It is Expensive to Lie to Your Insurer

Fraud in Inception Allows Insurer to Rescind

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Lamin Fatty appealed the trial court’s order granting summary disposition to Farm Bureau on the basis of finding Fatty’s fraud was grounds for contract rescission and reimbursement of benefits paid. In Lamin Fatty v. Farm Bureau Insurance Company Of Michigan, No. 363888, Court of Appeals of Michigan (November 21, 2023) the Court of Appeals resolved the dispute.


After a motor vehicle accident where Fatty sustained bodily injuries the issue of rescission was raised when it was discovered that at the time of the accident, Fatty was insured by Farm Bureau under the no-fault act. Fatty obtained insurance with Farm Bureau on July 17, 2019. On the application for insurance, Fatty answered the following question in the negative: “Are any vehicles to be insured used to carry persons for a fee?”

Fatty received treatment for his injuries at Columbia Clinic among other medical facilities, and indicated to providers that he was “rear-ended as an Uber driver.”

Uber records indicated that Fatty began working as an Uber driver in early May 2019 (before he applied for the insurance) and drove for Uber on the day of the accident. Fatty’s drive log shows he picked up a rider at 6:05 p.m. and dropped them off at 6:30 p.m. Fatty picked up another rider at 6:38 p.m. and dropped them off at their destination at 6:50 p.m. Fatty continued picking up riders and completing trips that night until 8:17 p.m.

After this discovery, Farm Bureau filed a counterclaim on the basis of fraud, requesting reimbursement of benefits paid to or on behalf of Fatty with regard to the accident.

The trial court granted Farm Bureau’s motion for summary disposition of the counterclaim, including its request for reimbursement of $104,730.82 for benefits paid, because the policy was rescinded under the doctrine of fraud in the procurement. The trial court also found Fatty’s fraud entitled Farm Bureau to attorney fees under the no-fault act, and costs. Specifically, the trial court found the requested costs of $2,599.50 were reasonable and awarded $10,000 in attorney fees. Fatty appealed.


The trial court properly rescinded the insurance policy because Fatty committed fraud in the procurement of the contract by explicitly denying using his vehicle to carry passengers for a fee. Because of this rescission, summary disposition of Fatty’s claims was appropriate, without regard to whether Fatty was driving for Uber at the time of the accident.

Fraud in the inducement to enter a contract renders the contract voidable at the option of the party deceived. An insurer has a reasonable right to expect honesty in the application for insurance. Rescission abrogates the contract and restores the parties to their relative positions had the contract never been made. A court must not hold an insurance company liable for a risk that it did not assume.

Farm Bureau’s evidence in the form of the litigation representative’s affidavit that he told the truth the policy would have been refused was unrefuted and it establishes the materiality of the misrepresentation. Fatty’s denial of carrying passengers for a fee was determined to be a material representation.


Reimbursement of the PIP benefits paid to Fatty was an appropriate remedy following rescission. Because the claim was fraudulent and Farm Bureau was the prevailing party, the award of attorney fees and costs was also proper.

The trial court properly awarded attorney fees to Farm Bureau. Farm Bureau was forced to defend against a claim pursued under a policy that was procured by fraud. Therefore, the award is within the range of reasonable and principled outcomes and was not an abuse of discretion. Accordingly, the award of attorney fees and costs to Farm Bureau was proper.

The trial court properly rescinded the contract because Fatty committed fraud in the procurement by explicitly denying he used his vehicle to carry passengers for a fee. Because the claim was fraudulent and Farm Bureau was the prevailing party, the award of attorney fees and costs was also proper.


Rescission is an equitable remedy that allows a contract to be voided from its inception as a result of fraud in the inception of the policy of insurance. Farm Bureau was deceived by Fatty who lied about a material fact, that he was carrying passengers as an Uber driver. He received no fault benefits as a result of this fraud and the court properly ordered the policy rescinded, ordered Fatty to repay the benefits he received plus attorneys fees it took to defeat the claim. Fatty learned that fraud does not pay and that he should never lie to a prospective insurer.

(c) 2023 Barry Zalma & ClaimSchool, Inc.

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About Barry Zalma

An insurance coverage and claims handling author, consultant and expert witness with more than 48 years of practical and court room experience.
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