Michigan Court of Appeals; Docket #356319, 356333, 356334, 356341; Unpublished
Judges Cameron, Cavanagh, and Gadola; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
Cancellation and Rescission of Insurance Policies
In this unanimous, unpublished, per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order in favor of Plaintiff Bronson Health Care Group, Inc. (“Bronson”), in Bronson’s first-party action against Defendant Falls Lake National Insurance Company (“Falls Lake”). The Court of Appeals held that Falls Lake failed to properly cancel the subject no-fault policy in the way prescribed by MCL 500.3020(1)(b), and thus remained responsible for payment of Bronson’s patient’s no-fault PIP benefits at the time of the subject motor vehicle-versus-pedestrian accident—approximately four months after the attempted cancellation. The Court of Appeals held, second, that the policy was not “effectively canceled”—such as would excuse Falls Lake’s failure to comply with MCL 500.3020(1)(b)—by its insured cashing the policy cancellation/premium refund check. The Court of Appeals held, third, that summary disposition was properly granted in Bronson’s favor as to the issue of whether its charges were reasonable, because Falls Lake presented no evidence in support of its argument to the contrary. The Court of Appeals held, fourth, that the trial court did not abuse its discretion in awarding Bronson no-fault attorney fees based on its finding that Falls Lake’s denial of Bronson’s claim for PIP benefits was unreasonable given the facts surrounding its improper attempt at cancelling the policy.
Morris House was walking in the street when he was struck by a motor vehicle driven by Samuel Jackson. House received treatment for his injuries from Bronson and executed an assignment in favor of Bronson. Bronson proceeded to file a claim for no-fault PIP benefits related to the treatment it provided to House with Jackson’s insurer, Falls Lake, but Falls Lake denied the claim, asserting that Jackson’s policy had been cancelled approximately four months prior to the accident due to nonpayment of the premium. In fact, Jackson had obtained in the policy in November 2018, and on December 7, 2018—before the first premium payment was due—Falls Lake sent Jackson a letter notifying him that if the premium was not paid by December 21, 2018, his policy would be canceled. Jackson did not pay the premium by that date, and thus, on January 7, 2019, Falls Lake sent Jackson a policy cancellation/premium refund check which Jackson cashed. Bronson proceeded to file suit against Falls Lake, arguing that the policy was still in effect on the date of the accident because Falls Lake failed to comply with the requirements of MCL 500.3020(1)(b) in cancelling the policy. The trial court agreed and granted summary disposition in Bronson’s favor on that issue, as well as on the issue of whether Bronson’s charges were reasonable, finding that Falls Lake presented no evidence to support its charge that Bronson’s charges were unreasonable. The trial court also granted Bronson attorney fees, finding that Falls Lake’s denial of Bronson’s claim was unreasonable.
The Court of Appeals affirmed the trial court’s summary disposition order, holding, first, that Falls Lake was responsible for House’s/Bronson’s claims for PIP benefits related to the accident because Falls Lake failed to properly cancel Jackson’s policy in accordance with MCL 500.3020(1)(b). The Court of Appeals noted that in Yang v Everest Nat’l Ins Co, 329 Mich App 461 (2019), it held that ‘a notice of cancellation sent before the time for making the premium payment has passed does not satisfy MCL 500.3020(1)(b).’ Rather, MCL 500.3020(1)(b) requires that an insurer send notice to an insured after the premium due date has passed, giving the insured not less than 10 days to cure the non-payment. In this case, Falls Lake sent the notice of cancellation to Jackson before the premium due date, and thus failed to properly cancel the policy under MCL 500.3020(1)(b). Falls Lake conceded that its December 7th letter was not compliant with MCL 500.3020(1)(b), but argued that its noncompliance was immaterial because ‘the premium refund check served as proper notice of cancellation and . . . Jackson agreed to the cancellation because he cashed the check.’ The Court of Appeals disagreed, because MCL 500.3020(1)(b) requires that notice be sent 10 days before cancellation. In this case, there was nothing on the check that would have indicated to Jackson that the policy was not already and unconditionally canceled.
“In this case, even Falls Lake concedes that the December 7, 2018 notice it sent to Jackson was not a valid cancellation notice under Yang because it was sent before the premium payment was due. See id. However, Falls Lake contends that the premium refund check served as proper notice of cancellation and that Jackson agreed to the cancellation because he cashed the check. This argument is unavailing because MCL 500.3020(1)(b) requires that the insured be provided with 10 days’ notice of the cancellation in order to reinstate the policy or obtain different insurance. Lease Car of America, Inc, 419 Mich at 54. In other words, an effective notice must advise ‘that because of an already-occurred failure to pay, the policy will be canceled in ten days.’ Yang, 329 Mich App at 470.
Moreover, both this Court and the Supreme Court rejected a similar assertion in Yang. In that case, the insurance company alleged that an October 30, 2017 letter offering to reinstate the policy served as an effective notice of cancellation. The Supreme Court disagreed, acknowledging that although the offer described an unconditional cancellation, it did not comply with MCL 500.3020(1)(b) because the statute requires that the notice be sent at least 10 days before the policy is canceled. Yang, 507 Mich at 326 n 6. See also Nowell v Titan Ins Co, 466 Mich 478, 488; 648 NW2d 157 (2002) (stating that ‘the notice must be mailed so as to be reasonably calculated to arrive at the appropriate address at least ten days before the cancellation date’). As explained by the Supreme Court in Yang, 507 Mich at 326 n 6, ‘the October 30 letter did not give that 10-day period; instead, it declared that the policy had already been cancelled and that the cancellation was already effective. It was insufficient to serve as a notice of cancellation under MCL 500.3020(1)(b).’ Therefore, Falls Lake’s contention that the premium refund check served as adequate notice of cancellation is erroneous.
