Christopher Best and Stephanie Strycharz of Segal McCambridge recently achieved a favorable outcome in the Michigan Court of Appeals, solidifying the legal application of rescission in the context of bodily injury benefits and residual liability insurance under MCL 500.3009.
Case Overview
The dispute arose when USA Underwriters rescinded an auto insurance policy due to material misrepresentation, rendering the policy void ab initio (from inception). Another insurance company, acting as the uninsured motorist benefits carrier for a driver who sued the insured individual, appealed the trial court’s ruling. The other insurance company argued that despite the rescission, MCL 500.3009 required USA Underwriters to maintain coverage for bodily injury limits and continue to defend and indemnify the insured.
Court of Appeals Decision
The Michigan Court of Appeals affirmed the trial court’s decision, granting summary disposition in favor of USA Underwriters. The Court concluded that:
A valid rescission voids a policy entirely from its inception, eliminating any obligation to provide coverage.
MCL 500.3009 does not contain language that restricts the use of rescission as a defense, and the other insurance company’s arguments failed to demonstrate otherwise.
By relying on the clear statutory language and long-standing common law principles, the Court dismissed the other insurance company’s claims and upheld the trial court’s ruling in USA Underwriters’ favor.
Outcome and Impact
This decision underscores the effectiveness of a thorough and methodical approach to defending rescission claims. By focusing on the facts of the case and the applicable legal framework, Christopher and Stephanie successfully demonstrated that USA Underwriters had no obligation to provide coverage following a valid rescission. This result protects insurers' rights and highlights the importance of carefully analyzing statutory language and legal remedies.
