Michael Schwartz Proves Material Misrepresentation in Insurance Policy Application to Obtain Dismissal of First-Party PIP Claim

In Michigan, the law is clear: an insurer is entitled to rescind a policy and declare it void ab initio when an insured makes a material misrepresentation in an insurance application. But how does rescission of a policy differ from cancellation?

On February 22, 2017, Zausmer attorney Michael Schwartz addressed this question and succeeded in having Oakland County Circuity Daniel Patrick O’Brien grant summary disposition in a first-party PIP lawsuit against Zausmer client, Everest National Insurance Company.

The plaintiff in the case, an Everest policyholder, sued Everest for benefits following a motor vehicle accident in March 2016. During discovery, she testified that she lived with her adult son at the time she applied for insurance coverage, though she failed to include her son on the insurance application, despite being asked to list other household members over the age of 14.  Had she included her son, Everest would have appropriately increased the premium by more than $300. Upon learning of the misrepresentation, Everest rescinded the policy, making it void from the time the policy went into effect.

With assistance from Zausmer attorney Danielle DePriest, Michael filed a Motion for Summary Disposition, seeking to dismiss the suit. In response, the plaintiff argued that the Everest policy language only allowed it to cancel the policy within the first 55 days, and it could not do so once that time period elapsed. By differentiating “cancellation” – the statutory right of an insurance company to reassess risk and terminate the policy under limited circumstances – from “rescission” – a legally distinguishable action that restores the parties back to the position in which they were before they entered into a contract – Michael convinced the judge that Everest had properly rescinded the policy, and that the plaintiff was not entitled to benefits.

Well done, Michael and Danielle!