July 13, 2021
Auto Club Insurance Association paid out nearly $750,000 to Brian Miller in PIP benefits following a 2011 vehicle-pedestrian collision. Auto Club was the assigned insurer on behalf of the MACP and discovered that another insurer, American Country Insurance Company, was the highest-priority no-fault insurer because it insured the vehicle that struck Brian Miller. Auto Club filed suit seeking reimbursement from American Country. American Country responded that Auto Owners was the proper no-fault insurer because Brian Miller lived with his father, an Auto-Owners insured. American Country also alleged that it was entitled to rescind its policy based upon fraud committed by its insured, Corporate Limousine Inc. Finally, American Country argued that Auto Club’s suit against it was untimely because Auto Club waited five years before filing suit even though it knew American Country might be an insurer of higher priority. The trial court ruled against American Country on all issues, and the Court of Appeals affirmed the trial court decision in Auto Club Insurance Association v. Corporate Limousine Inc. and American Country Insurance Company and Auto Owners Insurance Company.
The Court of Appeals first found that resident relative status is determined by the domicile of the person, that is, where the person has his true, fixed, permanent home. Brian Miller listed his father’s address on the police report, medical records, application for benefits, and his driver’s license. He also moved into his father’s home following his hospital stay. However, the unrebutted testimony of Mr. Miller’s father and mother was that he had not lived with them since getting married in 2007. As such, the Court found Brian Miller had expressed a clear intent to reside on his own and in fact did not reside at his father’s address on the date of the accident. He was no longer domiciled with the Auto-Owners insured and Auto Owners was not higher in priority than American Country.
On the rescission issue, the Court found that rescission is an equitable remedy that falls under the sound discretion of the trial court following Bazzi v Sentinel Ins. Co., 502 Mich 390 (2018). Under Bazzi, fraud in the inducement of a contract renders the contract voidable at the option of the defrauded party. However, because the issue is discretionary and equitable in nature, the court must balance the equities between the affected parties. Both Auto Club and American Country were innocent to the fraud committed by Corporate Limousine Inc., who failed to timely notify American Country of the accident when it requested coverage. The simple fact that Auto Club would have been reimbursed by MACP did not justify shifting the burden between the equally innocent parties. Therefore, the Court affirmed the trial court’s denial of American Country’s motion to rescind its policy.
Finally, the Court found that Auto Club had brought its suit against American Country within the applicable statute of limitations. As such the doctrine of laches could not operate to shorten the proper time to file the suit. The Court found none of the arguments raised by American Country on appeal warranted reversal of the award against it.