KATHLEEN MCNEEL V FARM BUREAU GENERAL INS CO OF MI
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STATE OF MICHIGAN
COURT OF APPEALS
KATHLEEN McNEEL, individually, and
WAKELIN McNEEL, as Trustee of the Kathleen
McNeel Revocable Living Trust,
FOR PUBLICATION
June 29, 2010
9:05 a.m.
Plaintiffs-Appellees/CrossAppellant,
v
No. 285008
Mecosta Circuit Court
LC No. 04-16507-CK
FARM BUREAU GENERAL INSURANCE
COMPANY OF MICHIGAN,
Defendant-Appellant/CrossAppellee.
Before: M. J. KELLY, P.J., and K. F. KELLY and SHAPIRO, JJ.
SHAPIRO, J.
This insurance coverage dispute stems from a fire on March 18, 2003 that completely
destroyed a farmhouse owned by the Kathleen McNeel Revocable Living Trust (the Trust).
Defendant appeals as of right from the trial court’s order granting plaintiffs the $69,500 jury
award, interest of $37,259.78 pursuant to MCL 500.2006, and case evaluation sanctions of
$19,818.34. We affirm the jury verdict but reverse the trial court’s decision on attorney fees and
remand for entry of an order consistent with this opinion.
I. BACKGROUND AND PROCEEDINGS
The property at issue, located at 10981 W River, Remus, MI (the Bundy farmhouse), was
purchased by Kathleen McNeel in the 1970 and transferred to the Kathleen McNeel Revocable
Living Trust in 1993. Defendant issued an insurance policy to Kathleen McNeel, with the Trust
as an additional insured, covering three dwellings and their contents, including the Bundy
farmhouse, which policy was in effect when the Bundy farmhouse was destroyed by arson1 on
1
The cause of the fire was “undetermined” because it could have been accidental or suspicious.
It was thought to have been set by a serial arsonist in the area.
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March 18, 2003. Defendant investigated the loss and determined that the loss was not covered
under the policy because “nobody had lived in the house as a domicile since November 2001.”
Under the “Increase in Hazard” provision, the policy provided that defendant was not liable for
losses occurring “[w]hile a described building, whether intended for occupancy by owner or
tenant, is vacant beyond a period of sixty consecutive days or is unoccupied beyond a period of
six consecutive months.”
In April 2003, plaintiffs hired Stewart Shipper, a public adjuster, to help them with their
claim. In an April 17, 2003 letter, Kathleen MacDonald, defendant’s adjuster, stated that she had
spoken with members of the McNeel family and they had indicated that no one had resided in the
dwelling for approximately 18 months and that there was no furniture in the dwelling. The letter
concluded, “due to the above we are denying coverage for this claim.” Shipper responded with a
May 12, 2003 letter stating that members of the family disputed MacDonald’s statements
regarding residency and he included a list of personal property that was in the home at the time
of the fire. He concluded by stating that “your denial of the claim is improper” and asking her to
“reconsider your denial and contact me for discussion of an adjustment and payment by Farm
Bureau Insurance.” In a separate letter of the same date, Shipper also sent in calculations of
actual cash value. On May 13, 2003, Shipper submitted a Sworn Statement in Proof of Loss
signed by Wakelin McNeel, Trustee.
In a letter dated May 22, 2003, MacDonald stated: “In response to your letter of May 12,
2003 we are continuing our investigation into this matter. As soon as we have completed this
investigation we will be in contact with you to discuss your client’s claim further.” On the same
date, MacDonald sent another letter, noting that the Sworn Proof of Loss was incomplete and
that the insured had to remedy this error within 15 days. The letter stated in bold print, “This is
not a denial of your claim but rather a rejection of the Proof of Loss which was incorrectly
completed.” Shipper timely resubmitted the information.
On June 16, 2003, Shipper wrote to MacDonald stating: “I am following up on the
telephone messages that I left you on June 9th, June 13th and most recently this morning. In your
correspondence of May 12, 2003, you indicated that you are continuing your investigation into
this matter. Please advise when you will be ready to speak with us to adjust the claim.”
On June 26, 2003, MacDonald wrote to Shipper and stated, “After careful review of this
matter along with additional investigation, we feel that we are justified in our denial of the above
claim.” The letter stated that it was “Farm Bureau’s position” that the dwelling had been
unoccupied for 18 months as substantiated by relatives of the insured and a neighbor.
The following day, June 27, 2003, Shipper wrote to Jason Babka, MacDonald’s claims
supervisor. The letter confirmed that Shipper had “contact[ed Babka] to try to correct a wrongful
denial of the insured’s claim” and that Shipper had “agreed to provide certain information which
reflects on the meaning of vacancy and unoccupancy.” The letter enclosed excerpts from two
insurance texts and concluded “please review and advise.”
