Insurance policy rescission; Material misrepresentations in the policy application; Titan Ins Co v Hyten; Rescission as to a third party not involved in the fraudulent procurement of the policy; Bazzi v Sentinel Ins Co; Balancing the equities; Pioneer State Mut Ins Co v Wright; Michigan Assigned Claims Plan (MACP)

The court held that the trial court erred in denying defendant-USA Underwriters’ (USAU) motion for summary disposition as to plaintiff, individually “because there was no genuine issue of material fact that [she] fraudulently obtained” the policy by making material misrepresentations in her insurance application. It was “an open question whether [USAU] should be permitted to rescind the policy it issued to plaintiff as to” her child, TB, given that the trial court did not balance the equities between TB and the insurer. Thus, it reversed the trial court’s orders denying USAU’s motion for summary disposition as to plaintiff, individually, and granting defendant-Farmers’ countermotion for summary disposition. It also vacated the trial court’s order granting Farmers’ summary disposition motion as to TB, and remanded. USAU refused to pay no-fault benefits to plaintiff and TB. Farmers was assigned to plaintiff and TB’s claims by the MACP. On appeal, the court noted the elements a “party moving to rescind a contract on the basis of the nonmoving party’s fraud in obtaining the contract must establish” and concluded as to plaintiff, individually, there was “no question of material fact that all of these elements are satisfied.” The evidence showed “that, regardless of whether [her] license was suspended when she applied for insurance, her license was not valid, contrary to the information she conveyed in her application. [She] admitted at her deposition that she knew that her license was not valid when she applied for insurance, insisting that she told the agent assisting her with the application that she only had ‘a State ID.’ But the record evidence demonstrates that, despite this,” her application listed “the status of her license as valid, and plaintiff initialed this portion of her application without making any alterations or correcting the misrepresentation. There can also be no serious dispute that [she] made the misrepresentation in her application . . . intending for [USAU] to rely on it—the reason that [she] filled out her application was so that an insurer like” USAU would issue her a policy. And it relied on her misrepresentation by issuing the policy. The trial court erroneously “did not balance the equities between TB and [USAU] because it concluded that plaintiff did not procure” the policy through fraud. The court remanded for the trial court to balance the equities between TB and USAU.