Michigan Basic Property Ins. Ass'n v. Detroit Edison Co.

• Decision Date: 26 June 2000
• Docket Number: Docket No. 211293.
• Citation: 240 Mich. App. 524,618 N.W.2d 32
• Parties: MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION and Lloyd's of London, Plaintiffs-Appellants, v. DETROIT EDISON COMPANY, Defendant-Appellee.
• Court: Court of Appeal of Michigan — District of US

618 N.W.2d 32

240 Mich. App. 524

MICHIGAN BASIC PROPERTY INSURANCE ASSOCIATION and Lloyd's of London, Plaintiffs-Appellants, v. DETROIT EDISON COMPANY, Defendant-Appellee.

Docket No. 211293.

Court of Appeals of Michigan.

Submitted November 4, 1999, at Detroit.

Decided April 18, 2000, at 9:10 a.m.

Released for Publication June 26, 2000.

Vandeveer Garzia (by Hal O. Carroll), Detroit, and Jon Shefferly & Associates, P.C. (by Jon B. Shefferly and Todd E. Briggs), Detroit, for the plaintiffs.

Jack M. Abella, Detroit (O'Leary, O'Leary, Jacobs, Mattson, Perry & Mason, P.C., by John P. Jacobs, Of Counsel), Southfield, for the defendant.

Before: TALBOT, P.J., and NEFF and SAAD, JJ.

SAAD, J.

I. NATURE OF THE CASE

Defendant's customer, Van Dyke Liquor Market, suffered property damage due to a fire caused by an electrical power surge. Plaintiffs, Michigan Basic Property Insurance Association and Lloyd's of London, the insurance carriers for Van Dyke Liquor Market, paid their insured for its loss. Plaintiffs then filed this subrogation action against defendant to recover for the property damage. Plaintiffs alleged that defendant's negligent handling of power transmission equipment caused the fire.

In the trial court, defendant asserted the defense of primary jurisdiction and argued that the trial court should defer its jurisdiction to the Michigan Public Service Commission (MPSC). Defendant persuaded the trial court, and attempts to persuade this Court, that under the primary jurisdiction doctrine, if a plaintiff's underlying claim against a utility is covered and regulated by the tariffs promulgated by the MPSC, then the MPSC should be the first forum to adjudicate the claim. Plaintiffs unsuccessfully argued to the trial court, and contends here, that the underlying claim sounds in tort and is therefore not subject to the primary jurisdiction doctrine as expounded in our Supreme Court's decision Rinaldo's Constr. Corp. v. Michigan Bell Telephone Co., 454 Mich. 65, 70, 559 N.W.2d 647 (1997).

We agree with plaintiffs' argument that their subrogation claim for fire damage to property caused by a power surge implicates alleged tortious conduct by defendant and, consequently, we hold that the primary jurisdiction doctrine is inapplicable. We therefore reverse the trial court's dismissal and remand for reinstatement of this matter.

II. FACTS AND PROCEEDINGS

Plaintiffs are casualty insurers for the Van Dyke Liquor Market in Detroit. Michigan Basic Property Insurance Association insured the structure, while Lloyd's of London provided insurance for the contents and for business interruption. In 1994, the market sustained significant damage during a fire, which allegedly was caused by an electrical power surge. Plaintiffs covered the insured's loss and became subrogated to the owner's claims arising from the fire. Plaintiffs brought this action against defendant and alleged that defendant's negligent conduct, specifically negligent design, installation, inspection, and maintenance of power transmission equipment, caused the power surge and fire. Specifically, plaintiffs alleged that Detroit Edison Company breached certain duties that it owed to the insured, and predicated its right to relief on theories of negligence, strict liability, and products liability.¹

Defendant claimed that primary jurisdiction of plaintiffs' claim rested with the MPSC. The trial court agreed and granted defendant's motion for summary disposition under MCR 2.116(C)(4).

III. ANALYSIS

This Court reviews decisions on motions for summary disposition de novo. Spiek v. Dep't of Transportation, 456 Mich. 331, 337, 572 N.W.2d 201 (1998). Moreover, the applicability of the primary jurisdiction doctrine presents a question of law, which we review de novo on appeal. Faircloth v. Family Independence Agency, 232 Mich.App. 391, 401, 591 N.W.2d 314 (1998). We briefly note, however, that the trial court erroneously stated that it was granting summary disposition under MCR 2.116(C)(4), lack of subject-matter jurisdiction (which we also review de novo). James v. Commercial Carriers, Inc., 230 Mich.App. 533, 536, 583 N.W.2d 913 (1998). The trial court's reference to lack of subject-matter jurisdiction was erroneous because this Court recently held in Travelers Ins. Co. v. Detroit Edison Co., 237 Mich. App. 485, 603 N.W.2d 317 (1999), that the primary jurisdiction doctrine, which merely "suspends" court action, is not the same as lack of subject-matter jurisdiction, but is "more closely akin to the affirmative defense of the existence of an arbitration agreement." Id., at 492-494, 603 N.W.2d 317. Under Travelers Ins., summary disposition under the primary jurisdiction doctrine is governed by MCR 2.116(C)(7). Nonetheless, if summary disposition is granted under one subpart of the court rule when it was actually appropriate under another, the defect is not fatal and does not preclude appellate review as long as the record permits review under the correct subpart. Gibson v. Neelis, 227 Mich.App. 187, 189, 575 N.W.2d 313 (1997).

