Titan Ins. Co. v. Hyten, 491 Mich. 547 (2012) is a landmark opinion from the Michigan Supreme Court. Under Titan, an insurer can avoid coverage based on fraud in the procurement of the policy even if that coverage would have inured to the benefit of an innocent third party (as opposed to the policyholder, who would have committed the fraud). Titan also espoused a broad definition of “fraud.”
Bazzi v. Sentinel Ins. Co., 315 Mich. App. 763 (2016) was a landmark decision from the Michigan Court of Appeals that confirmed that the Titan v. Hyten ruling applies to No-Fault / PIP cases as well. Last week, the Michigan Supreme Court issued its opinion on the Bazzi case.
The Supreme Court upheld the insurer’s right to invoke the fraud defense, even when innocent third-parties would be harmed.
An insurance policy is a contract, and “there is simply no basis in the law to support the proposition that public policy requires a private business in these circumstances to maintain a source of funds for the benefit of a third party with whom it has no contractual relationship.” Bazzi, quoting Titan at 568-69.
But, here’s the game changer: “Rescission in an equitable remedy, not an absolute right.” Rescission is no longer just a question of whether there was a material misrepresentation. Rather, courts must balance the equities and decide whether it is fair to allow rescission.