By Ben Solis
Gongwer Nes Service
An insurer's decision to deny claims because of a purported rescission is not justification for withholding payment when an injured party is not involved in the fraud that led to recission of a separate policy, the Michigan Court of Appeals ruled in a unanimous decision issued Monday.
In a published per curiam opinion released Tuesday, the panel in VHS of Michigan Inc. v. Michigan Automobile Placement Facility (COA Docket No. 368755) reversed the Wayne Circuit Court's order denying the plaintiff, doing business as the Detroit Medical Center, in its motion for summary disposition considering for summary disposition concerning its request for interest and attorneys fees. The case was remanded for further proceedings.
The case involved a question of whether an insurance company, in this case the Falls Lake Insurance Company, and insured customers may, without court involvement, rescind a policy on the basis of fraud in a way that no payment could be made under the policy after a crash involving an innocent third-party.
Falls Lake did just that following a crash caused by a person who did not have permission to drive the vehicle, which was insured by the company. The person driving the vehicle injured another, who was an innocent party to the purported fraud, which led to the recission of their policy.
The Detroit Medical Center sought summary disposition in the matter before the Wayne Circuit Court but denied that motion.
Upon appeal, the panel of Judge Mark Boonstra, Judge Kirsten Frank Kelly and Judge Adrienne Young ruled that Falls Lake should have known it could not simply rescind the policy unilaterally to avoid its obligations under it.
"In other words, an insurer's decision to deny claims because of a purported rescission is not justification for withholding payment when the injured party is not involved in the fraud," the panel wrote. "Accordingly, we reject Falls Lake's argument that it did not fail to pay within 30 days of receiving proof of loss because it paid within 30 days of the trial court's ruling on the issue of rescission. This argument ignores the principle that rescission is a remedy ordered by a court, not unilaterally chosen by an insurance company. This is particularly true here, where an innocent third party … is the individual affected by Falls Lake's decision."
Gongwer Nes Service
An insurer's decision to deny claims because of a purported rescission is not justification for withholding payment when an injured party is not involved in the fraud that led to recission of a separate policy, the Michigan Court of Appeals ruled in a unanimous decision issued Monday.
In a published per curiam opinion released Tuesday, the panel in VHS of Michigan Inc. v. Michigan Automobile Placement Facility (COA Docket No. 368755) reversed the Wayne Circuit Court's order denying the plaintiff, doing business as the Detroit Medical Center, in its motion for summary disposition considering for summary disposition concerning its request for interest and attorneys fees. The case was remanded for further proceedings.
The case involved a question of whether an insurance company, in this case the Falls Lake Insurance Company, and insured customers may, without court involvement, rescind a policy on the basis of fraud in a way that no payment could be made under the policy after a crash involving an innocent third-party.
Falls Lake did just that following a crash caused by a person who did not have permission to drive the vehicle, which was insured by the company. The person driving the vehicle injured another, who was an innocent party to the purported fraud, which led to the recission of their policy.
The Detroit Medical Center sought summary disposition in the matter before the Wayne Circuit Court but denied that motion.
Upon appeal, the panel of Judge Mark Boonstra, Judge Kirsten Frank Kelly and Judge Adrienne Young ruled that Falls Lake should have known it could not simply rescind the policy unilaterally to avoid its obligations under it.
"In other words, an insurer's decision to deny claims because of a purported rescission is not justification for withholding payment when the injured party is not involved in the fraud," the panel wrote. "Accordingly, we reject Falls Lake's argument that it did not fail to pay within 30 days of receiving proof of loss because it paid within 30 days of the trial court's ruling on the issue of rescission. This argument ignores the principle that rescission is a remedy ordered by a court, not unilaterally chosen by an insurance company. This is particularly true here, where an innocent third party … is the individual affected by Falls Lake's decision."
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