Hanging in the Balance: Court of Appeals Affirms Rescission in One of the First Cases Applying “Markman Factors”

Bazzi v Sentinel Ins Co, 502 Mich 390 (2018) confirmed that in no-fault cases, the innocent-third-party rule has been abrogated and insurers may rescind automobile policies based on fraud in the application for insurance – even when innocent third parties seek statutory PIP benefits.

However, Bazzi further noted that rescission is an “equitable remedy, not an absolute right.” Id. at 408. Therefore, before the claim of an innocent third-party can be dismissed, courts “must balance the equities to determine whether” the insurer “is entitled to the relief….” Id. at 410.

Although the Bazzi opinion did not say how to “balance” these “equities,” subsequent case law has identified five factors to be considered. Mullen v Progressive, unpublished opinion of the Court of Appeals, issued October 22, 2020 (Docket No. 350015), p 5. the panel “[c]onsider[ed] all of the facts and circumstances of this case,” and held that “the trial court did not abuse its discretion by holding that the balance of the equities weighed in favor of granting Progressive’s request to rescind….” Id.

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