On November 27, 2018, in an unpublished decision, the Michigan Court of Appeals reversed a trial court’s ruling that an insurer was entitled to rescind its insurance policy on the basis of material misrepresentation and further that the insurance company had no duty to investigate applications for insurance even where the error or misrepresentation was “easily ascertainable.” In San Juanita Gonzales, v Titan Indemnity Company & Patrick L. Coomes, No. 341227, 2018 WL 6185324 (Mich. Ct. App. Nov. 27, 2018), insurance agent Patrick Coomes (“Coomes”) sold San Juanita Gonzalez (“Gonzalez”) a Michigan No-Fault insurance policy through Titan Indemnity Company. The policy, effective April 1, 2016, covered two motor vehicles, including a Pontiac Torrento. Coomes disputed Gonzalez’s claim that she told him her fiancé, Quintana-Fiallo Lazaro Pedro (“Pedro”) would also be driving the vehicles. Gonzalez testified that Pedro was present at her meetings with Coomes, and that she specifically informed Coomes Pedro resided with her and would also operate the motor vehicles. Gonzalez further testified that she did not look at the policy documentation when she signed it.
Coomes testified that Gonzalez only told him that she had a fiancé after signing the paperwork. The policy did not list Pedro as a household resident. However, Gonzalez submitted an RD-108 form, also known as a Michigan Application for Title, to Coomes and Titan for the Pontiac Torrento. The RD-108 form listed Pedro as co-owner with the same address as Gonzalez.
Gonzalez was subsequently involved in an accident on May 30, 2016 in the Pontiac Torrento. When Titan discovered that Pedro resided with Gonzalez, it assigned two claims adjustors to investigate the claim for material misrepresentation. The two adjusters, Brittany Janes and Nathan Hoerig, performed a basic computer search which revealed a prior Titan policy for Gonzalez that listed Pedro as a household resident. Additionally, the search also showed that Titan had received the RD-108 form for the Pontiac Torrento, which listed Pedro as co-owner and living at the same address as Gonzalez. However, given that that present Titan policy did not list Pedro, on June 13, 2016, Titan officially informed Gonzalez that it would be rescinding her insurance policy due to her material misrepresentation. Titan then filed a Motion for Summary Disposition on that basis.
The trial court found a genuine issue of fact as to whether Titan had in its possession proof that Gonzalez’s fiancé resided with her. However, the trial court determined this to be immaterial based upon its interpretation of Titan Ins Co v Hyten, 491 Mich 487; 817 NW2d 562 (2012). Through its reading of Titan, the trial court found that an insurance company has no duty to investigate applications of insurance even where the error or misrepresentation is “easily ascertainable.” Therefore, even if Titan had the information regarding Pedro, it had no duty to investigate whether he was truly a household member. The trial court then granted Titan’s Motion for Summary Disposition, and Gonzalez appealed.
The Court of Appeals found that the trial court’s grant of summary disposition was based upon legal error. Specifically, the Court found that the trial court misinterpreted the ruling in Titan. The Gonzalez Court found that although a party may not be obligated to affirmatively and actively investigate a representation, a party may not ignore conflicting information that it actually receives. The Gonzalez Court found the Supreme Court’s decision in Titan to be clear: if an insurer has, or should have, information regarding possible misrepresentations on an application, it cannot willfully ignore that information. Thus, the Gonzalez Court found the trial court had misread Titan to essentially allow an insurer to ignore information it possessed.
Because the trial court found a question of fact whether Titan actually possessed knowledge indicating that Pedro was residing with Gonzalez when processing the application, summary disposition in favor of Titan was precluded.
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Sarah Nadeau, Editor of the Law Fax Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com
