Michigan Court of Appeals; Docket # 345551; Unpublished
Judges Murray, Swartzle, and Cameron; 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In this unanimous unpublished per curiam decision, the Court of Appeals vacated the trial court’s decision to grant the defendant’s motion for summary disposition, and remanded to the trial court for consideration of whether rescission of the subject automobile insurance policy—with regard to an innocent third-party’s claims for no-fault PIP benefits under it— would be an equitable remedy.
The plaintiff, Reginald Petite, was injured in a motor vehicle collision while traveling as a passenger in a vehicle that was insured with the defendant, Everest National Insurance Company, by Cherea White. Petite thereafter sought no-fault PIP benefits from Everest under White’s policy, but Everest sought to rescind White’s policy and deny Petite’s claims as a result. Everest argued that it was entitled to rescission because White had made a material misrepresentation in obtaining the policy, and that it therefore could not be responsible for any claims made under it. Ultimately, the trial court granted summary disposition in favor of Everest, “stating that White’s misrepresentation rendered the insurance policy void ab initio and that, because there was no insurance policy to enforce, Everest was not liable to Petite for PIP benefits.”
On appeal, Petite argued that the Supreme Court’s holding in Bazzi v. Sentinel Ins. Co., 502 Mich. 390 (2018) required the trial court to balance the equities between the parties before holding that rescission is an appropriate remedy with regard to an innocent third-party. The Court of Appeals agreed, noting that, in Bazzi, insurers are not automatically entitled to rescission under circumstances in which an innocent third party is involved. Rather, the trial court must determine whether rescinding the policy would be equitable. The trial court failed to do that in this case, and thus the Court of Appeals remanded for it to make such a determination.
Based on the holding in Bazzi, we conclude that the trial court correctly determined that Everest was entitled to seek rescission of the insurance policy obtained by White through fraudulent misrepresentation. However, the trial court erred when it determined that Petite was automatically excluded from seeking benefits under the policy. Our Supreme Court’s holding in Bazzi is clear: when an insurance company seeks rescission, the trial court’s next step is to determine whether the insurance company’s claim concerning the third-party is justified by the equities of the case. In this case, the trial court did not undertake this analysis. Consequently, we remand this matter to the trial court so that it can determine whether rescinding the insurance policy as between Everest and Petite would be equitable.
