Titan loses insurance dispute with innocent victims and Farm Bureau, where insured mis-stated license
McKinley Hyten was a lousy driver from day one, apparently. Her license was suspended by age 19, in response to her driving history. Her mother sought to re-insure her as the suspension termination approached, and arranged with Titan's agent to make the insurance effective on the date the suspension would end. Unknown to mom at the time, however, the license is not reinstated automatically, so on the effective date of the policy, McKinley remained unlicensed. She was licensed several weeks later, however, and wihin several months she caused another collision and injured Howard and Martha Holmes. When the injury victims sued, Titan defended by arguing that it was entitled to reduce its coverage from $100,000.00 per victim to $20,000.00 per victim because Hyten had "misrepresented" her license status when she applied for coverage. The insurer for Holmes' Underinsured Motorist Coverage, Farm Bureau, joined the Holmses in objecting to this reduction in coverage, arguing that Titan could not reduce the coverage it owed to an innocent victim because it could easily have confirmed Hyten's "misrepresentation" and failed to do so.The Court of Appeals made short work of Titan's defense. It pointed out, in a unanimous decision, that whilean insurer owes no duty to investigate its insured's coverage representations, if the insurer fails to investigate an easily identifiable misrepresentation, it, and not the innocent victim, will bear the expense of the insured's driving errors. This is longstanding law in Michigan, intended to assure that the no fault public policy of prompt, assured, adequate compensation of victims. If the insurer conducts no investigation, it cannot use later-acquired information to void even optional coverages after an innocent victim has been injured.
The Court also pointed out that Titan was willing to insure Hyten on the day her suspended license was reinstated, so it was more than disingenous for the company to argue that if fully informed, it would not have written coverage for her several weeks later.