In the published decision of Holman v. Farm Bureau Gen. Ins. Co. of Michigan, the Court of Appeals reversed the Circuit Court’s decision granting summary disposition in favor of Jonathan Heinzman Agency, et. al. Plaintiff argued a prior order from the Court of Appeals, upholding a Farm Bureau policy rescission, should not preclude the plaintiff from pursuing a negligence action against the agent personally for false statements in an application for insurance. The Court of Appeals agreed.
In a previous decision, the Michigan Court of Appeals found that Farm Bureau was entitled to a rescission of policy against Plaintiff for misrepresentations made in the insurance application. It was determined that Plaintiff materially misrepresented that: 1) he did not operate an uninsured motor vehicle in the six months prior to the application for insurance; and, 2) that he held current automobile insurance at the time of the application. A factual dispute existed as to whether Plaintiff had provided a “fake” policy number from AAA to his insurance agent, Jonathan Heinzman, or whether Heinzman provided the “fake” number to Farm Bureau. The Court of Appeals permitted rescission, finding that Plaintiff had an obligation to examine the contract of insurance prior to signing it. The Court alternatively determined that Plaintiff had no coverage on that date of his motor vehicle accident because the temporary certificate of insurance issued by Farm Bureau expired on its own terms prior to the accident.
Following the original Court of Appeals decision upholding the rescission, Plaintiff brought a negligence action against Heinzman, and claimed vicarious liability against Farm Bureau. Heinzman argued that the “fake” AAA insurance number was actually provided to him by the Plaintiff in 2014, and denied ever fabricating the AAA number himself. Plaintiff argued that he never gave Heinzman the AAA policy number and did not know where it came from. Plaintiff also argued that Heinzman “paraphrased” the question of whether he or a household member had driven an uninsured vehicle owned by the Plaintiff in the last six months. Heinzman alleged that he went through every question in detail with the Plaintiff and affirmed the information before submitting the Farm Bureau application.
Heinzman moved for summary disposition arguing that res judicata and collateral estoppel applied as the Court of Appeals had already determined that Plaintiff had an obligation to ensure the information contained in the application was accurate, even if it was Heinzman who actually filled out the application. Farm Bureau concurred and joined with Heinzman’s motion. The trial court granted summary disposition reasoning that the Court of Appeals decision was dispositive as to causation since the ruling determined Plaintiff was responsible for the misrepresentations in the application.
In overturning the trial court’s decision, the Court of Appeals held that the panel in the prior decision never actually or necessarily decided causation, and did not decide whether it was Plaintiff or Heinzman that made the misrepresentations in the insurance application. The Court relied on Zaremba Equip, Inc v. Harco Nat’l Ins Co, 280 Mich App 16; 761 NW2d 151 (2008), which established an insured’s duty to read the insurance policy does not preclude a negligence action against the insured agent personally. The Court further noted that Plaintiff’s failure to identify a misrepresentation in the application allegedly made by Heinzman should not preclude a negligence action, but it may be considered by a jury when determining comparative fault and proximate cause.
Importantly, the Court of Appeals held that given the fact insurance agents are “order takers”, it follows that there is a duty to do so accurately and not contribute to false information in the application for insurance, whether purposefully or mistakenly. See also Hart v. Farmers Ins Exch, 461 Mich 1, 7; 597 NW2d 47 (1999). As such, there was no need to determine whether there was a “special relationship” between Plaintiff and Heinzman since this falls within the more general, limited duty to take orders described in Hart. The Court of Appeals concluded that although an insured has an obligation and duty to read the policy, a failure to do so is not dispositive of the tort claim against an agent. Instead, the failure to read is only relevant to comparative negligence, and a jury could reasonably determine that it was the proximate cause of the insured’s damages.
Check out our News & Events page to see what’s happening at GLM and find out about our upcoming seminars.
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