Court of Appeals Erodes Worker’s Compensation Exclusive Remedy Provision

The Michigan Worker’s Disability Compensation Act  (WDCA) was created in order to ensure that employees injured on the job would receive compensation for their injuries, while at the same time protecting employers from tort liability. An injured worker must generally pursue compensation through the worker’s compensation system, rather than in tort. Essentially, both employer and employee trade the uncertainty of recovery in a tort action for the certainty of a worker’s compensation claim. Moreover, the employee may still sue other, non-employer parties such as the manufacturer of a machine that caused the injury. This is a very high standard. Negligence—even gross negligence—is insufficient to hold the employer liable.

The only exception to this rule allows an employee to recover damages from the employer if the employee can prove that the employer committed an intentional tort. In order to prevail, the employee must prove the employer acted deliberately, and with intent to cause an injury. Intent to injure will be imputed to the employer if the employer (1) had actual knowledge that an injury was certain to occur and  (2) disregards that knowledge.

In a recent Michigan Court of Appeals decision (Click Here to See a Copy of the Court’s Decision), the court ruled that liability for an intentional tort may exist where “the employer subjects an employee to a continuously operative dangerous condition that the employer knows will cause an injury, that it knows employees are taking insufficient precautions to protect themselves, and that the employer takes no action to remedy the situation.” This case presented a unique situation where multiple injuries occurred, management knew of the injuries, solutions to preventing injuries were discussed, and no changes were made. This created a “certainty of harm” because the employees had no effective means of protecting themselves from injury.

The Court of Appeals, in noting that the employers could have prevented the injuries by adopting some remedial safety equipment, seemed to adopt a negligence standard. Had the employer taken certain safety precautions it would not be open to liability. Only time will tell whether this case  is the first step toward judicial erosion of the prior strict interpretation of the exclusive remedy provision.

This article was written by Michael K. Hayes, Legal Clerk at Demorest Law Firm.

What Are the Duties of the Insurance Agent Regarding Coverage and Premiums?

The Michigan Court of Appeals has just issued a ruling that describes the duties and responsibilities of not only insurance agents, but also the insured. In General Agency Company v. Huron Oil Company (2010) (Click here to download a PDF), the Court of Appeals reinforced that an “insurance agent has no duty to advise an insured regarding the adequacy of insurance coverage.” The Court went on to state that the agent represents the insurance company, not the insured. The Court stated that “the agent’s job is merely to present the product of his principal and take orders from those who want to purchase coverage.”

There are several exceptions to this general rule. Specifically, an insurance agent can form a “special relationship” with the insured when the agent does one or more of the following:

(1) the agent misrepresents the nature or extent of the coverage offered or provided;

(2) an ambiguous request is made that requires a clarification;

(3) an inquiry is made that may require advice and the agent, though he need not, gives advice that is inaccurate; or

(4) the agent assumes an additional duty by either express agreement or promise to the insured.

In the above-mentioned case, the insured claimed that the insurance premiums they were charged were too high and that the insurance agent did not seek enough competitive bids. The insured claimed that the insurance agent had “represented that it would work diligently to obtain the best appropriate insurance coverage for the best premium reasonably available in the market.” The Court of Appeals ruled that this was insufficient to warrant a legal action against the agent by the insured. The Court of Appeals affirmed a ruling on this issue in favor of the insurance agent without a trial.

This case shows the importance of researching insurance rates and premiums on your own, or seeking competitive bids from more than one insurance agent. The agent’s first goal is to sell the insurance and it is not necessarily a top priority to find the best or least expensive insurance coverage for the insured. Furthermore, the insured will have no recourse if it later decides that it got a bad deal on the insurance coverage.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

One Contract or Two?

When will a Court treat two separate written contracts as a single agreement? In Johandes v Crowell (Click here for a PDF), decided by the Michigan Court of Appeals on April 27, 2010, the seller and buyer entered into two contracts — one for the sale of real estate (a house) and the other for the sale of personal property located on the real estate (such as kitchen appliances). The sale of the real estate and the personal property were supposed to close simultaneously.

