Michigan Court of Appeals; Docket # 346700; Unpublished
Judges Meter, Fort Hood, and Redford; 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In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s final order granting judgment to the plaintiff, Mohamed MM Alshabi, in his first-party action to recover no-fault PIP benefits. Alshabi was driving a vehicle owned by Auto Club Insurance Association’s insured, Javed Iqbal, at the time of the underlying motor vehicle collision. Auto Club later attempted to void Iqbal’s policy ab initio based on the fact that Iqbal had committed misrepresentations in his original application for coverage, and Auto Club subsequently argued that, as a result, it could not be responsible for paying Alshabi benefits under the now-voided policy. Relying on Bazzi v Sentinel Ins Co, 502 Mich 390 (2018), the Court of Appeals determined that the trial court did not err in weighing the equities of the case and concluding that Auto Club was not entitled to rescind the policy with regard to Alshabi, a party innocent of the fraud.
Alshabi filed a complaint against both Auto Club and the Michigan Assigned Claims Plan after the collision, and Auto Club moved for summary disposition, arguing that it was not liable for Alshabi’s PIP benefits because Iqbal made a misrepresentation on his original application for coverage, rendering the policy void from the outset and excusing Auto Club from any obligations it might have to Alshabi. The trial court denied Auto Club’s motion, after which Auto Club mailed a letter to Iqbal stating that it was rescinding his policy and including a refund check of his premium therein. Auto Club then filed a second motion for summary disposition, arguing that it had brought about a mutual rescission of the policy by mailing Iqbal the notice and refund and that Iqbal had consented to the rescission by cashing the premium. The trial court denied this motion as well, ruling, in reliance on Bazzi, that the equities of the case did not warrant rescission of the policy with regard to Alshabi.
The Court of Appeals affirmed the trial court’s denial of Auto Club’s second motion for summary disposition, because although Auto Club validly rescinded Iqbal’s policy based on his misrepresentations, the trial court was still required to weigh the equities of the case and determine whether rescission is proper with regard to an innocent third party, such as Alshabi.
As in this case, in both Bazzi and Mendelson Orthopedics, insurance companies validly rescinded insurance policies due to misrepresentations by the insured parties—although in this case, with Iqbal’s consent—and the insurance companies then asserted the rescission as a defense to a claim made by an innocent third party. Both this Court and our Supreme Court have concluded that, under such circumstances, the next step is for the trial court to determine whether the insurance company’s claim that the contract is void and unenforceable concerning the third party is justified by the equities of the case. Our review of the record indicates that the trial court in this case followed that exact procedure in denying ACIA’s second motion for summary disposition, and ACIA has provided no argument or analysis to suggest that we should disturb the court’s balancing of the equities.