A. Background: The Primary Jurisdiction Doctrine

This appeal turns on the application of the "primary jurisdiction" doctrine, whereby a court defers its own jurisdiction to the jurisdiction of an administrative agency better suited to handle the parties' dispute. Rinaldo's, supra, at 70, 559 N.W.2d 647. Our Supreme Court has described this doctrine:

Primary jurisdiction "is a concept of judicial deference and discretion." LeDuc, Michigan Administrative Law, § 10:43, p. 70. The doctrine exists as a "recognition of the need for orderly and sensible coordination of the work of agencies and of courts." White Lake Improvement Ass'n v. City of Whitehall, 22 Mich.App. 262, 282, 177 N.W.2d 473 (1970). In White Lake, the Court of Appeals correctly noted that "[t]he doctrine of primary jurisdiction does not preclude civil litigation; it merely suspends court action." Id. at 271, 177 N.W.2d 473. Thus, LeDuc notes, "[p]rimary jurisdiction is not a matter of whether there will be judicial involvement in resolving issues, but rather of when it will occur and where the process will start."Id. at § 10:44, p. 73. A court of general jurisdiction considers the doctrine of primary jurisdiction "whenever there is concurrent original subject matter jurisdiction regarding a disputed issue in both a court and an administrative agency." Id. at § 10:43, p. 70. [Rinaldo's, supra, at 70, 559 N.W.2d 647 (emphasis added).]

Under the primary jurisdiction doctrine, a plaintiff seeking relief against a public utility may be required to forestall court action in favor of a hearing before the MPSC when the plaintiff's claim falls within the jurisdiction of the MPSC. Id., at 70, 559 N.W.2d 647. The MPSC has complete power to regulate all public utilities and their rates and conditions of service. MCL 460.6; MSA 22.13(6). Its powers to investigate complaints by customers extend to matters anticipated by the regulatory scheme. MCL 460.58; MSA 22.8. Not all disputes between a customer and a public utility are subject to the MPSC's primary jurisdiction. Rather, the "question is whether the reasons for the existence of the doctrine are present and whether the purposes it serves will be aided by its application in the particular litigation." Rinaldo's, supra, at 71, 559 N.W.2d 647, quoting United States v. Western P.R. Co., 352 U.S. 59, 64, 77 S.Ct. 161, 1 L.Ed.2d 126 (1956).

The Michigan Supreme Court's decision in Valentine v. Michigan Bell Telephone Co., 388 Mich. 19, 199 N.W.2d 182 (1972), is the seminal Michigan case on the doctrine of primary jurisdiction. The plaintiff, Valentine, alleged that defendant Michigan Bell failed to provide adequate telephone service and sought damages on theories of breach of contract, gross negligence, fraud, and misrepresentation. Id., at 21-22, 199 N.W.2d 182. Bell argued that Valentine's action was precluded by the doctrine of primary jurisdiction. The Court summarized the rules for determining when this doctrine applies:

If a plaintiff's cause of action is based upon a claim that the utility has violated Public Service Commission promulgated tariffs or codes, or if the claim covers some action by the utility outside of the regulations of the Public Service Commission, a court of general jurisdiction is the proper forum. On the other hand, the code or tariff is part of the contract between the parties and limits of liability therein contained are presumptively valid. Any claim based upon the contractual obligation of the parties is limited to validly promulgated provisions of the tariff or code within the authority of the Public Service Commission. Ordinarily, a party aggrieved by the provisions of a tariff or code should seek relief by an attack upon those provisions before the Public Service Commission and from it to the Ingham County Circuit Court. While the contractual obligations of the parties may be determined by the rules, tariffs and regulations of the Public Service Commission, such is not the case with regard to tortious conduct. Harbaugh [v. Citizens Telephone Co., 190 Mich. 421, 157 N.W. 32 (1916)], supra, and Muskegon Agency [Inc. v. General Telephone Co. of Michigan, 340 Mich. 472, 65 N.W.2d 748 (1954) and 350 Mich. 41, 85 N.W.2d 170 (1957)], supra, have clearly established that the proper forum for a claim sounding in tort is a court of general jurisdiction of this state. [Valentine, supra, at 25-26, 199 N.W.2d 182.]

The Court then examined the plaintiff's complaint and concluded that "[n]o count sets forth acts or conduct of defendant that would constitute negligence, gross negligence, fraud, misrepresentation, or some other tort. As for any claim in contract, no violation of the code or tariff is pleaded." Id., at 30, 199 N.W.2d 182 (emphasis in original).

Recently, the Michigan Supreme Court elaborated on the law of primary jurisdiction in Rinaldo's, supra. There, the plaintiff alleged that Michigan Bell...