Acorn Investment Company
filed a claim with Michigan Basic Property Insurance Association, its fire
insurance carrier, in connection with a May 2007 fire at Acorn’s rental property
in Detroit. The insurer denied the claim, asserting that the policy had been
Acorn sued Michigan Basic for
breach of contract, specific performance of the contract, and violation of the
Uniform Trade Practices Act. In November 2008, the parties participated in case
evaluation, which resulted in an $11,000 award in Acorn’s favor; Acorn accepted
the award, but Michigan Basic rejected it.
The parties ultimately agreed
to submit the case to an appraisal panel to determine the value of Acorn’s loss;
the panel determined that $20,877 was the actual cash value of the loss. Acorn filed
a motion for entry of judgment, and also requested sanctions against Michigan
Basic for rejecting the November 2008 $11,000 evaluation. Acorn argued that, if
the insurer had accepted that award, all of the proceedings that had ensued,
including court appearances on motions, trial preparation, and the appraisal
proceedings, would not have been necessary.
Michigan Court Rule 2.403 states
Party’s Liability for Costs.
(1) If a party has rejected an evaluation and the action proceeds to
verdict, that party must pay the opposing party’s actual costs unless the
verdict is more favorable to the rejecting party than the case evaluation.
However, if the opposing party has also rejected the evaluation, a party is
entitled to costs only if the verdict is more favorable to that party than the
(2) For the purpose of this rule “verdict” includes,
(a) a jury verdict,
(b) a judgment by the court
after a nonjury trial,
(c) a judgment entered as a
result of a ruling on a motion after rejection of the case evaluation.
Acorn contended that the
appraisal award was a substitute for a jury determination of value and that,
because the proposed judgment exceeded the case evaluation award, Acorn was
entitled to case evaluation sanctions.
But the trial court judge
denied Acorn’s motion for case evaluation costs, holding that Acorn’s “situation
[did] not fit within the definition of ‘Verdict’ under [MCR 2.403(O)(2)].” Acorn
appealed, but in a published per curiam decision, the Court of Appeals upheld
the lower court, ruling that “the appraisal process was effectively an
arbitration, and an order or judgment entered pursuant to an arbitration or
settlement is not a ‘verdict’ within the meaning of MCR 2.403(O)(2)(c).”
Acorn appealed. In a June 7, 2013 order, the Supreme
Court said it would hear oral argument on whether to grant leave to appeal “or
take other action.” The Court directed the parties to “address whether the
Wayne Circuit Court judgment in this case amounted to a ‘verdict’ that entitled
the plaintiff to case evaluation sanctions under MCR 2.403(O)(2)(C).”