If this opinion indicates that it is “FOR PUBLICATION,” it is subject to

revision until final publication in the Michigan Appeals Reports.

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S T A T E O F M I C H I G A N

v

No. 364103

Wayne Circuit Court

FALLS LAKE NATIONAL INSURANCE

COMPANY,

LC No. 2021-008640-NI

Defendant-Appellee,

and

JOSEPH ANTHONY,

Defendants.

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to Guillermina Mota-Peguero after she was involved in a motor vehicle collision. As it turned out,

Mota-Peguero incorrectly stated on her application for automobile insurance coverage that she had

no dependent children living with her and she had no plans to drive for a ride-sharing service, such

as Uber or Lyft. Based upon the allegation that Mota-Peguero committed fraud in her application

for no-fault insurance coverage, defendant, Falls Lake National Insurance Company (Falls Lake),

sought and obtained summary disposition against Spine Specialists under MCR 2.116(C)(10). On

appeal, Spine Specialists contends that the trial court could not foreclose its claim without holding

a hearing to determine whether rescission was warranted based upon Mota-Peguero’s fraudulent

misrepresentations. We conclude that the trial court incorrectly awarded summary disposition to

Falls Lake, so we reverse that order and remand for further proceedings.

herself. But at Mota-Peguero’s deposition, she revealed that she used her vehicle to drive for Uber

and Lyft. Additionally, she disclosed that she had a 16-year-old daughter who lived with her.

On February 16, 2020, Mota-Peguero was involved in a motor vehicle collision, and then

she sought medical treatment from Spine Specialists. Mota-Peguero made a claim on her insurance

after the collision, but Falls Lake rescinded her automobile insurance policy, informing her through

a claims-management company that “[u]nderwriting has advised that, as a result of the commercial

use of your 2016 Malibu and [your 16-year-old daughter] Valentina living in your home, the policy

application would not have been accepted by Falls Lake, and a policy would not have been written

or maintained without disclosure of how you used your vehicles and who lived with you, so that it

could properly evaluate the risk associated with issuing your policy.”

of Mota-Peguero’s insurance coverage and reasoned that that relief would foreclose the claims of

the health-care providers as well as Mota-Peguero’s demand for first-party benefits.

The trial court conducted oral argument on Falls Lake’s motion for summary disposition

on July 27, 2022, and ruled from the bench that Falls Lake was entitled to complete relief pursuant

to MCR 2.116(C)(10) against Mota-Peguero and all of the health-care providers on their demands

for first-party benefits. Specifically, the trial court described the case as fraud in the procurement

revelation of Mota-Peguero’s misrepresentations would have resulted in an increased premium for

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a derivative claim of” Mota-Peguero “and as a result their claim[s] fail as well.” The trial court

memorialized its rulings in an order issued on July 28, 2022, and this appeal followed.

NW2d 665 (2019). A motion under MCR 2.116(C)(10) “tests the factual sufficiency of a claim.”

Id. at 160. “When considering such a motion, a trial court must consider all evidence submitted

by the parties in the light most favorable to the party opposing the motion.” Id. “A motion under

MCR 2.116(C)(10) may only be granted when there is no genuine issue of material fact.” Id. Such

Id. (quotation marks and citation omitted). Applying these standards, we shall address each of the

two challenges to the summary disposition award advanced by Spine Specialists.

Falls Lake obtained summary disposition under MCR 2.116(C)(10) by persuading the trial

court to rescind the insurance contract Falls Lake made with Mota-Peguero, and thereby excuse it

remedy of rescission requires proof of a fraudulent misrepresentation that was material. Titan, 491

Mich at 555. Here, Spine Specialists contends that Falls Lake presented no evidence to show that

Mota-Peguero’s misrepresentations about her daughter and her activities in driving for ride-sharing

services were material.

“The generally accepted test for determining the materiality of a fact or matter as to which

a representation is made to the insurer by an applicant for insurance is to be found in the answer

to the question whether reasonably careful and intelligent underwriters would have regarded the

fact or matter, communicated at the time of effecting the insurance, as substantially increasing the

chances of loss insured against so as to bring about a rejection of the risk or the charging of an

increased premium.” Keys v Pace, 358 Mich 74, 82; 99 NW2d 547 (1959) (quotation marks,

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lived with her was not a material misrepresentation, so it would not have been a basis for rescission

on its own. But the trial court determined that Mota-Peguero’s failure to disclose that she used the

issued November 21, 2023 (Docket No. 363888), we agree. In Fatty, just as in this case, “[o]n the

vehicles to be insured used to carry persons for a fee?’ ” Id. at 1. Indeed, in this case, the question

that plaintiff answered in the negative was even more precisely worded: “Are any vehicles used to

carry persons or property for compensation or a fee (transportation networks, ridesharing, Uber,

