Reese v. CURE : Rescission Cannot Extend to Innocent Pedestrian

July 15, 2026
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seva firm

Reese v. CURE: Court of Appeals Refuses to Extend Policy Rescission to an Innocent Pedestrian Injured in a No-Fault Claim

By Pratheep Sevanthinathan, Esq. The Seva Law Firm

Case: Reese v. Citizens United Reciprocal Exchange, No. 372786 (Mich. Ct. App. July 15, 2026) (Unpublished)

Court: Michigan Court of Appeals

Panel: Rick, P.J., and Murray and Borrello, JJ.

Decision: Affirmed — Per Curiam

Lower Court: Wayne Circuit Court, Case No. 23-001347-NI

Read the full opinion here: https://www.courts.michigan.gov/4a0555/siteassets/case-documents/uploads/opinions/final/coa/20260715_c372786_77_372786.opn.pdf

  1. Introduction

In Reese v. Citizens United Reciprocal Exchange, the Michigan Court of Appeals affirmed a trial court’s decision refusing to extend policy rescission to an innocent pedestrian who was struck by a vehicle. The insurer, Citizens United Reciprocal Exchange (CURE), sought to void the entire policy — including as to the injured claimant and her medical provider — because the named insured made misrepresentations on the insurance application. The Court held that the trial court did not abuse its discretion in applying the equitable balancing test from Bazzi v. Sentinel Insurance Co., 502 Mich 390 (2018), and Pioneer State Mutual Insurance Co. v. Wright, 331 Mich App 396 (2020), to protect the innocent third-party claimant. This decision reinforces the critical protection that Michigan law provides to innocent people who are harmed but had nothing to do with a policyholder’s fraud.

  1. Facts

Niema Reese lived with her adoptive mother, Latoya Winkfield. CURE had issued a no-fault insurance policy to Latoya several months before the accident. The policy listed Latoya as the named insured and identified two resident relatives — but it did not include Reese.

Latoya’s application also represented that she solely owned the vehicles insured under the policy. During discovery, however, Latoya admitted that her daughter, Surya Winkfield, actually owned or co-owned one of the insured vehicles. CURE later asserted that Latoya made material misrepresentations by failing to identify all household members and by misstating vehicle ownership, and that CURE would not have issued the policy had it known the true facts.

In May 2022, Reese was struck by a vehicle while she was a pedestrian outside a nightclub. She sought PIP benefits from CURE on the basis that she was a resident relative of Latoya under MCL 500.3114(1). She also submitted an application to the Michigan Automobile Insurance Placement Facility (MAIPF) through the Michigan Assigned Claims Plan (MACP), identifying herself as an uninsured pedestrian. VHS of Michigan Inc., doing business as Detroit Medical Center (DMC), intervened in the action to recover payment for medical treatment it provided to Reese.

The MAIPF moved for summary disposition, arguing it was not responsible because CURE’s policy applied to Reese as a resident relative. CURE cross-moved, arguing Latoya’s policy was void ab initio and should be rescinded as to Reese and DMC. The trial court agreed that Latoya made material misrepresentations and rescinded the policy as to Latoya — but declined to extend that rescission to Reese or DMC.

  1. Issues

The central questions on appeal were:

  1. Did the trial court abuse its discretion by refusing to extend rescission to Reese, an innocent third party, after finding that the named insured committed fraud on the application?
  2. Could rescission be extended to DMC, the intervening medical provider?
  3. Were Reese and DMC required to seek benefits through the MAIPF assigned-claims system instead of from CURE?
  4. Holding

The Court of Appeals affirmed on all three issues.

Rescission as to Reese. The Court applied the five-factor equitable balancing test from Pioneer State, which governs whether rescission should extend to innocent third parties after an insured’s fraud:

  • Factor 1 (Insurer’s diligence): Weighed in favor of rescission. CURE sent Latoya a letter asking her to confirm her household members, and the opposing parties presented no evidence that CURE could have discovered the misrepresentations before the accident.
  • Factor 2 (Third party’s knowledge of fraud): Weighed against rescission. Although Reese lived with Latoya and knew a CURE policy existed, there was no evidence Reese knew about the specific misrepresentations on the application. The familial relationship alone was not dispositive.
  • Factor 3 (Third party’s conduct): Weighed against rescission. Reese was a pedestrian who was intentionally struck by a vehicle. She had no negligent or reckless role in the accident.
  • Factor 4 (Alternate recovery): The trial court had erroneously weighed this factor against rescission because Reese had not served her complaint on the MAIPF. The Court of Appeals corrected this, finding the factor actually favored rescission because Reese had timely submitted a claim to the MAIPF within one year, preserving an alternate avenue of recovery.
  • Factor 5 (Relieving the fraudulent insured of liability): Inapplicable because Latoya was not involved in the accident.

