Michigan Supreme Court

Lansing, Michigan

Marilyn Kelly,

 Chief Justice

Michael F. Cavanagh

Elizabeth A. Weaver

Maura D. Corrigan

Robert P. Young, Jr.

Stephen J. Markman

Diane M. Hathaway, Justices

Order 

October 9, 2009 

137968 

GWINIOV J. RILEY, 

Plaintiff-Appellee, 

v SC: 137968 

 COA: 276195 

Muskegon CC: 03-042817-CZ 

STATE FARM FIRE AND 

CASUALTY COMPANY, 

 Defendant-Appellant. 

_________________________________________/ 

On order of the Court, the application for leave to appeal the September 25, 2008 

judgment of the Court of Appeals is considered, and it is DENIED, because we are not 

persuaded that the questions presented should be reviewed by this Court. 

 KELLY, C.J. (concurring). 

 I concur in the Court’s order denying defendant’s application for leave to appeal. 

I write separately in response to Justice Corrigan’s dissenting statement. 

 Defendant State Farm Fire and Casualty Company provided a homeowner’s 

insurance policy to plaintiff. The policy included coverage for damage caused by mold. 

In January 2001, plaintiff’s home was damaged by an ice dam, and in April 2002, the 

home sustained damage from a leaking toilet. Defendant paid more than $100,000 for 

mold remediation, structural repairs, content replacement or cleaning, and additional 

living expenses for plaintiff and her family when they could not live in the house. 

Defendant then advised plaintiff that it had repaired the home as required by the policy. 

However, when plaintiff continued to be ill after returning to the home, she sued on the 

basis of numerous theories. The jury returned a verdict in favor of plaintiff in the amount 

of $164,450, comprised of several awards. Specifically, the jury awarded $106,000 for 

property repair and replacement costs, $43,000 for cleaning or replacing contents, and 

$15,450 for additional living expenses. The trial court entered a final judgment of 

$33,523.49 after determining that defendant was entitled to a setoff of $140,111.02 for 

amounts it had previously paid plaintiff. 
2

 Plaintiff appealed as of right. The Court of Appeals held that the jury intended to 

award damages only for the time after defendant had stopped paying benefits under the 

policy and therefore reversed the trial court’s setoff determination. The Court of Appeals 

remanded for the entry of judgment for plaintiff in the amount of $124,450, plus case 

evaluation sanctions. Defendant now seeks leave to appeal in this Court. 

 Defendant contends that the Court of Appeals erroneously vacated the trial court’s 

setoff determination. I disagree. Plaintiff’s complaint specifically sought damages for 

breach of contract and alleged that defendant was responsible for all losses caused by 

mold. The trial court instructed the jury that plaintiff could receive damages “naturally 

arising from the breach.” The instruction further informed the jury that, if it found a 

breach, it had to determine damages for losses relating to the property, its contents, and 

for additional living expenses. Then it told the jury to determine its award regardless of 

any setoff for amounts already paid by defendant. Yet the instruction then stated that the 

jury could “evaluate the amounts allegedly paid and the timing of those payments.” 

 These instructions undoubtedly lack clarity. But plaintiff’s theory from the start, 

unequivocally expressed to the jury, was that defendant owed more money for the losses 

incurred than it had already paid under her policy. In defense, defendant argued that it 

owed plaintiff nothing more. Therefore, the fact that the jury awarded damages for 

breach of contract suggests that it accepted plaintiff’s theory of the case. Such an award 

would not allow the trial court to impose a setoff. The damages awarded under plaintiff’s 

breach of contract theory would cover losses in addition to the losses for which defendant 

already paid. 

 Furthermore, the Court of Appeals was correct to reverse the trial court’s setoff 

award because the damages plaintiff sought were those arising from defendant’s breach 

of contract. That breach of contract did not occur until defendant stopped paying benefits 

under plaintiff’s policy. Thus, any award in plaintiff’s favor, given that plaintiff sought 

damages for breach of contract, was specifically earmarked as damages resulting from 

defendant’s failure to continue payments. They were not damages for which defendant 

could claim a setoff for amounts paid before the contract’s breach. 

 Finally, the purchase price and market value of plaintiff’s home are not pertinent 

to the legal issues presented in this case. Defendant paid approximately $100,000 for 

losses related to plaintiff’s home before this action was brought. The fact that defendant 

paid this amount did not relieve it from potential liability in the instant matter. Indeed, 

the jury determined that plaintiff was entitled to damages based on defendant’s breach of 

contract. Thus, whether defendant’s liability extended beyond the initial purchase price 

or market value of plaintiff’s home is wholly irrelevant here. 
3

 In sum, I concur in the order denying defendant’s application for leave to appeal. 

The Court of Appeals properly held that defendant was not entitled to a setoff for 

amounts previously paid under plaintiff’s policy. 

 CORRIGAN, J. (dissenting). 

 I respectfully dissent from the order denying defendant’s application for leave to 

appeal. Because the Court of Appeals blatantly undermined common-law setoff rules 

when it reversed the trial court’s order to reduce the jury verdict by prior settlement 

amounts, I would grant leave to appeal or peremptorily reinstate the trial court’s order. 

 Plaintiff, Gwiniov Riley, purchased a house for $70,000. She insured it with a 

homeowner’s policy issued by defendant State Farm Fire and Casualty Co (State Farm). 