On June 30, 2003, Babka wrote back to Shipper. The letter quoted from the definitions
of unoccupied in a third source, FC & S, and concluded, “Based on the definitions provided, our
investigation, and the policy language under the increase in hazard, we must again respectfully
deny the claim for fire damage to 10981 W. River Rd. in Remus, Michigan of March 18, 2003.”
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On July 21, 2003, Shipper faxed a letter to Babka requesting page citations in the cited
text and stating that “you have denied the insured’s claim based on an FC&S reference.” On the
same date, Babka sent a response stating that the claim was not denied on the basis of an FC&S
definition and that “[t]he claim was denied based on the facts of the loss and our investigation, as
well as the applicable policy language.”
On September 24, 2003, Shipper wrote another letter to Babka, which stated:
I have reviewed Farm Bureau’s claim denial with the Insured. I am writing to ask
for an appointment with you to discuss Farm Bureau’s refusal to respond to the
claim. The attorneys that I have spoken to state that the controlling issue will
likely be a determination as to whether the house was abandoned. You may or
may not decide to continue to deny the claim, but you should understand the
reasons the insured believes that the house was occupied. We can meet at your
office or another agreeable location. I would like to arrange the meeting as soon
as possible because, in the face of your denial, I must soon recommend an
attorney for the future handling of this matter.
The record does not contain a response, but on October 10, 2003, Shipper and Babka did
meet. According to an affidavit signed by Shipper, at the meeting, Babka:
requested that I obtain and send him utility bills for the subject property which
would indicate that the power had been on, contrary to what one would expect in
a vacant/abandoned property) and evidence of payment of property tax bills
(which again would illustrate that the property was not vacant/abandoned). Mr.
Babka indicated that he would consider the claim in light of the requested
documents, once submitted, and would only make a decision as to whether or not
the claim would be denied after he had done so. [Emphasis in original].
A responsive affidavit signed by Babka was filed by defendant. It stated, “Farm Bureau never
contradicted its initial denial of Plaintiff’s claim, that Farm Bureau’s position never changed
from the initial denial and that I never conveyed to Mr. Shipper otherwise.”
Following up from the meeting, Shipper sent a letter and facsimilie on October 14, 2003,
attaching utility bills and property tax receipts which he asserted, along with the contractor’s
remodeling estimates “are indicative of an intent to continue to operate and occupy the
property.” Babka responded with a letter of the same date stating:
I have carefully reviewed the additional documents you have submitted regarding
this claim. Our findings still indicate that the house was both vacant and
unoccupied, as we have previously outlined in our correspondence of June 30,
2003 and June 26, 2003. Based on this, we must respectfully continue to deny
your client’s claim.
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Plaintiffs filed their complaint against defendant in Mecosta County Circuit Court2 on
October 5, 2004. In April 2005, defendant moved for summary disposition for failure to file
within one year of the date the claim was formally denied. MCL 500.2833(1)(q).3 Plaintiffs
opposed the motion. At the hearing on June 17, 2005, the trial court denied the motion, noting
that there was a factual dispute as to when the formal denial occurred and specifically referred to
Shipper’s and Babka’s affidavits.
At trial, defendant abandoned the issue of when the formal denial occurred; defendant
presented no evidence on the issue and did not request that the jury make a determination. The
jury returned a verdict for plaintiffs, concluding that the farmhouse was not vacant at least 60
consecutive days prior to the loss and that it “was occupied at least six consecutive months prior
to the loss date.” It awarded $3,000 for furnishings, $7,000 for other personal property, and
$15,000 for lost rents. The trial court issued a judgment on the verdict for $69,500, reflecting the
$50,000 policy limit on the building, $10,000 policy limit on lost rents, $3,000 for landlord
furnishings, $2,500 policy limits for other personal property, and $4,000 for the stipulated debris
removal.
Plaintiffs moved for case evaluation sanctions, interest and costs. On the interest claim,
defendant recognized this Court’s decision in Griswold Properties, LLC v Lexington Ins Co, 276
Mich App 551, 554; 741 NW2d 549 (2007), but objected to the interest based on the prior case
law in Arco v American Motorist Ins Co, 233 Mich App 143; 594 NW2d 74 (1998). The trial
court concluded that defendant’s denial was reasonable, but that Griswold was retroactive and
awarded 12% interest on $54,500 of the award. On the attorney fee issue, the trial court
ultimately issued an opinion that granted plaintiffs 43 hours at $150 per hour in attorney fees. It
also assessed 12% interest on $54,500 retroactively beginning on July 13, 2003, with the
remainder of the award subject to interest accrued from the date of the complaint. Defendant
now appeals.
2
Although the Bundy farmhouse is actually in Isabella County, halfway through the first day of
trial, defendant stipulated that venue was proper in Mecosta County.
3
MCL 500.2833(1)(q) provides:
(1) Each fire insurance policy issued or delivered in this state shall contain the
following provisions:
***
(q) That an action under the policy may be commenced only after compliance
with the policy requirements. An action must be commenced within 1 year after
the loss or within the time period specified in the policy, whichever is longer. The
time for commencing an action is tolled from the time the insured notifies the
insurer until the insurer formally denies liability. [Emphasis added.]
