Michigan Court Assesses Electronic Signature Authentication under UETA in Online Insurance Transaction

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[author: Jeff Neuburger]

The acceptance of electronic signatures in commercial transactions has become so commonplace that disputes about their use are relatively few. A Michigan appeals court recently considered the validity of an electronic signature where the issue was whether the signature on an online change of beneficiary of a life insurance policy was properly attributed to the decedent. The former beneficiary argued that the insurance company had failed to affirmatively establish the efficacy of its security procedures with respect to the acceptance of electronic signatures, and that in essence, a fraud had been committed by an imposter who actually opened the online account and requested the change in beneficiary.

Although decided under Michigan law, the ruling construes a provision of the Uniform Electronic Transactions Act. The UETA has been enacted in every state except New York, Washington and Illinois. At issue was the applicability Section 9 of the UETA, “Attribution and Effect of Electronic Record and Electronic Signature,” codified in Michigan as M.C.L. § 450.839:

(1) An electronic record or electronic signature is attributable to a person if it is the act of the person. The act of the person may be shown in any manner, including a showing of the efficacy of any security procedure applied to determine the person to which the electronic record or electronic signature was attributable.

(2) The effect of an electronic record or electronic signature attributed to a person under subsection (1) is determined from the context and surrounding circumstances at the time of its creation, execution, or adoption, including any agreements of the parties, and otherwise as provided by law.

In Zulkiewski v. American General Life Insurance Co., 2012 Mich. App. LEXIS 1086 (Mich. Ct. App. June 12, 2012) (unpubished), the former beneficiaries of the life insurance policy (the decedent’s parents) contested the change of beneficiary in favor of the decedent’s new spouse. The record established that the some months prior to the decedent’s suicide, someone purporting to be the decedent established an online account on the insurance company’s site, having supplied (as was required) the decedent’s policy number, social security number, mother’s maiden name, and an e-mail address. A confirmatory e-mail was generated by the insurance company, with instructions to contact the company if the insured did not intend to create an online account. A few minutes later, the account was used to execute the online change of beneficiary request in favor of the decedent’s spouse. The insurance company sent an e-mail message confirming that change, along with a letter confirmation sent by regular mail.

Following the decedent’s suicide, the former beneficiaries challenged the payout of the policy to the spouse, asserting that there was no proof that the decedent had requested the beneficiary change. They pointed out that while the UETA provides that an electronic record or signature cannot be denied effect simply because it is in electronic form, the electronic signature must be executed or adopted by the signatory as the embodiment of his or her intent. See M.C.L. § 450.832(h) (UETA Section 2(8)) (definition of an electronic signature). Referencing M.C.L. § 450.839(1) above, they argued that the insurance company was required to show the efficacy of its security procedures in order to establish the authenticity of the decedent’s electronic signature.

The Michigan appeals court disagreed, finding that the UETA does not require a showing of the efficacy of security procedures in order to establish the validity of an electronic signature. The court noted that M.C.L. § 450.839(1) provides that attribution of an electronic signature may be shown “in any manner,” with the efficacy of security procedures being one such showing. The court noted, among other things, that the person who made the online change of beneficiary had numerous items of the policyholder’s personal information; that both e-mail and postal mail notifications were sent upon the establishment of the online account and upon the change of beneficiary; that the policyholder was “highly computer-literate,” and that the policyholder had made the spouse the beneficiary on other insurance policies as well. The court also noted the spouse’s denial of any involvement in the making of the disputed change of beneficiary.

The court concluded that the insurance company had met its burden under Michigan law to establish its right to summary disposition of the issue of the validity of the signature. The court characterized the former beneficiaries’ argument as conjecture, and lacking support of any substantively admissible evidence.

While the ruling is grounded to some extent in Michigan procedural law concerning the evidentiary burden in a motion for summary disposition, it is a useful precedent construing the UETA. M.C.L. 450.836(c) (Section 6(3) of the Act), provides that the Act shall be construed to “[e]ffectuate its general purpose to make uniform the law with respect to electronic transactions among the states.”