Michigan Supreme Court Concludes Judgment Entered on Motion is a “Verdict” Sufficient to Invoke Case Evaluation Awards and Costs Provision of Michigan Court Rules

Yesterday, in Acorn Investment Co v. Michigan Basic Property Insurance, the Michigan Supreme Court issued an opinion clarifying a point that has been in contention for quite some time regarding the meaning of the term “verdict” under Michigan Court Rule (MCR) 2.403(O), for purposes of determining when a trial court may issue an award of case evaluation sanctions and costs.

MCR 2.403(O)(1) requires a court to award actual costs when an opposing party rejects a case evaluation, the action proceeds to verdict, and the verdict is less favorable to the rejecting party than the case evaluation.

This case originated when the plaintiff made a claim with its insurer under a fire insurance policy to recover insurance proceeds for property damages resulting from a fire on the plaintiff’s property.  The insurer disputed the claim and did not pay.  The plaintiff filed suit and the case was submitted to case evaluation.  Case evaluation resulted in an award of $11,000 to the plaintiff.  The plaintiff accepted the award, but the insurer rejected it.  Then, the plaintiff invoked a policy provision that the loss be set by appraisal.  The appraisal determined the claim was worth $20,877.  The plaintiff then filed a motion in the circuit court for entry of a judgment, with interest, actual costs, and case evaluation sanctions.  The trial court entered judgment, but refused to award costs and debris-removal expenses under the policy.  The Court of Appeals affirmed and the plaintiff appealed arguing that the MCR 2.403(O)(1) required a court to award actual costs when an opposing party rejects a case evaluation.

In this case, the parties agreed that the insurer rejected the initial case evaluation and that the appraisal panel’s award was less favorable to the insurer than the initial case evaluation.

The Court held that the remaining requirement, that the action “proceed to verdict,” was satisfied. Under MCR 2.403(O)(2)(c), the definition of “verdict” includes “a judgment entered as a result of a ruling on a motion after rejection of the case evaluation.”

In this case, the action proceeded to a judgment entered as a result of a ruling on a motion when the circuit court granted the plaintiff’s motion for entry of judgment and interest.

For more than a century, Lacey & Jones has distinguished itself from other law firms by maintaining a robust Appeals and Legal Research Group.  Effective appellate representation demands different skills than those required by litigation attorneys.  Our appellate attorneys are adept at analyzing the intricacies of each case from an objective and critical perspective.  From reviewing and preparing the lower court record, identifying appealable errors, and developing a strategy to raise issues that will be addressed by appellate courts, our seasoned appellate team is capable of handling the most complex appeals from the application stage to oral advocacy before the highest courts.  Our research abilities and knowledge of current issues in nearly all major subject-matter areas of the law provide our clients with efficient and immediate assistance with complex and high-exposure cases.

We are experienced at navigating through all appellate courts to shepherd the appeal in the most expeditious fashion possible so that it can be reviewed and quickly ruled upon.

During the last three decades alone, the Appeals and Legal Research Group at Lacey & Jones has been responsible for over 150 published decisions, including seminal decisions in workers’ compensation, governmental immunity, employment and labor law, civil rights law and insurance coverage.  Because of its specialized knowledge and focus on appellate law and its recognized expertise, the Appeals and Legal Research Group at Lacey & Jones has been asked to participate as amicus curiae writing briefs for the Supreme Court or as special counsel to the Michigan Attorney General and other governmental entities in some of the most significant cases in the Court of Appeals and Supreme Court.   Below are some of the recent significant cases in which Lacey & Jones, LLP’s Appeals and Legal Research Group has participated.

• Estate of Truett v. Wayne County (Court of Appeals Docket No. 313638 (May 6, 2014)
• Yono v. MDOT, ___ Mich. App. ___ (201_), amicus curiae brief to be filed after remand for Michigan Municipal League, et al., by Carson J. Tucker
• Omian v. Chrysler Group, LLC, 495 Mich. 859 (2013), application filed by Carson J. Tucker, Supreme Court remand to Court of Appeals on leave granted
• Ghanam v. John Does, 303 Mich. App. 522 (2013), application to appeal filed in Supreme Court by Carson J. Tucker
• State Farm v. MMRMA, ___ Mich App ___ (2013), amicus curiae for Oakland County in support of MMRMA application, by Carson J. Tucker
• Hannay v MDOT, ___ Mich ___ 201_), application granted, amicus curiae filed for Michigan Townships Association, Macomb County, Oakland County and Wayne County, et al., by Carson J. Tucker
• Yono v. MDOT, ___ Mich ___ (201_), oral argument on application granted, amicus curiae for Oakland, Macomb and Wayne County filed by Carson J. Tucker in support of the state’s application
• Huddleston v. Trinity Health, et al., 495 Mich. 976 (2014), oral argument on application granted, amicus curiae with Lawrence Garcia, Esq., for MDTC
• Ashley, LLC v Pittsfield Twp., 494 Mich 875 (2013), application granted, for Pittsfield Township by Carson J. Tucker (resolved by settlement)
• Bailey v. Schaaf, ___ Mich ___ (2013), amicus curiae for MDTC by Carson J. Tucker
• Atkins v. SMART, 492 Mich 707 (2012), oral argument on application, Court of Appeals case reversed by opinion, Carson J. Tucker
• Hagerty v Manistee, 493 Mich 933 (2013), amicus curiae for Michigan Municipal League, et al., by Carson J. Tucker
• McMurtrie v Eaton Corp, 490 Mich 976 (2011)
• Findley v DaimlerChrysler Corp., 490 Mich 928 (2011)
• Brewer v. AD.Transport Express, Inc, 486 Mich 50 (2010)
• Stokes v Chrysler, 481 Mich 266 (2008)
• Brackett v Focus Hope, Inc, 482 Mich 269 (2008)
• Rakestraw v Gen Dynamics, 469 Mich 220 (2003)