The buyer defaulted and failed to complete the purchase, and the seller then filed a lawsuit. The purchase agreement provided that the seller could retain the earnest money deposit as liquidated damages. In addition to keeping the deposit, the seller sought damages for the buyer’s failure to complete the purchase of the personal property. The Court of Appeals held that because the two contracts were really a single agreement, the seller was limited to keeping the deposit. The Court stated:

Because the two contract were intended to operate together to spell out a single transaction, the trial court did not err in concluding that the provision in the one for personal property tying its closing to the closing on the contract for real property indicated that there was requirements to close on the former if there was no closing of the latter.

The Court of Appeals looked at several factors to conclude that there really a single agreement between the seller and the buyer: (1) The contracts were drafted simultaneously. (2) The sale of the real estate and personal property were supposed to occur simultaneously. (3) Much of the personal property being sold consisted of fixtures or large equipment that was intended to remain with the house, such as kitchen appliances, a washer and dryer and a hot tub. Based on these factors, the Court of Appeals ruled that, “The structuring of the transaction into separate contracts for the sale of certain real property and related personal property resulted in a single agreement composed of two complementary components.”

It is common to have multiple related agreements as part of a business or real estate transaction. The lesson of this case is that the contracts must not only be read separately, but they must be read together as a whole. The contracts should specify how a default under one agreement affects the other agreements.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

New Calculation of Interest Rates on Judgments

The Michigan Court of Appeals has issued a decision that changes the way interest is calculated on every single Judgment issued by a Michigan Court.  Under Michigan Law, interest accrues from the date of filing a Complaint until a judgment is satisfied (paid in full). The current judgment interest rate is 3.48%, up from 3.1% the prior six months. The rate has varied widely over time. It has been over 10% and has been as low as the above-mentioned 3.1%.

Traditionally, interest has been calculated on judgments by using the date of the filing of the Complaint as the starting date. Each January 1^st and July 1^st, the interest rate is recalculated by the State Court Administrator’s Office, and is raised or lowered at that time based on prevailing interest rates.

In Chelsea Investment Group, LLC v. City of Chelsea and Michael Steklac (Click here for a PDF copy), the Court of Appeals ruled that the traditional method of interest calculations was incorrect. The Court ruled that interest is still to be calculated starting at the date of filing of the Complaint, but the interest rate is to be adjusted every 6 months from the date of filing. In other words, every January 1^st and July 1^st the judgment interest rate will be recalculated, but the adjusted rate will not apply to a particular case until the next six-month anniversary of the filing of the Complaint. It may seem like a minor tweak, but in many cases this delay in the interest rate change will drastically affect the total amount of the Judgment. Who is benefited or harmed will depend on whether the Judgment interest rate goes up or goes down.

The Court of Appeals did not address whether this change is retroactive, and it is unclear how this ruling will apply to a case previously filed or a Judgment previously entered.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Michigan Supreme Court Allows Detroit Public Schools to Keep Funds Collected through Unauthorized Tax Levy

The Michigan Supreme Court’s March 30, 2010 ruling in favor of the Detroit Public Schools (DPS) allows DPS to keep millions of dollars that DPS collected improperly, by continuing to charge taxpayers for a millage for three years after it expired.  Briggs Tax Service, LLC v Detroit Public Schools.

In September 1993, voters in Detroit approved a 32.25 mill school operating property tax.  As a result, DPS was authorized to levy and collect property taxes from Detroit property owners until the millage expired on June 30, 2002.  After the expiration of the millage in 2002, DPS continued to levy the tax through 2004.  Taxpayers continued to pay the tax without objection.

In 2005, Briggs Tax Service filed a claim against DPS in the Michigan Tax Tribunal seeking a refund of the unauthorized taxes levied and collected by DPS.

