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Holman v Farm Bureau Gen Ins Co, et al (COA – PUB 8/4/2022; RB #4460)   


Michigan Court of Appeals; Docket #357473; Published 
Judges Shapiro, Rick, and Garrett; Authored 
Official Michigan Reporter Citation: Forthcoming; Link to Opinion

Not Applicable

Insurance Agents (Duty to Insured)

In this unanimous, published decision authored by Judge Shapiro, the Court of Appeals reversed the trial court’s summary disposition order dismissing Plaintiff Lawrence Holman’s negligence action against Defendant Jonathan Heinzman, an insurance agent, based on misrepresentations Heinzman allegedly made on an application for no-fault coverage that he executed and submitted to Farm Bureau General Insurance Company (“Farm Bureau”) on Holman’s behalf.  The Court of Appeals held that Holman’s action against Heinzman was not barred by collateral estoppel, even though Holman’s prior first-party action against Farm Bureau, Holman I, was dismissed as a result of the same misrepresentations.  In Holman I, the Court held that Farm Bureau was entitled to rescission of Holman’s policy regardless of who was responsible for the misrepresentations, because Holman had a duty to know the contents of the application he signed.  Holman I did not stand for the proposition, however, that an insured who signs an application that contains misrepresentations is precluded from filing a tort action against the insurance agent who prepared the application.  Thus, in this case, the Court of Appeals held that a question of fact existed as to whether Heinzman breached his duty, as an insurance agent, to accurately prepare Holman’s application for coverage and to not contribute false information thereto.

After purchasing a used motor vehicle in December 2014, Lawrence Holman contacted Jonathan Heinzman, a Farm Bureau insurance agent, seeking no-fault coverage.  During the course of their telephone conversation, Heinzman filled out an application based on answers Holman allegedly gave to questions Heinzman allegedly asked.  Some answers on the application turned out to be inaccurate, and a fake AAA policy number was listed as Holman’s current insurance policy number.  After submitting the application to Farm Bureau, Heinzman faxed Holman a temporary certificate of insurance and asked Holman to fax him proof of current insurance in return.  Holman instead faxed Heinzman a AAA certificate from 2013 and advised Heinzman that that was his most recent insurance.  The parties dispute what happened next—Holman testified that Heinzman did not say for certain whether Farm Bureau would reject his application based on his not having current insurance; Heinzman said he made it unequivocally clear that Farm Bureau would reject his application—but on January 30, 2015, Farm Bureau sent Holman a letter officially rejecting his application, which Holman claimed he never received because he was seriously injured in a motor vehicle crash less than one week later, on February 5, 2015.  

After the crash, Holman filed suit against Farm Bureau, seeking no-fault PIP benefits.  Farm Bureau moved for summary disposition, arguing that if a policy existed at all, it was entitled to void it ab initio because Holman committed fraud in its procurement.  The trial court and Court of Appeals both agreed, after which Holman filed a negligence action against Heinzman, alleging that he did not provide Heinzman with the inaccurate answers on the application Heinzman submitted to Farm Bureau, and that Heinzman, therefore, breached his duty as an insurance agent to accurately fill out, and not contribute false information to, an application for insurance.  Heinzman moved for summary disposition, arguing that Holman’s action was barred by the doctrine of collateral estoppel based on the Court of Appeals’ holding in Holman I.  The trial court agreed with Heinzman, granting his motion.

The Court of Appeals reversed the trial court’s summary disposition order, holding that Holman’s action was not barred by collateral estoppel because Holman I did not actually dispose of the issue in this case: whether Heinzman negligently contributed false information to Holman’s application.  Holman I merely held that Farm Bureau was entitled to rescission because Holman had a duty to know the contents of the application he was signing.  In other words, Holman I dealt only with rescission as a remedy in a contract case; the Holman I court did not hold that an insured’s failure to know the contents of an application he signs also precludes him from subsequently filing a negligence action against an insurance agent who contributed false information to said application.  To the contrary, in Zaremba Equip, Inc v Harco Nat’l Ins Co, 280 Mich App 16 (2008), the Court “acknowledged an insured’s duty to read the policy, [but] did not hold that the insured’s failure to do so was dispositive of the tort claim against the agent [for failing to obtain the requested coverage or accurately representing the coverage obtained in the renewal policy.”  Although this case dealt with a different negligent act allegedly committed by the insurance agent, the Court further held that insurance agents do have a duty to accurately prepare applications for coverage and to not contribute false information thereto, and that while Holman’s signing of the application barred him from no-fault coverage, it did not preclude him from filing a negligence action against Heinzman.

“While Zaremba concerned an insurance agent’s duty to advise on the adequacy of coverage, this case primarily concerns the scope of an agent’s duty in preparing the application, which Michigan caselaw has not expressly addressed. However, given that captive insurance agents are “order takers,” Harts, 461 Mich at 9, it follows that there is a duty to do so accurately and not contribute false information to the application, whether purposefully or mistakenly. Thus, it is not necessary for us to determine whether there was a special relationship between plaintiff and Heinzman because this case falls within the more general, limited duty to take orders described in Harts. Harts, 461 Mich at 8. And under Zaremba, plaintiff’s corresponding duty to review the entire application may be considered in determining comparative fault, but it does not bar a negligence action against Heinzman.” 

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