Bazzi Bounce Back: Recovery Possible Under Seemingly Rescinded Policy

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. See El-Achkar v Sentinel Ins Co, unpublished opinion per curiam of the Court of Appeals, issued December 3, 2020 (Docket No. 348380), p 5. 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.

In El-Achkar – where the claimant sought recovery under the same policy that was at issue in Bazzi –the panel found that the equities favored an “innocent-third party” even though the insurer had already been granted rescission vis-à-vis another claimant injured in the same accident in the same vehicle.

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