Acorn Investment Co v. Michigan Basic Property Insurance Assn , 495 Mich. 338 ( 2014 )

Michigan Supreme Court
Lansing, Michigan
Syllabus
Chief Justice: Justices:
Robert P. Young, Jr. Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
This syllabus constitutes no part of the opinion of the Court but has been Reporter of Decisions:
prepared by the Reporter of Decisions for the convenience of the reader. Corbin R. Davis
ACORN INVESTMENT CO v MICHIGAN BASIC PROPERTY INSURANCE
ASSOCIATION
Docket No. 146452. Argued December 11, 2013. Decided May 20, 2014.
Acorn Investment Co. brought an action in the Wayne Circuit Court against the Michigan
Basic Property Insurance Association, which had issued a fire insurance policy to Acorn, seeking
to recover losses suffered in a fire on Acorn’s property. Michigan Basic had denied coverage on
the basis that the policy had been canceled before the fire occurred. The case proceeded to case
evaluation, which resulted in an award of $11,000 in Acorn’s favor. Acorn accepted the award,
but Michigan Basic rejected it. The court, Daphne Means Curtis, J., granted summary
disposition in Acorn’s favor, ruling that the notice of cancellation was insufficient to effectively
cancel the policy. The parties then agreed to submit the matter to an appraisal panel as permitted
in the insurance policy and MCL 500.2833(1)(m). The appraisal panel determined that Acorn’s
claim was worth $20,877. Acorn moved for entry of a judgment and also sought interest under
the Uniform Trade Practices Act, MCL 500.2001 et seq., case evaluation sanctions under MCR
2.403(O)(1), and expenses for the removal of debris. The court entered a judgment in Acorn’s
favor for $20,877 plus interest but declined to award case evaluation sanctions or debris-removal
expenses. Michigan Basic paid the judgment, and Acorn appealed the denial of those sanctions
and expenses. The Court of Appeals, FORT HOOD, P.J., and K. F. KELLY and DONOFRIO, JJ.,
affirmed. 298 Mich App 558 (2012). Acorn applied for leave to appeal, and the Supreme Court
ordered and heard oral argument on whether to grant the application or take other peremptory
action with regard to whether the judgment amounted to a verdict that entitled Acorn to case
evaluation costs under MCR 2.403(O)(2)(c). 494 Mich 863 (2013).
In an opinion by Justice ZAHRA, joined by Chief Justice YOUNG and Justices MARKMAN,
KELLY, MCCORMACK, and VIVIANO, the Supreme Court held:
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.
1. MCR 2.403(O)(1) provides that if a party rejects a case evaluation and the action
proceeds to verdict, that party must pay the opposing party’s actual costs unless the verdict is
more favorable to the rejecting party than the case evaluation. Under MCR 2.403(O)(2)(c), a
verdict includes a judgment entered as a result of a ruling on a motion after a rejection of the
case evaluation. The court retains discretion regarding whether to award costs in certain
circumstances. MCR 2.403(O)(11) provides that the court may refuse to award actual costs in
the interests of justice if the verdict is the result of a motion as provided in MCR 2.403(O)(2)(c).
2. Pursuant to MCL 500.2833(1)(m), Michigan fire insurance policies provide that if the
insured and insurer cannot agree on the actual cash value or amount of the loss, either party may
demand that the amount of the loss or the actual cash value be set by appraisal. It was
undisputed that Michigan Basic rejected the case evaluation in this case and that the outcome of
the appraisal proceeding, even without the court’s adding interest, was more favorable to Acorn
than the case evaluation. This action proceeded to a judgment entered as a result of a ruling on a
motion when the circuit court granted Acorn’s motion for entry of a judgment and interest.
Michigan Basic argued that the court rule contemplates resolution of a case by a dispositive
motion in lieu of a trial, whereas the parties in this case agreed to resolve the issue of damages
through the appraisal process. Michigan Basic also argued that Acorn’s motion for entry of a
judgment and interest was not required for the judgment to enter. While the case was not
resolved as a result of the circuit court’s ruling on a motion for summary disposition, however, it
was nonetheless resolved by a ruling on a different motion, that for entry of a judgment.
Moreover, it was the court, not the appraisal panel, that made the final determination of the
parties’ rights and obligations, and even if Michigan Basic had immediately paid the appraisal
panel’s award, the circuit court would still have had matters to attend to, including awarding
interest. Therefore, the circuit court, not the appraisal panel, determined and entered the
judgment. Thus, Acorn may recover its actual costs under MCR 2.403(O)(2)(c).
3. Michigan Basic contended that Acorn had waived its right to debris-removal expenses
by failing to present evidence of them at the appraisal proceeding or raise the issue of jurisdiction
in the circuit court before appraisal. There was no question that the insurance policy required
compensation for debris-removal expenses. Acorn presented a colorable argument that it did not
waive its right to collect debris-removal expenses at the appraisal proceeding. Debris-removal
expenses were not mentioned in the circuit’s court order permitting the parties to proceed to
appraisal, and it would not have made sense for the appraisal panel to determine the amount of
debris-removal expenses by engaging in a calculation of replacement cost less depreciation. But
Acorn did request debris-removal expenses with its motion for entry of a judgment and interest.
