Aspen American Insurance Company v. MF Acquisition Inc., 1:21-cv-00738

Ohana operated three underground storage tanks (USTs); MF Acquisition (agent) handled UST insurance renewals since 2008 and Nick Holton managed the account.
Insurer issued a Notice of Non-Renewal in March 2020 and a renewal quote in April 2020 that expressly expired at 5:00 p.m. on June 24, 2020; MF did not forward these to Ohana.
Holton emailed a binder to Ohana at 4:52 p.m. on June 23, 2020, with an attached package that incorrectly stated the quote was valid for 30 days; Ohana returned signed forms on July 8, 2020, after the June 24 deadline.
The issuer refused to renew; MF covertly attempted to place substitute coverage July–December 2020 but did not inform Ohana the policy had lapsed until December 22, 2020.
Ohana sued MF in New Jersey (March 2021) for alleged fraud and related claims; MF tendered defense to its E&O carrier, Aspen, which issued a policy effective November 9, 2020, after MF answered “no” to a question asking whether it knew of any circumstance that might result in a claim.
Aspen sought a declaratory judgment that coverage is excluded under the policy’s prior-knowledge exclusion and alternatively that the policy is void for material misrepresentation; the court granted Aspen summary judgment and denied MF’s cross-motion.

Issue	Plaintiff's Argument	Defendant's Argument	Held
Prior-knowledge exclusion	Aspen: MF (via Holton) knew or should have foreseen a claim before Nov 9, 2020; exclusion bars coverage	MF: Could not reasonably foresee the particular suit; prior renewal practice negated foreseeability	Court: Exclusion applies — MF knew or reasonably should have foreseen a claim once renewal was missed and Ohana was kept unaware
Material misstatement / rescission	Aspen: Foster’s "No" on application to Question 35 was a material misrepresentation; Aspen relied on it and would have declined or altered terms	MF: Answer was not materially false; Aspen failed to properly identify its corporate rep so affidavit on reliance should be excluded	Court: Misstatement was material; Price affidavit admissible; rescission (policy voidable) supports judgment for Aspen

Ann Arbor Pub. Sch. v. Diamond State Ins. Co., [citation="236 F. App'x 163"] (6th Cir. 2007) (interpretation of exclusionary clause and enforcement)
Auto-Owners Ins. Co. v. Churchman, 489 N.W.2d 431 (Mich. 1992) (exclusionary clauses strictly construed in favor of insured)
Taft Broad. Co. v. United States, 929 F.2d 240 (6th Cir. 1991) (summary judgment standard for cross-motions)
Lake States Ins. Co. v. Wilson, 586 N.W.2d 113 (Mich. 1998) (insurer entitled to rescind for material misrepresentation in application)
Oade v. Jackson Nat. Life Ins. Co. of Michigan, 632 N.W.2d 126 (Mich. 2001) (materiality measured by insurer’s likely reliance)
Lash v. Allstate Ins. Co., 532 N.W.2d 869 (Mich. 1995) (rescission may be justified despite innocent misrepresentation if insurer relied)