Further, to the extent that Falls Lake asserts that Jackson cashing the refund check established his agreement or assent to the cancellation of the policy, there is no evidence in the record indicating Jackson’s state of mind or understanding. ‘[P]arties to a contract are free to mutually waive or modify their contract . . . .’ Quality Prod and Concepts Co v Nagel Precision, Inc, 469 Mich 362, 364; 666 NW2d 251 (2003) (emphasis omitted). However, ‘a party alleging waiver or modification must establish a mutual intention of the parties to waive or modify the original contract.’ Id. at 372. ‘The mutuality requirement is satisfied where a modification is established through clear and convincing evidence of a written agreement, oral agreement, or affirmative conduct establishing mutual agreement to waive the terms of the original contract.’ Id. at 373.
In this case, although Jackson cashed the premium refund check, the document only stated that the refund was for the canceled policy. There was no indication that cashing the check constituted agreement to the policy’s cancellation or waiver of the 10 days’ notice requirement in MCL 500.3020(1)(b). Rather, like the offer to reinstate the policy in Yang, 507 Mich at 326 n 6, the check indicated that the policy was unconditionally canceled. In other words, it is possible that Jackson believed that the policy had been definitively canceled and he did not have a choice in the matter. In any event, the record does not contain clear and convincing evidence establishing Jackson’s agreement to cancel the policy.”
The Court of Appeals held, second, that summary disposition was also properly granted in Bronson’s favor as to the issue of whether Bronson’s charges were reasonable, because Falls Lake failed to present any evidence to the contrary. In support of its assertion that its charges were reasonable, Bronson presented billing forms and medical records which it argued constituted reasonable proof of its charges. Falls Lake presented no evidence to suggest that they were not, and Falls Lake’s own adjuster testified in his deposition that (1) Falls Lake’s denial was based solely on Falls Lake’s position regarding the policy’s cancellation, and (2) that he had no reason to believe Bronson’s charges were unreasonable.
“In response, Falls Lake alleged that Bronson failed to establish that its charges were reasonable, but Falls Lake failed to specify which charges were unreasonable or explain why those charges were unreasonable. Moreover, Falls Lake did not provide any documentary evidence showing that any of the charges were unreasonable or presenting specific facts to show that there was a dispute of material fact over whether the charges were reasonable. ‘A party opposing a motion for summary disposition must present more than conjecture and speculation to meet its burden of providing evidentiary proof establishing a genuine issue of material fact.’ Cloverleaf Car Co v Phillips Petroleum Co, 213 Mich App 186, 192-193; 540 NW2d 297 (1995). Accordingly, because Falls Lake failed to present any evidence which established specific facts showing that there is a genuine issue for trial in response to Bronson’s motion for summary disposition, the trial court properly granted summary disposition in Bronson’s favor.”
The Court of Appeals held, third, that the trial court’s award of attorney fees in favor of Bronson—based on its finding that Falls Lake’s denial of its claim was unreasonable—was not an abuse of discretion. The Court noted that Falls Lake’s cancellation was not only ineffective under Yang, but ineffective under the policy itself, the cancellation provision of which enshrined the 10-day-notice requirement in MCL 500.3020(1)(b).
“Falls Lake argues that the trial court erred by awarding attorney fees in this case because there was a factual uncertainty regarding whether the policy existed at the time of the accident. However, notwithstanding Yang, Falls Lake’s purported cancellation of its policy did not comport with the actual policy language. The policy obtained by Jackson contained a cancellation provision as required by MCL 500.3020(1)(b), and Jackson was not in default of the policy with respect to premium payments at the time the December 7, 2018 notice was sent. As a result, it was impossible for Falls Lake to comply with the policy’s 10-day notice provision by mailing a cancellation notice for nonpayment of a premium before Jackson failed to make the necessary payment. Rather, the notice merely concerned the future possibility of nonpayment, and it was not until Jackson actually missed the due date for making the premium payment that it became feasible for Falls Lake to send a true notice of cancellation for nonpayment of the premium. See Yang, 329 Mich App at 473 (SWARTZLE, J., concurring) (explaining that the trial court’s order could be affirmed on the basis of the language of the specific insurance contract).
Moreover, longstanding existing caselaw establishes that a notice of cancellation must be unconditional to be effective. American Fidelity Co v R L Ginsburg Sons’ Co, 187 Mich 264, 276; 153 NW 709 (1915). In this case, the December 7, 2018 notice of cancellation was conditioned on Jackson’s future failure to pay the premium, and did not constitute an effective notice of cancellation. In addition, even accepting Falls Lake’s assertion that the refund check could serve as a notice of cancellation, it also appears that the cancellation was conditioned on Jackson cashing the check. Therefore, even considering what was known to Falls Lake in March and April of 2019, when it denied Bronson’s claim for benefits, its denial was unreasonable considering the language of its own policy and longstanding caselaw. Accordingly, the trial court did not abuse its discretion by ruling that Bronson was entitled to attorney fees.”