Because the circuit court did not set forth its reasons for denying debris-removal expenses, it was
unclear whether it denied those costs because Acorn had waived the claim by not requesting
those expenses before the appraisal panel or whether the court properly denied them on other
grounds, such as forfeiture. Therefore, it was necessary to vacate the Court of Appeals’ decision
in that regard and remand the issue of debris-removal expenses for the circuit court to determine
(1) whether the appraisal panel had the ability under MCL 500.2833 to determine debris-removal
expenses, (2) if so, whether it erred by failing to award the expenses, and (3) if the appraisal
panel did not have that authority, whether Acorn waived or forfeited its claim to debris-removal
expenses.
Reversed in part with regard to the award of actual costs, vacated in part with regard to
debris-removal expenses, and remanded for further proceedings.
Justice CAVANAGH, concurring, agreed that there was a verdict for purposes of MCR
2.403(O)(2). Justice CAVANAGH, further noted that the possibility of actual costs in cases such
as this did not necessarily run afoul of the purpose of the court rule, as Michigan Basic’s
arguments implied. The court rule is not intended to punish parties but seeks instead to expedite
and promote the settlement of cases by shifting the financial burden of paying actual costs to the
party that imprudently rejected the proposed case evaluation award. Although Michigan Basic
argued that its decision not to contest the appraisal panel’s determination freed it from potential
responsibility regarding actual costs, Michigan Basic nevertheless rejected the proposed case
evaluation award, contested its liability until the circuit court granted Acorn’s motion for
summary disposition, and otherwise protracted the proceedings contrary to the aim of the rule.
Accordingly, Justice CAVANAGH concurred with the decision to reverse and remand for further
proceedings, including whether it was in the interests of justice to refuse to award actual costs
under MCR 2.403(O)(11).
©2014 State of Michigan
Michigan Supreme Court
Lansing, Michigan
Opinion
Chief Justice: Justices:
Robert P. Young, Jr. Michael F. Cavanagh
Stephen J. Markman
Mary Beth Kelly
Brian K. Zahra
Bridget M. McCormack
David F. Viviano
FILED MAY 20, 2014
STATE OF MICHIGAN
SUPREME COURT
ACORN INVESTMENT CO.,
Plaintiff-Appellant,
v No. 146452
MICHIGAN BASIC PROPERTY
INSURANCE ASSOCIATION,
Defendant-Appellee.
BEFORE THE ENTIRE BENCH
ZAHRA, J.
The issue in this case is whether plaintiff, Acorn Investment Co. (Acorn), may be
awarded case evaluation costs under MCR 2.403(O)(1). Acorn had purchased property
insurance from defendant Michigan Basic Property Insurance Association (Michigan
Basic). When the insured property burned down, Acorn filed an insurance claim with
Michigan Basic, which Michigan Basic disputed and did not pay. Acorn brought suit in
the Wayne Circuit Court to recover under the insurance policy. The court submitted the
case to case evaluation pursuant to MCR 2.403(A)(1), and the case evaluation panel
rendered an award in Acorn’s favor in the amount of $11,000. Acorn accepted the
proposed award, but Michigan Basic rejected it. Because the parties failed to agree on
the loss, Acorn demanded, pursuant to the terms of the insurance policy,1 that the loss be
set by appraisal. The appraisal panel determined that Acorn’s claim was worth $20,877.
Acorn filed a motion in the circuit court for entry of judgment and assessment of Uniform
Trade Practices Act (UTPA) interest,2 actual costs under MCR 2.403(O)(1) based on
Michigan Basic’s rejection of the case evaluation award, and debris-removal expenses
pursuant to the insurance policy. The court granted the motion for entry of judgment,
awarded Acorn $8,391.96 in interest, and ordered Michigan Basic to pay Acorn $6.86 per
day until it satisfied the judgment. The court refused Acorn’s requests for actual costs
and for debris-removal expenses. Acorn appealed, and the Court of Appeals affirmed.3
We ordered and heard oral argument on whether to grant Acorn’s application for leave to
appeal or take other peremptory action.4
We hold that the circuit court may award actual costs to Acorn.5 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
1
MCL 500.2833(1)(m) required the inclusion of the appraisal provision in the policy.
2
MCL 500.2001 et seq.
3
Acorn Investment Co v Mich Basic Prop Ins Ass’n, 298 Mich App 588; 828 NW2d 94
(2012).
4
Acorn Investment Co v Mich Basic Prop Ins Ass’n, 494 Mich 863 (2013).
5
We note that the circuit court has the discretion to refuse to do so in the interests of
justice under MCR 2.403(O)(11).
2
party than the case evaluation. The parties agree that Michigan Basic rejected the initial
case evaluation and that the appraisal panel’s award was less favorable to Michigan Basic
than the initial case evaluation. We hold that the remaining requirement, that the action
“proceed to verdict,” was also 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 Acorn’s motion for entry of
judgment and interest.
Though we did not request that the parties address whether Acorn should have
been awarded debris-removal expenses under the insurance policy,6 we vacate the
decision of the Court of Appeals in that regard and remand that issue to the circuit court.