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II. SUMMARY DISPOSITION
Defendant first argues that the trial court erred in denying its motion for summary
disposition because plaintiff’s suit was untimely even with the extension under MCL
500.2833(1)(q). Plaintiffs contend that defendant has waived its right to claim the complaint was
untimely by failing to raise the issue at trial, but that even if the issue was preserved, there was
evidence of a genuine issue of material fact as to when defendant “formally denied” plaintiffs’
claim, making the trial court’s denial of summary disposition appropriate.
We review de novo motions for summary disposition, taking the facts in the light most
favorable to the non-moving party. Dressel v Ameribank, 468 Mich 557, 561; 664 NW2d 151
(2003). We review the record and the documentary evidence, but do not make findings of fact or
weigh credibility. Taylor v Lenawee Rd Comm’rs, 216 Mich App 435, 437; 549 NW2d 80
(1996).
We agree with plaintiffs that defendant waived its affirmative statute of limitations
defense at trial. Defendant did not seek a jury finding as to when the formal denial occurred and
failed to present any evidence at trial that the denial occurred anytime other than October 14,
2003. The defense made a tactical decision not to argue this issue to the jury and focused solely
on whether the policy provided coverage. However, this waiver did not waive defendant’s right
to appeal the trial court’s denial of summary disposition. Although defendant waived any
complaint of error on this issue at trial, defendant may still argue that trial should never have
occurred because the trial court improperly denied summary disposition on the issue. Thus, the
issue is whether the trial court was correct that there was an outstanding question of fact material
to the determination of when the “formal denial” that stopped the tolling under MCL
500.2388(1)(q) occurred.
Given the language of the letters, we agree with plaintiffs that the April 2003 denial was
withdrawn by the May 22, 2003 letters stating that “[t]]his is not a denial of your claim” and that
“we are continuing our investigation into this matter.” However, we conclude that a second
formal denial did occur later. On June 26, 2003, MacDonald wrote to Shipper and stated that
“we feel we are justified in our denial of the above claim.” In his letter to Babka, Shipper
acknowledged the denial by stating that he was attempting to “correct a wrongful denial.” The
subsequent correspondence back and forth between the parties continued to mention a denial:
“we must again respectfully deny the claim”; “you have denied the insured’s claim”; “The claim
was denied”; “I have reviewed Farm Bureau’s claim denial with the Insured”; and “You may or
may not continue to deny the claim.”
However, we do not believe the trial court erred in finding a question of fact given
Shipper’s affidavit stating that he wrote Babka on September 24, 2003 requesting a meeting, and
that the two of them met on October 10, 2003. According to Shipper’s affidavit, “Babka
indicated that he would consider the claim in light of the requested documents, once submitted,
and would only make a decision as to whether or not the claim would be denied after he had
done so (emphasis added, underlining in original).”
The trial court properly concluded that this evidence created a question of material fact as
to when the formal denial occurred. Although it is reasonable to construe Babka’s letter on
October 14, 2003 and his affidavit responding to the Shipper affidavit as evidence of an
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unbroken denial since June 2003, Shipper’s affidavit presents evidence that creates a different
inference—that defendant again withdrew its formal denial while it reinvestigated the claim.
This inference is even more reasonable based on defendant’s prior course of conduct, having
once before withdrawn a denial of the claim. Taking this evidence in the light most favorable to
plaintiffs, Dressel, 468 Mich at 561, Shipper’s affidavit and defendant’s previous withdrawal of
its formal denial provided sufficient evidence to create a question of fact as to whether Babka’s
alleged comments at the meeting with Shipper constituted another withdrawal of the denial, with
a subsequent re-denial on October 14, 2003. The trial court properly left it up to a jury to
determine whether Babka made the comments attributed to him in Shipper’s affidavit and
whether those comments constituted a withdrawal of defendant’s previous formal denial
followed by a new formal denial. Accordingly, we conclude that the trial court properly denied
defendant’s motion for summary disposition. This question was properly held for a jury
determination, and defendant elected to waive that determination.4 We find no error.
III. OCCUPANCY
Defendant next argues that the trial court’s jury instruction regarding occupancy was
erroneous and that the instruction that should have been given was: “One must consistently or
habitually live there as a customary and usual dwelling place or place of abode or place of
habitation. Mere supervision and periodic checking or overnight visitations or storage or
furniture is not enough to satisfy an occupancy.” However, this definition was never presented
to the trial court. Indeed, the definitions requested by defendant are entirely different.
