No Noneconomic Damages for Negligent Destruction of Property

This ruling is an important decision for future plaintiffs in negligent destruction of property cases. While the Court of Appeals attempted to expand recovery for negligence to noneconomic harms such as emotional distress, the Michigan Supreme Court refused to allow noneconomic injuries to be recoverable. This decision is an overall negative for Michiganders who suffer mental and emotional anguish stemming from environmental harm or damage to personal property, especially because the value of natural lands are difficult to quantify in economic terms.

Beckie Price sued High Pointe Oil Company (High Pointe) after they negligently pumped 400 gallons of oil into her basement. In her complaint, she sought damages for the emotional distress she suffered as a result of High Pointe’s actions. The Michigan Supreme Court was asked to determine whether emotional injuries stemming from High Pointe’s’ negligent destruction of Price’s home are recoverable. The Court determined that, in light of Michigan’s common law rules, noneconomic harms caused by the negligent destruction of real property, or property that cannot be moved, are not recoverable.

The plaintiff’s home was originally heated by an oil furnace located in the basement. In 2006 the plaintiff replaced the oil furnace with a propane furnace but the oil fill pipe remained attached to her basement. In November 2007, High Pointe’s  truck driver pumped nearly 400 gallons of fuel oil into the plaintiff’s basement. This resulted in the destruction of the plaintiffs’ house and many of her belongings.

Though the plaintiff was fully compensated for her economic losses, she filed suit in August of 2008, alleging several claims for noneconomic damages. At trial, a jury awarded the plaintiff $100,000 for noneconomic damages. On appeal, the Michigan Court of Appeals affirmed the verdict, holding that a plaintiff may recover mental anguish damages flowing from the damage to or destruction of real property. The defendant then appealed to the Supreme Court of Michigan.

Can a plaintiff recover noneconomic damages for the negligent destruction of real property?

In a 4-0 decision, the Supreme Court of Michigan held that noneconomic damages are not recoverable for the negligent destruction of property. Justices Cavanagh, McCormack, and Viviano did not take part in the decision.

In the reasoning for its decision, the court first analyzed how the common law of Michigan has approached the calculation of damages in negligence cases. The Court cited O’Donnell v. Oliver Iron Mining Co., which held that the measure of damages in the case of negligently destroyed property should be the lower value of either: 1) the difference in market value before and after the injury, or 2) the cost of making repairs to the property. The Court found that the O’Donnell rule implicitly excludes noneconomic damages in negligent destruction of property cases.

As support for their holding, the court pointed out that before the Court of Appeals decision in this case, no case in the history of the Michigan common law had endorsed the recovery of noneconomic damages for the negligent destruction of property.

While the Court acknowledged that there are reasons to alter common law rules, it refused to do so in this case. The Court found that it is a responsibility of the legislature, if it chooses, to correct any shortcomings of the current common law rule. The Court made four public policy arguments justifying their decision not to alter the rule that damages in negligent destruction of property cases should be limited to the replacement or repair of the property.

First, the Court found that in our economic system, the market sets the price of property. Even though people generally value their property above the market rate, this surplus value should not be compensated by the court. Second, the Court found that economic damages are more easily verifiable, quantifiable, and measurable. This allows for more precise determinations of value by the court. Third, the Court found that limiting damages to the economic value of the property limits disparities in awards from case to case. Fourth, the court asserted that disallowing noneconomic damages allows businesses to assess the scope of their accident liability. The Court found that adding noneconomic damages would introduce uncertainty to businesses and insurers regarding possible tort liability.