It is undisputed that Acorn’s insurance policy included the right to recover for debris-
removal expenses. But there is a dispute about whether the appraisal panel awarded them
as part of its award, left them for the circuit court to determine, or whether Acorn waived
its right to claim them. Acorn makes a colorable argument that the appraisal panel could
not have determined the cost of debris removal because debris removal did not constitute
“damages.” Furthermore, debris removal costs could not logically be determined by
using the formula ordered by the circuit court in its decision in limine—replacement cost
less depreciation.
Accordingly, we reverse the decision of the Court of Appeals with regard to actual
(case evaluation) costs and remand this case to the circuit court for further proceedings
6
Acorn, 494 Mich 863 (2013).
3
consistent with this opinion—including a determination whether Acorn is entitled to
debris-removal expenses.
I. FACTS AND PROCEEDINGS
Acorn owned the property located at 12826 Marlowe in the City of Detroit (the
Property). On April 10, 2007, Acorn applied to Michigan Basic for fire insurance for the
Property. Michigan Basic issued Acorn Policy No. 4587875 (the Policy), which provided
fire insurance for the Property for the period April 11, 2007, to April 11, 2008. On
May 27, 2007, a fire occurred at the Property, causing significant damage. Acorn filed a
claim with Michigan Basic, which was formally denied on the basis that the Policy was
not in force at the time of the loss because it had been cancelled as of May 16, 2007.
Acorn filed suit against Michigan Basic. On June 27, 2008, Acorn filed a motion
for summary disposition, seeking a declaration that Michigan Basic was required to
provide coverage based on the Installment Payment Notice that Acorn received from
Michigan Basic on May 11, 2007. Michigan Basic filed a cross-motion for summary
disposition, which stated that Acorn was not covered because Michigan Basic had sent
two cancellation notices (on April 16, 2007, and May 16, 2007) to Acorn, both stating
that coverage would be cancelled on May 16, 2007, because of the Property’s ineligibility
for coverage. The circuit court denied the motions for summary disposition, concluding
that genuine issues of material fact precluded the entry of judgment.
Pursuant to MCR 2.403(A)(1), a case evaluation was performed on November 4,
2008, which resulted in an award for Acorn in the amount of $11,000. Acorn accepted
the award, but Michigan Basic rejected it.
4
On April 23, 2009, Acorn filed a motion for summary disposition with regard to
Michigan Basic’s cancellation defense on the basis that Michigan Basic’s notice of
cancellation did not conform to the statutory requirement that the cancellation notice
contain language advising the insured that any unused premium would be refunded on
demand.7 The circuit court granted Acorn’s motion on July 14, 2009.
While Acorn’s motion for summary disposition was pending, Acorn made a
motion in limine that the fire damage value be determined by replacement cost less
depreciation. The circuit court granted the motion. On November 19, 2009, Acorn made
a motion to strike Michigan Basic’s affirmative defense of misrepresentation. The circuit
court granted the motion, concluding that Acorn was under no duty to advise Michigan
Basic of changes in the occupancy of the rental dwelling.
Given that Michigan Basic’s liability had already been determined, Acorn filed a
motion to refer the issue of damages to a three-person appraisal panel and to appoint a
presiding umpire for the panel, as permitted by the insurance policy and the enabling
statute, MCL 500.2833(1)(m). Acorn also filed a motion asking the circuit court to
require the appraisers to consider only replacement cost less depreciation when
determining damages. The court granted both motions.
The appraisal panel issued the appraisal award on September 17, 2010, in the
amount of $20,877. Michigan Basic did not pay the award and filed no pleadings with
respect to the award. Upon Acorn’s receipt of the award, Acorn wrote to the umpire of
7
See MCL 500.2833(1)(i).
5
the appraisal panel, complaining that the award was too low because the panel did not
award debris-removal costs, which were permitted by the insurance policy.
On November 17, 2010, Acorn filed a motion for entry of judgment in the
appraisal amount, together with interest under the UTPA. Acorn also sought an award of
case evaluation costs and for additional proceeds under the policy for the cost of debris
removal services. Michigan Basic responded to the motion for entry of judgment,
indicating that it did not contest Acorn’s request for entry of judgment in the amount of
the appraisal award or Acorn’s claim to UTPA interest. Michigan Basic did object,
however, to Acorn’s request for case evaluation costs and for debris-removal expenses
under the insurance policy, which Michigan Basic claimed could have been, but were not,
part of the appraisal award. The circuit court entered a judgment in the amount of
$20,877, together with UTPA interest in the amount of $8,391.96, plus future interest in
the amount of $6.86 a day until Michigan Basic satisfied the judgment. The court denied
Acorn’s claims for case evaluation costs and debris removal costs. The court denied
Acorn’s motion for reconsideration. Michigan Basic paid the judgment.
Acorn appealed to the Court of Appeals, seeking review of the circuit court’s
denial of case evaluation costs and debris-removal costs. The Court affirmed the court’s
decision in a published opinion per curiam.8
With regard to case evaluation costs, the Court of Appeals reasoned that “[t]he
underlying purpose of case evaluation is to encourage settlement and deter protracted
litigation by placing the burden of litigation costs on the party that rejected case
8
Acorn, 298 Mich App 558.
