Summary
holding that under MCL 500.3204 et seq., “[r]escission is insufficiently similar to cancellation to support the conclusion that the Legislature's enactment of a statute controlling cancellation of an automobile insurance policy without mentioning rescission demonstrates the Legislature's intent to preclude rescission”
Summary of this case from Titan Ins. Co. v. HytenOpinion
Docket No. 67996.
Decided March 20, 1984.
Linsey, Strain Worsfold, P.C., for petitioner.
Frank J. Kelley, Attorney General, Louis J. Caruso, Solicitor General, and Harry G. Iwasko, Jr., and Fernando C. Gomez, Assistants Attorney General, for respondent.
An agent of the United Security Insurance Company issued a no-fault automobile insurance binder to Lee Scott. Within an hour, Scott was injured in an automobile accident. When Scott filed a claim for personal protection benefits, the insurance company refused to pay and attempted to rescind the binder ab initio on the ground that Scott had intentionally misrepresented material facts on his application. The Commissioner of Insurance held that rescission was not permitted under the circumstances presented and ordered the insurance company to process Scott's claim. The insurance company obtained review of the commissioner's decision in circuit court pursuant to MCL 500.244; MSA 24.1244, and the circuit court reversed the commissioner's decision. The commissioner appeals as of right.
I
In Keys v Pace, 358 Mich. 74; 99 N.W.2d 547 (1959), the Court recognized that an insurance company may rescind a policy ab initio for an intentional misrepresentation of a material fact on the application. The commissioner relies on the subsequent enactment of a statute controlling cancellation of automobile insurance policies, MCL 500.3204 et seq.; MSA 24.13204 et seq., enacted by 1966 PA 342. The commissioner points to the maxim of statutory construction that the express mention of one thing implies the exclusion of other similar things (expressio unius est exclusio alterius) and argues that the Legislature's enactment of a comprehensive statute controlling cancellation of automobile insurance policies and not expressly mentioning rescission implies an intent to preclude rescission ab initio.
Support for the commissioner's position may be found in dicta in State Farm Mutual Automobile Ins Co v Kurylowicz, 67 Mich. App. 568, 577-578; 242 N.W.2d 530 (1976):
"State Farm argues that the statutes cited by the trial judge and by the defendants are inapplicable since they relate to cancellations and not rescission ab initio. Such a construction would require that we hold, in effect, that although an insurer may not cancel a policy of automobile liability insurance based on fraud subsequent to the payment of a claim under the policy, it may nevertheless treat the policy as void ab initio and avoid liability on the policy altogether. We do not think that the Legislature intended such an absurd consequence."
See, however, State Farm Mutual Automobile Ins Co v Allen, 50 Mich. App. 71, 80; 212 N.W.2d 821 (1973):
"This statute, restricting an insurer's power to cancel a policy of insurance, does not limit the court's power to declare a policy inoperative because of fraud or forgery."
Rescission is a remedy distinct from cancellation. See 8B Appleman, Insurance Law and Practice, § 5011, p 403:
"When a policy is cancelled, it is terminated as of the cancellation date and is effective up to such date; however, when a policy is rescinded, it is considered void ab initio and is considered never to have existed." (Footnote omitted.)
The maxim of statutory construction on which the commissioner relies is merely one of various methods for inferring the intent of the Legislature. See Williams v Mayor of Detroit, 2 Mich. 560, 563 (1853), and Mosley v Federal Dep't Stores, Inc, 85 Mich. App. 333, 337; 271 N.W.2d 224 (1978). The maxim may be applied to infer the intent of the Legislature concerning things similar to those expressly mentioned in the statute. See Sebewaing Industries, Inc v Village of Sebewaing, 337 Mich. 530, 545; 60 N.W.2d 444 (1953), and Stowers v Wolodzko, 386 Mich. 119, 133; 191 N.W.2d 355 (1971). Rescission is insufficiently similar to cancellation to support the conclusion that the Legislature's enactment of a statute controlling cancellation of an automobile insurance policy without mentioning rescission demonstrates the Legislature's intent to preclude rescission. We therefore elect to follow State Farm Mutual Automobile Ins Co v Allen, supra, and hold that MCL 500.3201 et seq.; MSA 24.13201 et seq., does not affect the remedy of rescission.