Tenants Occupying Insured Property Not Entitled to Coverage for Loss of Home by Fire Where Insured Did Not Reside In Premises – Court of Appeals Issues 2-1 Decision Holding Insurer Did Not Owe Coverage for Claim

This is an interesting insurance coverage decision issued by the Court of Appeals involving a claim for coverage involving a residential property destroyed by fire, which was not occupied by the insured.

In Null v. Auto Owners, et al.COA.Opinion.10.22.2013, a 2-1 decision (Judges Fitzgerald and O’Connell, Shapiro, J. dissenting), the Court of Appeals holds an insurer did not owe coverage on the basis of the “residency clause” in the policy.  The owner and insured of the house was not living in the house; in fact, he was living in Indiana.  The insurer had an Indiana address to which it was sending bills for the premiums.

The Plaintiffs in the underlying lawsuit occupied the house under a land contract.  The insurer paid two prior minor claims for damage due to a leaking roof in the past, even though the land contract arrangement had already been executed and the insured was not occupying the premises.  Thus, Plaintiffs argued the policy provided coverage and, in any event, even if the residency clause applied, the insurer had waived and/or was equitably estopped from denying coverage due to its apparent knowledge the home was not actually occupied by the insured and because it had paid the two prior minor claims during the time the plaintiffs were living in the home.  The trial court initially denied the insurer’s motion for summary disposition, but after holding a bench trial granted judgment in its favor.

This is a 2-1 decision with a notable dissent from Judge Shapiro.  The majority cites well-established Supreme Court precedent demonstrating the residency requirement in such a clause is mandatory and that an insured will not be entitled to coverage for lost, damaged or destroyed property due to fire if he or she does not actually occupy the insured premises.  The majority also notes ambiguity in the record as to whether the insurer actually had notice of the insured’s residency status and ruled that ambiguity favored the insurer.  The majority also ruled equitable estoppel could not apply to the claim because the elements had not been established.

Judge Shapiro dissents.  He argues there were questions of fact concerning whether Auto Owners knew or should have known the insured was not residing in the premises.  The fact it paid two prior claims and sent the bills to an out-of-state address was significant to establish the plaintiff’s waiver and estoppel arguments and those should have been addressed.  (Note, the trial court did not address the equitable estoppel argument even though it was raised by plaintiff below).

The fact this is a 2-1 decision (albeit unpublished), I would anticipate the plaintiffs will at least attempt to file an Application for Leave to Appeal in the Supreme Court.  The only possible avenue plaintiffs have for a consideration by the Supreme Court is the extent to which there were facts that might lead a trier of fact to assess the equitable estoppel argument.  Recall the issue was presented to the trial court but never thoroughly addressed; the trial court first ruled in plaintiff’s favor and denied the insurer’s motion for summary judgment, but then, ultimately granted the insurer judgment after holding a full bench trial.  There was no opinion or analysis of the plaintiff’s equitable estoppel argument.  The plaintiffs’ attorney filed a motion for reconsideration bringing this to the trial court’s attention (obviously intending to appeal), but the trial court simply denied reconsideration without addressing the argument.  Thus, although the majority gets the law right, Judge Shapiro at least has a tangible point about having a court of first instance(the trial court) at least analyze the claim.

For more information about this and other similar cases contact Carson J. Tucker, Chair of the Appeals and Legal Research Group at Lacey & Jones, LLP, a Birmingham law firm serving clients since 1912.  Mr. Tucker can be reached at (248) 283-0763.

Continuing its tradition of providing highly specialized and unique legal services to an exclusive clientele, Lacey & Jones, LLP, works with insurance companies and businesses to develop comprehensive insurance coverage strategies for all lines of coverage.  From the simplest review (second look) of an in-house counsel’s coverage determination to complete coverage analysis involving high-exposure, multi-party, multi-jurisdiction, multi-claim events, the firm is capable of assisting its clients in making valuable choices and advising them on the proper course of action.  The firm’s coverage counsel and litigation team is also capable of pursuing coverage determinations and indemnity or subrogation in courts by filing declaratory judgment actions or indemnity and subrogation actions, respectively.

