Michigan Court of Appeals; Docket # 347072; Published
Judges Kelly, Borrello, and Servitto; 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 published per curiam decision regarding a declaratory action in which the defendants sought rescission of an automobile insurance policy, the Court of Appeals affirmed the trial court’s denial of the plaintiff’s motion for summary disposition, as well as the trial court’s summary disposition order in favor of the defendants. The Court of Appeals held that trial court properly balanced the equities, pursuant to the Supreme Court’s decision in Bazzi v. Sentinel Ins. Co., 502 Mich 390 (2018), in ruling that the plaintiff, Pioneer State Mutual Insurance Company, could not rely on its rescission of the subject insurance policy to deny payment of an innocent third-party’s claim for no-fault PIP benefits under that policy.
Vanetta Wright applied for automobile insurance with Pioneer in 2013, but failed to disclose her adult son, Dana Reynard Harris, as a resident in her household. A few months later, Harris was injured in a motor vehicle collision while traveling as a passenger in a vehicle insured by State Farm Mutual Automobile Insurance Company. Pioneer refused Harris’s subsequent claim for PIP benefits, arguing that he did not, in fact, live with Wright at the time of the collision. Eventually, Harris filed a first-party complaint against both Pioneer and State Farm, and Pioneer filed this separate action for declaratory relief, seeking rescission of Wright’s policy on the basis of her material misrepresentation in failing to disclose Harris as a resident relative and arguing that it could not, therefore, be responsible for paying no-fault PIP benefits to Harris under the policy.
Originally, the trial court summarily dismissed Pioneer’s declaratory action on the basis of laches, a decision the Court of Appeals reversed, finding that Pioneer’s decision to wait two years to file its declaratory judgment action was neither unreasonable nor unjustified. While on remand, however, the Michigan Supreme Court decided Bazzi v. Sentinel Ins. Co., 502 Mich 390 (2018), and in light of Bazzi, the trial court weighed the equities of the case and determined that it would be inequitable to permit Pioneer to rescind Wright’s policy because, “although Pioneer’s delay was “reasonable,” it waited two years to file its declaratory action and to permit rescission would preclude Harris from recovering most of his claim for no-fault benefits from any other insurer because of the application of the one-year-back rule.”
On appeal, Pioneer first argued that the trial court violated the law of the case doctrine because its second dismissal was essentially a reapplication of the doctrine of laches—that, on remand, it used the same analysis in “balancing the equities” as it did when it applied laches. The Court of Appeals disagreed, holding that the trial court merely considered Pioneer’s delay in bringing its action in resolving the case—it did not again find Pioneer’s delay to be unreasonable or unjustified.
Pioneer argues that the trial court violated the law of the case doctrine because, on remand, it used the same analysis as it did when it applied laches. Indeed, the trial court considered nearly all of the same facts to balance the equities on remand that it did when it applied the doctrine of laches. Specifically, it considered the fact that Pioneer waited over two years to file a declaratory judgment action for rescission even though it knew that Harris resided with Wright and that it could potentially rescind Wright’s insurance policy. The trial court also considered that Harris was prejudiced by Pioneer’s delay because the one-year-back rule, MCL 500.3145, now precludes Harris from recovering a majority of his claim for PIP benefits from any other insurer since Harris’s losses occurred more than one year after he added State Farm as a defendant. However, this factual analysis conducted by the trial court did not contradict this Court’s ruling in Harris. This Court did not absolve Pioneer of any delay; it only concluded that Pioneer’s delay was not unreasonable. Harris, unpub op at 8. This Court also acknowledged that Harris was “likely prejudiced” by Pioneer’s delay. Id. The fact that the trial court considered the same factors to balance the equities does not indicate that the trial court applied the doctrine of laches. The trial court simply concluded that both Pioneer and Harris are innocent parties, but a balancing of the equities demonstrated that rescission would be inequitable and that Pioneer should bear the loss.
In summary, the trial court’s analysis was consistent with this Court’s ruling in Harris because it did not find Pioneer’s delay to be unreasonable or unjustified; the court merely considered the delay in resolving the case. In fact, the court stated that, “despite the reasonableness” of Pioneer’s delay, the equities favored Harris. Accordingly, the trial court did not violate the law of the case doctrine.
Pioneer next argued that the trial court erred when balancing the equities because it “essentially applied the doctrine of laches and failed to consider other relevant factors." The Court of Appeals disagreed with this argument as well, relying on the factors for balancing the equities laid out by Justice Markman in Farm Bureau Gen. Ins. Co. of Mich. V. ACE American Ins. Co., 503 Mich. 903 (2018).
Balancing the equities is not concerned with laying blame, but determining which of the innocent parties should bear a loss. Bazzi II, 502 Mich at 411. The resolution of the issue does not require this Court to litigate the propriety of Pioneer’s delayed conduct, particularly where this Court previously addressed it. The trial court properly determined that rescission would be inequitable because Pioneer filed a declaratory judgment action seeking rescission nearly two years after it learned of Wright’s insurance representations and rescission would preclude Harris from recovering most of his PIP claim from any other insurer. Farm Bureau Gen Ins Co of Mich, 503 Mich at ___; slip op at 4-5 (MARKMAN, J., concurring). The trial court’s analysis was specific to the facts and circumstances of the case and went no farther than what was equitable. Therefore, we cannot conclude that the trial court abused its discretion by refusing to grant rescission. Lenawee Co Bd of Health, 417 Mich at 26. Moreover, the factors applied weigh against rescission. Accordingly, the trial court properly denied Pioneer’s motion for summary disposition and granted defendants’ motions for summary disposition.
