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STATE OF MICHIGAN 

COURT OF APPEALS 

OAKWOOD HEALTHCARE, INC., 

 Plaintiff, 

and 

UNPUBLISHED 

November 22, 2016 

 

MICHIGAN BIOTECH PARTNERS, LLC, 

 Intervening Plaintiff, 

v 

No. 328162 

Wayne Circuit Court 

 LC No. 13-009820-NF 

HARTFORD INSURANCE COMPANY OF THE 

MIDWEST, 

 Defendant/Third-Party 

Plaintiff/Cross-DefendantAppellant, 

and 

KASSEM KOUBISE, 

 Defendant/Cross-Plaintiff-Appellee, 

and 

ALI KOUBISE, and KOUBISE 

CONSTRUCTION, INC., 

 Third-Party Defendants/Third-Party 

Plaintiffs-Appellees, 

and 
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NESSREAN SAAD, also known as NATALIE 

SAAD, and HYDRA INVESTMENTS, LLC, 

doing business as GLOBAL INSURANCE 

AGENCY, 

 Third-Party Defendants. 

RELIEF PHYSICAL THERAPY & REHAB, 

INC., and CITY 2 CITY TRANSPORTATION, 

 Plaintiffs, 

v 

HARTFORD INSURANCE COMPANY OF THE 

MIDWEST, 

 Defendant/Third-Party PlaintiffAppellant, 

and 

ALI KOUBISE, and KOUBISE 

CONSTRUCTION, INC., 

 Third-Party Defendants-Appellees. 

No. 328265 

Wayne Circuit Court 

 LC No. 13-013849-NF 

Before: WILDER, P.J., and CAVANAGH and SERVITTO, JJ. 

PER CURIAM. 

 In this first-party no-fault insurance case, Hartford Insurance Company of the Midwest 

(Hartford) appeals as of right an order denying its motion for summary disposition premised on 

the ground that it was entitled to rescind a commercial automobile insurance policy procured by 

fraud. We reverse and remand for entry of an order granting Hartford’s motion for summary 

disposition and vacating the judgment in plaintiffs’ favor. 

 Kassem Koubise was injured in a car accident that occurred in the parking lot of his 

school while driving a 2005 Hyundai Accent that was titled and registered in his own name. The 

vehicle was insured under a commercial policy issued by Hartford to Koubise Construction, Inc., 

which was procured by Ali Koubise though Nessrean Saad at Global Insurance Agency. Ali is 

Koubise Construction’s owner and Kassem’s father. Kassem was neither identified as an 

employee of the business nor as a driver of any of the insured vehicles in the commercial 

insurance application. The application for insurance stated: 
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**I have reported all drivers that are involved in the daily operation of the 

business and understand that drivers not listed on the policy may or may not be 

covered in the event of a claim** 

**The information contained in this application was furnished by me (the insured) 

and was used for underwriting purposes and for the premium calculation** 

**By signing the application, I attest that I have reviewed the information on the 

application, which was provided by me (the insured) and agree to purchase this 

policy. 

Under the words “acknowledged and accepted by,” Ali signed the application. 

 Subsequently, Kassem and his medical providers sued Hartford seeking payment of 

Kassem’s first-party no-fault benefits, and Hartford filed third-party complaints against Ali and 

Koubise Construction. Hartford denied liability for Kassem’s benefits, asserting that material 

misrepresentations were made in the commercial insurance application that were relied upon and 

affected the risk it accepted; thus, it was entitled to rescind the policy and declare it void ab initio

because it had been procured by fraud. Similarly, Hartford argued that Kassem and his medical 

providers were not protected from its rescission defense under the innocent third-party rule 

because the abrogation of that rule in Titan Ins Co v Hyten, 491 Mich 547; 817 NW2d 562 

(2012), extended to first-party no-fault claims. 

