First-party action for PIP benefits & underinsured motorist (UIM) benefits; Rescission as to an injured insured who did not participate in the fraud; Farm Bureau Gen Ins Co of MI v ACE Am Ins Co; Pioneer State Mut Ins Co v Wright; Whether a misrepresentation was material; Reliance; 21st Century Premier Ins Co v Zufelt

As to plaintiff’s claim for PIP benefits, the court held that there was no evidence she participated in a coinsured’s alleged fraud and the factors adopted in Pioneer led to a balancing of the equities in her favor. As to her UIM claim, while the policy provided for rescission, this was “limited to ‘material’ misrepresentations” and the court concluded the misrepresentation at issue was not material to the vehicle she was driving at the time of the accident. Thus, it affirmed the denial of summary disposition to defendant-insurer (LM) in this first-party action. Plaintiff was driving a Mariner at the time of the accident. She and nonparty-B were listed as named insureds on the LM policy that covered the Mariner. The policy was originally issued in 2014 for other vehicles and the Mariner was later added. There were no allegations of fraud as to the 2014 purchase of the policy, its renewals, or the Mariner’s addition to it. It was misrepresentations about a Yukon that B had added to the policy a few weeks before the 2019 accident that caused LM to rescind the policy retroactive to the date the Yukon was added. As to PIP benefits, the court noted that LM was not injured “through reliance upon the misrepresented fact” because the coverage obtained by it (on the Yukon) was not at issue. Further, there was “no evidence that plaintiff made any false representations.” As she was an innocent third party to the misrepresentations, the court applied Farm Bureau’s five nonexclusive factors adopted in Pioneer in determining whether rescission as to plaintiff would be equitable. It found that the first four factors weighed in her favor, and the fifth one did not weigh for or against rescission here. The court additionally weighed “the fact that at the time of the accident plaintiff was not driving the Yukon—the vehicle as to which the allegations of fraud apply—and that she had held insurance with LM since 2014.” It concluded that rescission would not be equitable here. As to UIM benefits, the court determined that B’s misrepresentations, if material, would permit rescission under the policy’s antifraud provision. But LM failed to offer “any evidence that the misrepresentation was material to the coverage on the Mariner.” The court concluded that “a misrepresentation that is immaterial to the coverage in question should not be used as an excuse to deny or rescind that coverage.”