Hatcher v. Nationwide Property & Casualty Insurance Company

Filing 24

OPINION and ORDER re 16 MOTION for Summary Judgment Based on the Misrepresentation Regarding Delinquent Taxes Signed by District Judge Laurie J. Michelson. (JJoh)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF MICHIGAN
SOUTHERN DIVISION

TIJUANA HATCHER,
Plaintiff/Counter-Defendant,
Case No. 13-13926
Honorable Laurie J. Michelson

v.
NATIONWIDE PROPERTY &
CASUALTY INSURANCE COMPANY,
Defendant/Counter-Plaintiff.

__________________________________________________________________________/
OPINION AND ORDER GRANTING DEFENDANT’S
MOTION FOR SUMMARY JUDGMENT [16]
This is an insurance coverage dispute. In applying for homeowner’s insurance, Plaintiff
Tijuana Hatcher represented to Defendant Nationwide Property & Casualty Insurance Company
that the property taxes for the home she bought in Detroit, Michigan, were not delinquent by two
or more years. Nationwide contends that it relied on this representation in issuing an insurance
policy. Nationwide further contends that the representation was untrue. Thus, when a suspicious
fire destroyed Hatcher’s property on September 2, 2012, Nationwide rescinded the policy from
its inception and refused to pay for the damage. Plaintiff then brought this lawsuit seeking to
recover the insurance proceeds. Nationwide has moved for summary judgment pursuant to the
well-established Michigan law that a material misrepresentation in an insurance application, if
relied on by an insurer, allows the insurer to rescind the policy. Plaintiff does not dispute this
law. Instead, she contends that, under her definition of “delinquent for two or more years,” she
did not make a material misrepresentation in her insurance application. The Court rejects her
strained construction and grants Defendant’s Motion for Summary Judgment.