 Eventually, Hartford filed a motion for summary disposition pursuant to MCR 

2.116(C)(8) and (C)(10) regarding all claims filed against it, asserting those same two arguments 

for denying liability: it was entitled to rescind the insurance policy and rescission was not 

prohibited by the innocent third-party rule. Hartford noted, again, that it issued a commercial 

insurance policy on a vehicle that was reportedly being used for the business purposes of 

Koubise Construction; it did not issue a personal no-fault policy for a high risk teenage driver 

who was driving his personal vehicle. In a written opinion denying Hartford’s motion for 

summary disposition, the trial court agreed with Hartford that Ali intentionally made material 

misrepresentations regarding the ownership and use of the Hyundai, which substantially affected 

the risk accepted by Hartford when it issued the commercial policy to Koubise Construction. 

Nevertheless, the trial court concluded, Kassem was entitled to first-party no-fault insurance 

benefits because he was an innocent third-party with respect to those misrepresentations. The 

court observed that the innocent third-party rule was well-settled in Michigan law and prohibited 

an insurer from rescinding a policy based on fraud when the claim involved an innocent thirdparty. It reasoned that Hyten’s abrogation of the innocent third-party rule was limited to the 

factual circumstances surrounding that case, i.e., an insurer’s attempt in a third-party case to 

reduce the excess liability coverage available to an innocent third-party where the underlying 

policy was procured by fraud. Concluding that the overwhelming majority of caselaw does not 

allow rescission of a policy where first-party no-fault benefits are sought by an innocent thirdparty, the court denied Hartford’s motion for summary disposition. 

 Thereafter, the parties entered a stipulated order for dismissal and consent judgment, 

which noted that Hartford intended to appeal the court’s denial of its summary disposition 

motion and observed that there were several cases already pending before Michigan’s appellate 

courts that related to the alleged rights of “innocent third-parties” in first-party no-fault cases. 

Accordingly, the parties agreed to entry of judgment in favor of Kassem and his medical 
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providers, which would be payable in the event that Hartford’s position was ultimately rejected 

by this Court or the Supreme Court. The order also provided that, for purposes of this appeal, 

Kassem would be treated as an innocent third-party with respect to the commercial policy issued 

to Koubise Construction. 

 On appeal, Hartford argues that the trial court erred by denying its motion for summary 

disposition—after concluding that Hartford’s commercial policy was procured by fraud entitling 

it to rescind the policy—because abrogation of the innocent third-party rule by Hyten applies to 

bar claims for first-party no-fault insurance benefits, including those related claims of medical 

providers. We agree. 

 This Court reviews de novo a ruling on a motion for summary disposition. Dancey v 

Travelers Prop Cas Co, 288 Mich App 1, 7; 792 NW2d 372 (2010). Hartford brought its motion 

for summary disposition pursuant to MCR 2.116(C)(8) and (C)(10). However, because the 

parties relied on evidence beyond the pleadings in this matter, this Court must apply the standard 

of review applicable to summary disposition under MCR 2.116(C)(10). Nuculovic v Hill, 287 

Mich App 58, 61; 783 NW2d 124 (2010). The trial court may grant a motion for summary 

disposition under MCR 2.116(C)(10) only “if there is no genuine issue regarding any material 

fact and the moving party is entitled to judgment as a matter of law.” Dancey, 288 Mich App at 

7, quoting West v Gen Motors Corp, 469 Mich 177, 183; 665 NW2d 468 (2003). “A genuine 

issue of material fact exists when the record, giving the benefit of reasonable doubt to the 

opposing party, leaves open an issue upon which reasonable minds might differ.” Id. 

I. RESCISSION AS TO ALI AND KOUBISE CONSTRUCTION 

 A no-fault insurer may be entitled to rescind a policy and declare it void ab initio when 

the insured makes a material misrepresentation in the application for insurance that affected 

either the acceptance of the risk or the hazard assumed by the insurer. Oade v Jackson Nat’l Life 

Ins Co of Mich, 465 Mich 244, 252-254; 632 NW2d 126 (2001); Lake States Ins Co v Wilson, 

231 Mich App 327, 331; 586 NW2d 113 (1998). That is, a misrepresentation is material if, 

given the correct information, the insurer would have rejected the risk or charged an increased 

premium, i.e., not issued the same contract. Oade, 465 Mich at 253-254, quoting Keys v Pace, 

358 Mich 74, 82; 99 NW2d 547 (1959). 

 In this case, Ali sought to obtain a commercial insurance policy through Saad at Global 

Insurance Agency for Koubise Construction and completed an application with her assistance. 