The underlying issue in this case was whether the claim must be dismissed due to lack of jurisdiction (failure to timely file).  Ordinarily, the time limit to file a claim for a refund in Michigan is 35 days after a final decision. MCL 205.735(3).  Briggs did not meet this deadline and the Tax Tribunal initially dismissed Plaintiff’s claim.  The Tax Tribunal then allowed Briggs to amend its petition in order to assert a claim under MCL 211.53a, which has a three year statute of limitations.  Under MCL 211.53a, in order to assert a successful claim, the taxpayer must have been assessed and paid taxes in excess of the correct amount due to either (1) a clerical error or (2) a mutual mistake of fact by the assessing officer and the taxpayer.

There was no clerical error.  The DPS intended to levy the taxes.  Thus, in order for Briggs to successfully assert a claim under MCL 211.53a, Briggs had to prove that there was a mutual mistake of fact by both the assessing officer and the taxpayer.

The Michigan Supreme Court held that although a DPS employee certified the tax levy, a DPS employee is not the same as a tax assessor. Thus, there was no mistake by the assessing officer, because the “assessor” never certified the tax.

The Michigan Supreme Court also held that any mistake was a mistake of law, rather than a mistake of fact. The validity of a tax is a legal issue, rather than a factual issue.

While we find the result of the case somewhat surprising, the Michigan Supreme Court’s decision points out the importance of reviewing tax bills carefully, and promptly objecting to any item on the tax bill that you question.

Click here to download a PDF of the Michigan Supreme Court Opinion in Briggs Tax Service, LLC v Detroit Public Schools.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Michigan Consumer Protection Act Does Not Provide Protection for Businesses that are Consumers

The Michigan Consumer Protection Act provides consumers with protection against many unfair business practices.  However, the Act only applies to “the conduct of a business providing goods, property or service primarily for personal, family or household purposes …”  The Michigan Court of Appeals has previously ruled that the protections of the Act do not apply to transactions intended primarily for business or commercial purposes.

In the recent case of Edwards v Cape to Cairo, LLC, the Court of Appeals decided that the key is not who entered into the transaction, but rather the true nature of the transaction.  In the Edwards case, the plaintiff was planning a trip for himself and several members of his church to Africa.  The trip was going to involve both leisure activities and charitable mission work. The plaintiff paid the deposits for the trip through his corporation, and used also the staff of his corporation to make arrangements for the trip.  The defendant argued that the case should be dismissed because it had dealt with a corporation.  The Court of Appeals disagreed, ruling that the true purpose of the planned trip to Africa was personal in nature.  The trip had nothing to do with the business of the plaintiff’s corporation.  Furthermore, the plaintiff’s corporation was reimbursed for the deposits.  The Court of Appeals ruled that the corporation’s role in planning the trip “was done merely for convenience, not for any purpose related to [the corporation], which is an automotive supplier with no ties to Africa. … [T]he trip was planned for members of plaintiff’s family and church, not employees of [the corporation].”

Click here to download a PDF copy of the Court of Appeals Opinion in Edwards v Cape to Cairo, LLC.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Damages Under The Anti-Lockout Statute

In Christie v Fick, a recent unpublished Michigan Court of Appeals case (March 2, 2010, No.285924), the Court was asked to review whether a tenant alleging violation of Michigan’s Anti-Lockout Statute (MCL 600.2918) was entitled to exemplary damages.

The Anti-Lockout Statute specifically states that “any tenant in possession of premises whose possessory interest has been unlawfully interfered with by the owner, lessor, licensor, or their agents shall be entitled to recover the amount of his actual damages or $200.00, whichever is greater, for each occurrence and, where possession has been lost, to recover possession.” (emphasis added).  This statute prohibits a landlord from attempting self-help eviction of a tenant, or eviction without legal process.

In Christie, plaintiff tenant filed a complaint alleging that defendant landlord unlawfully locked them out of the rental premises and also moved a large quantity of valuable equipment from the rental premises to storage, where it was subsequently damaged.  Defendants argued that the plaintiffs were behind in rent, the plaintiffs had abandoned the premises, and that plaintiffs had numerous opportunities to retrieve their personal property after it was moved.

