The “innocent third-party rule” no longer exists in Michigan — at least until the state Legislature decides to create one, the Michigan Court of Appeals has declared in Bazzi v Sentinel Ins Co (Docket No. 320518).
As a result, innocent third parties — including medical providers who treat persons injured in car crashes — are not entitled to reimbursement for their services when a no-fault policy was allegedly obtained through fraud, although they were not involved in the purported fraudulent conduct.
For more than 30 years, the innocent third-party rule has allowed third parties, such as medical providers, to collect PIP benefits, even if the insured had fraudulently purchased the no-fault policy.
But according to the Court of Appeals in …show more content…
He sought no-fault PIP benefits, while Genex Physical Therapy, Elite Chiropractor Center and Transmedic also sought payment for the treatment they provided Bazzi. The vehicle was insured under a commercial no-fault policy issued by Sentinel Insurance to Mimo Investments, LLC. Sentinel claimed that Bazzi’s mother and sister fraudulently purchased the policy. Sentinel alleged the vehicle was actually leased to Bazzi’s mother for personal and family use, and that Mimo Investments was not a business at all. In fact, Sentinel had previously pursued a successful claim to rescind the no-fault policy based on fraud. The trial court held that Bazzi had a valid PIP claim based on the innocent third-party rule. The Court of Appeals denied the appeal. The Michigan Supreme Court, instead of granting leave to appeal, remanded the case to the Court of Appeals for a …show more content…
The Court of Appeals rejected these claims and said that Titan did, indeed, extend to mandatory no-fault benefits and that the easily ascertainable rule and the innocent third-party rule are one and the same. According to the Court:
“[I]n rejecting the ‘easily ascertainable’ rule, the Supreme Court of necessity also rejected the ‘innocent third-party’ rule because they are, in fact, the same rule. … [T]he question is not whether PIP benefits are mandated by statute, but whether that statute prohibits the insurer from availing itself of the defense of fraud. And none of the parties identify a provision in the no-fault act itself where the Legislature statutorily restricts the use of the defense of fraud with respect to PIP benefits.”
The Court of Appeals also rejected the argument that the innocent third-party rule should remain as a matter of public policy. The Court said that keeping the rule viable would ignore Supreme Court case precedent, and that it’s up to the Legislature, not the judiciary, to determine whether such a rule should be
As a result, innocent third parties — including medical providers who treat persons injured in car crashes — are not entitled to reimbursement for their services when a no-fault policy was allegedly obtained through fraud, although they were not involved in the purported fraudulent conduct.
For more than 30 years, the innocent third-party rule has allowed third parties, such as medical providers, to collect PIP benefits, even if the insured had fraudulently purchased the no-fault policy.
But according to the Court of Appeals in …show more content…
He sought no-fault PIP benefits, while Genex Physical Therapy, Elite Chiropractor Center and Transmedic also sought payment for the treatment they provided Bazzi. The vehicle was insured under a commercial no-fault policy issued by Sentinel Insurance to Mimo Investments, LLC. Sentinel claimed that Bazzi’s mother and sister fraudulently purchased the policy. Sentinel alleged the vehicle was actually leased to Bazzi’s mother for personal and family use, and that Mimo Investments was not a business at all. In fact, Sentinel had previously pursued a successful claim to rescind the no-fault policy based on fraud. The trial court held that Bazzi had a valid PIP claim based on the innocent third-party rule. The Court of Appeals denied the appeal. The Michigan Supreme Court, instead of granting leave to appeal, remanded the case to the Court of Appeals for a …show more content…
The Court of Appeals rejected these claims and said that Titan did, indeed, extend to mandatory no-fault benefits and that the easily ascertainable rule and the innocent third-party rule are one and the same. According to the Court:
“[I]n rejecting the ‘easily ascertainable’ rule, the Supreme Court of necessity also rejected the ‘innocent third-party’ rule because they are, in fact, the same rule. … [T]he question is not whether PIP benefits are mandated by statute, but whether that statute prohibits the insurer from availing itself of the defense of fraud. And none of the parties identify a provision in the no-fault act itself where the Legislature statutorily restricts the use of the defense of fraud with respect to PIP benefits.”
The Court of Appeals also rejected the argument that the innocent third-party rule should remain as a matter of public policy. The Court said that keeping the rule viable would ignore Supreme Court case precedent, and that it’s up to the Legislature, not the judiciary, to determine whether such a rule should be