PrimeOne asserted that, in response to a question on the insurance application seeking the "[n]umber of police calls within the past year," DDI had replied, "[one] call to report a fight that broke out outside the bar." PrimeOne said, however, that it found multiple instances of criminal activity at the bar in the year preceding DDI's submission of the insurance application, including several incidents involving police calls to the bar that DDI had not reported on its application for insurance.

DDI sued, and the parties moved for summary disposition. The trial court denied the motions, reasoning that there was a genuine issue of material fact as to whether DDI's answer to the police call question on the insurance application constituted a material misrepresentation.

The dispute reached a Michigan appellate court.

There, PrimeOne asserted that the trial court had erred in denying its motion for summary disposition because there was no genuine issue of material fact that DDI had made a material misrepresentation on its application for insurance, entitling PrimeOne to rescind the policy.

The Appellate Court's Decision

The appellate court reversed.

In its decision, the appellate court explained that if DDI had reported the actual number of police calls to Bar 153 in the year before it submitted its insurance application to PrimeOne, it also would have had to reveal at least two incidents of assault and battery.

The appellate court said that, according to PrimeOne's underwriting guidelines, PrimeOne would not insure "[a]ny risk with (2) or more assault or battery incidents in the last 3 years."

Therefore, the appellate court reasoned, if DDI had answered the police-calls question truthfully and had reported two assault and battery incidents in the year prior to applying for insurance with PrimeOne, not to mention the other activities for which police were called to Bar 153, PrimeOne "would have rejected the application."

The appellate court added that DDI's representation of the number of police-calls on its insurance application "was material" because truthfulness would have triggered the underwriting guidelines' prohibition against insuring a business with two or more incidents of assault and battery in the last three years.

In summary, the appellate court found that PrimeOne had presented evidence that DDI made a representation about police calls that it knew was false, that the representation was material, that it was made with the intent that PrimeOne would rely on it to issue a policy of insurance, that PrimeOne did rely on that misrepresentation when issuing a policy to DDI, and that PrimeOne suffered injury. Accordingly, the appellate court concluded that PrimeOne had met its burden to establish that DDI had engaged in actionable fraud and was entitled to summary disposition with respect to DDI's claim for coverage.

The case is Doa Doa, Inc. v. PrimeOne Ins. Co., No. 339215 (Mich. Ct. App. Oct. 31, 2019).