The dispute arose from an automobile insurance claim filed by the Estate of Calvin McWilliams against Citizens United Reciprocal Exchange (CURE) and Titan Insurance Company. McWilliams had applied for coverage in June 2022, listing himself and his daughter as the only household members. In July 2022, he called CURE to update his policy, adding a new vehicle and changing his address, while stating he was the only driver and denying that he resided with any new household members.
In August 2022, McWilliams was struck by a motor vehicle while crossing a street. He submitted claims for personal protection insurance (PIP) and uninsured/underinsured motorist (UM/UIM) benefits to both Titan and CURE. CURE’s special investigations unit (SIU) opened an investigation due to possible undisclosed household members.
CURE later obtained a recorded statement in January 2023 in which McWilliams stated that he had moved in with his grandson, Eric Bester Jr., and Bester’s girlfriend, Daijour Lathan. Bester, whose driving privileges had been suspended since October 2021, was listed as the driver of the new vehicle. In September 2022, CURE had obtained a recorded statement in which McWilliams claimed he resided alone, though he admitted his grandson and his grandson’s girlfriend “be there.”
In February 2023, CURE sent a letter signed by Underwriting Manager Denise Guest declaring the policy void ab initio due to material misrepresentations and omissions. The letter cited McWilliams’s failure to disclose Bester and Lathan and his false statements regarding his living situation and driving status. CURE issued a refund check for premium payments, which McWilliams cashed.
McWilliams sued CURE in August 2023 for unpaid PIP, UM, and UIM benefits. CURE answered with 43 special or affirmative defenses, including the assertion that the policy was void due to material misrepresentations. McWilliams died in October 2023, and his estate’s personal representative, Calvin Sinclair, succeeded to the claim.
During discovery, Sinclair moved to compel CURE to produce its PIP adjuster, UM adjuster, and underwriter for deposition. CURE moved for a protective order, arguing that deposing the PIP and UM adjusters was unnecessary because they played no role in the policy’s rescission. CURE offered to produce James Sullivan, the underwriting manager, for testimony limited to the rescission decision.
At a May 2024 hearing, the trial court ordered the depositions of CURE’s underwriter and PIP adjuster within 14 days but declined to order the deposition of the UM adjuster. The court did not limit the scope of the depositions or grant the protective order.
CURE produced Isaac Nzoma, its PIP adjuster, and James Sullivan for deposition. During Sullivan’s deposition, he testified that he was not an underwriter but the manager of underwriting investigations. He explained that his role involved reviewing SIU reports to determine whether to take adverse action on a policy, such as issuing a void letter or generating premium refunds.
Sullivan testified that he had not personally reviewed the recorded phone call in which McWilliams allegedly made the misrepresentation. He stated that his understanding was that once he assumed his position in October 2023, company protocol dictated that he would be the person subject to deposition regarding rescission decisions. He concurred with Guest’s decision to rescind the policy after reviewing the SIU report and policy file.
After the deposition, Sinclair moved to strike CURE’s rescission defense, arguing that CURE had willfully violated the discovery order by producing Sullivan instead of Guest, thereby prejudicing Sinclair’s ability to complete discovery. CURE responded that it believed Sullivan was the best person to testify and reiterated its willingness to produce Guest.
At the hearing on the motion to strike, Sinclair argued that he was “in no better position” than he was a year prior and that Sullivan’s deposition yielded nothing meaningful. CURE stated that Guest would not have been able to testify about more information than Sullivan and would not have listened to the recording of McWilliams’s call.
The trial court struck the affirmative defense, acknowledging the sanction was “harsh” but noting that CURE was “playing hide the ball” by producing the wrong person and delaying the case. The court rejected CURE’s suggestion that monetary sanctions under Dean v Tucker would be more appropriate.
On appeal, the Court of Appeals held that the trial court abused its discretion. The panel noted that while striking a defense is a severe sanction, it is not the functional equivalent of a dismissal or default judgment, especially when the defendant raised 42 other special or affirmative defenses. Therefore, the trial court was not required to make specific findings under each of the eight Dean factors but must consider the totality of the circumstances.
The Court of Appeals found that the trial court’s factual findings were clearly erroneous. It noted that Sullivan, despite not being an underwriter, was knowledgeable about the underwriting process, had been trained by Guest, and reviewed the same documents she did. The only questions Sullivan could not answer related to the exact phrasing of McWilliams’s statements, information that would likely only be known by customer service or accounting staff, not an underwriter.
The panel also found little evidence that CURE was acting in bad faith. CURE’s counsel had inaccurately described Sullivan as the underwriting manager, but the record supported that CURE’s decision to produce Sullivan was based on a change in company protocol that occurred after the policy was rescinded but before depositions were an issue.
Furthermore, the Court of Appeals found that CURE’s discovery violation did not prejudice Sinclair. Sinclair had been on notice of the rescission defense since September 2023 and had received the SIU report and recordings of McWilliams’s statements in December 2023. The court rejected the trial court’s assertion that Sinclair had “no idea” what the alleged misrepresentation was.
The panel also noted that the case’s delay was not solely attributable to CURE. The case was significantly delayed by McWilliams’s death and the subsequent appointment of his personal representative. Additionally, Titan Insurance Company had requested and received a three-month extension to its discovery deadline.
Finally, the Court of Appeals found that CURE attempted to cure the defect by offering to produce Guest or the SIU investigator for deposition after Sullivan’s testimony. The trial court failed to consider these mitigating circumstances.
The Court of Appeals concluded that striking the rescission defense was a disproportionately harsh sanction for a technical discovery violation and vacated the order, remanding the case for further proceedings.