Not Wise to Attempt Rescission Without Evidence
Post 5173
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Desiree Durga and Justin Durga v. Memberselect Insurance Company, No. 371891, Court of Appeals of Michigan (August 13, 2025) Desiree Durga and Justin Durga (plaintiffs) claimed the insurer wrongfully attempted to rescind an auto policy.
THE ALLEGATIONS
MemberSelect claimed that Desiree Durga’s application for insurance contained a material misrepresentation, it did not produce a copy of the application. In fact defendant admitted the application for insurance no longer exists.
Trial Court Decision
The trial court granted the plaintiffs’ motion for summary disposition on their breach of contract claim and denied the defendant’s cross-motion for summary disposition, which argued that it was entitled to rescind the policy. The court found that the defendant failed to provide clear and convincing evidence of fraud
The court ultimately affirmed the trial court’s decision, granting judgment in favor of the plaintiffs in the amount of $82,476.04.
LAW AND ANALYSIS
Insurance policies are contracts and, in the absence of an applicable statute, are subject to the same contract construction principles that apply to any other species of contract.
Seeking Policy Rescission Based Upon Alleged Fraud In The Application Or Procurement Process
Desiree Durga and Justin Durga v. Memberselect Insurance Company, No. 371891, Court of Appeals of Michigan (August 13, 2025) Desiree Durga and Justin Durga (plaintiffs) claimed the insurer wrongfully attempted to rescind an auto policy.
THE ALLEGATIONS
The plaintiffs alleged that the defendant breached their automobile insurance contract by rescinding their policy based on an allegation of fraudulent misrepresentation in the application process. The rescission was attempted because plaintiff Justin Durga had two or more substance abuse convictions in seven years, his Michigan operator’s license was mandatorily revoked from June 9, 2007 “until requirements have been met.”
While defendant MemberSelect claimed that Desiree Durga’s application for insurance contained a material misrepresentation, it did not produce a copy of the June 2012 application. In fact defendant admitted the application for insurance no longer exists.
Trial Court Decision
The trial court granted the plaintiffs’ motion for summary disposition on their breach of contract claim and denied the defendant’s cross-motion for summary disposition, which argued that it was entitled to rescind the policy. The court found that the defendant failed to provide clear and convincing evidence of fraud and that the plaintiffs had disclosed that Justin Durga did not have a valid driver’s license. The court also noted that the defendant’s reliance on underwriting guidelines that were not made available to the plaintiffs was not sufficient to support their claim .
The court ultimately affirmed the trial court’s decision, granting judgment in favor of the plaintiffs in the amount of $82,476.04.
LAW AND ANALYSIS
Insurance policies are contracts and, in the absence of an applicable statute, are subject to the same contract construction principles that apply to any other species of contract. An insurance policy must be enforced in accordance with its terms, which are given their commonly used meaning if not defined in the policy
Seeking Policy Rescission Based Upon Alleged Fraud In The Application Or Procurement Process
MemberSelect asserted the common law defense of fraudulent misrepresentation in plaintiff’s application for or procurement of the subject automobile insurance policy allowed it rescission of the policy ab initio in order to avoid its contractual obligations to pay on plaintiffs’ claim.
Because a claim to rescind a transaction is equitable in nature, it is not strictly a matter of right but is granted only in the sound discretion of the court.
The insurer, as the party asserting entitlement to the defense of fraudulent misrepresentation, bears the burden of proving the elements of rescission. At best, the question seeking license status of a proposed insured was ambiguous, such that it is construed against the drafter in favor of coverage. As a result the representation made by the plaintiffs did not constitute a false representation for purposes of establishing that prima facie element of a fraud in the application rescission claim.
DEFENDANT IS NOT ENTITLED TO RESCISSION
When people seek to procure insurance by making a clear material misrepresentation to the insurance company, thereby entitling the insurance carrier to rescind the subject policies of insurance, the insurer must produce admissible evidence of the misrepresentation. Not only has defendant not provided clear and convincing evidence of fraud in this case defendant provided no evidence of fraud. Therefore, it was not entitled to rescission.
ZALMA OPINION
Rescission is an equitable remedy that seeks to deal fairly with both parties to the insurance contract. The insurer claimed that the Durgas lied on the application which they could not produce because it did not exist. An insurer seeking rescission must do so fairly and in good faith with clear and unambiguous evidence of the misrepresentation. The insurer failed when it was unable to produce the allegedly false application.
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Death by Self-Administered Dialysis is Excluded
Post 5173
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Clear & Unambiguous Exclusion Effective
Dana Kleinsteuber died while administering her own dialysis at home. MetLife now agrees that tragedy was an accident but refused to pay because of an exclusion for losses caused or contributed to by the treatment of a physical illness.
