October 13, 2014
In the recent unpublished, but significant, opinion of Frost and Citizens Insurance Company v Progressive Insurance Company, (Docket No. 316157, issued September 23, 2014), the Michigan Court of Appeals vacated the trial court’s decision that an insurer is barred from rescinding a policy, ab initio, as to an innocent third party in a first-party PIP case.
In April 2010, Plaintiff Kenya Frost obtained a liability insurance policy from Progressive to cover her car. Approximately one month later, the car was destroyed. A month after that, Frost’s daughter was injured in an accident while an occupant of an uninsured motor vehicle. Frost’s daughter filed her claim for PIP benefits with the Assigned Claims Facility who then assigned her claim with Citizens Insurance Company. In September 2010, Progressive alleged that Frost had procured the policy of insurance through fraud and informed her that the policy would be rescinded, ab initio. In 2011, Frost filed suit against Progressive for losses incurred when her car was damaged. Citizens intervened in the lawsuit to seek reimbursement from Progressive for PIP benefits paid on behalf of Frost’s daughter.
Progressive and Citizens filed cross-motions for summary disposition. Progressive argued that Frost committed fraud when she procured the policy of insurance, and pursuant to Titan Ins Co v Hyten, 491 Mich 547; 817 NW2d 562 (2012), the claims of an innocent third party do not bar rescission of the policy ab initio.
Citizens argued that Progressive could not rescind the policy where an innocent third party is affected. The circuit court held that because the accident occurred before Progressive rescinded the policy, it lost its ability to rescind the policy.
The Court of Appeals concluded that the circuit court’s ruling was inconsistent with the Supreme Court’s holding in Hyten. The Supreme Court in Hyten held that ‘an insurer is not precluded from availing itself of traditional legal and equitable remedies to avoid liability under an insurance policy on the ground of fraud in the application for insurance, even when the fraud was easily ascertainable and the claimant is a third party.” Id. at 571. Pursuant to Hyten, the Frost Court held that the, “claim by Frost’s daughter did not bar Progressive from rescinding the policy in this case.” The Court of Appeals further found, however, that Progressive must establish proper grounds for rescission and so remanded the matter for further proceedings.
In short, the Frost Court has held that the “innocent third party” rule that generally applies to third-party automobile negligence cases, does not apply to first-party PIP cases. In third-party cases, an innocent third-party plaintiff would have no recovery if the defendant’s insurer was allowed to disavow coverage. In first-party PIP cases, however, an innocent plaintiff could recover benefits from the next priority insurer and, if none, the assigned claims facility would assign an insurer if the otherwise liable insurer has grounds to rescind coverage.
*****************************
REGISTER NOW!
BUCKEYE SEMINAR
October 23, 2014
GREATER COLUMBUS CONVENTION CENTER
8:30 – 9:00 a.m. CONTINENTAL BREAKFAST / REGISTRATION
9:00 – 9:05 a.m. WELCOME AND INTRODUCTION
Speaker: SUSAN M. WILLIAMS, ESQ.
9:05 – 9:50 a.m. 2014 NO-FAULT LAW UPDATES
Speaker: SAMANTHA E. DRAUGELIS, ESQ.
9:50 – 10:35 a.m. TIPS & STRATEGIES IN DEFENDING PROVIDER SUITS:
CLAIMS THROUGH TRIAL
Speaker: MARK L. NAWROCKI, ESQ.
10:35 – 11:05 a.m. HOME MODIFICATION & TRANSPORTATION AGREEMENTS:
MCCA REQUIREMENTS POST ADMIRE
Speaker: SUSAN M. WILLIAMS, ESQ.
Speaker: TARA L. VELTING, ESQ.
11:05 – 12:00 p.m. DEPOSITIONS OF CLAIM STAFF:
WHY WOULD YOU? HOW COULD YOU?
Speaker: JOHN W. WHITMAN, ESQ.
12:00 – 12:30 p.m. QUESTION & ANSWER SESSION
RETURN EVALUATION FORMS
Comprehensive written materials will be distributed to all program attendees.
To register: contact Eileen Carty: ecarty@garanlucow.com
**************************
Garan Lucow Miller
is hosting a U of M Tailgate
U of M v Indiana
When: Saturday, November 1, 2014
Game Time: 3:30 pm
Tailgate starts: 12:00 pm (Noon)
Where: Michigan Stadium
1201 South Main Street
Ann Arbor, MI 48104
Tailgate Location: Hospitality Area C
Enter off of West Stadium Blvd – Gate 1
Tailgate does NOT include tickets to the game
AT THE TAILGATE THERE WILL BE A RAFFLE FOR 2 SETS (2 TICKETS EACH) FOR THE UPCOMING
U OF M v MARYLAND GAME ON SATURDAY, NOVEMBER 22, 2014
Please RSVP to Eileen Carty at ecarty@garanlucow.com
Hope you can join us!
*************