Michigan Court of Appeals; Docket # 341013; Published
Judges Redford, Markey, and Kelly; per curiam
Official Michigan Reporter Citation: Pending; Link to Opinion
STATUTORY INDEXING:
One-Year Notice Rule Limitation [§3145(1)]
Obligation of Claimant to Make Timely Claim to the Assigned Claims Facility [§3174]
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
SUMMARY:
In this unanimous published per curiam decision, the Court of Appeals reversed the trial court’s summary disposition order dismissing the plaintiffs’ first-party action to recover no-fault PIP benefits and remanded for further proceedings. At issue was whether the defendant, Everest Nationwide Insurance Company, could rescind a policy on the basis of fraud—committed by the policyholder—to deny all claims for PIP benefits under the policy, even those made by individuals other than the policyholder. The trial court erroneously believed that it was compelled by the Supreme Court’s decision in Bazzi v. Sentinel Ins. Co., 315 Mich. App. 763 (2016) to enforce Everest’s rescission of the subject policy even with regard to the plaintiff, thereby disposing of the plaintiffs’ claims for benefits under the policy. The Court of Appeals reversed this decision, holding that the trial court could have—and should have—made a discretionary determination about whether to allow Everest to rely on its rescission to defend against the plaintiffs’ claims by balancing the equities between the non-policyholder plaintiffs and Everest. The Court of Appeals also determined, unrelatedly, that the plaintiffs’ claims against the MAIPF were not barred by the one-year-notice requirement of MCL 500.3174, because they qualified for an exception to that requirement found in MCL 500.3145(1)—which allows claimants to give notice of their claims within one year of the last payment of PIP benefits, if PIP benefits had been paid at any point for the same injury.
The plaintiffs, Larry Morgan and Donald DeVore, were traveling in a motor vehicle owned by the defendant’s insured, Cracynthia Havlicsek, when they were rear-ended and injured. The defendant, Everest Nationwide Insurance Company, paid PIP benefits to the plaintiffs for six months following the collision, but stopped after receiving the results of the plaintiffs’ independent medical examinations. After Everest refused to pay any further PIP benefits to Morgan and DeVore, two of Morgan’s treatment providers sued Everest to recover reimbursement for services they provided. Morgan and Devore moved to intervene in their providers’ action, and in their intervening complaint, they alleged claims against Everest and the MAIPF.
Around the time Morgan and DeVore filed their intervening complaint, Everest claimed it discovered that Havlicsek had misrepresented her address on her policy application. As a result, Everest rescinded Havlicsek’s policy, and moved for summary disposition in the present suit, arguing that the rescission “precluded all plaintiffs from seeking coverage under the policy.” The trial court granted Everest’s motion for summary disposition, believing that it was compelled to do so by Michigan law.
The MAIPF moved for summary disposition as well, arguing that the plaintiffs never submitted an application for benefits or notice of a claim until more than a year after the subject motor vehicle collision, which occurred on June 2, 2015. The MAIPF argued that it was not given notice of the plaintiffs’ claims until they filed this lawsuit, on September 19, 2016, in violation of MCL 500.3172 and 500.3174. The trial court also granted summary disposition in favor of the MAIPF.
The Court of Appeals reversed the trial court’s summary disposition order in favor of Everest and the MAIPF, noting first that insurers are not categorically entitled to rescission, and that trial courts are not required to grant rescission in all cases. Rather, as the Michigan Supreme Court pointed out, because “a claim to rescind a transaction is equitable in nature, it is not strictly a matter of right but is granted only in the sound discretion of the court.” Therefore, a trial court must balance the equities between the parties before determining whether rescission is proper. In this case, the trial court merely granted Everest’s motion for summary disposition on the erroneous belief that it was compelled to do so by Michigan law, when it could have—and should have—made a discretionary determination as to whether Everest’s could rely on the rescission of Havlicsek’s policy to deny the plaintiffs’ claims.
In this case, DeVore invoked the doctrines of equitable estoppel, laches, and promissory estoppel, in an effort to persuade the trial court to consider the equities as between the parties because Everest’s conduct placed DeVore in the position of having no recourse to any further recovery of PIP benefits. DeVore argued that Everest could not assert Havlicsek’s fraud in the application as an absolute defense against his claims irrespective of the equities of the parties. The trial court declined to consider the equities because it believed that Michigan law compelled it to grant Everest summary disposition.1
Our Supreme Court decided Bazzi on July 12, 2018. Bazzi confirms that the trial court appropriately recognized Everest’s right to rescind and treat the policy as void ab initio as between itself and Havlicsek. The Supreme Court, however, clarified in Bazzi that the trial court should consider and balance the equities to determine, as between Everest and DeVore, whether the equities permit Everest the equitable remedy of rescission as to DeVore or precluded it from relying on the fraud defense to DeVore’s claims. De novo review of the record establishes that the trial court did not consider or determine the equities as between Everest and DeVore. The trial court specifically stated on the record that it would not do so. Under our Supreme Court’s decision in Bazzi, the trial court should have exercised its discretion and determined whether Everest could rely on the rescission for its defense of DeVore’s claims because an insurer is not automatically entitled to rescission as between all parties by operation of law. Because the trial court did not consider or determine the equities as between Everest and DeVore, we reverse its decision and remand this case to the trial court for further proceedings consistent with our Supreme Court’s Bazzi decision.
The Court of Appeals also reversed the trial court’s summary disposition order in regards to the MAIPF’s argument that the plaintiffs’ claims were barred by MCL 500.3174 because the claimants failed to file an application of benefits or give notice of their claim within one year of the collision. The plaintiffs argued that the trial court failed to properly interpret the interplay between MCL 500.3174 and MCL 500.3145(1), and the Court of Appeals agreed. MCL 500.3145(1) provides that, in instances where an insurer—Everest, in this case—paid PIP benefits originally or at any point for the injury, then an action may be commenced at any time within one year of the most recent payment. Thus, although the plaintiffs filed their claim more than one year after the subject collision, they filed less than one year after their last payment by Everest.
In this case, the MAIPF moved for summary disposition on the ground that DeVore did not provide any notice of his claim to it until September 19, 2016, over one year and three months after he suffered injury in his accident, when the MAIPF received a copy of the complaint in this lawsuit. The MAIPF asserted that DeVore failed to comply with the claim notice requirements of MCL 500.3174. DeVore opposed the MAIPF’s motion on the ground that he met the notice requirement because he brought his action against the MAIPF within one year of the last payment of PIP benefits by Everest. DeVore supported his opposition by attaching to his opposition brief a comprehensive account statement of the payments made by Everest’s claims management company of PIP benefits to Mendelson for medical services rendered to DeVore in relation to his June 2, 2015 accident. The last date on which Everest made a payment occurred on January 22, 2016, for medical services rendered on December 11, 2015. The record, therefore, reflects that the most recent allowable expense, work loss, or survivor’s loss incurred by DeVore occurred on December 11, 2015. DeVore filed his Intervening Complaint against the MACP and the MAIPF on September 23, 2016. The MAIPF conceded in its motion for summary disposition that it received a copy of DeVore’s complaint on September 19, 2016. The record reflects that the MAIPF had notice of DeVore’s claims for PIP benefits well within the one-year notice limitation period extended by the payment exception that applied in this case. Therefore, DeVore’s notice to the MAIPF fell within the time that would have been allowed for filing an action for PIP benefits as prescribed by MCL 500.3174.
