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A Better Partnership
June 11, 2015

COA determines that renewals of insurance policies are not applications for insurance for purposes of Michigan statute

In Beckett-Buffum Agency v. Allied Property & Casualty Insurance Co., No. 321273, the Court of Appeals considered whether the renewal of an existing insurance policy is an application for insurance under the Insurance Code’s provision allowing an insurer to terminate an independent agency agreement.  The court held that the legislature’s intent was clearly not to include renewals of existing policies as applications for insurance.  Because the statute did not contemplate renewals of insurance, the court affirmed the trial court’s decision granting summary disposition to defendant.
In 2010, plaintiff Beckett-Buffum Agency entered into an independent agency agreement with defendant Allied Property & Casualty Insurance Co. to serve as an insurance producer for Allied.  The following year, Allied terminated the agency agreement, citing Beckett-Buffum’s lack of insurance policy production.  The Insurance Code, MCL 500.1209(2)(e), allows an insurer to terminate an independent agency agreement when the agent submits less than 25 applications for home and automobile insurance within the preceding 12-month period. Becket-Buffum alleged that it submitted 29 applications in the preceding 12 months, and thus the contract could not be canceled.  Allied moved for summary disposition and argued that six of those 29 policies were merely renewals of pre-existing policies and not applications for insurance.  The trial court granted Allied’s motion, and Beckett-Buffum appealed.
The Court of Appeals considered the dictionary definition of “application,” and determined that the term suggests a request or petition for insurance coverage.  The court then concluded that, where an existing policy is simply being renewed, the request or petition for insurance coverage has already occurred, and the renewal is simply an extension of an existing contract.  As a result, MCL 500.1209(2)(e) does not contemplate the renewal of existing policies or the reinstatement of lapsed policies as an application for insurance.  Therefore, the court held that the statute permitted Allied to terminate the contract, and affirmed the trial court’s decision granting summary disposition.

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