Michigan Supreme Court Lansing, Michigan

Marilyn Kelly,
Chief Justice

Michael F. Cavanag h

Elizabeth A. Weave r

Maura D. Corriga n Robert P. Young, Jr. Stephen J. Markma n Diane M. Hathaway,

J ustices 

# 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.

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On order of the Court, the application fo r leave to appeal the September 25, 2008 judgment of the Court of Appeals is consid ered, and it is DENIED, because we are not persuaded that the questions presented should be reviewed by this Court.

K ELLY , C.J. ( concurring ).

I concur in the Court’s order denying defe ndant’s application fo r leave to appeal. I write separately in response to Ju stice Corrigan’s dissenting statement.

Defendant State Farm Fire and Casu alty Company provid ed 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 da m, and in Ap ril 2002, the home sustained damage from a leaking toilet. Defendant paid more than $100,000 for mold remediation, structural repairs, cont ent replacement or cl eaning, 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 re quired by the policy. However, when plaintiff contin ued to be ill after returning to the home, she sued on the

basis of numerous theories. Th e jury returned a verdict in fa vor of plaintiff in the amount of $164,450, comprised of several awards. Specifically, the jury awarded $106,000 for property repair and replacement costs, $43,00 0 for cleaning or replacing contents, and $15,450 for additional living expenses. The trial cour t entered a final judgment of $33,523.49 after determ ining 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 defenda nt had stopped paying benefits under the policy and therefore reversed th e trial court’s setoff determina tion. The Court of Appeals remanded for the entry of judgment for plain tiff in the amount of $124,450, plus case

evaluation sanctions. Defe ndant now seeks leave to appeal in this Court.

Defendant contends that the Court of A ppeals erroneously vacated the trial court’s setoff determination. I disagree. Plaintiff’s complaint specifically sought damages for breach of contract and alleged that defend ant was responsible fo r all losses caused by

mold. The trial court instruct ed 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 proper ty, 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 th eory from the start, unequivocally expressed to th e jury, was that defendant ow ed more money for the losses incurred than it had already paid under her policy. In defens e, defendant argued that it owed plaintiff nothing more. Therefore, th e fact that the jury awarded damages for breach of contract suggests that it accepted pl aintiff’s theory of the case. Such an award would not allow the trial court to impose a se toff. The damages awarded under plaintiff’s breach of contract theory woul d cover losses in addition to the losses for which defendant already paid.

Furthermore, the Court of Appeals was co rrect to reverse the trial court’s setoff award because the damages plai ntiff sought were those arisi ng from defendant’s breach

of contract. That breach of contract did not occur until defe ndant stopped pa ying benefits under plaintiff’s policy. Thus , any award in plaintiff’s favo r, given that plaintiff sought damages for breach of contract, was specifi cally earmarked as damages resulting from

defendant’s failure to contin ue 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 va lue of plaintiff’s home are not pertinent to the legal issues presented in this case. Defendant paid appr oximately $100,000 for losses related to plaintiff’s hom e before this action was brought . The fact that defendant paid this amount did not relieve it from potentia l liability in the inst ant matter. Indeed, the jury determined that plai ntiff was entitled to damages base d on defendant’s breach of contract. Thus, whether defe ndant’s liability extended be yond the initial purchase price or market value of plaintiff’s home is wholly irrelevant here.3

In sum, I concur in the order denying de fendant’s application fo r leave to appeal. The Court of Appeals properly held that defendant was not en titled to a setoff for amounts previously paid u nder plaintiff’s policy.

C ORRIGAN , J. ( dissenting ).

I respectfully dissent from the order deny ing defendant’s application for leave to appeal. Because the Court of Appeals bl atantly undermined common-law setoff rules

when it reversed the trial court’s order to reduce the jury verd ict by prior settlement amounts, I would grant leave to appeal or pe remptorily 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 Fa rm Fire and Casualty Co (State Farm). In January 2001, plaintiff filed a claim fo r 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 de termined that plaintiff and he r family should vacate the

house because the leak had caused visible mo ld 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 repl ace its damaged contents. State Farm also paid the additional living expenses of plainti ff’s family so they could reside elsewhere during the remediation. In total, State Farm paid approximately $9 5,000 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 defe ndant had fully honored its policy obligations. State Farm further a sserted that because the house had passed clearance testing, it would not make additio nal payments on the leaky toilet claim.

Plaintiff filed suit, arguing that the mo ld remediation was unsuccessful and that

she continued to suffer losses re sulting 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 $100,00 0, which

included the total settlement be tween plaintiff and two additio nal defendants as a result of

an earlier case evaluation. The two additional defendants had worked as contractors on plaintiff’s house. The trial c ourt agreed with State Farm in part and orde red $140,111.02 in financial setoffs. The final judgment awarde d 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 th e trial court’s setoffs obliterates wellestablished legal principles regarding setoff s. The common-law setoff rule “is based on the principle that a plaintiff is only entitled to one full recovery fo r 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 unde r Michigan law.”). In Kaiser , the Court

held that the common-law setoff rule rema ins 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 plai ntiff only recovers t hose 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 am ount of $100,000. Neither side apprised the jury of this settlement. Additionally, State Farm had alr eady paid plaintiff $110,111.02 to resolve

her claims. The trial court inst ructed the jury abou t 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 aw ard such sums to the plaintiff as you find she has prove d regardless of any offset for amounts paid. If I find that State Farm is en titled 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 an d the timing of those payments in making all other decisions you need to make.

After the jury issued its verdict, the trial c ourt determined that State Farm was entitled to a setoff in the amount of $30,000 because of the overlapping br each 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 informin g the jury about the existe nce of a settlement between plaintiff and another defendant. See Brewer v Payless Stations, Inc , 412 Mich 673, 679 (1982). Moreover, by implementing a financia l 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 Mi chigan Supreme Cour t, certify that the foregoing is a true and complete copy of the order entered at the direction of the Court.

_______________________________________ __ Clerk October 9, 2009

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By its decision today, this Court allows plaintiff to recover n early 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 orde r reinstating the financial setoffs imposed by

the trial court.

Y OUNG and M ARKMAN , JJ., join the statement of C ORRIGAN , J.

M ARKMAN , J. ( dissenting ).

I join Justice Corrigan’s dissenting stat ement and write separa tely to emphasize a single point. As a result of th e majority’s denial of defenda nt’s application for leave to appeal, and its refusal to reinstate the tria l court’s setoff ruling, plaintiff will have received a total recovery of $335,561 under a homeo wner’s policy for damage done to a house that was valued no higher than $110,000. This is an unjust and indefens ible result.

Y OUNG , J., joins the statement of M ARKMAN , J.