reciprocal Exchange, doing business as CURE Auto Insurance, for coverage on a leased Ford Explorer and Ford Expedition. She answered “Yes” when the application asked whether each vehicle was solely owned by and registered to her. After Sanders was involved in an accident while driving the Explorer with her sister and daughter as passengers, CURE learned that Sanders’s fiancé, Janorris Hopkins, was a co-owner and coregistrant of both vehicles.
CURE sought to rescind the policy, presenting evidence that it does not insure vehicles with nonrelative, nonresident co-owners and would have declined the policy had Sanders disclosed Hopkins’s interest. The Wayne Circuit Court denied CURE’s motion for summary disposition, reasoning that a factual dispute existed because Sanders could have been confused about whether a coregistrant qualified as a co-owner. CURE appealed by leave granted in the consolidated cases.
The Court’s Holding
The Court of Appeals held that no genuine issue of material fact existed regarding innocent misrepresentation. The application stated that Sanders solely owned and registered the vehicles, while registration and title documents, deposition testimony, and Michigan’s statutory definition of “owner” established that Hopkins was a co-owner. CURE’s underwriting manager also testified that the representation was material and that CURE relied on it when issuing a policy it otherwise would have declined.
The panel explained that an insurer pursuing rescission for innocent misrepresentation need not prove that the applicant knew the representation was false or intended to deceive the insurer. Accordingly, Sanders’s asserted confusion about ownership did not create a material factual dispute. The court reversed the denial of summary disposition and remanded for the trial court to exercise its equitable discretion in deciding whether to rescind the policy as to the parties involved.
The panel declined to consider CURE’s separate argument that Sanders, her sister, and her daughter were not entitled to uninsured or underinsured motorist benefits because CURE had not raised that issue in its applications for leave to appeal and the orders granting leave limited the appeals to the issues presented there.
Key Takeaways
- An inaccurate statement in a no-fault insurance application may support rescission as an innocent misrepresentation without proof of knowledge or intent to deceive.
- A misrepresentation is material when truthful information would have caused the insurer to reject the risk or issue a different contract, and the insurer must show that it relied on the statement.
- Establishing innocent misrepresentation makes rescission potentially available, but the trial court must still exercise its equitable discretion to determine whether rescission is appropriate as to the affected parties.
Why It Matters
The decision distinguishes the factual and legal showing required to establish innocent misrepresentation from the separate equitable decision whether rescission should be granted. An insured’s asserted confusion does not defeat summary disposition when intent is not an element and the undisputed evidence establishes a material, relied-upon false statement.
The opinion also underscores that appellate review after a grant of leave remains confined to the issues identified in the application and the order granting leave.