I. BACKGROUND
In March or April 2012, Plaintiff Tijuana Hatcher (“Plaintiff”) bought from her brother’s
friend the real property located at 12667/12669 Roselawn Street in Detroit, Michigan (the
“Roselawn property”). (Dkt. 16, Def. Mot. for Summ. J., Ex. 9, Hatcher Exam. at 13-14.) The
Roselawn property is one building split into two separate living areas. Plaintiff rented out the top
apartment and lived in the downstairs unit. (Mot. for Summ. J. at ¶ 6; Dkt. 20, Pl. Resp. at ¶ 6.)
At the time of the purchase, the 2010 and 2011 property taxes were delinquent. (Mot. for Summ.
J. at Ex. 8; Pl. Resp. at ¶ 9.) On July 9, 2012, Plaintiff made a partial payment of these taxes. (Pl.
Resp. at ¶ 10.) Following this payment, there remained due approximately $2,048 on the 2010
property taxes and $1,879 on the 2011 taxes. (Mot. for Summ. J. at Exs. 8, 9.)
Through a series of phone calls with Defendant Nationwide Property & Casualty
Insurance Company (“Nationwide” or “Defendant”) in or around July 2012, Plaintiff applied for
homeowner’s insurance on the Roselawn property. (Mot. for Summ. J., Exs. 5, 7.) During the
application process, Nationwide specifically asked, “Are the property taxes for the insured
location delinquent by two or more years?” and Plaintiff answered “No.” (Mot. for Summ. J.,
July 17, 2012 Tr. at 4.) Nationwide issued an insurance policy on the Roselawn property with a
policy period July 17, 2012, to July 17, 2013. (Mot. for Summ. J. at Ex. 3.) The policy protects
against losses associated with fire. (See id.) It is undisputed that Nationwide would not have
issued the policy had it known that the property taxes were delinquent. (Id. at Ex. 11, Nationwide
Aff.) The policy was amended by the Michigan Amendatory Endorsement. (Id. at Ex. 4.) This
Endorsement contains a Concealment, Fraud, or Misrepresentation provision specifically
informing the insured that the
policy was issued . . . in reliance with the information you provided at the time of
your application for . . . this insurance coverage. We may void this policy, deny
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coverage under this policy, or at our election, assert any other remedy available
under applicable law, if you, or any other insured person seeking coverage under
this policy, knowingly or unknowingly concealed, misrepresented or omitted any
material fact or engaged in fraudulent conduct at the time the application was
made or at any time during the policy period.
(Id.)
The Roselawn property caught fire on September 2, 2012. (Dkt. 1, Compl. at ¶ 6.) The
fire damaged the home and its contents. (Id. at ¶¶ 6, 13.) Plaintiff made a claim with Defendant
for her damages, losses, and expenses caused by the fire. (Id. at ¶ 14.) Nationwide conducted an
investigation and found the fire to be intentional. (Mot. for Summ. J. at Ex. 2.) On March 4,
2013, Nationwide rescinded the policy from its inception. (Id. at Ex. 12.) As a result, there was
no policy coverage in force on the date of the fire. (Id.) Nationwide explained:
The reason for rescinding this policy number 9121 HP321825 is due to material
misrepresentation at time of the policy application. At the time you applied for a
Nationwide Homeowner policy effective July 17, 2012, you represented that you
were not delinquent in taxes for two or more years. Our claims investigation has
determined that at the time of application you currently have delinquent taxes in
2010 for $2,732.73 and in 2011 for $1,978.48. Had this information been
disclosed at the time of application, the policy would not have qualified and
would not have been issued. Michigan law supports an insurer’s right to rescind a
policy to the date of inception where there is material misrepresentation in the
policy application.
(Id.)
Following the rescission of the insurance policy, Plaintiff filed this lawsuit in Wayne
County Circuit Court claiming the right to recover under the policy. Defendant removed the
lawsuit to this court on the basis of diversity jurisdiction on September 13, 2013. (Dkt. 1.)
During a phone conference on April 3, 2014, the Court advised that Defendant could file an early
motion for summary judgment limited to the issue of the delinquent taxes. In its summary
judgment motion, Defendant contends that Plaintiff’s misrepresentation regarding the delinquent
property taxes was material and enabled Defendant to rescind the insurance policy and refuse to
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pay on Plaintiff’s claim. (Id.) Plaintiff responds that she did not make any misrepresentation
because, under her definition, the property taxes, while delinquent, were not delinquent “two or
more years.” (Dkt. 20.) The Court has carefully reviewed the briefing and does not believe that
oral argument will substantially aid in resolving the parties’ dispute. See E.D. Mich. 7.1(f)(2).
II. ANALYSIS
A. Standard of Review
Summary judgment is proper “if the movant shows that there is no genuine dispute as to
any material fact and the movant is entitled to judgment as a matter of law.” Fed. R. Civ. P.
56(a). A fact is material only if it might affect the outcome of the case under the governing law.
See Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 249, 106 S. Ct. 2505, 91 L. Ed. 2d 202
(1986). On a motion for summary judgment, the court must view the evidence, and any
reasonable inferences drawn from the evidence, in the light most favorable to the non-moving
party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S. Ct.
1348, 89 L. Ed. 2d 538 (1986) (citations omitted); Redding v. St. Eward, 241 F.3d 530, 531 (6th
Cir. 2001).
Defendant’s motion does not involve any disputed material facts. Instead, the parties
dispute whether Plaintiff’s response on her insurance application that the property taxes on the
Roselawn home were not delinquent two years or more constitutes a material misrepresentation
as a matter of law.
B. Michigan Law Supports Rescission of the Insurance Policy
Under Michigan law, an insurance contract is generally to be interpreted like any other
contract, according to Michigan contract interpretation principles. Stryker Corp. v. XL Ins. Am.,

