Michigan Court of Appeals; Docket # 346360; Unpublished
Judges Ronayne Krause, Cavanagh, and Shapiro; Per curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s denial of Pioneer Mutual Insurance Company’s motion for summary disposition and its summary disposition order in favor of Allstate Insurance Company. Pioneer attempted to avoid paying PIP benefits to the daughter and resident relative of its insured, Jeffry Baumgart, claiming that Baumgart made material misrepresentations on his application for no-fault PIP benefits and that his policy was therefore void ab initio. The Court of Appeals determined that the trial court did not err when it determined that rescission of Baumgart’s policy with respect to his daughter’s claims for PIP benefits would not be equitable, especially considering that Pioneer’s attempted rescission was based on an innocent misrepresentation Baumgart had made in his original application for insurance.
Baumgart’s daughter was injured after she was struck by a vehicle driven by Allstate’s insured, and subsequently made a claim under her father’s policy. At the time of the collision, Baumgart’s daughter was living with Baumgart, but at the time Baumgart submitted his application for insurance, his daughter was incarcerated. Ultimately, one of Baumgart’s daughter’s treatment providers’ brought an action to recover no-fault PIP benefits against the Michigan Assigned Claims Plan, Allstate, and Pioneer. The MACP had assigned Baumgart’s daughter’s claim to Citizens Insurance Company of America, who subsequently brought the instant suit seeking declaratory judgment against either Pioneer or Allstate, and seeking reimbursement for the benefits it paid to Baumgart’s daughter.
Pioneer moved for summary disposition, arguing that it was not responsible for paying Baumgart’s daughter’s PIP benefits because it had voided Baumgart’s policy ab initio two years after the collision on the basis of misrepresentations Baumgart made in his application. Specifically, Pioneer asserted that Baumgart lied about his daughter’s residence at the time of his application. The trial court ultimately denied Pioneer’s motion, and granted summary disposition in favor of Allstate instead, finding, among other things, that Baumgart did not intend to defraud Pioneer and that equity did not favor rescission of Baumgart’s policy with respect to his daughter.
On appeal, Pioneer first argued that Allstate did not have standing to contest rescission of Baumgart’s policy because Baumgart, himself, had not done so. Relying on Bazzi v Sentinel Ins Co, 502 Mich 390 (2018), however, the Court of Appeals determined that a trial court must determine whether rescission is equitable as to third parties claiming benefits under the policy regardless, and thus Baumgart’s failure to contest rescission was immaterial.
Accordingly, the fact the policy has been rescinded with respect to the insured is not dispositive of whether rescission is warranted as to a third party’s claim for benefits. So, it is immaterial that Jeffry has not contested rescission of the policy because the trial court was required to determine whether rescission was warranted as to Brittany, i.e., an innocent third party.
Pioneer next argued that the trial court erred in its determination that rescission would not be equitable as to Baumgart’s daughter’s claim for PIP benefits. Pioneer argued that it was entitled to rescission even on the basis of an innocent misrepresentation, but the Court of Appeals noted that, “[t]o the degree an innocent misrepresentation may be considered grounds to rescind as to the policyholder, making an innocent misrepresentation is less culpable behavior than actual fraud and so weighs against rescission as to a third party.”