Lyft, taxis, etc.)?” This Court made clear in Fatty that that false representation satisfied all of the

elements necessary to support rescission of the insurance policy issued to the insured, so the insurer

was entitled to summary disposition against its insured. Id. at 5-6. Although Fatty is not “binding

under the rule of stare decisis[,]” MCR 7.215(C)(1), we nonetheless find its reasoning persuasive,

see Paris Meadows, LLC v Kentwood, 287 Mich App 136, 145 n 3; 783 NW2d 133 (2010), so we

to pursue relief from automobile insurers exclusively through the assignment of claims, Covenant

Med Ctr, Inc v State Farm Mut Auto Ins Co, 500 Mich 191, 196, 217 n 40; 895 NW2d 490 (2018),

and thereby rendered providers’ claims derivative in the sense contemplated by the trial court, our

Legislature subsequently altered that framework by amending the no-fault act, MCL 500.3112, to

enable providers to pursue claims in their own right. That statutory amendment renders inoperative

the trial court’s characterization of Spine Specialists’s claim as “derivative” in this case.

In 2019, “the Legislature significantly overhauled the no-fault act.” Andary v USAA Cas

Ins Co, 512 Mich 207, 214; 1 NW3d 186 (2023). As a part of that major revision, the Legislature

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rescission of the insurance policy that Falls Lake issued to Mota-Peguero.

In its order granting Falls Lake summary disposition, the trial court stated that “Falls Lake

is entitled to rescind and thereby void the policy ab initio issued to [p]laintiff . . . Mota-Peguero,

due to the fraudulent nature in which the policy was obtained and that Falls Lake has no duty or

obligation to pay for any alleged damages purportedly arising out of the February 16, 2020 motor

vehicle accident pursuant to MCL 500.3107 by any providers of products, treatment, services, or

accommodations.” (Emphasis added.) In other words, the trial court decided that rejection of the

providers’ claims followed from a finding that Mota-Peguero made fraudulent misrepresentations

in her insurance application. But that approach, which involves automatic preclusion of providers’

claims, cannot be squared with the rules governing rescission.

When addressing the intervening interests of parties other than the fraudulent insured, our

Supreme Court ruled that “rescission does not function by automatic operation of the law.” Bazzi

v Sentinel Ins Co, 502 Mich 390, 411; 919 NW2d 20 (2018). “Just as the intervening interest of

an innocent third party does not altogether bar rescission as an equitable remedy, neither does fraud

in the application for insurance imbue an insurer with an absolute right to rescission of the policy

with respect to third parties.” Id. In Bazzi, our Supreme Court stated that the policy between the

court is required, in the exercise of its equitable powers, to determine which blameless party should

assume the loss[.]” Id. at 410-411 (quotation marks and citation omitted).

that the insured obtained an insurance policy through fraudulent misrepresentations. Id. Although

that decision arose in the context of a motion for summary disposition under MCR 2.116(C)(7)

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although the phrase “innocent third party” is still used, the innocent-third-party doctrine—which

barred rescission as to innocent third parties—was abrogated by our Supreme Court’s decision in

Univ of Mich Regents v Mich Auto Ins Placement Facility, 340 Mich App 196, 201; 986 NW2d

152 (2022) (“Thus, while the innocent-third-party doctrine no longer bars insurers from seeking

rescission for fraud, insurers are not categorically entitled to rescission.”). Second, an insurance

policy is not fully rescinded, but merely “reformed,” when “the insurer could not rescind as to the

third parties, but could rescind as to any claims by the fraudulent insured[.]” Bazzi, 502 Mich

at 412 n 12.

Here, faced with a direct claim by a provider, i.e., Spine Specialists, the trial court had the

by our Supreme Court in Bazzi, we believe that the proper course obligates us to remand the case

between Falls Lake and Spine Specialists. See Bazzi, 502 Mich at 412. The trial court may choose

to be guided in its analysis by the nonexclusive list of factors we listed in Pioneer State Mut Ins

Co v Wright, 331 Mich App 396, 410-411; 952 NW2d 586 (2020), but we recognize that some of

those factors are ill-suited to the consideration of rescission in the context of a dispute between an

insurer and a health-care provider. Thus, we entrust to the trial court’s discretion the identification

of factors that should guide its rescission analysis.

Reversed and remanded for further proceedings consistent with this opinion. We do not

retain jurisdiction.