AKC, Inc. v. United Speciality Ins. Co.
2019 Ohio 2809
Ohio Ct. App.2019Background
- AKC, Inc. (doing business as CleanTech) sued United Specialty Insurance Co. (United) for breach of contract after United denied an insurance claim for sanitary sewer backup damage at the Bank Nightclub; AKC was assignee of the insured Globalcor.
- AKC also sued neighboring restaurants (Cilantro Thai, Inc. and USAFA, LLC dba Bricco) in negligence, alleging their dumping of cooking grease into sanitary lines caused the backup.
- Globalcor had been instructed by its insurer to proceed with immediate cleanup; AKC performed restoration work and was later assigned Globalcor’s claim after United denied coverage.
- The trial court granted summary judgment for United (based on policy exclusions) and for Cilantro; AKC appealed. AKC later dismissed Bricco from the appeal with prejudice.
- On appeal the court (Ninth Dist.) sustained AKC’s challenge to United’s application of the policy’s water/sewer exclusion (finding the exclusion ambiguous as to raw sewage), reversed as to United, and affirmed summary judgment for Cilantro because AKC failed to produce evidence of breach or proximate cause.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy’s "water" exclusion (including "water that backs up or overflows from a sewer, drain or sump") excludes damage from raw sewage | AKC: exclusion is reasonably susceptible to another meaning; sewage is not necessarily covered by the word "water" and exclusion should be construed against insurer | United: wording of the exclusion and policy language excludes sewage-backed-up damage as "water" | Court: exclusion ambiguous as to raw sewage; apply contra proferentem and reverse summary judgment for United |
| Whether the pollution exclusion definition of "pollutant" includes raw sewage (and thereby excludes coverage) | AKC: "pollutant" should not reasonably be taken to include raw sewage; multiple interpretations exist favoring coverage | United: "pollutant" (including waste) plainly covers raw sewage and exclusion applies | Court: trial court had found "pollutant" includes raw sewage but did not base ruling on that exclusion; issue moot on appeal |
| Whether AKC (assignee) received tort claims and therefore may pursue negligence against Cilantro | AKC: assignment included negligence/subrogation claims; assignment intended to allow AKC to pursue tortfeasors | Cilantro: AKC did not receive an assignment to pursue negligence claims; summary judgment appropriate | Court: trial court found no assignment or, in any event, AKC failed to produce necessary elements of negligence; affirmed summary judgment for Cilantro |
| Whether AKC produced evidence of duty, breach, and proximate cause against Cilantro | AKC: evidence (affidavit re grease traps and industry practice) establishes duty and causation | Cilantro: no evidence of breach or proximate cause tying Cilantro to this backup | Court: AKC failed to produce evidence of breach and proximate cause; summary judgment for Cilantro affirmed |
Key Cases Cited
- Lane v. Grange Mut. Cos., 45 Ohio St.3d 63 (Ohio 1989) (insurance exclusions strictly construed against insurer)
- Dresher v. Burt, 75 Ohio St.3d 280 (Ohio 1996) (summary-judgment burden-shifting framework)
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (Ohio 1996) (de novo appellate review of summary judgment)
- Temple v. Wean United, Inc., 50 Ohio St.2d 317 (Ohio 1977) (summary judgment standard under Civ.R. 56)
- Murphy v. Reynoldsburg, 65 Ohio St.3d 356 (Ohio 1992) (view facts in favor of nonmoving party on summary judgment)
- Perez v. Scripps–Howard Broadcasting Co., 35 Ohio St.3d 215 (Ohio 1988) (competing inferences and credibility resolved for nonmovant on summary judgment)