Taybron v. Liberty Mut. Pers. Ins. Co.

568 F.Supp.3d 854

Tanesha TAYBRON, Plaintiff,

v.LIBERTY MUTUAL PERSONAL INSURANCE COMPANY, Defendant.

Case No. 20-10925

United States District Court, E.D. Michigan, Southern Division.

Signed October 21, 2021

Aaron J. Herskovic, Jason J. Liss, Fabian, Sklar, King & Liss, P.C., Farmington Hills, MI, for Plaintiff.

Stephen P. Brown, Plunkett & Cooney, Bloomfield Hills, MI, for Defendant.

OPINION AND ORDER GRANTING DEFENDANT'S MOTION FOR SUMMARY JUDGMENT (ECF NO. 18)

GEORGE CARAM STEEH, UNITED STATES DISTRICT JUDGE

Defendant Liberty Mutual Personal Insurance Company seeks summary judgment on its claim that it properly rescinded Plaintiff's insurance policy. For the reasons explained below, Defendant's motion is granted.

BACKGROUND FACTS

Plaintiff Tanesha Taybron seeks to recover benefits under a homeowners’ insurance policy issued by Defendant Liberty Mutual Personal Insurance Company ("Liberty Mutual"). Taybron's Saginaw, Michigan, home suffered a fire on November 25, 2019. During its investigation of the fire, Liberty Mutual determined that Taybron misrepresented facts on her insurance application. As a result, Liberty Mutual rescinded the policy and declined to provide coverage for the loss.

Taybron bought the home in Saginaw in 2016 and resided there with her children. She operated a licensed in-home day care on the premises. She sought homeowner's insurance from Liberty Mutual in May 2019. She spoke with Stacy Tomaszewski, a Liberty Mutual sales representative, to obtain a quote. Tomaszewski asked Taybron several questions as part of the application process, including whether Taybron operated a business or day care out of her home. Taybron testified that she informed Tomaszewski that she owned a day care that operated out of her home. Tomaszewski has denied knowledge of Taybron's day care.

Tomaszewski completed the insurance application electronically and sent it to Taybron for her electronic signature on June 25, 2019. The application contained the following questions: "[i]s there any business conducted at the insured location?" and "[a]re home day care services regularly provided at the insured location?" In response, the corresponding boxes were checked "no." ECF No. 18-4 at PageID 300.

Taybron contends that she did not fill out the application herself and that she only received the signature page, which she signed electronically. Liberty Mutual asserts that the application was electronically available to Taybron and that she signed after the following statement:

Signing this form does not bind the applicant to complete the insurance, but it is agreed that this form and the answers provided by you to questions asked as part of the application process shall be the basis of the contract should a policy be issued. In the event that any material misrepresentations, omissions, concealment of facts and/or incorrect statements are made by or on behalf of the insured during the application process, we may exercise whatever legal remedies may be available to us under the laws and regulations of this state....

***

By signing below I acknowledge that I have read and understand the Applicant Authorization and Acknowledgment as well as validated information on pages of the application.

ECF No. 18-4 at PageID 301. Based upon her application, Liberty Mutual issued a homeowner's policy to Taybron, with an effective date of June 22, 2019. The policy provides that "[w]ith respect to loss caused by fire, we do not provide coverage to the insured who has: (a) Intentionally concealed or misrepresented any material fact or circumstances; (b) Engaged in fraudulent conduct; or (c) Made false statements; relating to this insurance." ECF 18-2 at PageID 274.

Taybron alleges that, after the homeowner's policy went into effect, she spoke with Tomaszewski approximately once a month in order to make payments for her auto insurance by phone. During those calls, Tomaszewski allegedly "routinely asked [Taybron] about the day care, such as asking how many kids [she] had at the day care that day, and how the day care was going." ECF No. 22-1 at PageID 575. At least one of these conversations was overheard by Taybron's daughter, Ma'Kayla Smoot. ECF No. 22-5. Tomaszewski denies that these conversations occurred.

Taybron's home was damaged by a fire on November 25, 2019. See ECF No. 22-6. She submitted a claim to Liberty Mutual and the company paid for her living expenses while it investigated the claim. During the course of the investigation, a Liberty Mutual investigator interviewed Taybron. When she was asked where she was employed, Taybron told the investigator that she operated a day care out of her home. Liberty Mutual asserts that, had it known about the day care, it would not have issued the policy, as its homeowner's policies are not intended to insure against business risks. At a minimum, Liberty Mutual would have charged a significantly increased premium. Liberty Mutual determined that Taybron misrepresented the existence of the day care in her application. As a result, it rescinded the policy in a letter dated January 14, 2020, and refunded Taybron's premium.