In January 2001, plaintiff filed a claim for loss resulting from ice damming, which State 

Farm paid. In April 2002, plaintiff filed a second claim for loss resulting from a leaky 

toilet. State Farm’s agent determined that plaintiff and her family should vacate the 

house because the leak had caused visible mold growth. From April 2002 to December 

2002, State Farm paid various contractors to assess the air quality of the house, remove 

the mold, refurbish parts of the house, and replace its damaged contents. State Farm also 

paid the additional living expenses of plaintiff’s family so they could reside elsewhere 

during the remediation. In total, State Farm paid approximately $95,000 on plaintiff’s 

claim during this period. The house was worth between $100,000 and $110,000. On 

December 2, 2002, State Farm advised plaintiff that defendant had fully honored its 

policy obligations. State Farm further asserted that because the house had passed 

clearance testing, it would not make additional payments on the leaky toilet claim. 

 Plaintiff filed suit, arguing that the mold remediation was unsuccessful and that 

she continued to suffer losses resulting from the leak. After an eight day trial, the jury 

awarded plaintiff a verdict in the amount of $164,450. State Farm sought a financial 

setoff in the amount that it had already paid on plaintiff’s ice damming and leaky toilet 

claims, or $110,111.02. Additionally, State Farm sought a setoff of $100,000, which 

included the total settlement between plaintiff and two additional defendants as a result of 

an earlier case evaluation. The two additional defendants had worked as contractors on 

plaintiff’s house. The trial court agreed with State Farm in part and ordered $140,111.02 

in financial setoffs. The final judgment awarded to plaintiff was $33,523.49 with costs. 

Plaintiff appealed as of right. A divided Court of Appeals panel vacated the financial 

setoffs and remanded for entry of judgment in the amount of $125,450 plus case 

evaluation sanctions.1

 State Farm now seeks leave to appeal in this Court. 

 

1 Riley v State Farm Fire and Casualty Co, unpublished opinion per curiam of the Court 

of Appeals, issued September 25, 2008 (Docket No. 276195). 
4

 The Court of Appeals ruling barring the trial court’s setoffs obliterates wellestablished legal principles regarding setoffs. The common-law setoff rule “is based on 

the principle that a plaintiff is only entitled to one full recovery for the same injury.” 

Kaiser v Allen, 480 Mich 31, 39 (2008); see also Great Northern Packaging, Inc v 

General Tire and Rubber Co, 154 Mich App 777, 781 (1986) (“As a general rule, only 

one recovery for a single injury is allowed under Michigan law.”). In Kaiser, the Court 

held that the common-law setoff rule remains the law for vehicle-owner vicariousliability cases to the extent that joint and several liability principles have not been 

abrogated by statute. Kaiser, supra at 33. Admittedly, this case does not implicate 

vehicle-owner vicarious-liability issues. Nonetheless, the Kaiser rationale is instructive 

here because neither party asserts that the tort-reform statutes have somehow abrogated 

the common-law setoff rule. Consequently, “the common-law setoff rule should be 

applied to ensure that a plaintiff only recovers those damages to which . . . she is entitled 

as compensation for the whole injury.” Id. at 40. 

 In this case, the setoffs imposed by the trial court prevented plaintiff from 

realizing an oversized windfall. Before the trial began, plaintiff settled with two 

additional defendants in the amount of $100,000. Neither side apprised the jury of this 

settlement. Additionally, State Farm had already paid plaintiff $110,111.02 to resolve 

her claims. The trial court instructed the jury about the assessment of damages, stating in 

relevant part: 

 Whether or not State Farm is entitled to a credit or offset for 

amounts already paid is a question of law for the Court to determine. In 

making your assessment, therefore, I am asking you to award such sums to 

the plaintiff as you find she has proved regardless of any offset for amounts 

paid. If I find that State Farm is entitled to such a credit or offset, I will 

make that decision as a matter of law after the trial. You may, however, 

evaluate the amounts allegedly paid and the timing of those payments in 

making all other decisions you need to make. 

After the jury issued its verdict, the trial court determined that State Farm was entitled to 

a setoff in the amount of $30,000 because of the overlapping breach of contract theory on 

which plaintiff sued both State Farm and one of the other defendants. The trial court’s 

ruling regarding the amounts previously paid by other defendants aligns with this Court’s 

requirement of not informing the jury about the existence of a settlement between 

plaintiff and another defendant. See Brewer v Payless Stations, Inc, 412 Mich 673, 679 

(1982). Moreover, by implementing a financial setoff in the amount already paid by 

defendant State Farm, the trial court ensured that “a plaintiff is not overcompensated

for . . . her actual loss as determined by the trier of fact.” Velez v Tuma, 283 Mich App 

396, 413 (2009) (emphasis in original). 
I, Corbin R. Davis, Clerk of the Michigan Supreme Court, certify that the 

foregoing is a true and complete copy of the order entered at the direction of the Court. 

 _________________________________________ 

 Clerk

October 9, 2009 

l1006 

 

5

 By its decision today, this Court allows plaintiff to recover nearly three times the 

amount it would cost to demolish and rebuild her home. Because allowing plaintiff to 

recover such a sizable windfall obliterates the common-law setoff rule, I would grant 

leave to appeal or issue a peremptory order reinstating the financial setoffs imposed by 

the trial court. 

 YOUNG and MARKMAN, JJ., join the statement of CORRIGAN, J. 

 MARKMAN, J. (dissenting). 

 I join Justice Corrigan’s dissenting statement and write separately to emphasize a 

single point. As a result of the majority’s denial of defendant’s application for leave to 

appeal, and its refusal to reinstate the trial court’s setoff ruling, plaintiff will have 

received a total recovery of $335,561 under a homeowner’s policy for damage done to a 

house that was valued no higher than $110,000. This is an unjust and indefensible result. 

 YOUNG, J., joins the statement of MARKMAN, J.