Rescission of an insurance contract; Fraud; Titan Ins Co v Hyten; Mota-Peguero v Falls Lake Nat’l Ins Co; Fatty v Farm Bureau Ins Co of MI (Unpub); Personal protection insurance (PIP) benefits; Uninsured motorist (UM) benefits

The court held that because defendant-insurer established plaintiff-insured’s “fraud in the procurement (such that we are not dealing with the claim of an innocent third party), and requested rescission, it was entitled to rescind the policy and declare it void ab initio.” Thus, the trial court erred in denying defendant’s summary disposition motion. Because plaintiff was “compensated for food delivery while operating the SUV, despite her declaration that she would refrain from doing so, defendant sent a letter to [her] notifying her that it rescinded the policy due to her alleged material misrepresentation of fact.” Plaintiff sued for breach of contract due to defendant’s failure to pay PIP benefits, as well as UM benefits. The court found as “to elements two through five of common-law fraud, under Hyten,” the reasoning in Fatty was “persuasive, as applied to the similar facts of” this case. The court held that because “plaintiff was already driving for the food delivery service at the time of her application, her answer to the question about food delivery established elements two, three, and four of common-law fraud under Hyten, . . . a false statement, that was known to be false, and that was made intentionality. As to element five, defendant acted in reliance on plaintiff’s answer to the question as evidenced by the fact that it accepted the application and provided insurance coverage. [It] likewise suffered injury as a result of [her] misrepresentation because, as established by the unrefuted affidavit of defendant’s underwriting specialist employee, if plaintiff had disclosed she would be using the SUV for food delivery, defendant would have charged a significantly higher premium for the coverage.” Similarly, the court found “as to the issue of materiality, the facts of this case are almost identical to those in Mota-Peguero and Fatty. Just as those plaintiffs falsely represented that they would not be using their vehicles to carry persons for a fee, plaintiff in the instant case misrepresented that she would not use the SUV to receive compensation for delivering food. Just as in Fatty, defendant in the present case submitted an unrefuted affidavit by its representative. While the affidavit in Fatty averred that the defendant would not have even issued the policy if it had known about the falsity of the defendant’s statement, defendant’s representative . . . conceded that defendant would have issued the policy had plaintiff accurately disclosed her intent to being compensated for food delivery while operating the SUV, but at a 33% higher premium, due to the increased risk of loss from such activity. While no affidavit was submitted in Moto-Peguero, it held ‘[t]his Court made clear in Fatty that that false representation satisfied all of the elements necessary to support rescission of the insurance policy issued to the insured, so the insurer was entitled to summary disposition against its insured.’” Thus, the court reversed and remanded for entry of an order granting defendant summary disposition.