AMI Stamping, LLC v. ACE American Insurance Co.
709 F. App'x 354
| 6th Cir. | 2017Background
- AMI Stamping, LLC added equipment and a Detroit building to a Revstone commercial property policy issued by ACE (a replacement-cost policy) in Feb. 2010; Todd Associates broker Spankie Carolanne solicited values for underwriting.
- AMI (via Revstone assistant counsel Kiel Smith) provided an "appraisal" listing equipment value as $138,100, although AMI had earlier 2006 appraisals valuing the same equipment at roughly $385,450–$462,800.
- ACE issued an endorsement adding AMI and the equipment; premium was calculated based on the submitted value.
- In 2012 the equipment was stolen; AMI later submitted a proof of loss claiming replacement-cost value of $1,907,000.
- ACE declined payment, rescinded the policy, refunded premiums, and asserted AMI materially misrepresented property value (and protective safeguards); AMI sued for breach—district court granted summary judgment for ACE.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether AMI made a material misrepresentation of equipment value | AMI: the document was a neutral "appraisal" and Smith made an innocent mistake; no misrepresentation | ACE: the $138,100 figure was a grossly inaccurate valuation relied on for underwriting and premium | Held: AMI materially misrepresented value; admission and prior appraisals show inaccuracy and ACE relied on the value to price risk |
| Whether rescission is available for innocent misrepresentations | AMI: policy language limits rescission to intentional misrepresentations | ACE: Michigan law permits rescission for any material misrepresentation relied upon, regardless of intent | Held: Michigan law allows rescission for innocent material misrepresentations if insurer relied on them; rescission affirmed |
| Whether broker Carolanne’s communications bind AMI or ACE (agency) | AMI: Carolanne was ACE’s agent, so her statements cannot be attributed to AMI | ACE: Carolanne acted as an independent agent/broker for the insured and thus bound AMI | Held: Carolanne was AMI’s agent under Michigan law (independent agent); AMI’s attempts to invoke Ohio law or producer agreement fail |
| Whether policy endorsements (Unintentional Errors & Omissions; Commercial Property Conditions) bar rescission | AMI: Unintentional Errors endorsement prevents prejudice; Commercial Property Conditions limits voiding to intentional misrepresentations | ACE: endorsements do not waive common-law rescission rights for innocent but material misrepresentations | Held: Endorsements do not negate insurer’s common-law right to rescind for innocent material misrepresentations absent evidence of intentional waiver |
Key Cases Cited
- Gen. Am. Life Ins. Co. v. Wojciechowski, 22 N.W.2d 371 (Mich. 1946) (false representation in application that materially affects risk permits cancellation)
- Lakes State Ins. Co. v. Wilson, 586 N.W.2d 113 (Mich. Ct. App. 1998) (rescission justified for material misrepresentation irrespective of intent if relied upon)
- Montgomery v. Fidelity & Guar. Life Ins. Co., 713 N.W.2d 801 (Mich. Ct. App. 2005) (materiality defined by whether insurer would have rejected risk or charged higher premium)
- Lash v. Allstate, 532 N.W.2d 869 (Mich. Ct. App. 1995) (innocent misrepresentation does not preclude rescission to prevent unjust enrichment)
- Stone v. Auto-Owners Ins. Co., 858 N.W.2d 765 (Mich. Ct. App. 2014) (independent insurance agent is agent of the insured when placing coverage with various companies)
- Savedoff v. Access Grp., Inc., 524 F.3d 754 (6th Cir. 2008) (federal courts in diversity apply state high-court decisions)
- Rogers v. O’Donnell, 737 F.3d 1026 (6th Cir. 2013) (standard of review for summary judgment)