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Fraud in Inception Allows Insurer to Rescind\\n\\nLamin Fatty appealed the trial court\'s order granting summary \\ndisposition to Farm Bureau on the basis of finding Fatty\'s fraud was \\ngrounds for contract rescission and reimbursement of benefits paid. In \\nLamin Fatty v. Farm Bureau Insurance Company Of Michigan, No. 363888, \\nCourt of Appeals of Michigan (November 21, 2023) the Court of Appeals \\nresolved the dispute.\\n\\nFACTS\\n\\nAfter a motor vehicle accident where Fatty sustained bodily injuries the\\n issue of rescission was raised when it was discovered that at the time \\nof the accident, Fatty was insured by Farm Bureau under the no-fault \\nact. Fatty obtained insurance with Farm Bureau on July 17, 2019. On the \\napplication for insurance, Fatty answered the following question in the \\nnegative: "Are any vehicles to be insured used to carry persons for a \\nfee?"\\n\\nUber records indicated that Fatty began working as an Uber driver in \\nearly May 2019 (before he applied for the insurance) and drove for Uber \\non the day of the accident. Fatty\'s drive log shows he picked up a rider\\n at 6:05 p.m. and dropped them off at 6:30 p.m. Fatty picked up another \\nrider at 6:38 p.m. and dropped them off at their destination at 6:50 \\np.m. Fatty continued picking up riders and completing trips that night \\nuntil 8:17 p.m.\\n\\nAfter this discovery, Farm Bureau filed a counterclaim on the basis of \\nfraud, requesting reimbursement of benefits paid to or on behalf of \\nFatty with regard to the accident.\\n\\nThe trial court granted Farm Bureau\'s motion for summary disposition of \\nthe counterclaim, including its request for reimbursement of $104,730.82\\n for benefits paid, because the policy was rescinded under the doctrine \\nof fraud in the procurement. The trial court also found Fatty\'s fraud \\nentitled Farm Bureau to attorney fees under the no-fault act, and costs.\\n Specifically, the trial court found the requested costs of $2,599.50 \\nwere reasonable and awarded $10,000 in attorney fees. Fatty appealed.\\n\\nSUMMARY DISPOSITION OF THE CLAIM\\n\\nThe trial court properly rescinded the insurance policy because Fatty \\ncommitted fraud in the procurement of the contract by explicitly denying\\n using his vehicle to carry passengers for a fee. Because of this \\nrescission, summary disposition of Fatty\'s claims was appropriate, \\nwithout regard to whether Fatty was driving for Uber at the time of the \\naccident.\\n\\nFraud in the inducement to enter a contract renders the contract \\nvoidable at the option of the party deceived. An insurer has a \\nreasonable right to expect honesty in the application for insurance. \\nRescission abrogates the contract and restores the parties to their \\nrelative positions had the contract never been made. A court must not \\nhold an insurance company liable for a risk that it did not assume.\\n\\nSUMMARY DISPOSITION OF THE COUNTERCLAIM\\n\\nReimbursement of the PIP benefits paid to Fatty was an appropriate \\nremedy following rescission. Because the claim was fraudulent and Farm \\nBureau was the prevailing party, the award of attorney fees and costs \\nwas also proper.\\n\\nThe trial court properly awarded attorney fees to Farm Bureau. Farm \\nBureau was forced to defend against a claim pursued under a policy that \\nwas procured by fraud. Therefore, the award is within the range of \\nreasonable and principled outcomes and was not an abuse of discretion. \\nAccordingly, the award of attorney fees and costs to Farm Bureau was \\nproper.\\n\\nThe trial court properly rescinded the contract because Fatty committed \\nfraud in the procurement by explicitly denying he used his vehicle to \\ncarry passengers for a fee. Because the claim was fraudulent and Farm \\nBureau was the prevailing party, the award of attorney fees and costs \\nwas also proper.\\n\\nZALMA OPINION\\n\\nRescission is an equitable remedy that allows a contract to be voided \\nfrom its inception as a result of fraud in the inception. Farm Bureau \\nwas deceived by Fatty who lied about a material fact.