Policy rescission; Bazzi v Sentinel Ins Co; Equity balancing; Innocent third party; Pioneer State Mut Ins Co v Wright; Fraud; Insurer due diligence; Farm Bureau Gen Ins Co of MI v ACE Am Ins Co

The court held that the trial court erred by granting summary disposition to plaintiff-insurer on rescission because the first equity-balancing factor weighed against rescission. After defendant-Anthony, who was driving while intoxicated and with a suspended license, struck and killed decedent, defendant-estate sued Anthony for wrongful death. Plaintiff then rescinded defendant-Debbie’s policy, arguing that Debbie made material misrepresentations when she added Anthony’s truck to her policy without disclosing that Anthony owned the truck or lived in her home. The parties did not dispute fraud but disputed whether rescission was equitable against an innocent third party. On appeal, the court held that under Bazzi, rescission is equitable and “‘should not be granted in cases where the result thus obtained would be unjust or inequitable[.]’” The court next held that the trial court erred in finding that the first Pioneer factor favored rescission because plaintiff could have uncovered the fraud before the crash “through minimal due diligence.” Plaintiff did not ask Debbie whether she owned the truck, and a “simple title search” would have revealed the true owner and put plaintiff on notice that Debbie failed to disclose the truck’s ownership. Because plaintiff’s “failure to exercise due diligence resulted in Debbie being able to ‘commit the wrong,’” plaintiff was the blameless party that had to bear the loss. Reversed and remanded.