Nationwide Mutual Fire Ins Co v. Esurance Prop & Casualty Ins Co
361298
Mich. Ct. App.Jun 15, 2023Background
- In 2015 Derek Gregory (driver) collided with bicyclist Daniel Moore; the truck was insured by Esurance and co-owned by Derek and Blair Gregory. Moore was uninsured.
- Moore’s PIP claim was assigned through the Michigan Assigned Claims Plan/MAIPF to Nationwide, which paid $454,871.09 in medical benefits.
- Nationwide sued Moore and Esurance to recover PIP payments, alleging Esurance was higher in priority; Esurance counterclaimed that Blair committed fraud in her application and sought rescission of the policy.
- The trial court found Blair’s application fraudulent but denied rescission after balancing equities (applying the five-factor framework derived from Justice Markman’s Farm Bureau concurrence/Pioneer) and granted summary disposition to Nationwide.
- On appeal the court agreed rescission is not automatic but held the trial court misweighed factor four (alternate avenues for recovery) because Moore already had recovery via Nationwide/MACP; the Court reversed and remanded with instructions to enter judgment for Esurance under MCR 2.116(I)(2).
- The parties agreed Moore and Esurance are innocent parties (Moore = innocent third party; Esurance = innocent insurer); the question was which innocent party should bear the loss of Blair’s fraud.
Issues
| Issue | Plaintiff's Argument (Nationwide) | Defendant's Argument (Esurance) | Held |
|---|---|---|---|
| Whether an insurer may rescind a policy for fraud when an innocent third party was injured | Rescission would be inequitable here; balancing of equities favors enforcement to protect injured third party | Rescission is appropriate because insured’s fraud justifies voiding the policy | Rescission is available for fraud but is discretionary; here rescission is warranted after balancing equities in favor of Esurance |
| Between which parties must the equities be balanced (Nationwide v Esurance or Moore v Esurance)? | Nationwide argues it can stand in Moore’s shoes via equitable subrogation, but the court may still consider Nationwide’s position | Esurance contends the relevant comparison is between the injured person (Moore) and the insurer seeking rescission | Court: equities are balanced between the injured person and the insurer seeking rescission (i.e., Moore v Esurance) |
| Whether an assigned/MAIPF insurer (Nationwide) may recover via equitable subrogation after paying PIP for an uninsured claimant | Nationwide: can be subrogated if not in order of priority and not a mere volunteer | Esurance: disputes Nationwide’s ability to inherit Moore’s status and seek subrogation | Court: equitable subrogation is available per Supreme Court precedent when insurer pays under an arguable duty; but availability of subrogation does not preclude rescission where equities favor rescission |
| Whether the trial court properly applied the five-factor equity test (Pioneer / Farm Bureau concurrence), particularly factor 4 (alternate recovery) | Trial court’s weighing was reasonable; factor 4 was neutral because bills were paid | Esurance: trial court misapplied factor 4; existence of MACP/Nationwide as an alternate source means equity favors rescission | Court: trial court erred; factor 4 weighs heavily in favor of rescission because Moore already recovered via Nationwide/MACP, so rescission would not harm him |
Key Cases Cited
- Bazzi v. Sentinel Ins. Co., 502 Mich 390 (2018) (PIP statute does not preclude rescission for fraud; courts must balance equities when innocent third parties are affected)
- Esurance Prop. & Cas. Ins. Co. v. Mich. Assigned Claims Plan, 507 Mich 498 (2021) (equitable subrogation may allow an insurer that pays PIP to recover when not in priority and not a volunteer)
- Farm Bureau Gen. Ins. Co. of Mich. v. ACE Am. Ins. Co., 503 Mich 903 (2018) (vacating automatic rescission and remanding for equity balancing; Justice Markman’s concurrence frames five-factor test)
- Pioneer State Mut. Ins. Co. v. Wright, 331 Mich App 396 (2020) (adopts/condenses Justice Markman’s five-factor framework for weighing equities)
- Farm Bureau Gen. Ins. Co. of Mich. v. ACE Am. Ins. Co., 337 Mich App 88 (2021) (applies five-factor analysis to evaluate rescission between insurer and injured third party)