The application identified five purported business vehicles that were to be covered under the 

commercial policy, including the Hyundai that was driven by Kassem when he was in the car 

accident. However, the Hyundai was not owned by Ali or Koubise Construction—it was titled 

and registered to Kassem. And Ali admitted that Kassem used the Hyundai for personal errands, 

like going to school, visiting friends, and traveling to his other job. Ali also provided a list of 

five purported employee-drivers to be insured under the policy and the list did not include 

Kassem. 

 Given the inconsistencies between Ali’s testimony and the information he provided on 

the insurance application, it is clear that he made a number of misrepresentations when he 

procured the Hartford commercial insurance policy at issue in this matter. And Ali signed the 
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application below a disclaimer confirming that he had furnished the information and reviewed 

the application for accuracy. See Montgomery v Fidelity & Guar Life Ins Co, 269 Mich App 

126, 130; 713 NW2d 801 (2005) (stating that a “contracting party has a duty to examine a 

contract and know what the party has signed”). Further, as the trial court concluded, it is clear 

that these misrepresentations were relied upon with regard to the issuance of this commercial 

insurance policy. Ali misrepresented the ownership, use, and primary driver of the Hyundai—

issues that were central to the decision to insure the vehicle, as well as to the nature of the risk 

Hartford accepted when it issued the commercial policy to Koubise Construction. Specifically, 

the insurance agent, Saad, testified that the commercial insurance policy was approved by 

underwriting to be issued only under the conditions that the information furnished to Saad by Ali 

was correct and that he reported all vehicles and employee-drivers related to his business. Saad 

further testified that the “vehicles on the policy have to relate only to Koubise Construction;” 

otherwise, Hartford would not insure the vehicle. That is, she testified, a commercial insurance 

policy is not issued by Hartford unless the business vehicle sought to be insured is used “95% or 

more for the business.” It is clear from Saad’s testimony that, given the correct information, 

Hartford would not have insured the Hyundai under the commercial policy issued to Koubise 

Construction. See Oade, 465 Mich at 254; Montgomery, 269 Mich App at 129. Thus, as the trial 

court held, Ali’s misrepresentations were material and relied upon by Hartford when it issued the 

commercial policy. Accordingly, we agree with the trial court’s determination that Hartford 

would be entitled to rescind its policy as a matter of law. However, the trial court refused to 

grant Hartford’s motion for summary disposition, holding that the innocent third-party rule 

barred rescission in this case. We disagree with this conclusion. 

II. RESCISSION AS TO INNOCENT THIRD-PARTIES 

 In holding that the innocent third-party rule barred rescission in this case despite the 

fraudulent conduct in procuring the commercial policy, the trial court rejected Hartford’s 

argument that the reasoning in Hyten applied equally to first-party claims for personal injury 

protection (PIP) benefits. In Hyten, our Supreme Court considered under what circumstances an 

insurer could avoid liability arising from an insurance policy that was procured by fraud. Hyten, 

491 Mich at 550. The Hyten Court initially noted that, under the rule established in State Farm 

Mut Auto Ins Co v Kurylowicz, 67 Mich App 568; 242 NW2d 530 (1976), an insurer could not 

avoid liability under a fraudulently procured policy if the fraud was easily ascertainable and the 

claimant was a third-party. Hyten, 491 Mich at 563-564. In rejecting the Kurylowicz rule and 

concluding that an insurer can avail itself of traditional contract avoidance remedies even where 

the claim is brought by an innocent third-party, the Hyten Court reaffirmed the principles it had 

set forth in Keys, 358 Mich at 84: “The Keys rule, which allows an insurer to avail itself of a 

legal or equitable remedy on the ground of fraud in the application for insurance, 

notwithstanding that the claimant is a third party and the fraud could have been discovered 

through further investigation, comports with the long-established understanding of fraud in 