4
Despite the defense’s decision not to submit the issue to the jury, defendant’s witnesses and
counsel made several statements at trial that seem inconsistent with its claim that the June denial
remained in effect. Although these statements are not relevant to our review of the summary
disposition ruling as they occurred later, defendant does appear to have been trying to have it
both ways. On the one hand, when it moved for summary disposition, it argued to the court that
it was beyond question that the claim had been formally denied prior to October. On the other
hand, defendant sought to gain a tactical advantage at trial by repeatedly telling the jurors, in an
apparent appeal to their sense of fair play, that the company had gone so far as to keep the claim
open through October.
Defense counsel argued in his opening statement that Babka “kept this claim open . . . for review
for a period of April, 2003, to October of 2003” and later reiterated that Babka “kept it open for
six months” because he “wanted to be fair.” During trial, MacDonald testified that it was her
understanding that the claim was kept open until October of 2003. Babka testified that the
reserve on the claim was not closed until October 29, 2003 and when that was done, the denial
was a done deal and he was not going back on the denial. Finally, in defendant’s closing
argument, counsel stated that Babka spent five months, i.e. through October, going over things
with Shipper and that after that time “those two agreed to disagree.”
We do not conclude that these statements constituted judicial admissions. See Ortega v
Lenderink, 382 Mich 218, 222-223; 169 NW 2d 470 (1969). However, we do question whether
the defense would have taken this position at trial if the jury had in fact been permitted to decide
the date of formal denial.
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Defendant’s trial brief defined unoccupied as “ROUTINELY DEVOID OF HUMAN
PRESENCE (emphasis in original).”
Defendant’s proposed jury instructions stated,
“unoccupied: means not routinely characterized by the presence of human beings, or nobody is
living there.” Obviously, there is no error in the trial court’s failure to give an instruction that
was never requested. Nevertheless, defendant expressed a general objection to the instruction.
The question becomes what standard of review applies to this issue.
MCR 2.516(C) provides, “A party may assign as error the giving of or the failure to give
an instruction only if the party objects on the record before the jury retires to consider the verdict
. . . stating specifically the matter to which the party objects and the grounds for the objection.”
Here, the entire objection is “we’re going to go with the one jury instruction with respect to
occupancy. However, both of us have some misgivings about it and each of us wants to preserve
our right to, I guess, contest it after the fact depending on who wins.” Because the rule requires
the objecting party to specifically state the grounds for the objection on the record, and the
record in this case lacks any grounds for the objection, this issue is unpreserved. Accordingly,
our review is for plain error affecting defendant’s substantial rights. Hildendorf v St John Hosp
& Medical Ctr Corp, 245 Mich App 670, 700; 630 NW2d 356 (2001).
The trial court instructed the jury:
In determining whether the McNeel farmhouse was vacant or unoccupied before
the fire loss as alleged in this case, you are instructed to use the following
definitions:
Vacant means the residence was completely empty and was – and has
insignificant furnishings or property to support its intended purpose as a rental
property.
Unoccupied. Unoccupied means operations or other activities in the
building are suspended but contents remain in the building and is not being lived
in for a period of six consecutive months.
Defendant argues on appeal that the definition for unoccupied is improper.
“unoccupied” is a contractual term, the question is one of contract interpretation.
Because
“[I]n reviewing an insurance policy dispute we must look to the language of the insurance
policy and interpret the terms therein in accordance with Michigan’s well-established principles
of contract construction.” Henderson v State Farm Fire & Cas Co, 460 Mich 348, 353-354; 596
NW2d 190 (1999).
First, an insurance contract must be enforced in accordance with its terms. A
court must not hold an insurance company liable for a risk that it did not assume.
Second, a court should not create ambiguity in an insurance policy where the
terms of the contract are clear and precise. Thus, the terms of a contract must be
enforced as written where there is no ambiguity.
While we construe the contract in favor of the insured if an ambiguity is
found, this does not mean that the plain meaning of a word or phrase should be
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perverted, or that a word or phrase, the meaning of which is specific and well
recognized, should be given some alien construction merely for the purpose of
benefiting an insured. The fact that a policy does not define a relevant term does
not render the policy ambiguous. Rather, reviewing courts must interpret the
terms of the contract in accordance with their commonly used meanings. Indeed,
we do not ascribe ambiguity to words simply because dictionary publishers are
obliged to define words differently to avoid possible plagiarism. [Id. at 354
(citations omitted).]
The contract provision at issue provides that there is no coverage “[w]hile a described
building, whether intended for occupancy by owner or tenant, is vacant beyond a period of sixty
consecutive days or is unoccupied beyond a period of six consecutive months.” The parties
agree that unoccupied is not defined in the policy. Where terms are undefined, it is appropriate
for this Court to consult a dictionary for the common definition. Halloran v Bhan, 470 Mich
572, 578; 683 NW2d 129 (2004).5 “Vacant” is defined as, “Holding nothing: empty.” Webster’s
New Basic Dictionary (2007). Unoccupied is similarly defined as, “Not occupied: empty.” Id.
The most applicable definition of “occupy” would appear to be “To live in.” Id. Putting those
definitions together, unoccupied means not lived in.
