2022 Ohio 10
Ohio Ct. App.2022Background
- In 2014 a tenant (Connor) alleged he was injured at 15 Montgomery Way (Bayberry Crossing). Brookmeadow, the fee owner, was sued and then filed a third-party complaint (2017) seeking indemnity/contribution from lessee/manager defendants Joseph Fairless and Bayberry Crossing, LLC.
- The third-party pleading incorporated a June 2013 Lease with Option to Purchase and a 2016 Purchase/Sale agreement showing Fairless had lease/management duties and purportedly assigned his lease interest to Bayberry.
- The Acuity commercial general liability policy listed Brookmeadow (d/b/a Bayberry Crossing) as first named insured and defined insureds to include any organization acting as the insured’s “real estate manager.” The policy promised a duty to defend suits seeking damages for bodily injury.
- Brookmeadow settled the underlying personal-injury claim and voluntarily dismissed the third-party complaint; Fairless demanded defense fees from Acuity, and Acuity refused.
- Fairless (later joined by Bayberry) sued Acuity for declaratory relief, breach (duty to defend), and bad faith. The trial court granted summary judgment for the insureds on duty to defend and awarded attorney fees limited to fees incurred defending the third-party complaint; fees for the insureds’ litigation against Acuity were reserved.
- On appeal, Acuity challenged the duty-to-defend ruling; Fairless and Bayberry cross-appealed the denial of attorney fees for the litigation against Acuity. The appellate court affirmed and held the refusal to award litigation fees was not an abuse of discretion because bad-faith issues remained pending.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Acuity had a duty to defend Fairless/Bayberry in the third-party suit | Complaint + attached lease alleged Fairless/Bayberry were manager/operators with maintenance duties; policy covers organizations acting as insured’s "real estate manager," so duty to defend attached | Policy did not extend to Fairless/Bayberry for the alleged conduct or the allegations were outside coverage | Court: duty to defend attached because the complaint (and incorporated lease) arguably alleged management/maintenance conduct within the policy’s “real estate manager” insured grant |
| Whether insureds were entitled to attorney fees for litigation against Acuity (fee shifting) | Insureds rely on Trainor to recover attorney fees to date for insurer’s breach of duty to defend | No contractual fee‑shifting provision; under Ohio law fees for insurer–insured litigation are recoverable only if statutory authorization or a finding of bad faith; bad-faith claim was reserved | Court: affirmed denial of fees for the insureds’ litigation at this stage as fees are not automatically recoverable absent contractual or bad-faith basis; bad-faith issue remains pending |
Key Cases Cited
- William Powell Co. v. OneBeacon Ins. Co., 162 N.E.3d 927 (Ohio 2020) (contract interpretation and insurance principles)
- Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256 (Ohio 2003) (policy interpretation; duty to defend principles)
- Grafton v. Ohio Edison Co., 671 N.E.2d 241 (Ohio 1996) (standard of review for contract interpretation)
- Willoughby Hills v. Cincinnati Ins. Co., 459 N.E.2d 555 (Ohio 1984) (duty to defend broader than duty to indemnify; insurer must defend claims potentially within coverage)
- Westfield Cos. v. O.K.L. Can Line, 804 N.E.2d 45 (Ohio App. 2003) (when insurer must accept defense where coverage is arguable)
- Motorist Mut. Ins. Co. v. Trainor, 294 N.E.2d 874 (Ohio 1973) (historic rule on recovery of defense fees after insurer breach)
- Collins v. Auto-Owners Ins. Co., 80 N.E.3d 542 (Ohio App. 2017) (use of plain meaning when policy term undefined)
- Prudential Property & Cas. Ins. Co. v. Koby, 705 N.E.2d 748 (Ohio App. 1997) (contract interpretation guidance)