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August 10, 2022
Rescission Does Not Defeat Negligence Claim

Agent Can be Sued for Creating a False Application that Results in Rescission

Read the full article at https://lnkd.in/gR-wM-46 and at https://zalma.com/blog plus more than 4250 posts and see the full video at https://lnkd.in/g4Ps5Drp and at https://lnkd.in/gQ6cA5jq.

In a prior action, the Michigan Court of Appeals held that defendant Farm Bureau General Insurance Company of Michigan was entitled to rescind plaintiff’s insurance policy for material misrepresentations made in the application. The Court reasoned that, regardless whether plaintiff or his insurance agent contributed the false information, plaintiff affirmed any misrepresentation by signing the application.

Lawrence S. Holman v. Farm Bureau General Insurance Company Of Michigan, Jonathan Heinzman Agency, Inc., and Jonathan Heinzman, No. 357473, Court of Appeals of Michigan (August 4, 2022)

After losing his case because of the rescission the Plaintiff then sued his insurance agent claiming he was negligent in filling out the application.
BACKGROUND

Plaintiff purchased a 2007 Mercury Mountaineer from a car dealership and called Farm Bureau sales agent Jonathan Heinzman to obtain insurance on the Mercury. Heinzman testified that he filled out the insurance application on the basis of answers he received from plaintiff over the phone. The completed application misrepresented material facts about the fact that he had not driven or moved any vehicle owned by the Applicant which has NOT had the required insurance in force for the preceding six months? An AAA policy number is then listed as plaintiff’s current insurance, with an expiration date of before the effective date of the new policy. Heinzman faxed plaintiff a temporary certificate of insurance and asked plaintiff to send proof of his prior insurance. That evening, plaintiff faxed Heinzman a AAA certificate of insurance that expired that expired two years before.

Plaintiff’s application was sent to Farm Bureau without proof of prior insurance. On January 30, 2015, Farm Bureau sent plaintiff a letter explaining that his application could not be accepted because it was incomplete.

Plaintiff brought suit against Farm Bureau to recover PIP benefits arising from the accident, and the trial court granted summary disposition to Farm Bureau. In Holman v Mossa-Basha (Holman I), issued November 29, 2018, a panel of this Court affirmed the trial court’s ruling that a notice of cancellation was not required for the temporary certificate of insurance because it expired by its own terms on January 29, 2015, and therefore plaintiff did not have coverage on the date of the crash. The Court of Appeal also held, however, that Farm Bureau was entitled to rescind the policy for misrepresentations made in the insurance application. The record evidence demonstrated that these representations were false and material.

Plaintiff signed the application after having had the opportunity to read and review it. Because plaintiff signed the application after he “skimmed over it,” he affirmed any representations or misrepresentations in the document.

Heinzman testified that he knew that Farm Bureau would cancel plaintiff’s policy. According to his notes of his communications with plaintiff, however, Heinzman told plaintiff on January 6, 2015, that Farm Bureau would “probably” cancel the policy. Similarly, after receiving an e-mail from Farm Bureau regarding the missing proof of prior insurance, Heinzman called plaintiff on January 7, 2015, and told him that Farm Bureau “may terminate coverage.” Heinzman also testified that he offered to look for coverage for plaintiff through a different insurance company. In contrast, plaintiff denied that Heinzman told him that Farm Bureau would not be insuring him or that he needed to look for other coverage.

Heinzman moved for summary disposition of the suit arguing that plaintiff’s claims were barred by the doctrines of res judicata and collateral estoppel.

The trial court granted Heinzman’s motion for summary disposition. The court determined on the basis of collateral estoppel that Holman I was dispositive of the causation element of plaintiff’s negligence action.
ANALYSIS

Plaintiff argued that the trial court erred by concluding that his negligence action against Heinzman was barred by the doctrine of collateral estoppel.

The doctrine of collateral estoppel precludes relitigation of an issue in a subsequent, different cause of action between the same parties when the prior proceeding culminated in a valid final judgment and the issue was actually and necessarily determined in that prior proceeding.

Generally, for collateral estoppel to apply three elements must be satisfied:

a question of fact essential to the judgment must have been actually litigated and determined by a valid and final judgment;

the same parties must have had a full and fair opportunity to litigate the issue; and

there must be mutuality of estoppel.

To establish a prima facie case of negligence, a plaintiff must prove the defendant owed the plaintiff a legal duty, the defendant breached the legal duty, the plaintiff suffered damages, and the defendant’s breach was a proximate cause of the plaintiff’s damages. The trial court concluded that Holman I held that plaintiff made the misrepresentations in the application and that, as a result, plaintiff could not establish that any negligent conduct by Heinzman caused plaintiff’s damages.