Using these definitions, we conclude that the trial court’s jury instruction was proper.
The trial court said that unoccupied meant that the building had contents but “is not being lived
in.” It gave the appropriate duration from the contract provision of “six consecutive months.”
Thus, the instruction informed the jury that it had to determine whether the Bundy farmhouse
had not been lived in for more than six consecutive months. We find no plain error. Hildendorf¸
245 Mich App at 700.
Defendant argues that this Court’s opinion in Vushaj v Farm Bureau General Ins Co of
Michigan, 284 Mich App 513; ___ NW2d ___ (2009) is controlling on this issue. We disagree.
First, defendant’s contention that Vushaj “should have been incorporated into a proper jury
instruction” defies logic because it ignores the fact that Vushaj was not decided until after this
appeal had already begun. More important, the policy language at issue in Vushaj is markedly
different and distinguishable. The Vushaj policy precluded coverage if the house was “vacant or
unoccupied beyond a period of 30 consecutive days.” Id. at 519. The present policy exempted
coverage when the house “is vacant beyond a period of sixty consecutive days or is unoccupied
beyond a period of six consecutive months.” Thus, the present policy clearly separates the terms
vacant and unoccupied into different clauses with distinct time requirements. Such a structure
leads to the conclusion that the two terms have different meanings.
[M]ost authorities have distinguished the terms “vacant” and “unoccupied.” The
term “vacant” has been construed to mean empty, deprived of contents, and
without inanimate objects. It implies entire abandonment, and non-occupancy for
5
Although Halloran relates to statutory interpretation, the rules are the same for contract
interpretation. See Citizens Ins Co v Pro-Seal Service Group, Inc, 477 Mich 75, 82-85; 730
NW2d 682 (2007).
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any purpose. On the other hand “unoccupied” has been held to mean without
animate objects, and implies that no actual use is being made of the premises by
anyone corporeally present or in possession. [45 CJS Insurance § 1002.]
See also A Dictionary of Modern Legal Usage (2d Ed) (“vacant; unoccupied. These words are
often used in the context of insurance policies on buildings. They are not synonymous: vacant
means without inanimate objects, while unoccupied means without human occupants.”). The
necessity that “vacant” and “unoccupied” have different meanings within the instant policy is
enhanced by the fact that each term has its own time limit: vacancy for 60 days; unoccupancy
for six consecutive months. Vushaj simply had a singular time period that applied to either term.
Furthermore, it is not the definition of “occupied,” but “unoccupied,” that is at issue.
This difference is more than academic. Defendant asserts that “[t]he plain meaning of the
contract requires that someone be living in the house as a legal abode for six months before the
loss.” Whether intentionally wrong or simply inartfully worded, this is a misinterpretation of the
policy language. There is no requirement that the farmhouse be lived in “for six months before
the loss.” Rather, the house must be unoccupied beyond six consecutive months before a loss for
the exclusion to take effect. The house could have been unoccupied for six months, but so long
as it became occupied on that last day, the exclusion would never trigger because it was not
unoccupied beyond six months. As the policy is currently phrased, even a single day of
occupancy will restart the counter on the six consecutive months. This requirement further
distinguishes Vushaj, because application of Vushaj’s definition of unoccupied (“not routinely
characterized by the presence of human beings”) would impermissibly render nugatory the
instant policy’s requirement that the there be a “consecutive” period of unoccupancy. See Klapp
v United Ins Group Agency, Inc, 468 Mich 459, 468; 663 NW2d 447 (2003) (“[C]ourts must also
give effect to every word, phrase, and clause in a contract and avoid an interpretation that would
render any part of the contract surplusage or nugatory.”). Because of the clear differences
between the instant policy and the policy that was interpreted in Vushaj, we find Vushaj
inapplicable.
Finally, defendant’s contends that there was insufficient evidence to create a jury
question about occupancy. However, defendant’s argument presupposed that the definition
given by the trial court was erroneous. Defendant has not argued on appeal that there was
insufficient evidence under the definition as instructed. Accordingly, our determination that
there was no error in the definition given by the trial court has disposed of this issue.
IV. RETROACTIVITY OF GRISWOLD
Defendant’s final claim on appeal is that the trial court erred in concluding that this
Court’s decision in Griswold, 276 Mich App 551, applied retroactively. In Griswold, this Court
held that “a first-party insured is entitled to 12 percent penalty interest if a claim is not timely
paid, irrespective of whether the claim is reasonably in dispute.” Id. at 554. Defendant argues
that this rule should be prospective only because it overruled clear and settled case law.
Whether a ruling applies retroactively is a question of law that this Court reviews de
novo. People v Maxson, 482 Mich 385, 387; 759 NW2d 817 (2008). “The general rule is that
judicial decisions are to be given complete retroactive effect. We have often limited the
application of decisions which have overruled prior law or reconstrued statutes. Complete
prospective application has generally been limited to decisions which overrule clear and
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uncontradicted case law.” Hyde v Univ of Mich Bd of Regents, 426 Mich 223, 240; 393 NW2d
847 (1986) (citations omitted).
