SAWYER, J.

Defendant appeals by leave granted from a judgment of the district court entered for plaintiffs on their collision claim under an insurance policy issued by defendant. We affirm.

This case concerns an insurer's right to rescind an insurance policy for a misrepresentation made by an insured in the application for insurance following a loss by the insured and following the notice of cancellation by the insurer. This case was tried to the bench in a district court and submitted on stipulated facts. According to the stipulation, on October 14, 1986, plaintiff Piere Burton executed an application for automobile insurance with defendant. On that application, he misrepresented his driving record. This was discovered by defendant, and, on October 27, 1986, defendant sent plaintiffs a notice of cancellation that indicated that coverage would be canceled as of 12:01 A.M. on November 17, 1986. On November 8, 1986, however, plaintiff Paula Burton was involved in an automobile accident, resulting in a collision loss to her vehicle, which was covered under the policy. On November 10, plaintiffs notified their agent of the loss; the agent, in turn, notified defendant. Thereafter, on November 24, 1986, defendant notified plaintiffs that, on the basis of the misrepresentation on the insurance application form, it was rescinding the policy as of its effective date of October 14, 1986. That letter also returned the remainder of the premium.

The district court originally granted summary disposition for defendant. However, that decision was reversed on appeal to the circuit court. An application for leave to appeal to this Court was denied for failure to persuade the Court of a need for immediate appellate review. Thereafter, as noted above, the matter was submitted to the district court on stipulated facts, resulting in a judgment for plaintiffs, due at least in part to the prior circuit court decision. The appeal to the circuit court resulted in an affirmance, the circuit court indicating that it was obligated to do so under the law of the case doctrine. Defendant then pursued this appeal.

Defendant's only argument on appeal is that the courts below erred in entering judgment for plaintiffs because defendant was entitled as a matter of law to rescind coverage ab initio for material misrepresentations of fact in the application for insurance. We have no dispute with the general proposition that an insurer may rescind a policy ab initio because of a material misrepresentation in the application for insurance. Katinsky v Auto Club Ins Ass'n, 201 Mich. App. 167, 170; 505 N.W.2d 895 (1993); United Security Ins Co v Comm'r of Ins, 133 Mich. App. 38; 348 N.W.2d 34 (1984).

However, the case at bar does not simply present a case of an insurer exercising its right of rescission. Rather, after discovery of the material misrepresentation in the application, defendant chose, rather than issuing a letter of rescission, to issue a notice of cancellation, effective at some date in the future. Thus, before the accident in the case at bar, defendant discovered the material misrepresentation, chose to cancel (rather than rescind) plaintiffs' policy, and sent a notice of that cancellation before the accident with an effective date that happened to fall after the accident. As noted above, defendant also apparently retained a pro-rata share of the premium to cover the policy period from the onset of the policy until the effective date of cancellation, tendering that portion of the premium only after it chose to exercise rescission following the accident.

In light of defendant's actions in the case at bar, we are persuaded that it has waived its right of rescission in this case. While we certainly do not wish to reward plaintiffs for the misrepresentation in the application for insurance, it was defendant who chose the remedy. We would not interfere with defendant's right to rescind the policy ab initio had it chosen to do so upon discovery of the material misrepresentation, regardless of whether that discovery occurred before or after the loss. However, in the case at bar, defendant did discover the misrepresentation before the loss and chose to issue a cancellation rather than a rescission.

In drawing this distinction, it is important to consider the effects of defendant's choice to issue a cancellation. First, defendant induced plaintiffs to believe that they would have insurance until the effective date of the cancellation. Indeed, the cancellation notice specifically informed plaintiffs that their insurance would cease at the hour and date mentioned at the top of the notice, namely, 12:01 A.M. on November 17, 1986, a date approximately three weeks in the future. Thus, plaintiffs had no reason to act immediately to replace their insurance coverage, to cease driving until coverage could be obtained, or to do anything else immediately, as long as they eventually obtained coverage before November 17. Simply put, plaintiffs had no reason necessarily to have obtained replacement coverage at the time of the accident in the case at bar, the notice of cancellation having specifically told them that they would have coverage for more than an additional week after the accident occurred.

Second, defendant proposed to earn and keep a premium for the period in question. The notice of cancellation specifically stated that if a premium had been paid, a premium adjustment would be made after the cancellation became effective. It then states that if the premium had not been paid, plaintiffs would be billed for the premium earned to the time of cancellation.

Indeed, even had plaintiffs acted promptly to obtain coverage, it is unlikely that either they or their insurance agent would have requested that the coverage become effective before November 17. That is the date the cancellation notice said their existing coverage would cease and the date through which they had apparently paid a premium.

Clearly, defendant's intent upon learning of plaintiffs' misrepresentation on the application for insurance was, while to decline the risk over the long term, to cover the risk until November 17, 1986, and to retain a premium earned for that period. That is, there is nothing in the record to suggest that had this accident never occurred defendant would not have allowed the policy to remain in effect until November 17, 1986, and retained a premium for the period from the effective date of the policy of October 14 until the effective date of cancellation, November 17.

The remedy that defendant seeks is untenable. Defendant wishes, upon the discovery of a misrepresentation in the application, to have the right to collect a premium and provide coverage as long as there are no losses and yet remain entitled to choose rescission and deny coverage if a loss occurs. In short, defendant wishes to be able to earn a premium without having to provide coverage. That, however desirable it may be to defendant, is not an available option. Rather, it must either rescind the policy upon discovery of the misrepresentation and refund the premium or cancel the policy, retaining the premium earned until the effective date of the cancellation and provide coverage until the effective date of the cancellation. But it cannot have its premium and deny coverage too.

In sum, defendant was entitled upon discovery of the misrepresentation to rescind the policy issued to plaintiffs. Instead, it chose to continue coverage for approximately three weeks longer and to retain a premium for that period. Having chosen to do so, defendant was obligated to provide coverage for that period and to pay the loss that happened to have occurred.

Affirmed. Plaintiffs may tax costs.