952 N.W.2d 586
Mich. Ct. App.2020Background
- In 2013 Wright applied for auto insurance but did not list her adult son, Harris, as a household resident; Harris was injured as a passenger in September 2013.
- Harris had no separate no-fault coverage and sought PIP benefits under Wright’s Pioneer policy; Pioneer denied benefits and later filed for rescission of Wright’s policy based on alleged misrepresentation.
- The trial court initially found Harris was a resident relative domiciled with Wright, ordered Pioneer to pay as highest-priority insurer, and dismissed Pioneer’s rescission claim on laches grounds while applying the (then-controlling) innocent-third-party rule.
- On appeal this Court affirmed domicile but rejected application of the innocent-third-party rule (in light of Bazzi I) and held laches was improperly applied; the case was remanded for further proceedings.
- After the Michigan Supreme Court decided Bazzi II (requiring trial courts to “balance the equities” before granting rescission), the trial court on remand denied Pioneer’s rescission request, concluding rescission would be inequitable because Pioneer delayed nearly two years and the one-year-back rule would leave Harris without meaningful recovery.
- Pioneer appealed the denial of rescission; the Court of Appeals affirmed, finding the trial court properly balanced equities under Bazzi II and did not violate the law-of-the-case doctrine.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the trial court violated the law-of-the-case doctrine by balancing equities on remand | Pioneer: remand precluded relitigation of laches-related reasoning; trial court improperly applied same analysis | Defendants: trial court followed intervening Supreme Court precedent (Bazzi II) and properly balanced equities, not applying laches | Held: No violation; law-of-the-case did not prohibit equitable balancing under Bazzi II because of intervening change in law |
| Whether rescission was appropriate given Wright’s alleged fraud | Pioneer: policy obtained by misrepresentation; rescission appropriate despite innocent third parties | Harris & others: rescission would be inequitable because both Pioneer and Harris are innocent and Harris would be deprived of recovery | Held: Trial court did not abuse discretion; rescission would be inequitable after balancing the equities |
| Whether the trial court effectively applied laches in place of equitable balancing | Pioneer: court’s focus on Pioneer’s delay equates to laches and contradicts prior appellate ruling | Defendants: court distinguished laches from equitable balancing and expressly applied Bazzi II framework | Held: Court properly distinguished laches from equitable balancing and exercised equitable discretion |
| Whether Harris had an alternate avenue for recovery (impacting balance of equities) | Pioneer: Harris failed to timely add State Farm/Assigned Claims, so alternate recovery existed or his delay contributed | Defendants: because Pioneer was highest-priority insurer, and the one-year-back rule now bars most recovery from other insurers, Harris lacks meaningful alternate relief | Held: The balance favors Harris; lack of realistic alternate recovery weighs against rescission |
Key Cases Cited
- Bazzi v. Sentinel Ins. Co., 502 Mich 390 (Sup. Ct. 2018) (an insurer may seek rescission for fraud but must balance equities before rescission where two innocent parties are affected)
- Lenawee County Bd. of Health v. Messerly, 417 Mich 17 (Mich. 1982) (rescission is an equitable remedy granted in court’s discretion)
- Titan Ins. Co. v. Hyten, 491 Mich 547 (Mich. 2012) (insurer may seek equitable remedies for fraud in obtaining a policy)
- Sisk‑Rathburn v. Farm Bureau Gen. Ins. Co. of Mich., 279 Mich App 425 (Mich. Ct. App. 2008) (articulating the innocent-third-party rule prior to Bazzi)
- Farm Bureau Gen. Ins. Co. of Mich. v. ACE Am. Ins. Co., 503 Mich 903 (Mich. 2018) (order; Markman, C.J., concurring, listing nonexclusive factors to guide balancing of equities in rescission cases)