CYNTHIA R MONTGOMERY V FIDELITY & GUARANTY LIFE INS COAnnotate this Case
STATE OF MICHIGAN
COURT OF APPEALS
CYNTHIA R. MONTGOMERY,
September 20, 2005
December 1, 2005
FIDELITY & GUARANTY LIFE INSURANCE
Oakland Circuit Court
LC No. 2004-056217-CK
Official Reported Version
AARON T. BINDER, d/b/a AMERICAN
Before: Hoekstra, P.J., and Gage and Wilder, JJ.
Plaintiff appeals as of right the trial court's order granting summary disposition in favor
of defendant, Fidelity & Guaranty Life Insurance Company.1 We affirm.
In April 2002, plaintiff and her decedent husband applied for a life insurance policy with
defendant. Although the decedent had a significant cigarette-smoking habit, the application
reflects that he had not used tobacco within the previous five years. After defendant accepted
their application, it issued a policy2 and collected their premiums. In May 2002, the decedent
Because defendant Aaron T. Binder, doing business as American Classic Agency, is not a party
to this appeal, the term "defendant" refers only to Fidelity & Guaranty Life Insurance Company.
Plaintiff asserted that, although she and the decedent had applied for a $244,000 policy,
defendant issued a $50,000 policy. In her complaint, plaintiff claimed that the agent and
was killed in an automobile accident. Shortly after the decedent died, plaintiff received the
policy and filed a claim for death benefits. When defendant reviewed the clinical notes from the
decedent's doctor visits and the toxicology report from the decedent's autopsy, it discovered that
the decedent had been a smoker and denied the claim. Defendant also refunded the premiums
and rescinded the life insurance contract because it found that plaintiff and the decedent had
made a material misrepresentation—that the decedent did not use tobacco—on the life insurance
Plaintiff argues that the trial court erred in granting defendant summary disposition
because there is an issue of fact regarding whether plaintiff or the decedent made a material
misrepresentation on the insurance application. We review de novo a trial court's decision on a
motion for summary disposition. Rose v Nat'l Auction Group, Inc, 466 Mich 453, 461; 646
NW2d 455 (2002). When reviewing a decision on a motion for summary disposition pursuant to
MCR 2.116(C)(10), "we consider the affidavits, pleadings, depositions, admissions, and other
documentary evidence submitted by the parties in the light most favorable to the party opposing
the motion." Id. Summary disposition is appropriately granted, "if there is no genuine issue
regarding any material fact and the moving party is entitled to judgment as a matter of law." Id.
MCL 500.2218 provides that an insurer may rescind an insurance policy if it discovers
that an insured made a material misrepresentation on the application for insurance and that the
misrepresentation affected either the acceptance of the risk or the hazard assumed by the
insurer.3 See Oade v Jackson Nat'l Life Ins Co, 465 Mich 244, 252-253; 632 NW2d 126 (2001).
The term "acceptance of the risk" refers to the time at which the contract was made and the
insurance concept of risk. In re Certified Question (Wickersham v John Hancock Mut Life Ins
Co), 413 Mich 57, 63; 318 NW2d 456 (1982). An insurer's evaluation of the likelihood of a
factor increasing the risk of loss affects its decision to enter into a contract. Id. 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. Oade, supra at 254.
Because defendant's underwriter stated in his affidavit that defendant would not have issued the
policy if it had been aware of the decedent's smoking habit, the misrepresentation about the
decedent's smoking habit was material. If a misrepresentation is material, Michigan law does not
require that a causal connection exist between the misrepresentation and the death. Wickersham,
supra at 67.
Plaintiff asserts that the agent is the one who actually completed the application and that
neither she nor the decedent read the application before signing. Plaintiff 's argument is
defendant unilaterally changed the amount on the application, thereby reducing the amount of
the policy. However, in this appeal, plaintiff does not raise an issue regarding this alleged
reduction in the policy amount.
We note that acceptance of the risk and hazard assumed are terms with different meanings. In
re Certified Question (Wickersham v John Hancock Mut Life Ins Co), 413 Mich 57, 62; 318
NW2d 456 (1982). For a representation to be material to the hazard assumed—the death of an
insured in this context—it must contribute to the death in a substantial matter. Id. However, this
appeal only concerns whether the misrepresentation was material to acceptance of the risk.
misplaced. Whether it was plaintiff, the decedent, or the agent who misrepresented the
decedent's tobacco use on the application is not material because plaintiff and the decedent
signed the authorization, stating that they had read the questions and answers in the application
and that the information provided was complete, true, and correctly recorded. It is well
established that failure to read an agreement is not a valid defense to enforcement of a contract.
Snyder v Wolverine Mut Motor Ins Co, 231 Mich 692, 694; 204 NW 706 (1925); Marlo Beauty
Supply, Inc v Farmers Ins Group of Cos, 227 Mich App 309, 324; 575 NW2d 324 (1998), mod
on other grounds Harts v Farmers Ins Exch, 461 Mich 1, 10-11; 597 NW2d 47 (1999). 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. Komraus Plumbing &
Heating, Inc v Cadillac Sands Motel, Inc, 387 Mich 285, 291; 195 NW2d 865 (1972), applying
Liska v Lodge, 112 Mich 635, 637-638; 71 NW 171 (1897). Regardless of who actually
completed the application, plaintiff and decedent both signed the authorization, attesting to the
completeness and truth of the answers, after the application was completed.4 Thus, plaintiff and
the decedent had the opportunity to review the application and correct any errors before
submitting it. We therefore conclude that there was no genuine issue of material fact that the
decedent made a material misrepresentation on the application, entitling defendant to rescind or
avoid the policy.
Plaintiff also argues that defendant should not be permitted to rescind the contract
because its agent had knowledge of the decedent's smoking habit and that this knowledge should
be imputed to defendant. Although there is evidence that there were ashtrays in the decedent's
home and the home smelled of cigarette smoke, plaintiff has not presented any evidence to
suggest that the agent actually saw the decedent smoke or had knowledge that he was a smoker.
There is therefore no knowledge to be imputed to defendant. Even if the agent did have
knowledge of the decedent's smoking habit, plaintiff and the decedent had the opportunity to
review the application and correct any errors before submitting it.
/s/ Joel P. Hoekstra
/s/ Hilda R. Gage
/s/ Kurtis T. Wilder
4 Plaintiff relies on Smith v Globe Life Ins Co, 460 Mich 446; 597 NW2d 28 (1999), and asserts
that the signed application constitutes only prima facie evidence of misrepresentation. However,
we distinguish Smith because there is no dispute that the agent actually completed the
application. Furthermore, plaintiff and the decedent signed the authorization after the
application was completed, thus attesting to its truth and completeness.