Background
Michigan 32, LLC represented in its 2021 and 2022 commercial-property insurance applications that its premises had an ADT fire-and-theft alarm monitored by a central station. In fact, the premises never had a fire alarm. Northfield Insurance Company issued a policy containing a protective-safeguards endorsement that required a monitored automatic fire alarm as a condition of insurance.
After the policy was issued, a Travelers risk-control consultant conducted an underwriting survey by telephone and sent Michigan 32 a letter stating that its management policies and procedures effectively provided property-loss control. The fire alarm was not discussed. Following a June 2023 fire, Northfield denied Michigan 32’s claim, rescinded the policy, and refunded the premium. The district court granted Northfield summary judgment, holding that the material misrepresentation made the policy void ab initio and, alternatively, that the loss was excluded under the protective-safeguards endorsement.
The Court’s Holding
The Sixth Circuit affirmed, holding that Michigan law entitled Northfield to rescind the policy based on Michigan 32’s material misrepresentation in its insurance application. An insurer has no duty under Michigan law to investigate or verify an applicant’s representations.
Northfield did not waive rescission because it rescinded the policy and returned the premium after learning the truth, and the consultant’s silence about the fire alarm did not amount to decisive, unequivocal conduct showing an intent to relinquish that right. Equitable estoppel also did not apply because the survey and follow-up letter did not discuss the alarm and therefore did not induce Michigan 32 to believe that it had a policy-compliant system. Having upheld rescission, the court did not reach the protective-safeguards issue; it deemed Michigan 32’s remaining arguments forfeited because they were not raised below.
Key Takeaways
- A material misrepresentation in an insurance application permits rescission and renders the policy void ab initio under Michigan law.
- An insurer’s failure to investigate or discuss an applicant’s representation does not, without more, establish waiver or equitable estoppel.
- Because rescission independently supported summary judgment, the court did not decide whether the protective-safeguards endorsement also excluded coverage.
Why It Matters
The decision underscores that Michigan insureds bear responsibility for the accuracy of their applications and cannot ordinarily rely on an insurer’s silence or a general risk-control survey to cure a false representation. For insurers, it confirms that prompt rescission and return of the premium after discovering a material misrepresentation can preserve the rescission remedy.