Retroactive opinions apply to all cases “still open on direct review and as to all events,
regardless of whether such events predate or postdate our announcement of the rule.” Harper v
Va Dep’t of Taxation, 509 US 86, 97; 113 S Ct 2513; 125 L Ed 2d 74 (1993). Prospective-only
opinions, on the other hand, not only do not apply to cases still open on direct review, but their
holdings do not even apply to the parties in the case where the rule is declared. See Pohutski v
City of Allen Park, 465 Mich 675, 699; 641 NW2d 219 (2002). With this understanding, it is
clear that this Court has already concluded that Griswold is not prospective only because it
applied its holding to the three consolidated cases in Griswold and found that the plaintiffs in all
three cases were entitled to penalty interest, irrespective of whether the claims were reasonably
in dispute. Griswold, 276 Mich App at 566-567. However, because there are no published
opinions specifically holding that Griswold is fully retroactive,6 we have considered defendant’s
claims. Nevertheless, we conclude that Griswold is fully retroactive.7
As noted above, “[c]omplete prospective application has generally been limited to
decisions which overrule clear and uncontradicted case law.” Hyde, 426 Mich at 240. Here,
there is simply nothing “clear and uncontradicted” about the “reasonable dispute” standard,
particularly in light of the binding Michigan Supreme Court precedent in Yaldo that had
explicitly rejected the “reasonable dispute” standard as contrary to the language of the statute.
Moreover, even assuming Griswold represents a new rule, as opposed to clarification of a
previously ambiguous state of the law, the three-factor test set forth in Paul v Wayne Co Dep’t of
Pub Service, 271 Mich App 617; 722 NW2d 922 (2006) does not weigh in favor of prospective
application.
The threshold question in determining the application of a new decision is
whether the decision in fact clearly established a new principle of law. If that
question in answered in the affirmative, then a court must weigh three factors in
deciding whether a judicial decision warrants prospective application: (1) the
purpose to be served by the new rule, (2) the extent of reliance on the old rule,
and (3) the effect of retroactive application on the administration of justice. [Id. at
621.]
6
There is an unpublished opinion so holding. Frans v Harleysville Lake States Ins Co,
unpublished opinion per curiam of the Court of Appeals, issued September 23, 2008 (Docket No.
280173)
7
We note that, for the purposes of this case, it makes no difference whether Griswold has full
retroactivity or only limited retroactivity, because full retroactivity makes it applicable to all
cases then pending and limited retroactivity applies “in pending cases where the issue had been
raised and preserved.” Stein v Southeastern Michigan Family Planning Project, Inc, 432 Mich
198, 201; 438 NW2d 76 (1989). Because the issue was raised and preserved in this case,
Griswold would apply even under limited retroactivity.
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There are multiple purposes served by the new rule. First, it clarified an ambiguous state
of the law. Second, it was intended to give meaning to the statutory language, which appears
designed to deter, and limit the length of, denials of justified claims. The “timely payment”
purpose weighs heavily in favor of retroactive application, because prospective application
removes the incentive of limiting any further delay of payment as to justified claims already in
litigation when Griswold was decided.
The second factor is the extent of reliance on the old rule. It is true that the insurance
industry relied heavily on the Arco decision to delay payment in claims that were reasonably in
dispute. However, where an insurance company truly has a complete defense, i.e., it is
ultimately determined that there is no coverage, the company is relieved from any requirement to
pay interest. Additionally, given the ambiguous state of the law, it is unclear how reasonable the
reliance on Arco was, given that it contradicted the Supreme Court’s precedent in Yaldo. Thus,
this factor does not seem to weigh heavily in either direction.
The third factor, the effect of retroactive application on the administration of justice,
weighs in favor of retroactive application. Given the limited number of cases to which this issue
applies, applying the Griswold decision retroactively will have little impact on the courts and
their caseload.
Given that 1) the Griswold Court retroactively applied its decision to the three
consolidated cases before it and at least one subsequent panel of this Court determined it to be
retroactive; 2) the law that was overturned can hardly be considered “clear and uncontradicted”;
and 3) the factors for prospective-only application weigh in favor of retroactive application, we
conclude that the trial court properly concluded that Griswold was retroactive and, therefore,
applicable to this case.
V. ATTORNEY FEES
Plaintiffs argue in their cross-appeal that the trial court erroneously and arbitrarily
reduced their attorney’s hours by 60 percent based on a patently erroneous premise that counsel
had padded his billing.8 Although this Court reviews de novo a trial court’s decision to grant
case-evaluation sanctions, the amount awarded as reasonable attorney fees is reviewed for an
abuse of discretion. Peterson v Fertel, 283 Mich App 232, 235, 239; 770 NW2d 47 (2009). A
trial court abuses its discretion when its decision falls outside the range of reasonable and
principled outcomes. Id. at 235.
