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A Better Partnership
May 23, 2014

MSC concludes that the grant of a motion for entry of judgment qualifies as a "verdict" for the purposes of case evaluation sanctions

In Acorn Investment Co. v. Michigan Basic Property Insurance Association, the Michigan Supreme Court held that a circuit court’s granted motion for entry of judgment and interest was a “verdict” under MCR 2.403(O)(1), allowing the plaintiff to receive case evaluation costs.  The court determined that a "verdict" included a judgment entered by the granting of a motion that occurred after the case evaluation, and that the motion in this case met that definition.

In this case, the plaintiff filed an insurance claim with its insurer for fire insurance coverage, which the insurance company denied on the basis that the policy was canceled prior to the incident.  Subsequently, the plaintiff brought suit against the insurer to recover under the insurance policy.  After the circuit court denied both parties’ motions for summary disposition, a case evaluation was performed pursuant to MCR 2.403(A)(1).  Resulting from the evaluation, plaintiff was awarded $11,000.  The plaintiff accepted the award, but the insurer rejected it.  Due to the insurer’s rejection, the plaintiff filed a motion to have its damages set by an appraisal panel pursuant to the insurance policy and MCL 500.2833(1)(m).  The panel appraised the damages “in the amount of $20, 877,” and the plaintiff filed a motion for entry of judgment in the appraisal amount with interest.  Additionally, the plaintiff sought an award for case evaluation costs and additional monetary damages for the cost of debris removal services. 

The circuit court entered a judgment in the amount of the appraisal award, together with interest, but it denied the plaintiff’s claim for case evaluation costs.  The Court of Appeals affirmed the decision, reasoning that the appraisal process was effectively a form of arbitration, and 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).”  However, the Supreme Court reversed and remanded this decision, holding that 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.”  Applying this definition to MCR 2.403(O)(1), the insurer is liable for 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 the insurer rejected the case evaluation.  The Court held that under the plain meaning of the court rule, all of the elements of the three-part test were satisfied.  First, the action “proceeded to judgment” when the circuit court granted the plaintiff’s motion for entry of judgment and interest.  Second, the judgment was “entered as a result” of the motion for entry of judgment and interest.  Finally, the judgment occurred after the insurer rejected the case evaluation.  Accordingly, the plaintiffs were permitted to recover actual costs under MCR 2.403(O)(2)(c). 

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