Michigan Court of Appeals; Docket #349944; Unpublished
Judges Murray, Kelly, and Stephens; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
In this unanimous unpublished per curiam opinion, the Court of Appeals reversed the trial court’s denial of Defendant National Liability & Fire Insurance Company’s (“National”) motion for summary disposition, in which National sought to dismiss Plaintiff Natalie Banks’s first-party action and rescind her commercial automobile insurance policy on the basis of fraud in the policy’s procurement. The Court of Appeals held that Banks did, in fact, misrepresent that the covered vehicle’s intended purpose was for use in her cosmetic business when she filled out her application for coverage, and that rescission of the policy was therefore warranted.
Banks was injured while traveling as a passenger in a motor vehicle and thereafter filed a claim for no-fault PIP benefits from National, with whom she had a commercial automobile insurance policy. When she first applied for coverage from National, she stated that her vehicle was primarily used for business purposes related to her purported cosmetics business, which she operated as her primary business for hire and profit. In her first deposition, however, and in response to National’s interrogatories, she indicated that her only job was as an office/administrative assistant and that she was not self-employed. She also admitted in her second deposition that she did not keep any records related to her cosmetics business, did not file tax returns, did not hire employees, did not take tax deductions, and did not register or license the business with the state. Moreover, she indicated that she did “ ‘[n]ot really charge’ ” the few close family and friends to whom she provided her cosmetics services, save for the occasional “ ‘[g]as money, like $10 or $5 here,’ ” and that she used the vehicle to commute to work and school and made only periodic trips to buy products for her business. In light of her testimony, National denied her claim for benefits and filed a counterclaim in Banks’s first-party lawsuit against it, arguing that it was entitled to rescind Banks’s policy on the basis of the aforementioned misrepresentation she made in its procurement. Specifically, National argued that all the evidence indicated that Banks only used her vehicle to commute to her job as an office/administrative assistant, not to run errands for her purported cosmetics business. The trial court denied National’s motion, finding that although Banks did not operate a business in the normal sense, her testimony was sufficient to create a question of fact as to whether she did, in fact, operate “ ‘a business that would qualify her for this commercial policy.’ ”
The Court of Appeals reversed the trial court’s denial of National’s motion for summary disposition, holding that Banks failed to present evidence that she was engaged in a commercial cosmetics enterprise for profit, and that her indication in her application for commercial coverage through National to the contrary was therefore a material misrepresentation. Additionally, the Court held that there was no evidence that Banks utilized the insured vehicle for a commercial purpose. Given these two conclusions, and in relying on Michigan case law which stands for the proposition that, if a material misrepresentation is made in an application for insurance, the insurer is entitled to rescind the policy ab initio, the Court held that National was entitled to such a remedy.
“Taken together, there is no evidentiary dispute that, while plaintiff does provide nail and cosmetic services on occasion, she was not, through this business, engaging in a commercial enterprise for profit. When asked about basic business operations, plaintiff admitted that she does not (1) keep any income or expense records related to her business, (2) take any tax deductions related to her business, (3) file business tax returns, (4) have business-specific insurance, or (5) have employees. Moreover, plaintiff estimated that she has only between one and four customers per week, which consists only of close friends and family, and whom plaintiff admitted she is ‘not really charging anything’ outside of ‘gas money, like $10 or $5 here.’ Quite simply, there was no genuine issue of material fact that plaintiff was not utilizing the insured vehicle for a commercial purpose. This is not to say that a nonlicensed or registered business could not fall within the terms of the insurance policy, for one that is actually ‘for hire’ and ‘for profit,’ and which is one’s ‘primary business,’ could do so. All we are concluding is that although plaintiff attested to these circumstances in the application, the evidence described above shows that it was indisputably not true.
. . .
Therefore, a rational trier of fact could determine that no genuine issue of material fact existed as to whether plaintiff truly operated a business to qualify for a commercial automobile insurance policy, and therefore, summary disposition should have been granted. Because the nature and extent of plaintiff’s business was misrepresented in the application for commercial insurance—likely made to obtain a reduced-premium policy—the trial court further erred in denying National’s request to rescind the policy.”