Tiffany Lynn Dewley v. Pioneer State Mutual Insurance Company
324828
| Mich. Ct. App. | Oct 25, 2016Background
- Woodyard insured a Saturn Vue with Pioneer; Dewley (his household member and regular driver) was never added to the policy.
- Dewley, driving Woodyard’s vehicle, was seriously injured in a 2013 accident and sought PIP benefits from Pioneer.
- Pioneer discovered Dewley’s driving record would have made her ineligible under its underwriting and denied benefits, then sued to rescind Woodyard’s policy for fraud.
- Trial court bifurcated the proceedings and, after a bench trial on fraud, found sufficient evidence of silent fraud by Woodyard and rescinded the policy, ordering premium refunds.
- Dewley and intervening medical provider Beaumont appealed; Dewley also contested findings that she had any duty of disclosure and that she was not an innocent third party.
- The Court of Appeals affirmed: Woodyard’s silence supported rescission; Dewley owed no duty to Pioneer (but that error was harmless); the innocent-third-party rule did not bar rescission; Pioneer did not waive rescission.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether silent fraud (failure to disclose household driver) by insured permits rescission | Dewley/Beaumont argued absence of fraud or no duty to disclose by Woodyard | Pioneer argued Woodyard had a duty under the policy/agency contacts to update driver information; silence is actionable | Court: Silent fraud established as Woodyard had a duty to disclose and his silence justified rescission |
| Whether Dewley owed a direct duty to disclose or is an innocent third party, barring rescission | Dewley argued she had no contractual duty to Pioneer and is an innocent third party entitled to PIP benefits | Pioneer argued Dewley’s silence supported fraud findings and that Titan permits rescission despite a third-party claimant | Court: Dewley had no direct duty to Pioneer (trial court erred on that point) but error was harmless; Titan/Bazzi remove innocent-third-party protection for PIP rescission claims |
| Whether Pioneer waived rescission by continuing the policy/keeping premiums after notice | Appellants argued Pioneer’s conduct (continued policy, retained premiums) equaled waiver, preventing rescission | Pioneer argued it consistently sought rescission and retained premiums only while litigation determined rights | Court: No waiver — pioneer consistently sought rescission and withholding refunds during litigation was not inconsistent |
Key Cases Cited
- Titan Ins Co v. Hyten, 491 Mich 547 (Mich. 2012) (reaffirmed insurer’s right to assert common-law defenses like fraud to avoid enforcing a policy, even against third-party claimants, unless statute prohibits)
- Tompkins v. Hollister, 60 Mich 470 (Mich. 1886) (early articulation that suppression of truth with intent to defraud is actionable as silent fraud)
- Burton v. Wolverine Mut. Ins. Co., 213 Mich App 514 (Mich. Ct. App. 1995) (insurer that elects cancellation cannot later rescind where insureds relied on cancellation notice)
- Farmers Ins. Exch. v. Anderson, 206 Mich App 214 (Mich. Ct. App. 1994) (discussed insurer’s rescission rights and the innocent third-party rule)
- Lash v. Allstate Ins. Co., 210 Mich App 98 (Mich. Ct. App. 1995) (rescission annuls contract ab initio and restores parties to pre-contract positions)