As noted, the Holman I panel determined that it was “meaningless” whether Heinzman provided the “bogus” AAA policy number in the application because plaintiff, as the contracting party, had a duty to read the contract and know what he signed. In other words, the panel did not need to decide whether any misrepresentation was attributable to plaintiff or Heinzman for purposes of determining whether Farm Bureau was entitled to rescission because plaintiff affirmed the contents of the application as the signing party.

The Court found in favor of the insurer, relying on the principles of contract law that “failure to read an agreement is not a valid defense to enforcement of a contract” and “[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.”

Stated differently, under contract law, a signing party is bound by the contract’s terms, regardless of whether they have read them. Accordingly, it was immaterial who contributed false information to an insurance application for purposes of determining whether an insurer may rescind a policy. The contract principles relied on in Holman I have no application in a negligence action concerning whether the insurance agent breached a duty to the insured.

Because plaintiff’s negligence claims in the instant case are tort-based, the court of appeal concluded that the plain language of the comparative fault statutes, required the trial court to give defendants’ requested instruction regarding comparative negligence.

The court of appeal additionally concluded that plaintiff’s admitted failure to read the policy could qualify as comparative negligence and that the trial court should have permitted the jury to consider whether plaintiff unreasonably failed to read the insurance policy and related documents.

The insured’s failure to read the insurance application and related documents was relevant to comparative negligence, and that the jury could reasonably determine that it was the proximate cause of the insured’s damages. Applied here, an insured’s failure to identify a misrepresentation in the application allegedly made by the insurance agent should not preclude a negligence action, but it may be considered by a jury when determining comparative fault and proximate cause.

Given that captive insurance agents are “order takers,” it follows that there is a duty to do so accurately and not contribute false information to the application, whether purposefully or mistakenly.

It was not necessary for the Court of Appeal to determine whether there was a special relationship between plaintiff and Heinzman because this case falls within the more general, limited duty to take orders.

The Court’s prior decision granting rescission to the insurer does not preclude a negligence action against the insurance agent. The trial court’s decision was reversed and remanded for further proceedings.
ZALMA OPINION

There is no reasonable basis for an insured or an insurance agent seeking to obtain insurance for the prospective insured to lie to the insurer to obtain the insurance. There is no question that the policy was acquired as a result of a material misrepresentation sufficient to require the rescission of the policy. Since the plaintiff claims he told the truth to the agent then there may be a case for the agent’s wrongdoing. If he lied to the agent he will lose the negligence case. If both lied the jury will determine what percentage of responsibility each obtains. A trial will go forward and a decision will be made.

(c) 2022 Barry Zalma & ClaimSchool, Inc.

Barry Zalma, Esq., CFE, now limits his practice to service as an insurance consultant specializing in insurance coverage, insurance claims handling, insurance bad faith and insurance fraud almost equally for insurers and policyholders. He practiced law in California for more than 44 years as an insurance coverage and claims handling lawyer and more than 54 years in the insurance business. He is available at http://www.zalma.com and [email protected].

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Write to Mr. Zalma at [email protected]; http://www.zalma.com; http://zalma.com/blog; daily articles are published at https://zalma.substack.com.

Go to the podcast Zalma On Insurance at https://anchor.fm/barry-zalma; Follow Mr. Zalma on Twitter at https://twitter.com/bzalma; Go to Barry Zalma videos at Rumble.com at https://rumble.com/c/c-262921; Go to Barry Zalma on YouTube- https://www.youtube.com/channel/UCysiZklEtxZsSF9DfC0Expg; Go to the Insurance Claims Library – https://zalma.com/blog/insurance-claims-library/

00:12:23
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Supreme Court of Louisiana Removes Judge

Judge Who Lied to Get Elected Cannot Serve

In In Re: Judge Tiffany Foxworth-Roberts, No. 2025-O-01127, Supreme Court of Louisiana (December 11, 2025) the Louisiana Supreme Court in an opinion by Chief Justice Weimer dealt with the recommendation of the Judiciary Commission of Louisiana (Commission) that Judge Tiffany Foxworth-Roberts be removed from office for:

1. making false and misleading statements regarding her judicial campaigns;
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Montana Lawyer Commits Insurance Fraud and Receives Minimal Punishment

Montana County Attorney Admits to Insurance Fraud & Is Only Suspended from Practice for 60 Days
Post 5251

Read the full article at https://lnkd.in/gnBaCjmv, see the video at https://lnkd.in/gfpVsyAd and at https://lnkd.in/gC73Nd8z, and at https://zalma.com/blog plus more than 5250 posts.

