Michigan Court of Appeals; Docket # 316157; Unpublished
Judges Owens, Jansen and O'Connell; Unanimous, Per Curiam
Official Michigan Reporter Citation: Not Applicable; Link to Opinion 
STATUTORY INDEXING:
Misrepresentation/Fraud as a Basis to Rescind Coverage [§3113]
TOPICAL INDEXING:
Not Applicable
CASE SUMMARY:
In this unanimous unpublished per curiam Opinion involving whether the claimant's no-fault policy was void ab initio on the grounds of fraud, the Court of Appeals held, on remand from the Michigan Supreme Court, that the procurement of a policy by fraud was sufficient to justify rescission of the policy and render it void ab initio pursuant to the recent appellate decision in Bazzi v Sentinel Ins Co., even though it resulted in a denial of PIP benefits to an innocent third party.
Plaintiff obtained a vehicle liability policy from defendant Progressive. The vehicle was destroyed one month later. A month after that, plaintiff's minor daughter was injured in an accident while riding in an uninsured car. The Assigned Claims Facility assigned plaintiff's daughter's claim to Citizens Insurance. Progressive then informed plaintiff that her policy was rescinded ab initio, alleging that she had procured it through fraud. Plaintiff filed an action against Progressive, seeking recovery for the losses she incurred when her vehicle was destroyed. Citizens intervened in the case to seek reimbursement from Progressive for the benefits that it paid on behalf of plaintiff's daughter. Citizens argued that Progressive could not void a policy ab initio when an innocent third party was affected. Progressive asserted that plaintiff committed fraud and that, pursuant to the Supreme Court's ruling in Titan Ins Co v Hyten, 491 Mich 547 (2012), the claims of an innocent third party did not bar rescission of a policy ab initio. The trial court ruled that, once the accident occurred, Progressive lost its ability to rescind the policy as to plaintiff's daughter, and granted Citizens' motion for summary disposition. On appeal, the Court of Appeals vacated the summary disposition order and remanded the case, finding the trial court's decision was inconsistent with Titan Ins Co v Hyten.
On the application for leave to appeal, the Michigan Supreme Court ordered that the Court of Appeals judgment be vacated, and remanded the case for consideration in light of the Court of Appeals 2016 decision in Bazzi (Docket No. 32051). In Bazzi, the Court concluded that "there is no innocent third-party rule as to a claim for [PIP] benefits."
On remand from the Supreme Court, the Court of Appeals again held that fraud in the procurement of a policy was sufficient to justify rescission of the policy and render it void ab initio, even if it resulted in the denial of PIP benefits to an innocent third party. Relying on the Bazzi analysis, the Court of Appeals held:
"The issue on appeal is whether the circuit court erred by ruling that Progressive could not rescind the policy ab initio as to Frost's daughter. We previously concluded that the circuit court's ruling is inconsistent with our Supreme Court's holding in Hyten .... In Hyten, our Supreme Court held that absent statutory provisions to the contrary, 'an insurer is not precluded from availing itself of traditional legal and equitable remedies to avoid liability under an insurance policy on the ground of fraud in the application for insurance, even when the fraud was easily ascertainable and the claimant is a third party.' ... Accordingly, the claim by Frost's daughter did not bar Progressive from rescinding the policy in this case. We conclude that our previous decision is consistent with and adheres to the majority decision in Bazzi. To prevail on its rescission claim, Progressive must establish proper grounds for rescission. Because the circuit court did not expressly rule on the grounds for rescission, the case must be remanded for further proceedings."
Accordingly, the Court of Appeals vacated the trial court's order granting summary disposition for Citizens and denying summary disposition to Progressive, and remanded the case for further proceedings.