II
We emphasize that the person making the claim under the insurance policy here is the insured who made the intentional material misrepresentations; this is not a case in which the claimants are innocent third parties. Panels of this Court have held that the liability of an insurer with respect to insurance becomes absolute whenever injury covered by the policy occurs and that no statement made by or on behalf of the insured or violation of the policy may be used to avoid liability under such circumstances. Detroit Automobile Inter-Ins Exchange v Ayvazian, 62 Mich. App. 94, 99-100; 233 N.W.2d 200 (1975); Frankenmuth Mutual Ins Co v Latham, 103 Mich. App. 66, 68; 302 N.W.2d 329 (1981). See also the dicta in State Farm Mutual Automobile Ins Co v Kurylowicz, supra, p 574. However, in those cases the insurance companies were attempting to use acts or misrepresentations by the insured to rescind a policy ab initio and thus avoid liability to other claimants.
Michigan's comprehensive scheme of compulsory no-fault automobile insurance arguably requires as a matter of policy that the insurer rather than innocent third parties bear the risk of intentional material misrepresentations by the insured. However, we see no reason in law or policy for the burden of such a risk to be placed on the insurer in preference to the insured who made the intentional material misrepresentations. Cases from other jurisdictions supporting this distinction include Safeway Ins Co v Harvey, 36 Ill. App.3d 388; 343 N.E.2d 679 (1976), State Farm Mutual Automobile Ins Co v Wall, 92 N.J. Super. 92; 222 A.2d 282 (1966), Ferguson v Employers Mutual Casualty Co, 254 S.C. 235; 174 S.E.2d 768 (1970), Fireman's Fund Ins Co v Knutsen, 132 Vt. 383; 324 A.2d 223 (1974), and Zepczyk v Nelson, 35 Wis.2d 140; 150 N.W.2d 413 (1967). Contra, Pearce v Southern Guaranty Ins Co, 246 Ga. 33 ; 268 S.E.2d 623 (1980); Sentry Indemnity Co v Sharif, 156 Ga. App. 828; 280 S.E.2d 354 (1980); Teeter v Allstate Ins Co, 9 App. Div. 2d 176; 192 N.Y.S.2d 610 (1959), aff'd 9 N.Y.2d 655; 212 N.Y.S.2d 71; 173 N.E.2d 47 (1961).
III
In State Farm Mutual Automobile Ins Co v Kurylowicz, supra, pp 575-577, the Court placed a duty on an insurer to make a reasonable investigation of insurability within a reasonable period of time after acceptance of an application and issuance of a policy. The commissioner argues that the duty should be extended to the issuance of binders, that the insurance company failed to make a reasonable investigation here, and that such a failure should bar rescission ab initio. The commissioner explains that a binder is a guarantee of insurance on which the public has a right to rely. Here, however, no question of reliance on the binder by the public is presented, because the claim for personal protection benefits is made by an insured who made intentional material misrepresentations, rather than an innocent third party.
This point is illustrated by the landmark case recognizing a duty of an insurer to make a reasonable investigation, Barrera v State Farm Mutual Automobile Ins Co, 71 Cal.2d 659; 79 Cal.Rptr. 106; 456 P.2d 674 (1969). The California court noted that the duty is owed primarily to the class of potential victims of the insured, 71 Cal.2d 675; 79 Cal.Rptr. 117, and emphasized that the insurer retains its remedies against the insured for the the latter's misrepresentation, 71 Cal.2d 681; 79 Cal.Rptr. 121.
We need not decide whether there is a duty to investigate before issuing a binder, because under no circumstances does an insurer owe a duty to the insured to discover the latter's intentional material misrepresentations.
Affirmed.