Michigan Court of Appeals; Docket # 322339; Unpublished
Judges Sawyer, Beckering and Boonstra; Unanimous Per Curiam (with Judges Beckering and Boonstra concurring)
Official Michigan Reporter Citation: Not Applicable; Link to Opinion; Link to Concurrence: Link to Concurrence: 
STATUTORY INDEXING:
Not Applicable
TOPICAL INDEXING:
Cancellation and Rescission of Insurance Policies
Fraud/Misrepresentation
Intervention by Service Providers and Third-Party Payors in PIP Claims
CASE SUMMARY:
In this unanimous unpublished per curiam Opinion, the Court of Appeals held that, pursuant to its binding decision in Bazzi v Sentinel Ins Co (issued June 14, 2016), the “innocent third-party rule” did not apply in this no-fault case where the insurance policy had successfully been rescinded based on fraud, because the rule was abrogated in Titan Ins Co v Hyten, 491 Mich 547 (2012).
Christopher Carmichael was injured in an auto accident while riding as a passenger in a vehicle owned by Dominique Williams. At the time of the accident, the vehicle was insured by Progressive. Plaintiff AR Therapy provided Carmichael $17,280 in medical services and sought compensation for these services as PIP benefits through Farm Bureau, the assigned insurer under the Michigan Assigned Claims Plan. Farm Bureau denied the claim and AR Therapy filed suit for payment in district court. Farm Bureau then alleged that Progressive had higher priority to pay PIP benefits and filed an action against Progressive and Williams. Progressive moved for summary disposition, arguing it was not responsible for coverage because it had rescinded Williams’ policy due to alleged fraud. In response, Farm Bureau claimed Progressive could not rescind the policy with respect to mandatory PIP benefits after a claim involving an innocent third party arose (innocent third-party rule). Progressive responded by claiming the innocent third-party rule was overruled in Titan. The district court granted summary disposition to Farm Bureau, concluding the innocent third-party rule survived the Titan decision. The circuit court affirmed the district court’s ruling.
The Court of Appeals reversed in light of its decision in Bazzi (Docket No. 320518). The Court held:
“We concluded in Bazzi, that Titan abrogated the innocent third-party rule. Accordingly, if Progressive is able to establish fraud in this case, they may declare the policy void ab initio and are not obligated to pay PIP benefits for Carmichael.”
Judge Boonstra concurred in the decision, “for the reasons set forth in my concurrence in Bazzi ….”
Judge Beckering concurred in the decision, but only because she was bound to do so by Bazzi. She said:
“Were I not bound by that ruling, however, I would conclude that our Supreme Court’s decision in Titan …, which dealt with contractually-based, excess liability coverage and the easily ascertainable rule, does not adversely impact the innocent third-party rule with respect to statutorily mandated no-fault personal injury protection (PIP) benefits. As such, I would affirm the circuit court’s ruling (which affirmed the district court’s ruling) that Progressive … may not rescind its insurance policy that was in place at the time of the accident at issue and covered first-party PIP benefits for Christopher Carmichael, as he was injured while a passenger in an automobile insured by Progressive.”
Editor’s Note: Innocent third parties are not completely barred from collecting PIP benefits under this decision. Rather, they are barred from recovering benefits under a policy with respect to which the insured has committed fraud. Innocent third parties may still make a claim for PIP benefits through the assigned claims facility or another source of coverage that may be in the order of priority. Also, in those instances where fraud is found more than one year after the accident, innocent third parties may be time barred from filing a claim with the assigned claims facility.
