In Petite v Everest National Insurance Company et. al., the Michigan Court of Appeals addressed the ‘balance the equities’ test set forth in Bazzi v Sentinel Ins. Co., 520 Mich. 390 (2018). Petite involved PIP benefits arising out of a motor vehicle accident on April 21, 2016. The Plaintiff was a passenger in a vehicle driven by Randy Patterson, but the vehicle was insured with Everest Insurance Company by Cherea White. After initial discovery, Everest Insurance sought summary disposition based upon rescission of the subject policy. Everest argued that Ms. White did not list Mr. Patterson or their daughter as members of her household in her application for insurance and it was therefore secured through fraudulent misrepresentation, and under Bazzi, a third-party has no right to claim benefits when an insurance policy has been rescinded because of fraud.
Plaintiff argued that it would be inequitable to rescind the policy as it concerned him since he was an innocent third party who had nothing to do with securing the policy or making any misrepresentation. The trial court granted summary disposition in favor of Everest finding White’s misrepresentation rendered the policy void ab initio and, because there was no insurance policy to enforce, Everest was not liable to Plaintiff for PIP benefits.
The Court of Appeals affirmed the trial court’s finding that Everest was entitled to seek rescission on the policy obtained by White through fraudulent misrepresentation. The Court found the trial court erred, however, in determining Plaintiff was automatically excluded from seeking benefits under the policy. Instead, the trial court should have followed the process for balancing the equities, as set forth by Bazzi. The Court vacated the trial court’s decision and remanded to the trial court for a determination whether rescinding the insurance policy as between Everest and Petite would be equitable.
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Sarah Nadeau, Editor of The Garan Report Publication, is a Shareholder in our Detroit Office. Sarah can be reached at 313.446.1530 or snadeau@garanlucow.com