6
evaluation and required the case to proceed to trial.”9 The Court noted that the statutory
appraisal process under MCL 500.2833(1)(m) is “a substitute for the judicial
determination of disputes” and “a simple and inexpensive method for the prompt
adjustment and settlement of claims [that] effectively constitutes arbitration.”10
Furthermore, the Court stated that it had “previously rejected the notion that an order or
judgment entered following arbitration or settlement constitutes a ‘verdict’ within the
meaning of MCR 2.403(O).”11 To support this proposition,12 the Court cited Jerico
Constr, Inc v Quadrants, Inc;13 Saint George Greek Orthodox Church of Southgate, Mich
v Laupmanis Assoc, PC;14 and Smith v Elenges.15 The Court of Appeals wrote: “[T]he
appraisal process was effectively an arbitration, and an order or judgment entered
pursuant to an arbitration or settlement is not a ‘verdict’ within the meaning of
MCR 2.403(O)(2)(c) . . . [T]he trial court properly denied plaintiff’s request for case
evaluation sanctions.”16
9
Id. at 561 (citations and quotation marks omitted).
10
Id. at 562 (citations and quotation marks omitted).
11
Id.12
Id. at 562-563.
13
Jerico Constr, Inc v Quadrants, Inc, 257 Mich App 22, 666 NW2d 310 (2003).
14
Saint George Greek Orthodox Church of Southgate, Mich v Laupmanis Assoc, 204
Mich App 278, 514 NW2d 516 (1994).
15
Smith v Elenges, 156 Mich App 260, 401 NW2d 342 (1986).
16
Acorn, 298 Mich App at 564.
7
With regard to debris-removal expenses, the Court of Appeals reasoned that
[i]ssues involving an insurance policy’s coverage are generally for the court
to determine, and the appraisal process cannot legally settle coverage
issues. Where the parties cannot agree on coverage, a court is to determine
coverage in a declaratory action before an appraisal of the damage to the
property.[17]
It further stated that a party
waive[s] its coverage-based challenge and [is] bound by the appraisal
award absent bad faith, fraud, misconduct, or manifest mistake when the
parties stipulate[ ] to submit the plaintiff’s claim for appraisal without first
seeking court intervention to determine coverage issues.
Here, plaintiff erroneously characterizes its argument regarding
debris-removal expenses as a coverage issue and contends that the trial
court, rather than the appraisal panel, should have determined the issue. To
the contrary, defendant did not assert that debris-removal expenses were not
covered under the policy. Rather, it appears that the case proceeded
through the appraisal process without plaintiff raising the issue of debris
removal expenses. In a letter accompanying the appraisal award, [the]
appraiser . . . stated that “no allowance was made for debris removal, as no
evidence ha[d] been presented that the insured incurred any debris removal
expense.” Thus, the appraisal panel would have addressed debris-removal
expenses if plaintiff had submitted evidence showing that it had incurred
debris-removal costs. While plaintiff contends that it did not incur such
costs until after the appraisal proceedings, it is noteworthy that the appraisal
award was issued on September 17, 2010, and the fire occurred on May 27,
2007. By submitting its case for appraisal and proceeding through the
appraisal process without raising the issue of debris-removal expenses,
plaintiff waived its claim for such expenses.[18]
Acorn filed an application for leave to appeal in this Court. We directed the Clerk
to schedule oral argument about whether to grant the application or take other action
17
Id. (citations and quotation marks omitted).
18
Id. at 564-565 (fifth alteration in original), citing Angott v Chubb Group of Ins Cos,
270 Mich App 465, 473-474, 717 NW2d 341 (2006).
8
pursuant to MCR 7.302(H)(1) with regard to whether the judgment amounted to a
“verdict” that entitled Acorn to case evaluation costs under MCR 2.403(O)(2)(c).19
II. STANDARD OF REVIEW
Whether Acorn is entitled to case evaluation costs depends on our interpretation of
a court rule. The interpretation of a court rule is an issue that this Court reviews de
novo.20
III. ANALYSIS
A. CONTROLLING LAW
Whether Acorn is entitled to actual costs because Michigan Basic rejected the case
evaluation is determined by MCR 2.403(O). MCR 2.403(O)(1) states, in relevant part:
If a party has rejected an evaluation and the action proceeds to
verdict, that party must pay the opposing party’s actual costs unless the
verdict is more favorable to the rejecting party than the case evaluation.
MCR 2.403(O)(2) defines the meaning of the word “verdict”:
For the purpose of this rule “verdict” includes,
(a) a jury verdict,
(b) a judgment by the court after a nonjury trial,
(c) a judgment entered as a result of a ruling on a motion after
rejection of the case evaluation.
19
As mentioned, the Court did not request that the parties address whether the circuit
court should have awarded Acorn debris-removal expenses.
20
People v Burns, 494 Mich 104, 110; 832 NW2d 738 (2013).
9
Despite the strong terminology in MCR 2.403(O)(1), stating that the party
rejecting the case evaluation “must pay the opposing party’s actual costs,”21 the court
retains discretion regarding whether to award costs in certain circumstances.