Taybron brought this action, arguing that Liberty Mutual was not entitled to rescind the policy because it knew about the day care when the policy was issued. Liberty Mutual filed a counterclaim, seeking a declaration that it properly rescinded the policy and presenting a claim for unjust enrichment. Liberty Mutual seeks summary judgment in its favor on the issue of rescission.

LAW AND ANALYSIS

I. Standard of Review

Summary judgment is appropriate if "there is no genuine issue as to any material fact and ... the moving party is entitled to a judgment as a matter of law." Fed. R. Civ. P. 56(c). In reviewing a motion for summary judgment, the court must determine " ‘whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law.’ " Amway Dist. Benefits Ass'n v. Northfield Ins. Co. , 323 F.3d 386, 390 (6th Cir. 2003) (quoting Anderson v. Liberty Lobby, Inc. , 477 U.S. 242, 251-52, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). The facts and any reasonable inferences drawn from the facts must be viewed in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp. , 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986). In response to a properly supported motion for summary judgment, the opposing party must come forward with specific evidence showing there is a genuine issue of fact for trial. A "mere scintilla" of evidence is insufficient to meet this burden; the evidence must be such that a reasonable jury could find in favor of the nonmoving party. Anderson , 477 U.S. at 252, 106 S.Ct. 2505.

II. Rescission

Liberty Mutual seeks a declaration that it properly rescinded Taybron's insurance policy. When a party has been fraudulently induced to enter a contract, it may void the contract upon discovering the fraud. Bazzi v. Sentinel Ins. Co. , 502 Mich. 390, 408, 919 N.W.2d 20, 29 (2018). Thus, "an insurance policy procured by fraud may be declared void ab initio at the option of the insurer," returning the parties to their relative positions as if the policy had never existed. Id. "Because a claim to rescind a transaction is equitable in nature, it ‘is not strictly a matter of right’ but is granted only in ‘the sound discretion of the court.’ " Id. at 409, 919 N.W.2d 20, 29 (citations omitted). For example, rescission should not be granted if the result would be unjust, inequitable, or infeasible, particularly with regard to innocent parties. Id. at 410-11, 919 N.W.2d 20, 29.

To establish actionable fraud in the procurement of an insurance policy, Liberty Mutual bears the burden of proving that (1) Taybron made a material representation; (2) it was false; (3) Taybron knew it was false when she made it, or made it recklessly, without knowledge of its truth; (4) she made it with the intent that Liberty Mutual act upon it; (5) Liberty Mutual acted in reliance upon it; and (6) Liberty Mutual was injured. Webb v. Progressive Marathon Ins. Co. , 335 Mich.App. 503, 967 N.W.2d 841 (2021). In addition, "[r]escission is justified in cases of innocent misrepresentation if a party relies upon the misstatement, because otherwise the party responsible for the misstatement would be unjustly enriched if he were not held accountable for his misrepresentation." Id. at 509, 967 N.W.2d 841 (quoting Lash v. Allstate Ins. Co. , 210 Mich. App. 98, 103, 532 N.W.2d 869 (1995) ). "A misrepresentation on an insurance application is material if, given the correct information, the insurer would have rejected the risk or charged an increased premium." Montgomery v. Fidelity & Guar. Life Ins. Co. , 269 Mich. App. 126, 129, 713 N.W.2d 801, 804 (2005).

It is undisputed that Taybron's insurance application contained false information, as it disclaimed the existence of her day care business. The issue here whether Taybron or Liberty Mutual is accountable for that misrepresentation. Taybron contends that Liberty Mutual's agent filled out the application and had actual knowledge of her day care. Taybron alleges that she signed the application without seeing the pages that preceded her signature and assumed that Tomaszewski filled it out correctly. However, by signing the application, Taybron attested that she read and understood it and that the information provided was correct. "It is well established that failure to read an agreement is not a valid defense to enforcement of a contract. A contracting party has a duty to examine a contract and know what the party has signed, and the other contracting party cannot be made to suffer for neglect of that duty." Montgomery , 269 Mich. App. at 130, 713 N.W.2d 801 (citations omitted).

In Montgomery , the defendant insurance company rescinded a life insurance policy because the plaintiff failed to disclose the insured's smoking habit on the...