Rescission of Policy Reversed on Appeal; Judicial Balancing of Equities Required in a First Party No-Fault Action
On November 18, 2018, the driver of a vehicle insured by Falls Lake National Insurance Company was attacked by an alighting passenger. The attacker kept a firm grip on the vehicle’s door while the driver attempted to shake the menace by swerving and dragging him through traffic. The attacker sustained serious injuries when he struck a parked car. Plaintiff medical facility treated the attacker’s injuries.
The attacker’s claim for no-fault PIP benefits was denied by Falls Lake based upon the insured’s failure to disclose material facts at the inception of the insurance policy. Falls Lake rescinded the policy, issued a refund check and the draft was subsequently endorsed and cashed.
Plaintiff applied for benefits through the assigned claims plan (MAIPF). MAIPF denied the claim. Plaintiff medical provider filed suit against the MAIPF and Falls Lake seeking payment for medical services provided to the attacker. MAIPF and Falls Lake filed competing motions for summary disposition.
The Trial Court found in favor of Falls Lake holding that it effectively rescinded its contract and was not obligated to pay Plaintiff’s claims. MAIPF appealed relying on Bazzi v. Sentinel Ins. Co.502 Mich 390 (2018), insisting that the equities be balanced to address the claims of an innocent third party; i.e., Plaintiff medical provider.
In the soon-to-be published case of University of Michigan Regents v. Michigan Automobile Insurance Placement Facility, and Unnamed Assignee of the MAIPF and Falls Lake National Insurance Company ___ Mich. App. ______ (2022), the Court opined that recission is equitable in nature, is not a matter of right and must be granted within the sound discretion of the court. When two equally innocent parties are affected, the court must balance the equities to determine if the Plaintiff medical provider is entitled to the relief it seeks. The ruling of the Trial Court was vacated and the case was remanded so that the Trial Court could balance the equities between the defrauded insurer (Falls Lake) and the innocent third party (Plaintiff medical provider).
Read the entire case at: https://www.courts.michigan.gov/siteassets/case-documents/uploads/OPINIONS/FINAL/COA/20220120_C354808_50_354808.OPN.PDF
