2021 Ohio 445
Ohio Ct. App.2021Background
- Plaintiff-appellant City of Gahanna (Gahanna) is a municipal member of the Ohio Municipal Joint Self-Insurance Pool (OMJSP).
- In a 2012 class action (LaBorde), taxpayers alleged Gahanna's tax form/misapplication of former City Code 161.18(a) caused overpayment of municipal income taxes for tax years 2008–2011.
- After a 2018 bench trial the court found liability for over $10 million; the case settled for $9.5 million (Gahanna paid $9.1 million, RITA $400,000).
- Gahanna timely notified OMJSP and sought indemnity up to the $5 million policy limit; OMJSP defended under a reservation of rights and later denied coverage relying on a policy exclusion for refunds of taxes resulting from an "improper or illegal levy, tax, imposition, assessment or valuation of property."
- The trial court granted OMJSP's summary judgment and denied Gahanna's; Gahanna appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy exclusion applies only when the tax law itself is unconstitutional or illegal | Exclusion applies only if the underlying tax provision is illegal/unconstitutional | Exclusion covers refunds caused by improper or illegal imposition or improper administration of a law | Exclusion applies to refunds resulting from either an illegal law or improper administration; not limited to unconstitutional laws |
| Whether the phrase "of property" limits the entire series (levy, tax, imposition, assessment, valuation) to property taxes | "Of property" qualifies every preceding term; exclusion therefore limited to property taxes | "Of property" modifies only the last antecedent (valuation); exclusion reaches non‑property taxes too | Applied last‑antecedent rule: "of property" only qualifies "valuation;" exclusion is not limited to property taxes |
| Whether the settlement payment was a "refund" within the exclusion | Settlement was not a statutory refund procedure; therefore not a "refund" covered by exclusion | Substance controls: payments returning overpaid taxes are refunds regardless of procedure | The settlement payments were refunds of overpaid taxes; exclusion applies despite not using statutory refund procedure |
| Whether the exclusion is ambiguous and must be construed against the insurer | Exclusion ambiguous (e.g., scope, grammar); construe in insured's favor | Language is clear; qualifying words have ordinary meaning; no ambiguity | Court found language unambiguous when read in context and construed it to bar coverage |
Key Cases Cited
- Long Beach Assn., Inc. v. Jones, 82 Ohio St.3d 574 (1998) (contract interpretation is a question of law)
- Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd., 64 Ohio St.3d 657 (1992) (insurance policies are contracts subject to ordinary contract rules)
- Skivolocki v. E. Ohio Gas Co., 38 Ohio St.2d 244 (1974) (purpose of contract construction is to effectuate parties' intent)
- Kelly v. Medical Life Ins. Co., 31 Ohio St.3d 130 (1987) (party intent presumed to reside in chosen contract language)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (1978) (common words given ordinary meaning absent manifest absurdity)
- Faruque v. Provident Life & Acc. Ins. Co., 31 Ohio St.3d 34 (1987) (ambiguities in insurance policies construed against insurer)
- Dresher v. Burt, 75 Ohio St.3d 280 (1996) (moving party’s initial burden on summary judgment under Civ.R. 56)
- Vahila v. Hall, 77 Ohio St.3d 421 (1997) (responding party must show specific facts creating genuine issue)
- Wohl v. Swinney, 118 Ohio St.3d 277 (2008) (last‑antecedent rule may be displaced by contrary intent)
- Carter v. Youngstown Div. of Water, 146 Ohio St. 203 (1946) (statement of last‑antecedent grammatical rule)