Opinion ID: 2981463
Heading Depth: 3
Heading Rank: 1

Heading: Taking Advantage of Its Own Breach

Text: RFT argues that Phoenix cannot take advantage of its breach of the Policies by allegedly wrongfully rescinding them. Further, according to RFT, it had no other choice but to default on the loans because it did not want to pay on an outstanding loan for assets which had legally ceased to exist. The law provides that a party cannot benefit from its own breach. GenCorp, Inc. v. Am. Int’l Underwriters, 178 F.3d 804, 817 (6th Cir. 1999). Said another way, a party cannot take advantage of his own default in the performance of a contract. Id. (citing Cussler v. Firemen’s Ins. Co., 260 N.W. 353, 356 (Minn 1935)). - 14 - No. 11-2181 Ellias v. Phoenix Life Ins. Company To rescind a contract is to abrogate and undo it from the beginning and “restore the parties to the relative positions which they would have occupied if no such contract had ever been made.” Old Line Life Ins’ Co. Of Am. v. Garcia, 309 F. Supp. 2d 966, 969-70 (E.D. Mich. 2004), rev’d on other grounds, 411 F.3d 605 (6th Cir. 2005). Further, when a contract is rescinded, an action will not lie for breach of that contract. Adam Kroehle’s Sons Co. v. Rockford Oak Leather Co., 215 N.W. 324, 325 (Mich. 1927). If the Policies were rescinded, as RFT argues as the basis for not paying the loan, then an action would not lie for breach of the Policies. If the Policies were not rescinded, then RFT should have paid the loan. RFT had the choice as to whether or not to treat the Policies as not rescinded and pay on the loans and elected not to. It would appear as though it is RFT that is attempting to benefit from its decision to treat the Policies as rescinded and not Phoenix. In an attempt to overcome the rescission, RFT wants to hold Phoenix to the fiduciary standard established for ERISA plan administrators. However, parties to an insurance contract deal at arm’s length and owe no fiduciary obligations to each other. Bolden v. John Hancock Mut. Life Ins. Co., 422 F. Supp. 28, 31 (E.D. Mich. 1976).