Natalie Banks purchased a commercial automobile insurance policy from National Liability & Fire Insurance Company. In her application, Banks represented that she operated a nail and cosmetic business, Naelba Makeup, as her primary business for hire and profit and used her vehicle in the operation of that business. Part of the application signed by Banks contained a provision stating National was relying on the information Banks supplied, and any material misrepresentation would result in rescission of the policy.
Banks was involved in a 2016 motor vehicle accident and sought to recover PIP benefits from National. National denied the claim, asserting her policy should be rescinded due to Banks’ material misrepresentations in applying for the commercial policy. During discovery, Banks denied being self-employed. She testified she did not use her vehicle for her business. Rather she primarily used the vehicle to travel to and from her employment at Wayne Community College, to attend school at Wayne State University, and only periodically used the vehicle for trips to the store to get products for her business. Further, regarding her business practices, Banks admitted that she did not keep records regarding her business income or expenses, take business tax deductions, file business tax returns, have business-specific insurance, or have employees. Moreover, Banks estimated she only had approximately one to four customers which were friends and family, that she would only charge gas money for her services, and expressly testified that she only purchased the commercial policy because it was a cheaper option.
The trial court denied National’s motion for summary disposition, finding there was a question of fact as to whether Banks was operating a business that would qualify for the commercial policy. The Court of Appeals disagreed, holding in the unpublished opinion of Natalie Banks, et. al., v National Liability & Fire Ins. Co., et. al., that there was not a question of fact that Banks was not utilizing the vehicle for a commercial purpose.
Specifically, the Court of Appeals noted that “an insurer is entitled to rescind a policy ab initio on the basis of a material misrepresentation made in an application for no-fault insurance.” After “balancing the equities”, the Court of Appeals found that while Banks provided “nail and cosmetic services on occasion, she was not, through this business engaging in a commercial enterprise for profit.” Thus, summary disposition should have been granted in National’s favor.
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Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com