A Lawyer Who Commits Insurance Fraud and Pleas to a Lower Charge Only Suspended

In The Matter Of: Naomi R. Leisz, Attorney at Law, No. PR 25-0150, Supreme Court of Montana (December 23, 2025) the Montana Office of Disciplinary Counsel (ODC) filed a formal disciplinary complaint with the Commission on Practice (Commission) against Montana attorney Naomi R. Leisz.

On September 25, 2025, Leisz tendered a conditional admission and affidavit of consent. Leisz acknowledged the material facts of the complaint were true and she had violated the Montana Rules of Professional Conduct as alleged by ODC.

ADMISSIONS

Leisz admitted that in April 2022, her minor son was involved in a car accident in which he hit a power pole. Leisz’s son ...

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December 30, 2025
Montana Lawyer Commits Insurance Fraud and Receives Minimal Punishment

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Post 5251

Read the full article at https://lnkd.in/gnBaCjmv, see the video at https://lnkd.in/gfpVsyAd and at https://lnkd.in/gC73Nd8z, and at https://zalma.com/blog plus more than 5250 posts.

A Lawyer Who Commits Insurance Fraud and Pleas to a Lower Charge Only Suspended

In The Matter Of: Naomi R. Leisz, Attorney at Law, No. PR 25-0150, Supreme Court of Montana (December 23, 2025) the Montana Office of Disciplinary Counsel (ODC) filed a formal disciplinary complaint with the Commission on Practice (Commission) against Montana attorney Naomi R. Leisz.

On September 25, 2025, Leisz tendered a conditional admission and affidavit of consent. Leisz acknowledged the material facts of the complaint were true and she had violated the Montana Rules of Professional Conduct as alleged by ODC.

ADMISSIONS

Leisz admitted that in April 2022, her minor son was involved in a car accident in which he hit a power pole. Leisz’s son ...

00:08:27
December 31, 2025
“Sudden” is the Opposite of “Gradual”

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Read the full article at https://www.linkedin.com/pulse/sudden-opposite-gradual-barry-zalma-esq-cfe-h7qmc, see the video at and at and at https://zalma.com/blog plus more than 5250 posts.

Insurance Policy Interpretation Requires Application of the Judicial Construction Doctrine

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December 29, 2025
Doctor Accused of Insurance Fraud Sues Insurer Who Accused Him

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He Who Represents Himself in a Lawsuit has a Fool for a Client

In Pankaj Merchia v. United Healthcare Services, Inc., Civil Action No. 24-2700 (RC), United States District Court, District of Columbia (December 22, 2025)

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Parties & Claims:

The plaintiff, Pankaj Merchia, is a physician, scientist, engineer, and entrepreneur, proceeding pro se. Merchia sued United Healthcare Services, Inc., a Minnesota-based medical insurance company, for defamation and related claims. The core allegation is that United Healthcare falsely accused Merchia of healthcare fraud, which led to his indictment and arrest in Massachusetts, causing reputational and business harm in the District of Columbia and nationwide.

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The alleged defamation occurred when United ...

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December 15, 2025
Zalma’s Insurance Fraud Letter – December 15, 2025

Zalma’s Insurance Fraud Letter

Read the full article at https://lnkd.in/dG829BF6; see the video at https://lnkd.in/dyCggZMZ and at https://lnkd.in/d6a9QdDd.

ZIFL Volume 29, Issue 24

Subscribe to the e-mail Version of ZIFL, it’s Free! https://visitor.r20.constantcontact.com/manage/optin?v=001Gb86hroKqEYVdo-PWnMUkcitKvwMc3HNWiyrn6jw8ERzpnmgU_oNjTrm1U1YGZ7_ay4AZ7_mCLQBKsXokYWFyD_Xo_zMFYUMovVTCgTAs7liC1eR4LsDBrk2zBNDMBPp7Bq0VeAA-SNvk6xgrgl8dNR0BjCMTm_gE7bAycDEHwRXFAoyVjSABkXPPaG2Jb3SEvkeZXRXPDs%3D

Zalma’s Insurance Fraud Letter (ZIFL) continues its 29th year of publication dedicated to those involved in reducing the effect of insurance fraud. ZIFL is published 24 times a year by ClaimSchool and is written by Barry Zalma. It is provided FREE to anyone who visits the site at http://zalma.com/zalmas-insurance-fraud-letter-2/

Zalma’s Insurance Fraud Letter

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