Cheboygan County Road Commission v. Auto-Owners Insurance

277 N.W.2d 176, 87 Mich. App. 681, 1978 Mich. App. LEXIS 2721

• Court: Michigan Court of Appeals
• Decided: December 28, 1978
• Docket: Docket 77-4467
• Status: Published

Opinions

D. E. Holbrook, J.

The Cheboygan County Road Commission stored a quantity of salt on property which it owned in the Indian River area. The salt was owned by the State Highway Department. Salt seeped into the ground water and contaminated the water supply of several persons in the vicinity. The highway department and the road commission agreed to divide equally the cost of drilling new wells for the affected residents. At the date of trial the cost of such drilling totalled $30,911.95. The road commission sought to recover half of this amount from the defendant pursuant to a contract of insurance. After a bench trial the court found that a valid settlement contract existed wherein the road commission agreed to accept $6,120.93 as full compensation for its claim. We disagree with that finding.

The purported offer in this case is contained in a letter from the road commission’s attorney to the insurance company’s attorney dated November 27, 1972. That letter proposed an open-ended formula by which the insurance company and the road commission would split the road commission’s liability. The letter did not mention future claims.

The insurance company responded with a letter dated April 12, 1973, which offered a fixed dollar amount in return for which the road commission was to release the insurance company from all present and future liability.

It is elementary that a proposal to accept an offer which contains terms differing from the offer is a rejection. Board of Governors of Wayne State University v Building Systems Housing Corp, 62 Mich App 77; 233 NW2d 195 (1975). The insurance company’s letter of April 12, 1973, was a counteroffer. It did not purport to accept the terms of the November 27, 1972, letter. It offered new and different terms.

The plaintiff’s claim is not barred by accord and satisfaction.

The trial court also found that recovery under the contract was precluded by failure to establish compliance with a condition precedent contained in the insurance contract which was not waived by the defendant. The contract of insurance contained a clause requiring the company’s written authorization before payment of claims which were not judgment claims.

At trial the defendant moved to include noncompliance with the "written authorization” clause as an affirmative defense. The plaintiff objected saying that it was only prepared for trial on the one issue stated in the pretrial summary. The trial court ruled that the affirmative defense could not be added but that it would allow testimony concerning compliance with the same contract provision. In so ruling the court held that the plaintiff had the duty to plead and prove compliance with all conditions precedent to recovery contained within the insurance contract. This is contrary to GCR 1963, 112.4 which states specifically that an insurance company must plead noncompliance with a condition precedent as an affirmative defense. GCR 1963, 111.3 provides that affirmative defenses which are not asserted in the pleadings are waived. The defendant further waived its right to assert noncompliance with the condition precedent as an affirmative defense by failing to have that defense included in the pretrial summary. Farida v Zahar, 50 Mich App 137, 143; 212 NW2d 739 (1973), GCR 1963, 301.3.

In the pretrial summary the defendant specifically admitted liability under the policy but claimed that recovery was precluded by the existence of a settlement contract. The only issue at trial, therefore, should have been whether or not a valid settlement contract existed. We have found that a settlement contract did not exist. We reverse and remand with the instruction that a judgment in the amount of $15,455.97 be entered for the plaintiff.

Reversed and remanded, costs to appellant.

G. R. Cook, J., concurred.