Zaremba Equipment, Inc. v. Harco National Insurance

302 Mich. App. 7
CourtMichigan Court of Appeals
DecidedJuly 25, 2013
DocketDocket Nos. 298221 and 298755
StatusPublished
Cited by74 cases

This text of 302 Mich. App. 7 (Zaremba Equipment, Inc. v. Harco National Insurance) 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
Zaremba Equipment, Inc. v. Harco National Insurance, 302 Mich. App. 7 (Mich. Ct. App. 2013).

Opinion

PER CURIAM.

This insurance coverage dispute arose in 2003, when a fire consumed the primary building occupied by plaintiff Zaremba Equipment, Inc. Defendant Harco National Insurance Company sold Zaremba the insurance policy in effect at the time of the fire. The policy stated limits of $525,000 for the building and $700,000 for its contents. After the loss, Zaremba learned that it would cost far more than those limits to replace the building and its contents.

Zaremba brought suit, complaining that defendant Patrick Musall, an insurance agent employed solely by Harco, negligently advised Zaremba regarding the appropriate amount of replacement coverage for the business and misrepresented the nature and extent of the coverage purchased. Zaremba further alleged that Mus-all improperly appraised the building at a value far lower than its actual replacement cost, and committed [11]*11fraud. Defendants denied that Musall performed an appraisal and asserted that had Zaremba bothered to read its policy, it would have understood its clearly stated coverage limits. In 2009, an Otsego County jury found in Zaremba’s favor and awarded the corporation $2,353,778 exclusive of costs, attorney fees, interest, and case evaluation sanctions.

This Court reversed and remanded for a new trial, holding that the trial court had erroneously refused to instruct the jury that Zaremba bore a duty to read its insurance policy. Zaremba Equip, Inc v Harco Nat’l Ins Co, 280 Mich App 16; 761 NW2d 151 (2008) (Zaremba I)- Our opinion explained that Zaremba’s admitted failure to read its policies could constitute comparative negligence. We directed that a second jury assess the comparative fault of both Zaremba and Musall when considering Zaremba’s negligence claims.

A properly instructed jury found Musall negligent and determined that Musall had made an innocent misrepresentation, but rejected Zaremba’s fraud claim. The jury further determined that Zaremba’s comparative negligence constituted a proximate cause of its damages. The trial court entered judgment for Zaremba in the amount of $1,245,264.40 plus interest, and subsequently awarded $134,739.33 in costs and attorney fees.

Defendants raise a number of appellate challenges to the verdict and postverdict awards. Defendants insist that Zaremba’s failure to read the policy should have operated as a complete bar to recovery, that Musall owed Zaremba no duty of care, and that Zaremba’s counsel repeatedly distracted the jury by injecting irrelevancies, including the length and interpretive difficulty of the insurance policy. Zaremba cross-appeals, arguing that the jury should not have been permitted to [12]*12consider Zaremba’s comparative negligence in relation to Musall’s innocent misrepresentations.

The law of the case disposes of defendants’ first two arguments, and the trial court’s oft-repeated instruction that the lawyers’ comments were not evidence defeats the third. Because facts emerged during the second trial substantiating defendants’ argument that Zaremba bore responsibility for Musall’s innocent misrepresentation, the trial court correctly ruled that a comparative negligence analysis applied to this claim. Although the trial was far from perfect, we find no errors warranting reversal.

I. UNDERLYING FACTS AND PROCEEDINGS

The evidence developed during the second trial generally duplicated our previous description of the relationship between Zaremba and Musall:

Musall testified that since 1998 or 1999 he had met with Jimmy Zaremba,[1]cu plaintiff’s business manager, at least twice a year to discuss plaintiff’s insurance needs, Harco’s available coverages, and potential policy limits. Musall admitted that at some point before plaintiff accepted Harco’s 2002-2003 insurance proposal, Jimmy presented a “Customgard John Deere Insurance Proposal” prepared for plaintiff. The Deere insurance proposal included a “Building Coverage” limit of $450,000 and identified an applicable “Extended Recovery Endorsement” that included “Guaranteed Replacement Cost.” Musall conceded that Jimmy had asked him to “meet or beat” the Deere proposal and expressed a desire “to be fully insured.” Musall utilized a software program called “Marshall & Swift” to prepare a “cost estimate” for reconstructing plaintiffs building, which calculated a building value of $494,449. According to Jimmy, Musall represented that Marshall & Swift was “the leader in the industry, and this is what [13]*13insurance agents use ail the time to come up with evaluations on a building.” Although Musall did not recall telling Jimmy about the Marshall & Swift estimate, he admitted that after its preparation, plaintiff increased its building coverage limit to $525,000.
Musall also conceded that he made specific recommendations in response to Jimmy’s request that plaintiff be “fully insured.” He admitted that he would have recommended more coverage if he had known that it would cost $1,192,000 to replace the building because the “intent was there” to insure plaintiff “for the cost of replacing the building.” Musall further explained that if Jimmy had asked for $1.5 million of building coverage, Musall would have advised him that “I didn’t feel he needed that much coverage.”
Jimmy recalled that in July 2001 a car had run into a nearby restaurant, killing some customers. Jimmy heard that the restaurant owner “had a holy nightmare” with his insurance company and realized that if something happened to plaintiffs building, zoning issues would preclude rebuilding in the same location. At about the same time, Jimmy learned of Deere’s “guaranteed replacement coverage” and consulted Musall to discuss the adequacy of plaintiffs coverage and to communicate his desire that plaintiff be “fully insured.” Jimmy asked Musall to compare plaintiffs 2001 Harco coverage, which included an 80 percent coinsurance provision that obligated plaintiff to cover 20 percent of its own insured losses, with the Deere proposal. According to Jimmy, Musall represented that for $500 less than the Deere quotation, Harco would provide a building policy limit of $525,000 and that “with the replacement costs, we would be fully insured.” [Id. at 23-24.]

Based on these facts, we held that Zaremba established that Musall and Zaremba shared a “special relationship” pursuant to Harts v Farmers Ins Exch, 461 Mich 1, 10-11; 597 NW2d 47 (1999). Using Harts as our guide, we described the parties’ respective duties of care as follows: “[W]hen an insurance agent elects to [14]*14provide advice regarding coverage and policy limits, the agent owes a duty to exercise reasonable care. The insured has a duty to read its insurance policy and to question the agent if concerns about coverage emerge.” Zaremba I, 280 Mich App at 36.

Given our holding, we anticipated that the second trial would generally focus on whether: (1) Musall negligently appraised the replacement costs of Zaremba’s building and contents, (2) Musall misrepresented that the Zaremba policy included “replacement coverage,” (3) Musall negligently failed to provide Zaremba with the replacement coverage it had ordered, and (4) Zaremba was comparatively negligent.

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Cite This Page — Counsel Stack

Bluebook (online)
302 Mich. App. 7, Counsel Stack Legal Research, https://law.counselstack.com/opinion/zaremba-equipment-inc-v-harco-national-insurance-michctapp-2013.