Plaintiffs’ counsel originally provided to the trial court a two-page typed time sheet
memorializing 115.4 hours that he had spent working on the case after case evaluation.
Defendant objected, indicating that its counsel “spent only 90.2 hours” for the same time period
and, after objecting to several entries, concluded that “[g]iven these reductions, the total amount
8
Plaintiffs have conceded that the reduction of their counsel’s hourly rate from $350 to $150 was
within the court’s discretion. Accordingly, the issue on appeal is limited solely to the number of
hours to which this rate was applied.
-11-
of attorney time that could reasonably be awarded would be approximately 90 hours.”
Defendant also requested an evidentiary hearing “and a more exact accounting” of the time
indicated on the billing statement.
During the hearing for case evaluations, plaintiffs’ counsel justified his time, indicating
that he worked only five hours from case evaluation until 10 days before trial, when it became
clear it was going to go to trial. He further indicated that the case filled three bankers boxes
because it was document intensive and argued against defendant’s assertion that it was a simple
case:
It involved technical contract issues, definition of technical terms, occupancy and
vacancy, which are not the same thing as they are out there in the real world.
When we talked about an insurance contract earlier in the litigation, it involved
interpretation and doing battle over MCL 500.2833 regarding limitation issues.
It’s a very technical case.
Defendant’s counsel argued that he still believed plaintiffs’ counsel was only entitled to $9,000
(90 hours time a rate of $100 per hour) and requested an evidentiary hearing. He maintained that
it was “a simple case to try, not difficult at all in my mind” and that damages had been agreed to
so that the jury only had to decide whether the farmhouse was vacant or unoccupied.
At the evidentiary hearing on attorney fees, plaintiffs’ counsel testified regarding his
billing records. He testified that his handwritten record of time was filled out concurrently with
when the time was expended. He also justified each of the items about which he was questioned,
and testified that he had worked the hours listed. The trial court took issue with plaintiffs’
counsel’s indicated time for trial. According to the time records, plaintiffs’ counsel billed 46
hours of trial and trial preparation for July 23-26. The trial court used 45 hours as the figure and
determined that the time for trial, including deliberation, was 17.5 hours. Plaintiffs’ counsel
indicated that there was a great deal of trial preparation, but the trial court appeared flippant and
told plaintiffs’ counsel that whether the house was occupied or unoccupied did not require much
time because the trial judge “figured that out in about five minutes.” Plaintiffs’ counsel then
argued that it was clear defendant’s counsel had spent approximately as much time on the case as
he had. The trial court rejected this argument because plaintiffs’ counsel’s records were not
detailed enough.
The trial court issued its opinion and order, which held, in relevant part:
Plaintiff’s attorney submitted a hand written record of purported hours
spent in preparation and actual time spent at trial. The most objective criteria that
the Court has to determine the accuracy of the purported hours is the actual time
that the Court observed the Plaintiff’s attorney at trial. Plaintiff’s attorney
recorded thirty-six (36) hours that he claims to have been in trial, the Court’s
records indicate that the actual trial time was nineteen and one-half (19 ½) hours,
an overstatement of sixteen and one-half (16 ½) hours or forty-six [percent]
(46%).
Using the Plaintiff’s attorney records – claiming that trial preparation
totaled forty-three and one-half (43 ½) hours – and using the above forty-six
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percent (46%) overage, the Court determined the preparation hours to be twentythree and one-half (23 ½) hours, which reduced the hours of preparation by
twenty (20) hours. Hence the total hours that can be charged for attorney fees is
forty-three (43) hours (19 ½ trial plus 23 ½ hours of preparation)[.]
Plaintiffs argue that the basis for the reduction is erroneous and unreasonable.
In determining a reasonable attorney fee, there is no set formula, but multiple factors to
consider. In re Temple Trust, 278 Mich App 122, 138; 748 NW2d 265 (2008). These factors
include:
(1) the skill, time and labor involved; (2) the likelihood, if apparent to the client,
that the acceptance of the employment will preclude other employment by the
lawyer; (3) the fee customarily charged in that locality for similar services; (4) the
amount in question and the results achieved; (5) the expense incurred; (6) the time
limitation imposed by the client or the circumstances; (7) the nature and length of
the professional relationship with the client; (8) the professional standing and
experience of the attorney; and (9) whether the fee is fixed or contingent. [Id.
(citations omitted).]
Here, although the trial court discussed some other factors at the hearing, in its opinion, the trial
court relied on a single factor—how much time it believed plaintiffs’ counsel had actually spent
on the case. However, based on the testimony at the hearing and the information on plaintiffs’
counsel’s timesheet, the trial court’s calculation is erroneous. The timesheet indicates, and
plaintiffs’ counsel testified at the hearing, consistent with the timesheet, that he did more than
trial on the days listed for trial—he also did preparation for the next day’s trial. Accordingly, the
trial court’s determination of a 46% overbilling is inconsistent with the record, making its
reduction based on this calculation erroneous.