MCR 2.403(O)(11) states that “[i]f the ‘verdict’ is the result of a motion as provided by
subrule (O)(2)(c), the court may, in the interest of justice, refuse to award actual costs.”
Under MCL 500.2833(1)(m), Michigan fire insurance policies contain the
following provision:
That if the insured and insurer fail to agree on the actual cash value
or amount of the loss, either party may make a written demand that the
amount of the loss or the actual cash value be set by appraisal.
It is undisputed that Michigan Basic rejected the case evaluation and that the
outcome of the appraisal proceeding, even without the court adding interest, was more
favorable to Acorn than the case evaluation. The parties further agree that Acorn is not
entitled to actual costs under either MCR 2.403(O)(2)(a) or (b). The dispute is whether
Acorn may be awarded costs under MCR 2.403(O)(2)(c).
To aid our comprehension of MCR 2.403(O)(1) and (2), we substitute the
definition of “verdict” from subrule (O)(2)(c) (italicized) for the term “verdict” in
subrule (O)(1). The resulting rule states as follows:
If a party has rejected an evaluation and the action proceeds to a
judgment entered as a result of a ruling on a motion after rejection of the
case evaluation, that party must pay the opposing party’s actual costs
unless the verdict is more favorable to the rejecting party than the case
evaluation.
21
Emphasis added.
10
Under this rule, Michigan Basic is liable for Acorn’s actual costs if: (1) the action
proceeded to a judgment, (2) the judgment entered as a result of a ruling on a motion, and
(3) the judgment occurred after Michigan Basic rejected the case evaluation.
B. APPLICATION OF CONTROLLING LAW TO FACTS
Court rules are interpreted using the same principles that govern the interpretation
of statutes.22 When ascertaining the meaning of a court rule, the reviewing court should
focus first on the plain language of the rule in question, and when the language of the rule
is unambiguous, it must be enforced as written.23
In this case, under the plain meaning of the court rule, Michigan Basic is liable for
Acorn’s actual costs. All the elements of the three-part test have been satisfied. First, the
action “proceeded to a judgment” when the circuit court granted Acorn’s motion for entry
of judgment and interest. Second, the judgment “entered as a result” of the court’s ruling
on a motion—here, the motion for entry of judgment and interest. Third, the court
entered the judgment after Michigan Basic rejected the case evaluation.
Michigan Basic disputes that the judgment was entered as a result of a judge’s
ruling on a motion. Relying on this Court’s opinion in Haliw v Sterling Hts,24 Michigan
Basic argues that the rule contemplates resolution of the case by a dispositive motion in
22
Marketos v American Employers Ins Co, 465 Mich 407, 412-413; 633 NW2d 371
(2001).
23
Fisher Sand & Gravel Co v Neal A Sweebe, Inc, 494 Mich 543, 560; 837 NW2d 244
(2013).
24
Haliw v Sterling Hts, 471 Mich 700, 708, 691 NW2d 753 (2005).
11
lieu of a trial. Michigan Basic claims that, in contrast, the parties in this case agreed to
resolve the issue of damages through the appraisal process. Further, Michigan Basic
maintains that Acorn’s motion for entry of judgment and interest was not required for
judgment to enter.
Michigan Basic is correct that the case was not resolved as a result of the circuit
court’s ruling on a motion for summary disposition. This fact, however, is immaterial
because the case nonetheless was resolved by a ruling on a different motion—the motion
for entry of judgment.
We also disagree with Michigan Basic’s contention that the motion for entry of
judgment and interest was not necessary for judgment to enter. MCR 2.403(O)(1) and
(2)(c) require that “the action proceed[ ] to” a “judgment entered as a result of a ruling on
a motion.” A “judgment” is “[a] court’s final determination of the rights and obligations
of the parties in a case.”25 In this case it was the court, not the appraisal panel, that made
the final determination of the parties’ rights and obligations. Even if Michigan Basic had
immediately paid the appraisal panel’s award, the circuit court would still have had
matters to attend to, including awarding interest under MCL 500.2006 for defendant’s
failure to pay in a timely fashion.26 Therefore, the circuit court, not the appraisal panel,
determined and entered the judgment.
25
See Black’s Law Dictionary (9th ed 2009).
26
See also, e.g., Marketos, 465 Mich at 407 (stating that, for the purposes of awarding
sanctions under MCR 2.403(O), a “verdict” “must represent a finding of the amount that
the prevailing party should be awarded,” and the “dollar amount that the jury includes on
the verdict form may or may not be the ‘verdict’ for that purpose”). Cf Jacobs v Schmidt,
231 Mich 200; 203 NW 845 (1925) (explaining the difference between arbitration and
12
Additionally, submitting the case to the appraisal panel to determine the amount of
loss did not constitute a settlement. The circuit court retained the ability to overturn the
appraisal panel’s award if the panel acted in bad faith, engaged in fraud or misconduct, or
made a manifest mistake.27 For example, in this case, the circuit court ordered that the
appraisal panel determine Acorn’s loss by subtracting depreciation from replacement
cost. Had the appraisal panel deviated from this formula when calculating the loss, the
circuit court arguably could have overturned the appraisal award for bad faith or manifest
mistake. Therefore, the court retained jurisdiction over the case and the award, and it
entered a judgment as a result of its ruling on the motion for entry of judgment and
interest.