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735 F.3d 349, 354 (6th Cir. 2012); Rory v. Cont’l Ins. Co., 703 N.W.2d 23, 26 (Mich. 2005).1
The policy application, declarations page, and the policy itself constitute the contract. See Royal
Prop. Grp., LLC v. Prime Ins. Syndicate, Inc., 267 Mich. App. 708, 715, 706 N.W.2d 426, 432
(Mich. App. 2005) (citing Hall v. Equitable Life Ass. Soc’y of the U.S., 295 Mich. 404, 408, 295
N.W. 204, 206 (1940)). Pursuant to the relevant contract interpretation principles, courts should
enforce contract language in accordance with its plain and commonly used meaning, being
careful to enforce specific and well-recognized terms. Henderson v. State Farm, 596 N.W.2d
190, 193–94 (Mich. 1999); Stryker, 735 F.3d at 354. A contract should be read as a whole
instrument and with the goal of enforcing the intent of the parties. Prestige Cas. Co. v. Mich.
Mut. Ins. Co., 99 F.3d 1340, 1350 (6th Cir. 1996). The meaning of a contract is a question of
law. Wilkie v. Auto-Owners Ins. Co., 664 N.W.2d 776, 780 (Mich. 2003). The Sixth Circuit
recently reiterated that “[i]f an insurance contract provision is ambiguous—meaning it is
susceptible to two different reasonable interpretations—it is strictly construed against the
insurer,” but “[t]he mere fact that a term is undefined in an insurance contract does not render the
term ambiguous. Undefined terms, too, should be construed according to their commonly used
meaning unless it is apparent from the whole policy that a special meaning was intended.”
Whitehouse Condo. Group, LLC v. Cincinnati Ins. Co., No. 13-2376, 2014 U.S. App. LEXIS
11708 (6th Cir. June 17, 2014) (citing Henderson v. State Farm, 596 N.W.2d 190, 194-95 (Mich.
1999)). And courts “should not create ambiguity in an insurance policy where the terms of the
contract are clear and precise.” Henderson, 596 N.W.2d at 193.

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Neither party raises any choice of law issues and both apply Michigan law. Thus, the
Court will do so as well. See Uhl v. Komatsu Forklift Co., Ltd., 512 F.3d 294, 302 (6th Cir. 2008)
(“When interpreting a contract in a diversity case, we apply the law of the forum state—in this
case, Michigan.”).
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1. Nationwide’s Reliance
The insurance policy at issue here expressly states that it may be voided by Defendant if
Plaintiff “knowingly or unknowingly concealed, misrepresented or omitted any material fact . . .
at the time the application was made . . . .” (Mot. for Summ. J. at Ex. 3, Nationwide Policy.) This
is consistent with “the well-settled law of [Michigan] that where an insured makes a material
misrepresentation in the application for insurance . . ., the insurer is entitled to rescind the policy
and declare it void ab initio.” Lake States Ins. Co v. Wilson, 231 Mich. App. 327, 331, 586
N.W.2d 113 (Mich. Ct. App. 1998); see also Lash v. Allstate Ins. Co., 210 Mich. App. 98, 532
N.W.2d 869, 872 (Mich. Ct. App. 1995) (collecting cases). This is true whether the
misrepresentation was innocent or intentional, as long as the insurer relied on it. Lash, 210 Mich.
App. at 103. “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. Fid. & Guar. Life Ins. Co., 269 Mich. App. 126, 129, 713 N.W.2d 801 (2005).
There is no dispute that Defendant’s oral application for homeowner’s insurance asked
whether the taxes on the Roselawn property were delinquent for two or more years and Plaintiff
answered, “No.” Defendant has provided an unopposed affidavit from its Personal Lines
Underwriting Manager stating that “[t]he status of the property taxes is material to Nationwide’s
decision whether to insure the property” and that “Nationwide would not have issued the policy
had it known that the taxes were two years or more delinquent at the time of the application.”
(Mot. for Summ. J., Ex. 11, Nationwide Aff.) Indeed, under Michigan law a person is not eligible
for homeowner’s insurance if their “real property taxes with respect to the dwelling insured or to
be insured have been and are delinquent for 2 or more years at the time of renewal of, or
application for, home insurance.” Mich. Comp. Laws § 500.2103(2)(j). See also Carter v. Liberty

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Insurance Corp., No. 11-14690, 2012 U.S. Dist. LEXIS 164505, at *18 (E.D. Mich. Nov. 19,
2012) (“Courts in this District have already determined that misrepresentations with regard to the
status of property taxes are material.”)
Thus, the record is undisputed that Plaintiff’s representation regarding the (lack of)
delinquency status of her property taxes was material and that Defendant relied on it.
1. Plaintiff’s Misrepresentation
Plaintiff admits that at the time she completed the insurance application in July 2012, the
2010 and 2011 taxes on the Roselawn property were delinquent. She contends, however, that the
application did not contain a material misrepresentation because, under a proper construction of
Michigan Compiled Laws § 500.2103(2)(j), these property taxes were not “delinquent for two or
more years.” (Resp. at 4-5.) The essence of Plaintiff’s argument is that the phrase “delinquent for
two or more years,” as used in the Essential Insurance Act, Mich. Comp. Laws § 500.2103(2)(j),
should be defined according to Michigan’s General Property Tax Act, Mich. Comp. Laws §
211.78a(2). This tax provision states:
On March 1 in each year, taxes levied in the immediately preceding year that
remain unpaid shall be returned as delinquent for collection. . . . Except as
otherwise provided in section 79 for certified abandoned property, property
delinquent for taxes levied in the second year preceding the forfeiture under
section 78g or in a prior year to which this section applies shall be forfeited to the
county treasurer for the total of the unpaid taxes, interest, penalties, and fees for
those years as provided under section 78g.
Mich. Comp. Laws § 211.78a(2). From this provision, Plaintiff makes the following argument:
(1) the Roselawn taxes due in 2010 became delinquent on March 1, 2011, and the taxes due in
2011 became delinquent on March 1, 2012; (2) “the length of time a tax bill remains in
delinquency status, not the number of tax bills in delinquency status, is the critical factor in the
tax foreclosure process”; and (3) “[t]hus, in July 2012, at the time of the application for home

