Rescission; Fraudulent inducement; Drivers in the household; Mutual & unilateral rescission; Inferring mutual rescission; Puffer v State Mut Rodded Fire Ins Co; Cheema v Progressive Marathon Ins Co (On Reconsideration) (Unpub); Innocent third-party doctrine; Unlawful taking; MCL 500.3113; Monaco v Home Owners Ins Co; Ahmed v Tokio Marine Am Ins Co; Whether Swoope v Citizens Ins Co of the Midwest was binding

The court held as a matter of law that nonparty-Clementine “did not procure her insurance policy via fraudulent inducement because” defendant-insurer never asked her “to identify the members of her household and” she did not represent “to defendant that plaintiff did not reside with her and use her car.” It also concluded “that the rescission relied upon by defendant was not mutual and that the claimed basis for a unilateral rescission, i.e. fraud,” could not be shown. Further, “because there was no rescission, the innocent third-party doctrine” did into apply. “Finally, the fact that plaintiff operated the vehicle without a valid license does not constitute an unlawful taking pursuant to MCL 500.3113.” Clementine (plaintiff’s mother) “had an auto no-fault insurance policy through defendant. Unbeknownst to defendant, Clementine lived with plaintiff, and Clementine allowed plaintiff to drive her car. Plaintiff was in an accident and sought PIP benefits from defendant,” which sought to rescind the policy. The court held that defendant “failed to produce any evidence suggesting that Clementine made a false representation. Defendant’s application for insurance did not ask the applicant who lived with her and whether there were other drivers in the household.” Defendant emphasized “the following line in an unsigned copy of Clementine’s insurance application: ‘In making this application for insurance, it is understood that as a part of our underwriting procedure, an investigative consumer report containing driving record information may be obtained for each driver in the household.’ Simply put, this statement does not say what defendant wants it to say; it does not direct or ask the applicant to list the drivers in the household or even who lived in the household. A failure to provide information that is not requested does not constitute a misrepresentation, let alone fraud.” Because there was no evidence of a misrepresentation, defendant was not entitled to rescind the contract based on fraud. It alternatively argued that Clementine agreed to mutually rescind the policy by accepting a refund. The court concluded that “mutual rescissions must be based on proof that the insurer informed the insured that cashing the check would constitute a mutual rescission by which the insured would forfeit any right to dispute the lawfulness of the rescission.” Under the circumstances here, cashing the check was insufficient to mutually rescind the policy. As to whether plaintiff lawfully took the vehicle, the court found “that Monaco controls the issue and Swoope is not binding.” Reversed and remanded.