With two factors favoring rescission, two against, and one inapplicable, CURE failed to meet its burden of proving that rescission was warranted. The trial court’s denial of rescission as to Reese fell within the range of reasonable and principled outcomes.

Rescission as to DMC. The Court rejected CURE’s argument that DMC’s claim was entirely derivative and that the Pioneer State factors are unworkable for medical providers. Citing Van Dyke Spinal Rehab Center v. USA Underwriters (2024), the Court applied the same five factors and reached the same result — CURE did not meet its burden.

Assigned-claims eligibility. Because CURE’s policy was not rescinded as to Reese or DMC, applicable personal protection insurance existed. Reese could claim benefits from CURE under MCL 500.3114(1) as a domiciled relative, and DMC could pursue overdue benefits under MCL 500.3112. The MAIPF was properly dismissed.

The Court also applied the standard of review recently clarified by the Michigan Supreme Court in Sherman v. Progressive Michigan Insurance Co. (2026): de novo review for genuine issues of material fact, followed by abuse-of-discretion review for the equitable remedy of rescission.

  1. Conclusion

The Court of Appeals affirmed the trial court in full. CURE’s policy was rescinded as to Latoya, the fraudulent applicant, but was not rescinded as to Reese or DMC. CURE remains responsible for PIP benefits to Reese as a domiciled relative, and DMC may recover directly from CURE for medical services provided. The MAIPF was properly granted summary disposition because applicable personal protection insurance exists.

  1. What Does This Mean for Our Clients?

This decision is a significant win for anyone who has been injured in a motor vehicle accident and seeks PIP benefits under a family member’s no-fault policy — even when the policyholder made errors or misrepresentations on the application. Here is what you need to know:

If you are an innocent third party, an insurer cannot automatically void your coverage because someone else committed fraud. Under Bazzi and Pioneer State, Michigan courts must balance the equities before extending rescission to innocent claimants. The insurer bears the burden of proving that rescission is warranted — and in this case, CURE could not meet that burden despite the trial court finding that Latoya actually did commit fraud.

Living with the policyholder does not mean you knew about the fraud. CURE tried to argue that Reese had constructive knowledge of the misrepresentations simply because she lived with Latoya. The Court rejected this. A close family relationship may support an inference, but it is not enough on its own. The insurer must present actual evidence that the third party knew about the specific misrepresentations.

Medical providers are also protected as innocent third parties. The Court reaffirmed that the Pioneer State equitable balancing test applies to medical providers who intervene to recover PIP benefits. Insurers cannot avoid paying providers simply because the underlying policy was procured through fraud by someone else.

File your claims promptly — it matters. One factor in the equitable balancing test is whether the injured person has an alternate source of recovery. Reese’s timely claim to the MAIPF within one year of the accident actually worked against her on this factor (because it showed she could recover elsewhere). But the bigger lesson is this: always file claims with every potentially responsible entity as soon as possible. Missing a deadline can close doors permanently.

The burden is on the insurer, not on you. CURE bore the burden of proving rescission was appropriate, and it failed. When an insurer tries to void your coverage, they must do the heavy lifting — and courts are watching closely to make sure they do.

If your insurance company is trying to deny your PIP benefits by voiding a family member’s policy, contact The Seva Law Firm. We understand the equitable balancing test, and we know how to fight these rescission arguments.

Pratheep Sevanthinathan is the owner and managing attorney of The Seva Law Firm, located at 100 W. Big Beaver Rd, Suite 500, Troy, MI 48084. He can be reached at (248) 385-5704.

This article is for informational purposes only and does not constitute legal advice. Every case is different, and past results do not guarantee future outcomes.