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insurance, the 2010 taxes had only been delinquent for a period of 16 months [March 1, 2011, to
July 2012], and the 2011 taxes had only been delinquent for a period of 4 months [March 1,
2012, to July 2012]. In July 2012, the real property taxes had not been and were not delinquent
‘for two or more years.’” (Resp. at 12, 14.) This argument is unavailing for several reasons.
First, the Court must interpret the phrase “delinquent two or more years” according to its
commonly used meaning and the expectations of the parties, not Michigan’s General Tax Act,
which has no relevance to this case. Nor does this case involve the construction of the Michigan
Insurance Code, because Nationwide did not rescind the policy based on Mich. Comp. Laws
§ 500.2103(2)(j). Rather, as its letter to Plaintiff makes clear, Nationwide rescinded the policy
pursuant to an express policy provision and Michigan case law that permit rescission based upon
a material misrepresentation by the insured. See Carter, 2012 U.S. Dist. LEXIS 164505, at *17
(“Insurance policies are contracts subject to the same construction principles.”).
Nationwide’s application asks, “Are the property taxes for the insured location delinquent
by two or more years?” (Mot. for Summ. J., Ex. 5 at 4.) It may be that Nationwide’s application
includes this question because the Michigan Insurance Code deems ineligible for obtaining
homeowner’s insurance anyone whose real property taxes are delinquent for two or more years at
the time of application. But the application does not cite the code or make any other reference to
it. On its face, there is nothing about this application question that indicates its terms should be
defined in accordance with the code, much less Michigan’s General Tax Act. The expectations of
the parties control the interpretation of the contract (which includes the application, see Royal
Prop. Grp., 706 N.W.2d at 432):
If the insurance policy fails to define a term, the court must interpret it according
to its commonly used meaning, taking into account the reasonable expectations of
the parties. That is, the policy language in insurance contracts is to be accorded its
commonly used meaning unless it is apparent from reading the instrument as a
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whole that a different or special meaning was intended. A technical construction
of policy language which defeats a reasonable expectation of coverage is
disfavored.
Prestige Cas. Co. v. Mich. Mut. Ins. Co., 99 F.3d 1340, 1350 (6th Cir. 1996). There is nothing in
the record to indicate that when Plaintiff represented that her property taxes were not delinquent
two or more years that she was referring to the timetable in Michigan Compiled Laws §
211.78a(2).
Regardless, the Court agrees with Defendant that Michigan Compiled Laws § 211.78a(2)
simply explains when property taxes are sufficiently delinquent to allow collection activities by
the taxing entity. It does not define the phrase “delinquent two or more years,” as Plaintiff would
have it. Plaintiff contends that “under the General Property Tax Act, when real property taxes are
in the second year of delinquency, parcels are forfeited to the county treasurers. In the third year
of delinquency, the properties are foreclosed upon by the Foreclosing Governmental Unit.”
(Resp. at 9.) But this is a “foreclosure timeline” (id. at 10)—not a definition of “delinquent two
or more years.” In fact, the tax collecting entity, the Wayne County Treasurer, defines
“delinquent” as “[t]axes that were not paid to the local treasurer. . . .” (Mot. for Summ. J. at Ex.
20), which is similar to the dictionary definitions the Court relies upon below.
Because the Court finds Nationwide’s application (which is part of the overall insurance
contract) to be clear and unambiguous, it will interpret “delinquent two or more years” using the
common and ordinary meaning of the phrase. “The court may refer to dictionary definitions
when appropriate when ascertaining the precise meaning of a particular term.” Morinelli v.
Provident Life & Accident Ins. Co., 242 Mich. App. 255, 262, 617 N.W.2d 777, 781 (2000).
Webster’s Third New International Dictionary (1993) defines “delinquent” as “in arrears in
payment of debt or interest” or “past due and unpaid.” Black’s Law Dictionary (10th ed. 2014)

