Holman v Mossa-Basha (COA – UNP 11/29/2018; RB #3817)


Michigan Court of Appeals; Docket # 338210; Unpublished
Judges O’Brien, Tukel, and Letica per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion


Cancellation and Rescission of Insurance Policies 

In this unanimous unpublished per curiam opinion, the Court of Appeals upheld the trial court’s grant of summary disposition for Defendant Farm Bureau Insurance Company (“Farm Bureau”) regarding its refusal to pay Plaintiff Lawrence Holman (“Holman”) first-party PIP benefits. The Court of Appeals upheld the trial court’s grant of summary disposition because it found that Holman’s auto insurance policy had expired prior to his accident and, alternatively, Plaintiff had engaged in misrepresentation or fraud when he applied for his auto insurance policy.

In June 2013, Holman purchased a used Chevy Malibu and an automobile insurance policy through AAA. Holman made payments on the Malibu while his girlfriend made payments on the AAA policy. In February of 2014, the couple separated and then in August 2014 Holman reclaimed the Malibu from his ex-girlfriend. The Malibu did not have no-fault insurance at that time and Holman drove the vehicle “a couple of times” until it was vandalized and rendered inoperable in October 2014.

On December 30, 2014, Holman purchased a 2007 Mercury Mountaineer. Holman spoke on the phone with Farm Bureau sales agent Jonathan Heinzman, to whom Holman provided information to obtain an auto insurance policy. The application asked “Has the Applicant or a member of the Applicant’s household driven or moved any vehicle owned by the Applicant which has not had the required insurance in force for the preceding six months?” Holman answered no to this question.

Holman was issued a temporary insurance policy that lasted from December 30, 2014 to January 29, 2015. Holman was sent a notice explaining that Farm Bureau could revoke his policy during this time. On January 30, 2015, Farm Bureau sent Holman a letter explaining that his application could not be accepted because it was incomplete, and his initial payment would be refunded, and his policy was revoked.

Expiration of the Policy
The Court of Appeals first held that the policy was a short-term policy that ended on January 29, 2015. Holman argued that his temporary coverage was a “binder” that was effective until properly rejected by the insurance company. Binders are contracts of temporary insurance pending issuance of a formal policy or proper rejection by the insurer. Binders are issued in automobile insurance situations to allow the applicant to use the car while awaiting a decision from the insurance company whether it will insure the driver. The Court then cited to McCormic v Auto Club Ins Ass’n, 202 Mich App 233, 238; 507 NW2d 741 (1993), which explained that while binder is in effect it cannot be canceled without proper notice; however, after the period of coverage has expired, the policy is no longer in effect and notice of cancellation is no longer required. Here, the Court found that the coverage expired on January 29, 2015. By the terms of the auto insurance policy to ended and Defendant was not required to send notice pursuant to McCormic. The Court further distinguished Du Brul v American Mfr’s Mut Ins Co, 60 Mich App 299; 230 NW2d 404 (1975) and State Auto Mutual Ins Co v Babcock, 54 Mich App 194; 220 NW2d 717 (1974) because both cases involved a cancellation notice within the 30 day binder notice period.

“Plaintiff’s argument is misplaced because, as the circuit court recognized, even if the binder is construed as a short-term policy, “it expired on its own terms on January 29, 2015.” While MCL 500.3020(1)(b) requires insurers to provide “a not less than 10 days’ written notice of cancellation,” a notice of cancellation is not required when the period of coverage has expired. See McCormic, 202 Mich App at 238. Moreover, Farm Bureau never issued plaintiff a formal insurance policy, and the certificate of insurance issued to plaintiff merely provided him with coverage for his Mountaineer “until the expiration date shown on the certificate,” MCL 257.328(2).”

The Court of Appeal went on to rule that Plaintiff is also subject to summary disposition because he made material misrepresentations. The Court cited to Lash v Allstate Ins Co, 210 Mich App 514, 517; 540 NW2d 869 (1995) to explain that material misrepresentations made in an application for no-fault insurance entitles the insurer to rescind the policy. The Court found that Holman made two material misrepresentations: (1) that he did not operate an uninsured motor vehicle owned by him in the six-month period preceding his insurance application; and (2) that he held current automobile insurance at the time of his application. Holman’s own testimony made it clear that these two statements were not accurate. Had Farm Bureau known that Holman did not have insurance for six months prior, it would have denied him insurance. Thus, the misrepresentations were material. The Court found that this constituted innocent fraud at the least and thus Farm Bureau could deny benefits.

“Because plaintiff misrepresented that he did not operate an uninsured motor vehicle owned by him in the six-month period preceding his insurance application and that he held current auto insurance at the time of his application, Farm Bureau was entitled to rescind ab initio any coverage plaintiff might have had under the certificate of insurance.”

Thus, the Court found that Farm Bureau was not liable to Holman because the policy expired by its own terms and alternatively Holman made material misrepresentations in his application.