At trial, the court gave the jury an instruction regarding the award of exemplary damages.  Specifically, the jury was instructed that “an award of exemplary damages is proper if it compensates a plaintiff for humiliation, sense of outrage, and indignity resulting from injustices maliciously, willfully, and wantonly inflicted by the defendant.”  After a jury found for plaintiffs and against defendants on plaintiffs’ claim for violation of the anti-lockout statute, MCL 600.2918, they awarded plaintiffs treble damages for the anti-lockout claim, or three times the actual damages amount.

Defendants appealed on this issue, arguing that a statutorily based cause of action will not allow for damages other than those specified in the statute.  Exemplary damages are not specifically provided for in the Anti-Lockout Statute.

Although Michigan Court of Appeals in Christie agreed with Defendants argument, it did not reverse the ruling.  The Court reasoned that, under Michigan law, recovery under the Anti-Lockout Statute may include damages for emotional distress, embarrassment, and humiliation, as part of actual damages.  Therefore, although a separate award for exemplary damages is not appropriate in a statutorily based action unless the statute in question specifically provides for such damage, damages for mental distress are allowable as part of a plaintiff’s actual damages. As a result, the Court allowed plaintiffs to recover the damages awarded as emotional distress damages under the Anti-Lockout Statute.

This article was written by Natalie C. Najarian, Associate at Demorest Law Firm.

Attorney’s Signature Creates Binding Settlement

You might think that the settlement of a lawsuit requires the signature of the client.  That is not the case under this Michigan Court Rules.   A settlement may be enforced if (a) it is agreed to before the Judge in open court on the record by the client or attorney or (b) if there is “written evidence” of the settlement signed by the client or attorney.  MCR 2.507(G0.

In Kennedy v Hayduk, the plaintiff’s attorney claimed that a settlement had not been reached.  The Michigan Court of Appeals disagreed.  The defense attorney sent a letter summarizing the terms of a proposed settlement.  There were more detailed settlement documents still to be prepared.  The plaintiff’s attorney then signed and returned to the defense attorney a stipulation and order to dismiss the case.  The plaintiff later argued that there were terms of the settlement that had not been agreed upon, so there was no binding settlement.    The Court of Appeals ruled that: “The signed stipulation was unconditional acceptance of defendants’ offer. … The objective evidence shows that an agreement was reached.”

A lesson from this case:  Don’t sign a settlement until all terms have been agreed upon.

Download a PDF of the decision by clicking here.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

To Quality as a Future Advance Mortgage, Correct Language Must By Included in the Recorded Mortgage

A mortgage has priority over other liens on the property from the date it is recorded with the Register of Deeds. The mortgage can also have priority for amounts advanced by the lender after the date of recording if the mortgage contains certain specific language making it a “future advance mortgage”. In Citizens State Bank v. Nakash (2010), the Michigan Court of Appeals considered what happens when a recorded mortgage references a promissory note or agreement that contains the future advance language, but the recorded mortgage itself contains no future advance language. The Court of Appeals ruled that the mortgage creates no priority for future advances by the lender when the promissory note or agreement containing the future advance language is unrecorded. MCL 565.901(b) holds that the instrument creating a future advance mortgage must be recorded. This ruling makes sense, because the recorded mortgage should put other parties on notice that it is a future advance mortgage, and not merely refer to another document that is not part of the chain of title.

To download a PDF of the case click here.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.

Separate Appeal of Attorney’s Fees and Costs

The Michigan Court of Appeals decided an interesting procedural issue regarding the appeal of post-judgment orders awarding or denying attorney’s fees. In Mossing v. Demlow Products, Inc. (2010), the trial court denied an award of attorney’s fees and costs to the defendants.  This occurred after the plaintiff had already filed an appeal, and the defendants had already filed a cross-appeal, in the Court of Appeals. In their cross-appeal, the defendants seek to have that fee order reversed. The Court of Appeals ruled that a completely separate appeal must be taken from the post-judgment order. In other words, the appeal cannot be tacked on to the cross-appeal; it must stand alone as a separate appeal.

Click here to download a PDF of the Court of Appeals decision in Mossing v Demlow.

This article was written by Mark S. Demorest, Managing Member of Demorest Law Firm.