In Charles M. Kleinsteuber v. Metropolitan Life Insurance Company, CIVIL No. 23-3494 (JRT/DTS), United States District Court, D. Minnesota (August 19, 2025) the USDC was faced with the interpretation of an exclusion in an ERISA plan.
KEY FACTS:
Dana Kleinsteuber’s Death:
Dana Kleinsteuber, diagnosed with end-stage renal disease (ESRD), was self-administering dialysis at home when she suffered acute blood loss and died. The cause of death was listed as ESRD and natural causes.
Insurance Claims:
Charles Kleinsteuber, Dana’s husband, filed claims for both ...
Improper Joinder of Multiple Party Criminal Fraud Case With Co-Defendants Charged with Murder
Post 5172
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Murder Defendants Must be Tried Separately from Fraud Defendants
A case that involved allegations of a years-long scheme by over a dozen individuals to stage fake automobile collisions in the New Orleans metropolitan area and file fraudulent insurance claims and lawsuits based on the staged collisions. The key individuals involved included Cornelius Garrison, who began cooperating with the federal government in 2019 and was subsequently murdered on September 22, 2020.
FACTS
In United States Of America v. Ryan Harris, et al., CRIMINAL ACTION No. 24-105, United States District Court, E.D. Louisiana (July 25, 2025) the USCA dealt with motions to sever some defendants from the massive and admittedly complex case. There are 11 defendants charged with a multi-year conspiracy involving ...
Additional Insureds Can Intervene to Try to Defeat Suit to Rescind Policy
Post 5170
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Posted on August 18, 2025 by Barry Zalma
The case involves Accelerant Specialty Insurance Company (“Accelerant”) seeking a declaratory judgment against Big Apple Designers, Inc. (“Big Apple”), declaring that the insurance policies issued by Accelerant to Big Apple are invalid and do not create a duty to defend or indemnify Big Apple in several personal injury actions currently pending in New York State Supreme Court. M&R Construction Group, Inc. (“M&R”) and Continental Indemnity Company (“Continental”) filed a motion to intervene, asserting that M&R is entitled to coverage from Accelerant as an additional insured.
In Accelerant Specialty Insurance Company v. Big Apple Designers, Inc., No. 24-CV-7793 (ARR) (RML), United States District Court, E.D. New York (August 6, 2025) the USDC ruled to ...
Is Injury in the Course of Self-Defense an Occurrence?
Post 5171
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When There is no Accident the Intentional Acts Exclusion is Irrelevant
The case involves a tragic incident where Kimberly Mollicone was killed during a gunfight between her husband, Matthew Mollicone, and Daniele Giannone. The central issue is whether Giannone’s actions, taken in self-defense, are covered under his State Farm homeowner’s insurance policy.
In State Farm Fire And Casualty Company v. Daniele Giuseppe Giannone; Heidi C. Aull, personal representative for the estate of Kimberly Ann Mollicone, Nos. 24-1264, 24-1265, United States Court of Appeals, Sixth Circuit (August 5, 2025) resolved the dispute.
THE INSURANCE COVERAGE
Although rare in insurance contracts the policy in question provides coverage for the insured’s liability to third parties who are injured ...
Rulings on Motions Reduced the Issues to be Presented at Trial
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CASE OVERVIEW
In Richard Bernier v. State Farm Mutual Automobile Insurance Company, No. 4:24-cv-00002-GMS, USDC, D. Alaska (May 28, 2025) Richard Bernier made claim under the underinsured motorist (UIM) coverage provided in his State Farm policy, was not satisfied with State Farm's offer and sued. Both parties tried to win by filing motions for summary judgment.
FACTS
Bernier was involved in an auto accident on November 18, 2020, and sought the maximum available UIM coverage under his policy, which was $50,000. State Farm initially offered him $31,342.36, which did not include prejudgment interest or attorney fees.
Prior to trial Bernier had three remaining claims against State Farm:
1. negligent and reckless claims handling;
2. violation of covenant of good faith and fair dealing; and
3. award of punitive damages.
Both Bernier and State Farm dispositive motions before ...
ZIFL Volume 29, Issue 10
The Source for the Insurance Fraud Professional
See the full video at https://lnkd.in/gK_P4-BK and at https://lnkd.in/g2Q7BHBu, and at https://zalma.com/blog and at https://lnkd.in/gjyMWHff.
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/ You can read the full issue of the May 15, 2025 issue at http://zalma.com/blog/wp-content/uploads/2025/05/ZIFL-05-15-2025.pdf
This issue contains the following articles about insurance fraud:
Health Care Fraud Trial Results in Murder for Hire of Witness
To Avoid Conviction for Insurance Fraud Defendants Murder Witness
In United States of America v. Louis Age, Jr.; Stanton Guillory; Louis Age, III; Ronald Wilson, Jr., No. 22-30656, United States Court of Appeals, Fifth Circuit (April 25, 2025) the Fifth Circuit dealt with the ...