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provides, as one definition of delinquent, “(Of an obligation) past due or unperformed.” Thus,
Defendant’s application by its plain meaning is asking the homeowner whether there are
property taxes that are past due and that have been past due for two years or longer from the time
of the application. On July 17, 2012, the property taxes for the 2010 calendar year were past due
and owing. Thus, Plaintiff’s response that there were no delinquent property taxes for two or
more years was a misrepresentation.
Several courts in this District have addressed whether an insured’s failure to report
delinquent property taxes on an application for homeowner’s insurance is a material
misrepresentation that enabled the insurer to rescind the policy and avoid paying on losses
caused by fire damage. None of those cases employed the definition of “delinquent” being
advanced here by Plaintiff. For example, in Carter v. Liberty Insurance Corp., No. 11-14690,
2012 U.S. Dist. LEXIS 164505 (E.D. Mich. Nov. 19, 2012), the plaintiff filled out a homeowners
insurance policy application on October 21, 2010, in which he stated that the real property taxes
were not delinquent and had not been delinquent for two or more years. The previous owner,
however, had never paid the property taxes on the residence for the 2008, 2009, and 2010 tax
years. The court found that the plaintiff’s response was a material misrepresentation and the
policy was null and void. Id. at *18. In Stevens v. Liberty Insurance Co., No. 11-14695, 2012
U.S. Dist. LEXIS 88230 (E.D. Mich. June 26, 2012), the plaintiff completed the defendant’s
application for insurance in July 2010 and attested there were no delinquent property taxes on the
property to be insured. At the time, however, the 2008 and 2009 property taxes were delinquent.
The court found this to be a material misrepresentation that the insurer relied on because, in part,
“Michigan law prohibits the issuance of a home insurance policy to ‘[a] person whose real
property taxes with respect to the dwelling insured or to be insured have been and are delinquent

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for 2 or more years at the time of renewal of, or application for, home insurance.’” Id. at *8
(quoting Mich. Comp. Laws § 500.2103(2)(j)). Similarly, in Campbell v. Liberty Mutual Group,
No. 10-14179, 2011 U.S. Dist. LEXIS 63031 (E.D. Mich. June 14, 2011), the plaintiff
represented on an August 2009 insurance application that the property taxes were not delinquent
when the 2007, 2008, and 2009 taxes remained due and owing. One of the reasons the defendant
rescinded the policy was that “[a]t the time [plaintiff] applied for this policy, real property taxes
were delinquent for two or more years.” Id. at *4. The court found this to be a material
misrepresentation that the defendant reasonably relied on. Id. at *10. None of these cases
referred to the Tax Act to interpret the phrase “delinquent two or more years.” Instead the court
in each case interpreted the phrase as it is commonly understood.
III. CONCLUSION
In sum, Defendant was entitled to rescind Plaintiff’s homeowner’s insurance policy as a
matter of law based on Plaintiff’s material misrepresentation, relied on by Defendant, that the
property taxes on the Roselawn property were not delinquent two years or more at the time of the
application. And since Defendant properly rescinded Plaintiff’s policy of insurance, it is entitled
to summary judgment on Plaintiff’s claims alleging failure to pay on this policy.
Accordingly, Defendant’s Motion for Summary Judgment is GRANTED and Defendant
is entitled to judgment as a matter of law in its favor on the claims of Plaintiff’s Complaint. A
separate judgment will follow.

s/Laurie J. Michelson
LAURIE J. MICHELSON
UNITED STATES DISTRICT JUDGE
Dated: July 25, 2014

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CERTIFICATE OF SERVICE
The undersigned certifies that a copy of the foregoing document was served on the attorneys
and/or parties of record by electronic means or U.S. Mail on July 25, 2014.
s/Jane Johnson
Case Manager to
Honorable Laurie J. Michelson

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