Where a judge ruled that a defendant insurance company was not entitled to rescind an auto policy, that ruling should be affirmed because a balancing of the equities weighs heavily in favor of denying rescission.
“The essential facts in this appeal are both brief and uncontested. On February 22, 2021, Pamela Orr completed an application for no-fault insurance upon which she made a material misrepresentation. Specifically, she answered ‘no’ to the question whether her driver’s license had been suspended within the last 3 years. In actuality, her license had been suspended twice and was, in fact, suspended at the time she made the application. The application was submitted to defendant who issued an automobile no-fault insurance policy.
“Approximately five months later, on July 18, 2021, Orr was involved in an automobile accident. She sought treatment from plaintiff, who performed medical services for plaintiff over the course of the next several months. It is undisputed that on August 21, 2021, defendant issued a renewal policy apparently after Orr repeated the misrepresentation. Defendant, during the course of investigating the claim, discovered the misrepresentation, and, on December 17, 2021, notified Orr that it was declaring the policy void ab initio and sent Orr a refund check for the entire amount of the premium paid, which Orr cashed.
“Consistent with rescinding the policy, defendant denied the claims that plaintiff submitted. Plaintiff instituted this action seeking payment of the claims. Defendant filed a motion for summary disposition based upon the rescission of the policy, arguing both a failure to state a claim and no genuine issue of material fact. The trial court denied the motion in a detailed opinion and order dated April 4, 2023. The trial court rejected out of hand the motion under (C)(8), noting that the motion relied upon evidence outside the complaint and, therefore, it was inappropriate to consider (C)(8). The trial court explicitly stated that it would only analyze the motion under (C)(10). The trial court granted summary disposition based upon defendant’s delay in rescinding the policy and, after a balancing of the equities, concluded that defendant was not entitled to rescission. Defendant then filed an application for leave to appeal to this Court, which we granted.
“Defendant presents this case as having three different issues: that the trial court erred in determining that defendant waived rescission due to delay, that a balancing of the equities was unnecessary because this case involved mutual rescission, and that even when the equities are balanced, rescission should be allowed. But in reality, all three issues are interrelated.
“In light of Michigan Regents , it is clear that, regardless of the basis for seeking the remedy of rescission, the trial court was obligated to balance the equities in determining whether defendant was entitled to rescission. Accordingly, the analysis must now turn to the trial court’s balancing of the equities.
“In sum, had defendant exercised due diligence, the insured’s misrepresentations would have been discovered long before the accident occurred and the policy would have been rescinded before plaintiff provided any services to the insured.
“In sum, we conclude that a balancing of the equities weighs heavily in favor of denying rescission as it applies to plaintiff’s claims for services rendered before plaintiff received notice that defendant was rescinding Orr’s policy due to misrepresentation in the application. As between the parties, it was defendant who was in the best position to discover Orr’s misrepresentation. Had defendant reviewed Orr’s driving record at the time the application was submitted, it could have rescinded the policy several months in advance of the accident. And, even having waited until the accident occurred to review Orr’s driving record, it could have rescinded the policy shortly after the accident and precluded plaintiff rendering a vast majority of the services while under the belief that Orr was covered by insurance. This latter point was compounded by the fact that even after notifying Orr that it was rescinding the policy, defendant’s EOBs to plaintiff listed the claims as pending rather than informing plaintiff that defendant was rescinding the policy.
“In conclusion, the trial court properly denied summary disposition as defendant has not established a lack of genuine issue of material fact that the balancing of the equities must weigh in favor of rescission. Regardless whether this case is treated as one of equitable rescission or contractual rescission, the equities must be balanced and, in doing so, the trial court correctly weighed the equities in favor of plaintiff.”
Van Dyke Spinal Rehab. Ctr. PLLC v. USA Underwriters; MiLW 07-108050, 12 pages; Michigan Court of Appeals published; Feeney, J., joined by M.J. Kelly, J., Rick, J.; on appeal from Macomb Circuit Court; Jonathan R. Freshour for appellant; Fadi F. Toma for appellee.
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