Michigan Court of Appeals; Docket #346345; Unpublished
Judges Gadola, Cavanagh, and Kelly; Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
Fraud/Misrepresentation
SUMMARY:
In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s summary disposition order dismissing the plaintiff medical provider’s first-party action to recover no-fault PIP benefits under a theory of assignment, but vacated the trial court’s order insofar as it required defendant, IDS Property Insurance Company (IDS), “to refund the full premium amount to its insureds to effectuate rescission of their no-fault policy” without first subtracting the amounts it paid in benefits. The Court of Appeals held that the no-fault policy at issue was procured by fraud, and that IDS was therefore entitled to rescind the policy ab initio and deny any claims for benefits made under it. Furthermore, the Court of Appeals held that the trial court properly balanced the equities in determining that AAA, as the assignee of the named insureds under the policy, could not recover PIP benefits under the policy either.
Isha Simpson and Anaquetta Terry are friends who co-owned a 2014 Chrysler 300, and obtained a policy of no-fault insurance for their vehicle from IDS. Simpson and Terry listed Simpson’s address in Redford, Michigan as the address on the application, but both Simpson and Terry testified later that Terry lived in Detroit, Michigan and never, in fact, lived at the Redford address. Some time thereafter, Simpson was injured in a motor vehicle collision and received treatment from AAA. Simpson assigned her right to PIP benefits to AAA, but IDS informed Simpson that it was invoking the fraud provision in the policy to rescind the policy. IDS further informed Simpson that it would tender back the amount of premiums paid, $3,677.17, less the amount of benefits paid under the policy, approximately $10,000. Since the amount IDS paid in benefits under the policy exceeded the amount Simpson and Terry paid in premiums, no money was actually refunded to Simpson and Terry. In AAA’s resultant lawsuit to collect no-fault PIP benefits, IDS moved for summary disposition, arguing that it was not liable for payment of any benefits under the policy, having rescinded the policy on the basis of fraud in its procurement. The trial court granted IDS’s motion, but also ordered IDS to refund the premiums in full, notwithstanding the fact that it had paid approximately $6,000 more in benefits than had been paid in premiums.
On appeal, the Court of Appeals first held that the trial court correctly concluded that Simpson and Terry made material misrepresentations on their application for insurance with IDS, and that the trial court properly determined that the circumstances of the case warranted rescission. The Court noted that “[c]ontrary to AAA’s argument that IDS did not establish that the misrepresentation was false and knowingly or recklessly made, the testimony of both Simpson and Terry demonstrated that they knew their representations were false.” The Court further held that the trial court properly balanced the equities in determining that AAA was not entitled to seek benefits under the now-rescinded policy, because AAA, as Terry’s assignee, was “not an innocent party for purposes of this analysis.”
In this case, however, AAA is not an innocent party for purposes of this analysis. A healthcare provider stands in the shoes of the insured for purposes of entitlement to benefits, and therefore cannot recover benefits if the insured is not permitted to recover. See Bahri v IDS Prop Cas Ins Co, 308 Mich App 420, 424; 864 NW2d 609 (2014). Here, although AAA is innocent of the fraud perpetrated by Simpson and Terry, it is the assignee of Simpson and therefore is essentially the same person as Simpson, standing in her shoes for purposes of recovery against IDS. IDS’s rescission of the policy therefore is effective against AAA because it is effective against Simpson. Because AAA is an assignee standing in Simpson’s shoes who cannot recover benefits Simpson cannot recover, see id., the trial court did not err by not separately considering the equities between AAA and IDS before granting IDS summary disposition.
The Court of Appeals next held that the trial court erred in ordering IDS to refund the full premium without regard for the fact that it paid considerably more in benefits under the now-rescinded policy.
[R]equiring IDS to refund the premiums without considering IDS’s claim that it had already paid to or on behalf of the insureds more than the amount of the premiums, restores Simpson and Terry to their precontract position, but not IDS. “Setoff is a legal or equitable remedy that may occur when two entities that owe money to each other apply their mutual debts against each other.” Walker v Farmers Ins Exch, 226 Mich App 75, 79; 572 NW2d 17 (1997). What amount, if any, IDS contends Simpson and Terry owe is unclear from the trial court record. However, IDS should be given an opportunity to present its claim that the refund of the premiums should be weighed against amounts paid by IDS under the policy in the trial court’s balancing of the equities.
