Jackovich v. General Adjustment Bureau, Inc

326 N.W.2d 458, 119 Mich. App. 221
CourtMichigan Court of Appeals
DecidedSeptember 7, 1982
DocketDocket 52856
StatusPublished
Cited by28 cases

This text of 326 N.W.2d 458 (Jackovich v. General Adjustment Bureau, Inc) is published on Counsel Stack Legal Research, covering Michigan Court of Appeals primary law. Counsel Stack provides free access to over 12 million legal documents including statutes, case law, regulations, and constitutions.

Bluebook
Jackovich v. General Adjustment Bureau, Inc, 326 N.W.2d 458, 119 Mich. App. 221 (Mich. Ct. App. 1982).

Opinions

R. B. Burns, J.

Plaintiffs appeal and defendants, Continental Insurance Company and Boynton Engineers, Inc., cross-appeal from the verdict in a personal injury and wrongful death case. The jury found in favor of plaintiffs and against both Continental Insurance Company and Boynton Engineers, Inc., on the basis of negligence and against [227]*227Continental Insurance Company for wrongful interference with economic advantage.

The trial involved what is commonly referred to as a "suit within a suit”. By way of background, plaintiffs Jackovich had a new home erected. Although the new house was completed, the Jackoviches refrained from moving in because a serious problem with water entering the basement existed. Attempts to remedy the leakage were unsuccessful.

In order to alleviate the problem, the Jackoviches bought an electric sump pump to remove the water from the basement. Mr. Jackovich and Mr. George Stalo entered the basement of the home to pump out the accumulated water when the accident occurred. Apparently, when the plug of the pump was removed from the outlet, a spark flew and ignited a quantity of propane causing an explosion and a flashfire. Mr. Jackovich suffered burns over 40% of his body, and Mr. Stalo eventually died from the explosion.

The propane-fired boiler installed in the home had been connected to the propane tank by the propane supplier, Northern Propane Gas Company. The Jackoviches’ house was insured by Continental Insurance Company. Continental Insurance Company also carried the liability insurance for Northern Propane Gas Company.

Continental Insurance Company assigned the adjustment of the loss covered by the homeowners’ policy to Dean Albrecht of General Adjustment Bureau, Inc. On the other hand, as instructed by Continental, a local adjuster employed by Michigan Claims Service was in charge of investigating the liability coverage of Northern Propane Gas Company.

Dean Albrecht hired Boynton Engineers to ex[228]*228amine the scene of the accident and locate the cause of the explosion. Boynton Engineers sent their employee, Simon Choi, to conduct the investigation. While on the sight of the accident Simon Choi removed a copper tubing, two flare nuts, and an elbow of the propane, line from the premises. The condition of these pieces was important because a carbon deposit known as "flashback” would appear on the tube if a propane leak caused the explosion.

Plaintiffs’ attorney requested a copy of the report that Choi prepared. The request was refused. Plaintiffs’ attorney twice filed motions in the circuit court to produce the report, which were denied. At this point, plaintiffs’ attorney had his own expert inspect the basement.

The fact that Choi had removed parts from the basement was not immediately apparent because on the day of the fire the local fire chief had removed some parts from the basement. Two months before the original trial was to begin, Choi’s deposition was taken. The deposition revealed, for the first time, that Choi had lost the parts removed from the basement.

Based on the fact that the parts Choi removed were no longer available for inspection, the efforts of the plaintiffs’ expert to determine the cause of the explosion were impeded. Plaintiffs’ attorney concluded that without a more concrete finding by his expert, he possibly could not establish his case. Thus, the case was settled. However, Northern Propane Gas Company, insured by Continental, did not contribute to the settlement, and the case against it was dismissed with prejudice. After the original case was settled, plaintiffs instituted this suit.

The first issue on appeal is whether the trial [229]*229judge erroneously failed to instruct the jury on the elements of damage which would have been at issue if the original suit had gone to trial.

Plaintiffs and defendants, Continental Insurance Company and Boynton Engineers, Inc., argue that because this was a derivative suit, the jury should have received the same instruction that would have been given in the underlying action. Defendants Dean Albrecht and General Adjustment Bureau argue that, since the original case did not reach trial, it is impossible to determine what instructions the original jury should have received and, therefore, the judge’s refusal to instruct the jury in regard to the original action was proper.

The plaintiffs’ theory of the case was that defendants’ conduct reduced the chances of a suitable judgment in the original case. In order for a jury to evaluate this claim, the plaintiffs had to establish that but for defendants’ actions they would have recovered a higher verdict in the initial suit than the settlement gained.

The trial judge recognized that the litigation involved two lawsuits, i.e., a "suit within a suit”. Yet, he failed to give the jury any guidance or specific instructions on the theories surrounding the original action. He instructed the jury on the interplay between the two lawsuits as follows:

"You are further instructed that you are to assume that in the first original case between the plaintiffs and the eight defendants that a jury, or the jury in that case, if it would have been tried and not settled, would have been properly instructed as to the plaintiff’s [sic] theories of recovery, the damages, and the defendant’s [sic] affirmative defenses of denial of any liability.”

Although usually the litigation of a "suit within a suit” arises in the legal malpractice setting, [230]*230cases have found that the same rules apply to claims of negligence by insurance adjusters. Gay & Taylor, Inc v American Casualty Co, 381 SW2d 304 (Tenn, 1964). The general rule in the litigation of a "suit within a suit” was set forth in Basic Food Industries v Grant, 107 Mich App 685, 692; 310 NW2d 26 (1981):

"As another commentator has stated the matter:
" 'A client’s burden of proving injury as a result of his attorney’s negligence is especially difficult to meet when the attorney’s conduct prevented the client from bringing his original cause of action or the attorney’s failure to appear caused judgment to be entered against him as a defendant. In addition to proving negligence, a client must show that but for his attorney’s negligence he would have been successful in the original litigation; in effect, he must prevail in two distinct suits.’ Note, Attorney Malpractice, 63 Colum L Rev 1292, 1307 (1963). (Emphasis added.)”

The jury, in order to determine if the plaintiffs would have been successful in the original litigation, needed to be specifically instructed on the theories involved in the underlying lawsuit. We appreciate the difficulty a trial judge confronts in determining what instructions are properly presented to a jury in a "case within a case”. Nonetheless, the instructions the jury received here were vague and afforded the jury little guidance.

Chocktoot v Smith, 280 Or 567, 571; 571 P2d 1255 (1977), where legal malpractice was claimed, emphasized that despite some shortcomings in the system a jury in a "suit within a suit” must be regarded as the original jury. The court stated:

"The question is on what information the jury is to reach this conclusion.
"The answer seems easiest when the outcome in the

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Bluebook (online)
326 N.W.2d 458, 119 Mich. App. 221, Counsel Stack Legal Research, https://law.counselstack.com/opinion/jackovich-v-general-adjustment-bureau-inc-michctapp-1982.