Defendant’s argument that Haliw requires a dispositive motion before case
evaluation costs are awarded is also incorrect. Though this Court considered the meaning
of MCR 2.403(O) in Haliw, that case is not directly on point because it addressed
whether the term “costs” in MCR 2.403(O) includes appellate attorney fees.28 However,
while making that determination, we noted that the 1997 amendment of the court rule in
MCR 2.403(O)(1) made clear that a “verdict” includes a judgment entered by dispositive
motion:29
appraisal, noting that, in appraisals, the sole function is to determine value, whereas in
arbitration the function is to “adjust disputed claims between the parties”).
27
See Angott, 270 Mich App at 473.
28
Haliw, 471 Mich at 702.
29
The 1997 amendment of MCR 2.403(O) changed the phrase “proceeds to trial” to
“proceeds to verdict” in MCR 2.403(O)(1). See id. at 708.
13
Until this Court amended MCR 2.403(O) in 1997, it was sufficiently
unclear whether a judgment that entered as a result of a dispositive motion
instead of a trial would engender sanctions [now called “costs”]. By
amending the court rule, this Court clarified that case evaluation sanctions
may indeed be available when a case is resolved after case evaluation by a
dispositive motion.[30]
While Haliw involved an entry of judgment after a dispositive motion, and though we
used the term “dispositive motion” when resolving Haliw, we clarify that Haliw does not
require a dispositive motion before case evaluation costs are awarded. Haliw merely
indicated that dispositive motions were now covered by the modified case evaluation
rule. It did not hold that only such motions were covered. The plain language of the rule
merely requires that “judgment enter[ ] as a result of a ruling on a motion.”31
We now turn to a discussion of the Court of Appeal’s reasoning. The Court of
Appeals erroneously relied on four cases for its holding that Acorn is not entitled to case
evaluation costs: Jerico,32 Saint George Greek Orthodox Church,33 Auto-Owners Ins Co v
Kwaiser,34 and Smith.35 Some of these cases are inapplicable because they offer
30
Id.31
MCR 2.403(O)(2)(c) (emphasis added).
32
Jerico, 257 Mich App 22. The Court of Appeals cited Jerico for the proposition that a
stipulated order of dismissal entered on the basis of a settlement agreement does not
constitute a verdict under MCR 2.403(O)(2). Acorn, 298 Mich App at 563.
33
Saint George, 204 Mich App 278. The Court of Appeals cited Saint George for the
proposition that mediation sanctions could not be awarded under a prior version of MCR
2.403. Acorn, 298 Mich App at 562.
34
Auto-Owners Ins Co v Kwaiser, 190 Mich App 482, 476 NW2d 467 (1991). The Court
of Appeals cited Kwaiser for the proposition that an appraisal effectively constitutes
arbitration. Acorn, 298 Mich App at 564.
35
Smith, 156 Mich App 260. The Court of Appeals cited Smith for the proposition that a
14
interpretations of an earlier version of the court rule and are no longer controlling. Others
are merely inapposite.
We conclude that the Court of Appeals’ reliance on Smith was misplaced because
it relied on a different court rule. Smith is a 1986 case that held that a consent judgment
entered into after was not a “verdict.” Smith refers to the Wayne Circuit Court Rule
403.15(c), which provided:
When the board’s evaluation is unanimous, and the defendant
accepts the evaluation but the plaintiff rejects it and the matter proceeds to
trial, the plaintiff must obtain a verdict in an amount which, when interest
on the amount and assessable costs from the date of filing of the complaint
to the date of the mediation evaluation are added, is more than 10 percent
greater than the board’s evaluation in order to avoid the payment of actual
costs to the defendant.
We note that the above rule did not specifically define the term “verdict,” as the current
rule does. Futhermore, a consent judgment is not the kind of “judgment” required by
MCR 2.403(O)(2)(c) because the court does not “determine . . . the rights and obligations
of the parties” in a consent judgment.36 Rather, a consent judgment is a “settlement” or a
“contract” “that becomes a court judgment when the judge sanctions it.”37
Likewise, the Court of Appeals was incorrect to rely on Saint George, a 1994 case
that relied on the 1987 version of the court rule. At the time Saint George was decided,
MCR 2.403(O) stated:
consent judgment was not a verdict. Acorn, 298 Mich App at 563.
36
See Black’s Law Dictionary (9th ed 2009) (defining “judgment”).
37
Black’s Law Dictionary (9th ed 2009) (defining “consent judgment” as “agreed
judgment”).
15
(1) If a party has rejected an evaluation and the action proceeds to
trial, that party must pay the opposing party's actual costs unless the verdict
is more favorable to the rejecting party than the mediation evaluation.
However, if the opposing party has also rejected the evaluation, a party is
entitled to costs only if the verdict is more favorable to that party than the
mediation evaluation.
