Case Name: CHEBOYGAN COUNTY ROAD COMMISSION v. AUTO-OWNERS INSURANCE COMPANY
Court: Michigan Court of Appeals
Jurisdiction: Michigan
Decision Date: 1978-12-28
Citations: 87 Mich. App. 681
Docket Number: Docket No. 77-4467
Parties: CHEBOYGAN COUNTY ROAD COMMISSION v AUTO-OWNERS INSURANCE COMPANY
Judges: Before: Beasley, P.J., and D. E. Holbrook and G. R. Cook, JJ.
Reporter: Michigan appeals reports; cases decided in the Michigan Court of Appeals.
Volume: 87
Pages: 681–689

Head Matter:
CHEBOYGAN COUNTY ROAD COMMISSION v AUTO-OWNERS INSURANCE COMPANY
Docket No. 77-4467.
Submitted November 3, 1978, at Grand Rapids.
Decided December 28, 1978.
Leave to appeal denied, 406 Mich 909.
The Cheboygan County Road Commission stored a quantity of salt on property which it owned in the Indian River area. The salt was owned by the State Highway Department. Salt seeped into the ground and contaminated the water supply of several persons in the vicinity. The highway department and the county road commission agreed to divide equally the cost of drilling new wells for the affected residents. The road commission then commenced an action against Auto-Owners Insurance Company, seeking to recover, pursuant to a contract of insurance, one-half of the total amount of the cost of the drilling. Cheboygan Circuit Court, Philip J. Glennie, J., found that a valid settlement contract existed wherein the plaintiff agreed to accept a lesser amount as full compensation for its claim. The plaintiff appeals. Held:
1. A letter from the insurance company to the plaintiff, after the plaintiff’s attorney sent a letter to the insurance company’s attorney proposing an open-ended formula for dividing the plaintiff’s liability between the plaintiff and the insurance company, was a counter offer and not an acceptance of the plaintiff’s earlier proposal. The plaintiff’s claim was not barred by an accord and satisfaction.
2. The insurance company waived its right to assert, as an affirmative defense, the plaintiffs noncompliance with a condition precedent by failing to have that defense included in the pretrial summary.
References for Points in Headnotes
17 Am Jur 2d, Contracts §§ 39, 62.
Difference between offer and acceptance as regards place of payment or of delivery as variance preventing consummation of contract. 3 ALR2d 256.
43 Am Jur 2d, Insurance §§ 754-756.
44 Am Jur 2d, Insurance §§ 1944, 1946.
61 Am Jur 2d, Pleading §§ 127, 395.
44 Am Jur 2d, Insurance §§ 1553,1554.
Liability insurance: insurer’s assumption of or continuation in defense of action brought against the assured as waiver or estop-pel as regards defense of noncoverage or other defense existing at time of accident. 38 ALR2d 1148.
1 Am Jur 2d, Accord and Satisfaction §§ 1, 27.
Reversed and remanded.
Beasley, P.J., dissented. He would hold that the record supports the trial court’s conclusion that the plaintiffs attorney, acting within the authority given him by the plaintiff, had negotiated, in good faith, a binding accord and satisfaction with the insurance company. He would affirm.
Opinion of the Court
1. Contracts — Acceptance—Offer—Differing Terms — Rejection of Offer.
A proposal to accept an offer which contains terms differing from the offer is a rejection of the offer.
2. Insurance — Conditions Precedent — Affirmative Defense — Noncompliance — Court Rules.
An insurance company, wishing to use as a defense a plaintiffs failure to comply with a condition precedent to recovery under the terms of the contract, must plead noncompliance with the condition precedent as an affirmative defense (GCR 1963, 112.4).
3. Pleading — Affirmative Defenses — Waiver—Court Rules.
Affirmative defenses which are not asserted in the pleadings are waived (GCR 1963, 111.3).