Michigan.” Hyten, 491 Mich at 570. The Hyten Court further noted: 

[I]t is well settled in Michigan that fraud in the application for an insurance policy 

may allow the blameless contracting party to avoid its contractual obligations 

through the application of traditional legal and equitable remedies. . . . We discern 

no basis for treating insurers differently from all other parties who enter into 

contracts in this state. [Id. at 570-571.] 
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Thus, the Hyten Court concluded, in the context of contractually negotiated excess liability 

insurance coverage, the insurer could seek to avoid liability under the fraudulently procured 

insurance policy when a claim was brought by third-parties injured in an accident. 

 In this case, Hartford argued that the reasoning in Hyten applied equally to first-party nofault claims because the no-fault act, MCL 500.3101 et seq., does not prohibit an insurer from 

seeking to rescind the policy based on fraud in the procurement. In contrast, Kassem and his 

medical providers argued that the Court’s decision in Hyten only relieved an insurer of “its 

purely contractual obligations to indemnify an insured tortfeasor, not potential obligations – 

including PIP coverage – owed to third parties by operation of law.” Despite their differing 

interpretations of Hyten, the parties correctly agreed that the applicability of Hyten’s abrogation 

of the innocent third-party rule in first-party no-fault litigation would be clarified by this Court’s 

decision in Bazzi v Sentinel Ins Co, ___ Mich App ___; ___ NW2d ___ (2016) (Docket No. 

320518). 

 In Bazzi, this Court agreed with the arguments now proffered by Hartford on appeal. 

Bazzi, ___ Mich App at ___; slip op at 3. This Court observed that the Hyten Court abrogated 

the innocent third-party rule “without qualification regarding whether those benefits are 

mandated by statute,” nor was the outcome in Hyten based on the mandatory nature of the 

minimum liability coverage required under the financial responsibility act. Id. at ___; slip op at 

5-7. According to Bazzi, 

[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. [Id. at ___; slip op at 5.] 

Thus, this Court concluded that “if an insurer is entitled to rescind a no-fault insurance policy 

based upon a claim of fraud, it is not obligated to pay benefits under that policy even for PIP 

benefits to a third party innocent of the fraud.” Id. at ___; slip op at 3. 

 Hartford correctly interpreted Hyten’s abrogation of the innocent third-party rule as 

extending to first-party no-fault cases. Therefore, because Hartford was entitled to rescind the 

commercial insurance policy it issued to Koubise Construction, it was not obligated to pay PIP 

benefits that were sought under the policy by parties innocent of the fraud, including Kassem1

 

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 We note, however, that Kassem is not truly an “innocent third-party.” The Hyundai was titled 

and registered in his name. As the owner, registrant, and driver of that vehicle, it was Kassem’s 

responsibility under the law to ensure that he had no-fault automobile insurance. See MCL 

500.3101(1). As our Supreme Court noted in Hyten, 491 Mich at 569: “Absent insurance, the 

operator of the motor vehicle is personally liable for tort liability.” Similarly, absent insurance, 

the operator of the motor vehicle is personally liable for his own medical bills and the related 

costs of being in an automobile accident. See MCL 500.3113(b). And, as Hartford argues on 
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and his medical providers. Accordingly, we reverse the trial court’s denial of Hartford’s motion 

for summary disposition premised on its erroneous conclusion that the innocent third-party rule 

barred rescission in this case. 

 Reversed and remanded for entry of an order granting Hartford’s motion for summary 

disposition and vacating the judgment in plaintiffs’ favor. We do not retain jurisdiction. 

/s/ Kurtis T. Wilder 

/s/ Mark J. Cavanagh 

/s/ Deborah A. Servitto 

appeal, our decision operates to bar the claims of Kassem’s medical providers because Kassem 

was not entitled to PIP benefits from Hartford. See MCL 500.3112; TBCI, PC v State Farm Mut 

Auto Ins Co, 289 Mich App 39, 44; 795 NW2d 229 (2010).