(2) For the purpose of this rule “verdict” includes,
(a) a jury verdict,
(b) a judgment by the court after a nonjury trial,
(c) a judgment entered as a result of a ruling on a motion filed after
mediation. [Emphasis added.][38]
In Saint George, the Court of Appeals refused to award sanctions, holding that when a
case first proceeds in mediation evaluation and then proceeds to arbitration, the process
cannot satisfy the “proceeds to trial language” found in MCR 2.403(O)(1).39 Because
Saint George’s holding is based on language that has been removed from the present
MCR 2.403(O)(1), we do not believe that its precedent is persuasive.
We conclude that the Court of Appeals’ reliance on Jerico is misplaced for the
same reason that it was incorrect to rely on Smith. Jerico held that a stipulated order of
dismissal that the court entered on the basis of a settlement agreement did not constitute a
verdict under MCR 2.403.40 But Jerico’s holding does not extend to this case. A
stipulated order of dismissal based on a settlement agreement is not a “judgment” in the
sense that it is not a final determination by the court of the rights and obligations of the
38
Saint George, 204 Mich App at 281-282.
39
204 Mich App at 283.
40
Jerico, 257 Mich App at 31.
16
parties.41 In this case, there was neither a settlement agreement nor a stipulated order of
dismissal. And though the parties proceeded to appraisal, the ultimate appraisal award
did not constitute the entire judgment. The parties had not settled at the time that Acorn
filed its motion for entry of judgment and interest because they were still in dispute with
regard to the proper award. That is, Acorn still believed that it was entitled to debris-
removal expenses, which Michigan Basic disputed. Thus the circuit court, not the
appraisal panel, entered the judgment required to satisfy MCR 2.403(O)(2)(c).
Accordingly, the Court of Appeals erred by concluding that Jerico compels the
conclusion that the appraisal was akin to a settlement agreement or a stipulated order of
dismissal and thus did not constitute a verdict under MCR 2.403.
Finally, the Court of Appeals’ reliance on Kwaiser is misplaced because Kwaiser
did not involve case evaluation costs and, thus, did not address the meaning of the term
“verdict” within MCR 2.403(O)(2)(c). The Kwaiser Court noted that appraisal
effectively constitutes arbitration.42 Michigan Basic argues that this means that an order
of judgment following an appraisal cannot be a verdict, particularly in light of holdings
from previous caselaw from the Court of Appeals, such as Saint George. However,
Michigan Basic’s argument does not necessarily follow from Kwaiser because, as
previously stated, Saint George is not dispositive, and in this case we are asked to
determine a different issue than what was before the Court in Kwaiser: whether “a
judgment entered as a result of a ruling on a motion after rejection of the case
41
See Black’s Law Dictionary (9th ed 2009) (defining “judgment”).
42
Kwaiser, 190 Mich App at 486.
17
evaluation.” MCR 2.403(O)(2)(c). Here, there was no final determination of the rights
and obligations of the parties after appraisal because the court would have been able to
review the appraisal award for bad faith, fraud, misconduct, and manifest mistake.43 If
the appraisal panel had not followed the court’s method for calculating damages, this
would arguably have been bad faith or manifest mistake. Furthermore, the court added to
the appraisal award by adding interest and thereby determining the full amount of the
verdict. Judgment against Acorn did not enter until Acorn’s rights and liabilities had
been finally determined, and this did not occur until the court ruled on the motion for
entry of judgment and interest. Michigan Basic’s argument from analogy fails to focus
on what entity enters the judgment. It was the circuit court, not the appraisal panel, that
did so.
IV. DEBRIS-REMOVAL EXPENSES
In its motion for leave to appeal, Acorn argued that it was entitled to debris-
removal expenses under the contract and that either the appraisal panel or the circuit court
should have awarded them. Michigan Basic contends that Acorn waived its right to
debris-removal expenses by failing to present evidence of them at the appraisal
proceeding or raise the issue of jurisdiction in the circuit court before appraisal.
A “waiver is the intentional relinquishment or abandonment of a known right.”44
There is no question that the Policy required compensation for debris-removal expenses.
Under its “Incidental Coverages” section, the Policy states:
43
See Angott, 270 Mich App at 472.
44
People v Vaughn, 491 Mich 642, 663; 821 NW2d 288 (2012) (citations and quotation
18
Debris Removal – We pay for the cost to remove the debris of
covered property after an insured loss. . . .
We will not pay more for direct loss to property and debris removal
combined than the limit that applies to the damaged property. However
when the covered loss plus the cost of debris removal is more than the
applicable limit, we will pay up to an extra 5% of the applicable limit to
cover the cost of debris removal.
MCL 500.2833(1)(m) requires that every insurance policy in Michigan contain the
following provision: “That if the insured and insurer fail to agree on the actual cash value
or amount of the loss, either party may make a written demand that the amount of the loss
or the actual cash value be set by appraisal.” Acorn claims that MCL 500.2833(1)(m)
only governs actual losses, not the cost of removing debris. Furthermore, Acorn argues
that the circuit court’s May 20, 2010 order made it impossible for the appraisal panel to
determine the cost of debris removal because the panel was limited to determining losses
in a particular way that would have excluded debris-removal expenses. That order stated:
IT IS FURTHER ORDERED that the parties and the Appraisal
Panel are limited to a determination of actual cash value that is consistent
with the Court’s prior Order in Limine and only evidence of replacement
cost less depreciation may be considered by the Panel in rendering its
Award.