Further, defendant’s and the trial court’s conclusion that the sole matter in dispute was
the definition of occupancy/vacancy was erroneous because it ignored several outstanding issues
that could have come up at trial, for which plaintiffs’ counsel needed to be prepared. There was
an outstanding fact question as to when defendant could be deemed to have formally denied the
claim in order to trigger the statutory one-year deadline. That defendant ultimately failed to
address this issue at trial is irrelevant. Plaintiffs still had to prepare to fight this issue and present
evidence and testimony relevant to it, as they had no way to know prior to trial that defendant
was not going to address it.
The same is true with the stipulations defendant referenced. These stipulations were
made during trial. For example, it was not until the end of the second day of trial that defendant
stipulated to “a $4,000 debris removal amount” and a $50,000 cash value for the dwelling. Even
if the stipulations had been made the morning of trial, it would not change the fact that plaintiffs’
counsel had to be prepared to present evidence on those issues. Moreover, even with these
stipulations, there were still outstanding issues regarding the amount of lost rents, the value of
landlord furnishings, and the value of the owner’s other personal property that were left to the
jury to decide. Additionally, with plaintiffs presenting their case first, they had to put all of their
evidence regarding the formal denial and subsequently stipulated values into evidence, and
assume that defendant was going to counter it during its presentation of the evidence. Again, just
-13-
because defendant ultimately decided not to address those issues or agreed to stipulate to certain
amounts does not make the time plaintiffs’ counsel was required to prepare for those disputed
issues, including witness and document presentation at trial, unreasonable or unnecessary.
Both defendant and the trial court made much of the fact that plaintiffs’ counsel had not
itemized his time in six-minute increments or used time slips, but instead kept a running
handwritten record in clumps of time. Plaintiffs’ counsel testified that he filled out his
handwritten record contemporaneously with when the work was completed, and that it was not
more detailed because he had a contingent fee arrangement with his clients. We conclude that
under Michigan law, the billing records submitted by plaintiffs’ counsel were sufficient. Indeed,
this Court has held that descriptions such as “trial prep” and “trial” in billing records are selfexplanatory.
[I]n order for the trial court to arrive at a reasonable attorney fee award, it must
determine what services were actually rendered. Although a detailed bill of costs
is not required, some documentation is needed to enable the trial court to
determine the proper amount to award. . . .
Although plaintiff's counsel did not list exactly what she was doing with
regard to her “trial” and “trial prep” submissions . . . lawyers generally know what
other lawyers do during “trial” and “trial prep”—review the pleadings, review
discovery responses, read depositions, prepare experts, prepare lay witnesses,
prepare cross-examinations, prepare opening and closing arguments, prepare
exhibits, attend the trial, and so forth. The list is quite extensive but well known,
i.e., there are no surprises. . . . It would be unreasonable to force lawyers, who do
not even know if they will be entitled to case evaluation sanctions at the time they
are preparing for and attending trial, to record exactly what they were doing at
every “billable” moment. And, it is unnecessary. The trial court can certainly
consider the type of case, the length of the trial, the difficulty of the case, the
numbers and types of witnesses, as well as other relevant factors, and determine
what services were necessitated by the rejection of the case evaluation. We refuse
to require an exhaustive and detailed list of the precise service provided at every
moment. [Young v Nandi, 276 Mich App 67, 88-89; 740 NW2d 508 (2007),
vacated in part on other grounds 482 Mich 1007 (2008) (citation omitted).]
In sum, plaintiffs’ counsel’s billing records were legally sufficient, his testimony
supported his claims of time, and no contrary evidence was presented. Although the trial court
took issue with his claimed time for trial, plaintiffs’ counsel stated that the listed time was not
solely time spent in trial, but included preparation for the next day’s presentation. There is
simply nothing in the record to support the trial court’s application of a 46% reduction in hours
billed to come up with a “reasonable” fee. The trial court gave only mild consideration to the
complexity of the case, and even when it did so, it disregarded the fact that plaintiffs had to be
prepared to argue all of the issues, even if defendant ultimately waived or stipulated to them.
Accordingly, the trial court abused its discretion in its determination of a reasonable attorney fee.
We therefore reverse the trial court’s assessment of attorney fees and remand the issue
back to the trial court. On remand, the trial court should examine the appropriate factors listed
above based on the evidence obtained at the previous hearing. However, given defendant’s
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counsel’s repeated representations that 90 hours was reasonable (indeed, he spent that many
hours working on the case after case evaluation), we hold that the minimum to which plaintiffs
are entitled is $13,500 (the trial court’s $150 per hour rate times 90 hours).
Affirmed in part, reversed in part, and remanded for additional proceedings consistent
with this order. Plaintiffs are entitled to costs under MCR 7.219. We do not retain jurisdiction.
/s/ Douglas B. Shapiro
/s/ Michael J. Kelly
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