WENDT v. AUTO OWNERS INS.
CO.
156 Mich. App. 19 401
N.W. 2d 375 (Mich. App.
1986)
GRIBBS, JUDGE.
Plaintiff's vehicle jackknifed and sustained extensive collision damage
while it was being driven on hazardous winter roads on February 3, 1982, in
Eureka, Missouri. Plaintiff promptly notified defendant of the accident and was
advised by defendant to attempt to drive the vehicle back to Menominee County
in Michigan. However, the vehicle could be driven only as far as Milwaukee,
Wisconsin, where the damage was adjusted by defendant.
On March 22, 1982, defendant made an offer of settlement to plaintiff.
Plaintiff rejected the offer, contending
that defendant refused to pay for total damages sustained, and that
defendant had inappropriately applied a $1,000 deductible, contrary to the
language of the insurance policy.
On April 30, 1982, approximately three months after the accident,
plaintiff filed the instant suit in circuit court, alleging breach of contract
(Count 1), negligence in adjustment (Count II), and intentional infliction of
emotional distress in willfully failing to settle plaintiff's collision damage
claim timely and properly (Count III). In addition to the damages recoverable
under the policy for repair or replacement of the vehicle, plaintiff sought
additional damages on all three counts for the following:
"A) Loss of use of the
settlement amount;
"B) Default has occurred on
the Note between Plaintiff and the North Menominee Credit Union under which
Note the vehicle was pledged as security, and Plaintiff has incurred all costs
incident thereto;
"C) Loss of use of the vehicle
or its replacement with resulting loss of revenue normally generated by said
vehicle;
"D) Plaintiff's overall
business has declined, and is continuing to decline, as a direct result of the
loss of revenue from this vehicle;
"E) Storage charges have been
incurred, and are continuing to be incurred, while the vehicle remains with the
dealership in Milwaukee, Wisconsin, where it has been appraised by
Auto-Owners."
Upon defendant's motion, the circuit court dismissed plaintiff's
intentional infliction of emotional distress claim (Count 111), and struck
plaintiff’s claims for the damages sought in A through D (hereinafter
referred to as additional damages) in the remaining breach of contract and
negligence claims, (Counts 1 and II).
In the instant case, plaintiff pled that, knowing the hardship which
would be caused to plaintiff through the loss of his vehicle, defendant
intentionally and willfully breached its contract by refusing to settle
plaintiff's claim according to the terms of its contract with plaintiff.
Liberally construing these allegations, we find that plaintiff alleged that
defendant has breached its obligation to process plaintiff's claim in good
faith. Thus plaintiff can seek damages for defendant's breach, subject to the
limitations applicable to damages for breaches of commercial contracts.
Michigan follows the rule of Hadley v. Baxendale, 9 Exch. 341, 156
Eng.Rep. 145 (1854), that damages recoverable for breach of a contractual
obligation are those that arise naturally from the breach or those that were in
the contemplation of the parties at the time the contract was made. Thus, for
example, lost profits resulting directly from the breach of the insurer's obligation
under an insurance contract which affects a specific collateral enterprise of
both parties are aware at the time of the agreement would be recoverable.
In the instant case, plaintiff alleged that defendant was aware of the
fact that Plaintiff was involved in a small family trucking business and that
the loss of the vehicle, or a replacement, would cause an extreme financial
hardship to Plaintiff and his business. Thus, we conclude that Plaintiff has
properly pled lost profits as an element of damages in his breach of contract
claim.
With respect to the loss of use of the settlement amount, defendant's
refusal to pay plaintiff's claim would logically result in a loss of the use of
the settlement amount, at least until the time the settlement was paid or a
complaint was filed, at which time the prejudgment statutory interest
compensating plaintiff for loss of use of the settlement would be applicable if
plaintiff prevailed. Thus we hold the loss of use of the settlement amount from
the date it should have been paid until the date of the filing of the complaint
can be said to have naturally arisen from the breach. Similarly, loss of the
use of a vehicle and costs arising from the default on the note secured by the
vehicle can also be viewed as natural consequences of defendant's failure to
pay the settlement amount on a vehicle sustaining serious collision damage.
In summary, we find that damages in the breach of contract claim for
lost profits, loss of use of the vehicle, costs arising from the default on the
note secured by the vehicle, and loss of use of the settlement amount until the
date of the filing of the complaint were improperly stricken. The claim for
damages for loss of use of the settlement amount from the date of the filing of
the complaint was properly stricken.
Affirmed in part, and reversed in part.