Titan Insurance Company v. Hyten
491 Mich. 547
| Mich. | 2012Background
- Titan Insurance seeks declaratory relief to avoid indemnification of Hyten based on fraud in the insurance application.
- Hyten's license was suspended in Aug 2007; Titan issued a policy effective Aug 24, 2007 while Hyten’s license remained suspended until Sept 20, 2007.
- Hyten’s household misrepresentation on the application stated no unlicensed drivers or suspended licenses.
- Titan learned Hyten lacked a valid license during investigation after the Feb 2008 accident.
- The Court of Appeals relied on Kurylowicz’s “easily ascertainable” rule to bar Titan’s remedies; the Supreme Court granted review.
- The ruling clarifies contract/insurance principles and whether courts may apply traditional remedies (cancellation, rescission, reformation) despite easily ascertainable fraud.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether insurer may use traditional remedies for fraud despite easily ascertainable fraud and third-party claim. | Titan argues the insurer may pursue cancellation or rescission. | Hyten argue Kurylowicz bars such remedies when fraud is easily ascertainable and third parties are involved. | Yes; insurer may use traditional remedies despite easily ascertainable fraud. |
| Whether MCL 257.520(f)(1) applies to motor vehicle liability policies not certified under the financial responsibility act. | Titan contends broader application supports insurer relief. | Courts misread the statute’s scope; it applies only to certified policies. | MCL 257.520(f)(1) does not apply to uncertified policies; it is limited to certified financial responsibility policies. |
| Whether Keys v Pace remains controlling law over Kurylowicz’s rule. | Keys supports insurer remedies for fraud despite third-party claims. | Kurylowicz allowed easily ascertainable rule to protect third parties. | Keys is reaffirmed; Kurylowicz is overruled. |
Key Cases Cited
- Keys v Pace, 358 Mich 74 (1959) (insurer may avoid liability for fraud in application; no duty to investigate by insurer; third-party can be harmed by fraud remediable by traditional remedies)
- Kurylowicz v State Farm Mut Auto Ins Co, 67 Mich App 568 (1976) (established the easily ascertainable rule for third-party claims (overruled))
- State Farm Mut Auto Ins Co v Sivey, 404 Mich 51 (1978) (no-fault context; public policy considerations discussed)
- Ohio Farmers Ins Co v Mich Mut Ins Co, 179 Mich App 355 (1989) (Court of Appeals on insurer liability and third-party claims)
- Farmers Ins Exch v Anderson, 206 Mich App 214 (1994) (no-fault/insurance liability; third-party considerations)
- Manier v MIC Gen Ins Corp, 281 Mich App 485 (2008) (appellate unanimity on related fraud/coverage issues)
- Hammoud v Metro Prop & Cas Ins Co, 222 Mich App 485 (1997) (insurer remedies in fraud contexts)
- United States Fidelity & Guaranty Co v Black, 412 Mich 99 (1981) (elements of actionable fraud; common-law framework)