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January 04, 2021
In Westfield Insurance Company v Cole et al, the Michigan Court of Appeals reversed the lower court’s decision granting partial summary disposition in favor of Westfield, in which the lower court piece-mealed the policy, rescinding only part of it.
On April 7, 2017, Defendants Cole and Wilson went to an independent Insurance Agency to obtain insurance for a 2006 Dodge Charger and a 2007 Ford Crown Victoria. Cole, after indicating in the insurance application that there were no co-owners for the vehicles, was added as the only named insured on the policy. Cole failed to disclose that Wilson lived with her at the time of the accident and that Wilson frequently drove both vehicles.
Three days after obtaining the insurance, Cole loaned her Crown Victoria to Williams, who lost control of the vehicle on wet pavement. Wilson was a passenger in the car. Cole then drove her Dodge Charger to the scene, where she was rear-ended by another driver who also hit the wet pavement and lost control of his vehicle.
After the accidents occurred, Westfield began its investigation and found that the Charger was co-owned by Cole with her mother. The Crown Victoria, on the other hand, was co-owned by Cole with Wilson, who was ineligible to possess a Michigan driver’s license. Westfield’s Master Underwriter subsequently testified in an affidavit that, had these facts been known, the policy would not have been issued because Westfield’s underwriting guidelines do not authorize coverage of ineligible drivers who own or have access to insured vehicles.
In the litigation which ensued, Westfield moved for summary disposition arguing that no genuine issue of material fact existed regarding its ability to rescind the policy based on the multiple misrepresentations and omissions in the insurance application. The lower court, rather than rendering the policy voidable in its entirety with respect to Cole and Wilson, granted partial summary disposition, noting that it could not find that Westfield would have refused to insure the Charger and ordering reformation of the policy for the Charger, only.
The Court of Appeals, applying Oade v Jackson Nat’l Life Ins Co of Mich, 465 Mich 244 (2001), held that the trial court’s piece-mealing of the policy was erroneous. Cole had submitted one application for insurance, paid one premium, and was issued one policy with one policy number. Additionally, the Court of Appeals noted, even if Westfield had insured the vehicles with an increased premium or provided coverage for the Charger, only, the policy would have been a different policy. Finally, Westfield conceded that Williams was an innocent third party, and therefore, the lower court should follow Bazzi v Sentinel Ins Co, 502 Mich 390 (2018), and balance the equities with regard to rescission of the policy as to Williams.
Therefore, the Court remanded the case to the lower court with instruction to grant summary disposition in Westfield’s favor as to Cole and Wilson’s claims in their entirety, and to conduct a balancing of the equities as to Williams.