Michael F. Schmidt Obtains Summary Judgment in US District Court Rescinding Insurance Policy for Misrepresentation in The Application and Allowing Insurer to Obtain Reimbursement of Defense Costs

Security National Insurance Company v Salient Landscaping, Inc., et al., 2022 U.S. Dist. LEXIS 194971; 2022 WL 15088848 (ED Mich, 2022).  We filed a declaratory complaint that the policy of insurance issued by Security National Insurance Company to Salient Landscaping, Inc. should be rescinded based on a material misrepresentation made by the insured in the application and that Security National should recover the defense costs and attorney fees incurred in providing a defense to the insured in an underlying action filed in the Washtenaw County Circuit Court.  We determined from discovery that the insured had indicated in the application that its operations were “basic landscape/lawn care service, maintenance and gardening – mowing, mulching, planting and/or installation,” that its work was identified as “Landscaping Gardening” and had answered “no” to the question in the application whether it had performed, supervised or subcontracted similar work in the past 10 years.  After the policy was issued, Security National was notified that suit had been filed against the insured in Michigan state court arising out of an alleged November 2018 slip and fall on ice incident.  This was the first notice to Security National that its insured had been involved in snow removal work.  Discovery then determined that the insured had entered into a snow removal contract for snow removal and de-icing services five months before making the application that it had not performed, supervised or subcontracted similar work in the previous 10 years.  After discovery, we then filed a motion for summary judgment to rescind the policy based on the misrepresentation in the application and to recover the defense costs and attorneys fees incurred in defending the insured in the underlying action.  The court granted summary judgment by opinion and order.  The court first held that we had properly established from analysis of the applicable factors that this was a proper case for the court to exercise jurisdiction under the Federal Declaratory Judgment Act.  The court then granted summary judgment on the basis that the policy should be rescinded based on the misrepresentation in the application which was relied upon by Security National in issuing the policy.  The court further held that Security National was entitled to recover “reasonable defenses costs” expended in defending the insured in the underlying action.