We conclude that Acorn presents a colorable argument that it did not waive its
right to collect debris-removal expenses at the appraisal proceeding. Debris-removal
expenses were not mentioned in the circuit’s court order permitting the parties to proceed
to appraisal. Neither would it have made sense for the appraisal panel to determine the
amount of debris-removal expenses by engaging in a calculation of “replacement cost
marks omitted).
19
less depreciation.” But Acorn did request debris-removal expenses alongside its motion
for entry of judgment and interest.
Because the trial court did not set forth its reasons for denying debris-removal
expenses, it is unclear whether those costs were denied because Acorn waived its claim
for them by not requesting them before the appraisal panel or whether they were properly
denied on other grounds, such as forfeiture.45 Therefore, we vacate the decision of the
Court of Appeals and remand the issue of debris-removal expenses to the circuit court to
determine (1) whether the appraisal panel had the ability under MCL 500.2833 to
determine debris-removal expenses, (2) if the appraisal panel did have the authority to
determine debris-removal expenses, whether it erred in failing to award such expenses,
and (3) if the appraisal panel did not have the authority to determine debris-removal
expenses, whether Acorn waived or forfeited its claim to debris-removal expenses.
V. CONCLUSION
Acorn may recover its actual costs under MCR 2.403(O)(2)(c) because the motion
for entry of judgment and interest caused the case to “proceed to verdict” when the circuit
court ruled on the motion. Because the circuit court has the discretion to award such
costs to Acorn,46 we reverse the Court of Appeals and remand the case to the circuit court
for further proceedings. Additionally, we remand to the circuit court for a determination
45
Forfeiture, “the failure to assert a right,” is distinguishable from waiver. Vaughn, 491
Mich at 663.
46
See MCR 2.403(O)(1); MCR 2.403(O)(11).
20
whether Acorn is entitled to recover debris-removal expenses in accordance with Part IV
of this opinion. We do not retain jurisdiction.
Brian K. Zahra
Robert P. Young, Jr.
Stephen J. Markman
Mary Beth Kelly
Bridget M. McCormack
David F. Viviano
21
STATE OF MICHIGAN
SUPREME COURT
ACORN INVESTMENT CO.,
Plaintiff-Appellant,
v No. 146452
MICHIGAN BASIC PROPERTY
INSURANCE ASSOCIATION,
Defendant-Appellee.
CAVANAGH, J. (concurring).
I concur with the majority’s decision to reverse the Court of Appeals and remand
for further proceedings consistent with the majority opinion. The primary issue in this
case is whether there was a “verdict” for purposes of case evaluation costs under MCR
2.403(O).
In this case, Acorn Investment Company (Acorn) filed suit after Michigan Basic
Property Insurance Association (Michigan Basic) denied Acorn’s claim. After both
parties’ motions for summary disposition were denied, the case was submitted to case
evaluation, resulting in an award in Acorn’s favor, which Acorn accepted but Michigan
Basic rejected. Accordingly, the action proceeded. Subsequently, Acorn and Michigan
Basic again moved for summary disposition. The trial court denied Michigan Basic’s
motion but granted Acorn’s motion, effectively leaving only the issue of damages in
dispute and ultimately leading to entry of a judgment in Acorn’s favor.
Under the circumstances of this case, I agree with the majority that there was a
“verdict” for purposes of MCR 2.403(O)(2) when a judgment entered as a result of a
ruling on a motion after case evaluation. I also agree with the majority’s determination
that the Court of Appeals erred insofar as it focused its analysis on caselaw, such as Saint
George Greek Orthodox Church of Southgate, Mich v Laupmanis Assocs, PC, 204 Mich
App 278; 514 NW2d 516 (1994), that is inapposite or interpreted previous versions of the
court rule. Finally, I note that the possibility of actual costs in cases such as this does not
necessarily run afoul of the purpose of the court rule, as Michigan Basic’s arguments
imply. The court rule is not intended to punish parties; instead, the court rule seeks to
expedite and promote the settlement of cases by shifting the financial burden of paying
actual costs to the party that imprudently rejected the proposed case evaluation award.
See McAuley v Gen Motors Corp, 457 Mich 513, 523; 578 NW2d 282 (1998); Dessart v
Burak, 252 Mich App 490, 498; 652 NW2d 669 (2002). In this case, although Michigan
Basic argues that its decision not to contest the appraisal panel’s determination regarding
Acorn’s losses frees it from potential responsibility regarding actual costs, Michigan
Basic nevertheless rejected the proposed case evaluation award in Acorn’s favor,
contested its liability until the trial court granted Acorn’s motion for summary
disposition, and otherwise protracted the proceedings contrary to the aim of the rule.
Accordingly, I concur with the majority’s decision to reverse the Court of Appeals and
remand for further proceedings, including whether it is in the interest of justice to refuse
to award actual costs under MCR 2.403(O)(11).
Michael F. Cavanagh
2