4. Pleading — Pretrial Summary — Affirmative Defenses — Waiver —Court Rules.
A defendant insurance company waived its right to assert as an affirmative defense a plaintiffs noncompliance with a condition precedent where the defendant failed to have that defense included in the pretrial summary (GCR 1963, 301.3).
Dissent by Beasley, P.J.
5. Accord and Satisfaction — Settlement of Disputed Claim— Agreement.
It is necessary in order that an accord and satisfaction may constitute a settlement of a disputed claim that there must have been, ñrst, an agreement between the parties (an accord) that something new and different be substituted for the existing claims of the parties, and second, there must have been a satisfaction or at least some legal excuse for not performing and carrying out the accord.
Lyon, Mellon & Conboy, for plaintiff.
Carpenter, Fenner, Barney & Hofmann, for defendant.
Before: Beasley, P.J., and D. E. Holbrook and G. R. Cook, JJ.
Circuit judge, sitting on the Court of Appeals by assignment.

Opinion:
D. E. Holbrook, J.
The Cheboygan County Road Commission stored a quantity of salt on property which it owned in the Indian River area. The salt was owned by the State Highway Department. Salt seeped into the ground water and contaminated the water supply of several persons in the vicinity. The highway department and the road commission agreed to divide equally the cost of drilling new wells for the affected residents. At the date of trial the cost of such drilling totalled $30,911.95. The road commission sought to recover half of this amount from the defendant pursuant to a contract of insurance. After a bench trial the court found that a valid settlement contract existed wherein the road commission agreed to accept $6,120.93 as full compensation for its claim. We disagree with that finding.
The purported offer in this case is contained in a letter from the road commission's attorney to the insurance company's attorney dated November 27, 1972. That letter proposed an open-ended formula by which the insurance company and the road commission would split the road commission's liability. The letter did not mention future claims.
The insurance company responded with a letter dated April 12, 1973, which offered a fixed dollar amount in return for which the road commission was to release the insurance company from all present and future liability.
It is elementary that a proposal to accept an offer which contains terms differing from the offer is a rejection. Board of Governors of Wayne State University v Building Systems Housing Corp, 62 Mich App 77; 233 NW2d 195 (1975). The insurance company's letter of April 12, 1973, was a counteroffer. It did not purport to accept the terms of the November 27, 1972, letter. It offered new and different terms.
The plaintiff's claim is not barred by accord and satisfaction.
The trial court also found that recovery under the contract was precluded by failure to establish compliance with a condition precedent contained in the insurance contract which was not waived by the defendant. The contract of insurance contained a clause requiring the company's written authorization before payment of claims which were not judgment claims.
At trial the defendant moved to include noncompliance with the "written authorization" clause as an affirmative defense. The plaintiff objected saying that it was only prepared for trial on the one issue stated in the pretrial summary. The trial court ruled that the affirmative defense could not be added but that it would allow testimony concerning compliance with the same contract provision. In so ruling the court held that the plaintiff had the duty to plead and prove compliance with all conditions precedent to recovery contained within the insurance contract. This is contrary to GCR 1963, 112.4 which states specifically that an insurance company must plead noncompliance with a condition precedent as an affirmative de fense. GCR 1963, 111.3 provides that affirmative defenses which are not asserted in the pleadings are waived. The defendant further waived its right to assert noncompliance with the condition precedent as an affirmative defense by failing to have that defense included in the pretrial summary. Farida v Zahar, 50 Mich App 137, 143; 212 NW2d 739 (1973), GCR 1963, 301.3.
In the pretrial summary the defendant specifically admitted liability under the policy but claimed that recovery was precluded by the existence of a settlement contract. The only issue at trial, therefore, should have been whether or not a valid settlement contract existed. We have found that a settlement contract did not exist. We reverse and remand with the instruction that a judgment in the amount of $15,455.97 be entered for the plaintiff.
Reversed and remanded, costs to appellant.
G. R. Cook, J., concurred.