Policy rescission; Titan Ins Co v Hyten; Innocent third party; Balancing the equities; Pioneer State Mut Ins Co v Wright; Van Dyke Spinal Rehab Ctr, PLLC v USA Underwriters; Insurer priority; Michigan Assigned Claims Plan (MACP)

The court held in this insurer priority dispute that defendant-Farmers Insurance Exchange established a genuine issue of material fact as to “whether the balancing of the equities weighed in favor of” permitting defendant-Progressive to rescind its policy as to plaintiff, an innocent third party. Thus, it reversed the trial court’s grant of summary disposition to Progressive and denial of summary disposition to Farmers, and remanded. Plaintiff was injured in an accident while a passenger in a vehicle owned and operated by defendant-Roth. She did not have no-fault coverage at the time. She lived with her mother (nonparty-J), who had a policy with Progressive. When plaintiff sought no-fault benefits under the policy, Progressive rescinded it based on fraud or misrepresentation in the policy application. Plaintiff then sought no-fault benefits through the MACP, which assigned her claim to Farmers. On appeal, the court reviewed the Pioneer factors and concluded that “the trial court’s analysis of the first, second, and third factors either applied an improper standard or was contradicted by the available evidence[.]” As a result, it erred in “ruling that Progressive was entitled to rescind the insurance policy as to plaintiff.” As to the first factor, instead of “assessing the extent to which Progressive could have uncovered the fraud prior to plaintiff’s injury, as required under” this factor, it “broadly concluded that Progressive had no duty to uncover the fraud before the subject incident. In doing so, [it] failed to consider Progressive’s actual ability to discover the misrepresentations before the accident, including the timing of the original application and the relative ease of ascertaining the number of resident relatives in [J’s] household—particularly given that Progressive did so less than one month after plaintiff filed her claim.” It incorrectly weighed the second factor in Progressive’s favor given that, while she was J’s daughter, “there was no evidence that plaintiff was ever aware of the misrepresentation.” As to the third factor, considering “the evidence in the light most favorable to the nonmoving party, there is, at minimum, a question as to the extent that plaintiff’s conduct led to the accident.” She did not have control over the vehicle’s operation. And there was no evidence “it would have been safe for [her] to attempt to leave” it before the accident, or that she “encouraged or advised Roth to drive after consuming alcohol.”