Our attorneys have successfully navigated coverage cases in state and federal courts, involving multiple insurers, multiple claimants and multiple forums to arrive at favorable resolutions for our clients in eight figure exposure cases, including, but not limited to, environmental liability claims, construction claims, professional liability claims, catastrophic personal injury claims, and product liability claims.  Our coverage lawyers speak the language of insurers and understand the intricacies of policy coverage involving multiple insurers, multiple policy forms, and multiple layers and years of coverage.

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Michigan Supreme Court Issues Opinion Articulating Its Constitutional Limitations and Authority in Changing the Common Law

In Price v. High Pointe Oil Co, Inc., the Michigan Supreme Court provides a clear pronouncement on the constitutional limitations and legitimate authority the judiciary has to change the common law.  In doing so, the Court refused to extend as a common-law rule the view that a plaintiff may recover non-economic damages (i.e., mental and emotional distress, etc.) for claims arising out of destruction of real property.

The facts are quite remarkable.  The plaintiff owned residential property, which was constructed in 1975.  For nearly 30 years, the home was heated by a furnace that utilized heating oil as fuel.  However, in 2006 the plaintiff replaced the oil furnace with a propane furnace.  She canceled her contract with the oil company, which was the predecessor of defendant oil company.  However, the oil fill pipe remained attached to the house.

In November of 2007 plaintiff’s house remained on the defendant’s “keep full” list.  While plaintiff was at work, defendant’s truck driver pumped nearly 400 gallons of fuel oil directly into plaintiff’s basement through the oil fill pipe before realizing his mistake and immediately calling 911.  Plaintiff’s house and many of her belongings were destroyed.  Between plaintiff’s and defendant’s insurers, the site was remediated, a new house was built in a different location, plaintiff’s personal property was either cleaned or replaced, and she was reimbursed for all temporary-housing related expenses.  It was undisputed that plaintiff was fully reimbursed and compensated for her economic losses arising out of the incident.

Plaintiff filed suit against the oil company in 2008 alleging claims for negligence, gross negligence, negligent infliction of emotional distress, nuisance, trespass, and a private claim under the Natural Resources and Environmental Protection Act (NREPA), MCL 324.101 et seq.  Plaintiff’s only claim to survive to trial was for the recovery of non-economic damages for defendant’s negligent destruction of her real property.

A jury found in favor of plaintiff in the amount of $100,000.  The trial court denied defendant’s motion for a judgment notwithstanding the verdict.  On appeal, the Court of Appeals affirmed, holding that in a negligence action, a plaintiff may recover mental anguish damages naturally flowing from the damage to or destruction of real property.  See Price v.  High Pointe Oil Co., 294 Mich. App. 42, 60 (2011).

The Supreme Court granted defendant’s application for leave to appeal.  The issue before the court was whether non-economic damages are recoverable for the negligent destruction of real property.  In a thorough and well-researched opinion authored by Justice Markman (with Justices Cavanagh, McCormack and Viviano not participating) the Court held, without dissent, that the common law of Michigan has long provided that the appropriate measure of damages in cases involving the negligent destruction of property is the cost of replacement or repair of the property.  The Court ruled that it was not persuaded that this long-standing common-law rule should be changed.

The Court goes through the history of the common-law rule respecting the measure of damages available for the negligent destruction of property in Michigan.  In arriving at this conclusion, the Court discusses in detail the meaning and application of the common law by Michigan courts, the means by which the common law may be abrogated, and, particularly, the manner in which the Supreme Court can alter or change a common-law rule.

The Court notes it is the “principal steward” of the common law.  Slip Op. at 20, citing Mich. Const. 1963, art. 7, § 3, which provides:  “[t]he common law and the statute laws now in force, not repugnant to this constitution, shall remain in force until they expire by their own limitations, or are changed, amended or repealed.”  See also Longstreth v. Gensel, 423 Mich. 675 (1985).   The common law remains as such until modified by the Supreme Court or by the Legislature.  In regard to the former, the Court goes on to note that change or alteration of the common law by the Court is to be made with the utmost of caution.  Id. at 20-21, 25 and n. 20.  Ordinarily, the Court goes on to explain, the changes in the law should come about by legislation, because the Legislature is best equipped to consider the social and political ramifications of changing the law.  Id.  In footnote 20, the Court further explains the restraint it will ordinarily exercise in considering whether it should change, alter or modify a common-law rule.

While the rule of law analyzed by the Court is important in guiding future courts, and can also lend aid in the consideration of valuation of real property in a variety of contexts (e.g., takings claims, condemnation proceedings, etc.), the discussion regarding the application and tenacity of the common law is particularly enlightening for future cases anytime courts are faced with established common-law rules.

It is safe to say from this opinion, and others the Court has issued in the past several years, that the non-abrogation principle in the Michigan Constitution is a strong indication that the Court will retain the common-law rule in most cases.  Thus, it is incumbent on advocates to determine whether an existing common-law rule applies in the given case and to determine whether and to what extent a court, and particularly the Supreme Court, rather than the Legislature, will be willing to alter or change that rule as applied.