Auto negligence; Third-party action under the No-Fault Act (NFA); Bar from recovery if the injured person was operating their own vehicle at the time the injury occurred & did not have an insurance policy in effect for the vehicle; MCL 500.3135(2)(c); Effect of rescission of a policy on the vehicle after the accident

The court held that an insurer’s decision to rescind a no-fault policy after an accident does not trigger MCL 500.3135(2)(c)’s exclusion prohibiting an injured person from recovering third-party no-fault benefits. Thus, the court affirmed the Court of Appeals decision that reversed the trial court’s grant of summary disposition to defendant-Zakir, who rear-ended plaintiff’s vehicle in the underlying accident. At the time of the accident, plaintiff had an insurance policy issued by defendant-Everest National Insurance Company. After the accident, she “submitted a claim to Everest for first-party no-fault benefits. Rather than paying plaintiff benefits, Everest notified her that it would be rescinding her policy and returning her premiums because it concluded that she had made a material misrepresentation in her insurance application.” Plaintiff subsequently sued Everest and Zakir. After the trial court granted Everest summary disposition on the basis it had the right to rescind the policy, Zakir also successfully moved for summary disposition, relying on MCL 500.3135(2)(c). The Court of Appeals agreed with plaintiff that the trial court erred as to Zakir. On his appeal, the court concluded that rescission of an insurance policy is an equitable, “contractual remedy between the insured and insurer[,]” exercised at the insurer’s discretion. It “does not alter the reality that, at the time the injury occurred, the injured motorist held the required security. Rescission by the insurer postaccident is not a defense that can be used by a third-party tortfeasor to avoid liability for noneconomic damages.” The court noted that “MCL 500.3135(2)(c) requires that the owner or registrant maintained the required security ‘at the time the injury occurred.’ The statute uses the past-tense phrase ‘at the time the injury occurred’ twice. This signals the Legislature’s intent concerning the time that is relevant when considering whether a claimant is barred from suing for noneconomic damages. It is undisputed in this case that, ‘at the time the injury occurred,’ plaintiff held an insurance policy issued by Everest and that the policy was not rescinded until much later.” The court remanded the case to the trial court for further proceedings.