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Estate of Audisho, et al v Everest Nat’l Ins Co  (COA – UNP 6/24/2021; RB #4286) 


Michigan Court of Appeals; Docket #352391; Unpublished
Judges  Kelly, Shapiro, and Swartzle;  Per  Curiam
Official Michigan Reporter Citation: Not  Applicable; Link to Opinion

Not Applicable

Cancellation and Recission of Insurance Policies
Innocent Third Party Doctrine

In this unanimous unpublished per curiam decision, the Court of Appeals affirmed the trial court’s denial of Defendant Everest National Insurance Company’s (“Everest”) motion for summary disposition, in which Everest sought dismissal of Plaintiff Estate of Yacoub Audisho, Salima Audisho, and Sky 1 Transport’s (“Sky 1”) first-party action. The Court of Appeals held that the trial court did not err in concluding that a question of fact existed as to whether Yacoub accepted rescission of his no-fault policy by cashing the refund check Everest sent him after it determined that he had committed fraud in the procurement of his policy. The Court of Appeals further held that a balancing of the equities weighed against allowing Everest to rescind Yacoub’s policy with respect to Salima, his wife, an innocent third-party to his alleged fraud. As a result, the Court of Appeals remanded to the trial court to enter an order granting summary disposition to Salima on that issue.

Yacoub obtained an automobile insurance policy from Everest and was involved in a motor vehicle collision with his wife, Salima, 20 days later. Both Yacoub and Salima made a claim for no-fault PIP benefits with Everest, who mailed Yacoub a letter notifying him that his policy was being rescinded because he failed to list Salima as a household resident on his original application for coverage. A premium refund check was then mailed to Yacoub, which he endorsed and cashed. Yacoub filed the underlying lawsuit against Everest approximately one year after the collision, and Sky 1 intervened as an assignee of Yacoub and Salima. Everest moved for summary disposition, arguing that Yacoub had accepted rescission by endorsing and cashing the premium refund check, and that a balancing of the equities weighed in favor of rescinding the policy with respect to Salima and Sky 1, who were innocent third parties of any fraud committed by Yacoub, as well. The trial court disagreed, noting that a question of fact existed as to whether Yacoub, who could not read or write English, knew that he was accepting rescission by cashing the premium refund check, and also as to whether a balancing of the equities weighed in favor of rescinding the policy with respect to Salima and Sky 1.

The Court of Appeals affirmed the trial court’s denial of Everest’s motion, holding that a question of fact did exist as to whether Yacoub knew he was cashing a premium refund check and thereby accepting rescission of his policy. The Court of Appeals noted that the date on the check was different than the date on the letter, and that Everest failed to present any evidence that a notification about the reason for the check’s issuance was sent along with the check. Everest ultimately attached a letter from a representative of Everest’s third-party administrator, in which she claimed that a rescission letter was sent with the premium refund check, to its motion for reconsideration, but the trial court properly exercised its discretion in declining to consider new evidence on the motion for reconsideration, especially considering the letter could have been attached to the original motion.

"In support of its motion for summary disposition, Everest produced a letter to Yacoub dated March 22, 2018, that stated the company was rescinding his policy because of his failure to list Salima on the application. The letter also indicated that a premium refund in the amount of $1,315.16 was enclosed, but the copy of the check provided by Everest was dated April 18, 2018, which strongly suggested that the letter and check were not mailed together. In addition, the copy of the check submitted did not contain a memo line or any other indication that the check described the reason for its issuance. In the absence of a writing that directly accompanied the premium refund check stating what it constituted, a reasonable juror could find Yacoub did not know he was agreeing to a rescission when he endorsed and cashed the premium refund check."

The Court of Appeals next held that a balancing of the equities did not weigh in favor of rescinding the policy with respect to Salima. The Court noted that insurers do not have an automatic right to rescission with respect to third parties, and that courts must balance the equities to determine if an insurer is entitled to such relief. A “nonexclusive five-factor test” for determining whether rescission is equitable as to an innocent third party was set forth in Pioneer State Mutual Ins Co v Wright, 331, Mich App 396 (2020):

"(1) the extent to which the insurer could have uncovered the subject matter of the fraud before the innocent third party was injured; (2) the relationship between the fraudulent insured and the innocent third party to determine if the third party had some knowledge of the fraud; (3) the nature of the innocent third party’s conduct, whether reckless or negligent, in the injury-causing event; (4) the availability of an alternate avenue for recovery if the insurance policy is not enforced; and (5) a determination of whether policy enforcement only serves to relieve the fraudulent insured of what would otherwise be the fraudulent insured’s personal liability to the innocent third party. [Id.]"

The Court noted that the first factor favored Everest, because there was “no indication that Everest could have discovered the alleged misrepresentation with additional professional diligence” given the fact that Yacoub had only completed his application for coverage 20 days earlier. The other four factors, however, weighed against rescission. As to the second factor, Salima apparently knew nothing about Yacoub’s acquisition of the policy; as to the third factor, Salima was merely a passenger in Yacoub's car during the “injury-causing event”; as to the fourth factor, there would be no “alternate avenue for recovery,” because Salima would be barred from recovery from a different insurer due to the one-year-back rule; and as to to the fifth factor, the Court noted, first, that “affording first-party coverage to Salima does not require Everest to provide Yacoub with liability coverage,” and, second, that “no tort claim could be brought against Yacoub as the limitations period of three years has expired.” Thus, a balancing of the equities clearly weighed against rescission, and the Court of Appeals instructed the trial court to enter an order granting summary disposition in Salima’s favor on this issue.

Lansing car accident lawyer Stephen Sinas is the lead editor of the appellate case summaries published on this site regarding the Michigan auto insurance law. To learn more about how Stephen Sinas and how the Sinas Dramis Law Firm can help you if you have been injured in a Michigan auto accident, visit

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