LGR Realty, Inc. v. Frank & London Ins. Agency
2016 Ohio 5044
| Ohio Ct. App. | 2016Background
- LGR Realty purchased a claims-made Real Estate Agents Errors & Omissions policy (effective May 12, 2010–May 12, 2011) through its agent, Frank & London.
- A liability claim arose during the policy period; Continental Casualty denied LGR’s demand for defense and indemnity on April 26, 2011, forcing LGR to retain counsel and incur >$420,000 in defense costs.
- LGR sued Frank & London on April 17, 2015 for negligent failure to procure appropriate coverage and negligent misrepresentation.
- Frank & London moved to dismiss under Civ.R. 12(B)(6), arguing R.C. 2305.09(D)’s four-year statute of limitations began when the policy was issued (May 12, 2010), so the April 2015 suit was time-barred.
- The trial court granted dismissal; the Tenth District reversed, holding Kunz’s delayed-damages rule applies and LGR’s cause of action accrued on April 26, 2011 (date of denial), so the April 17, 2015 complaint was timely.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| When does the 4-year statute of limitations under R.C. 2305.09(D) begin to run for an agent’s alleged failure to procure requested insurance? | Statute begins when the claim is denied and actual injury occurs (delayed-damages rule/Kunz). | Statute begins when the negligent act occurred (policy issuance); delayed-damages rule abrogated by Flagstar. | Accrual delayed until denial of coverage (Apr 26, 2011); suit filed Apr 17, 2015 is timely. |
| Whether an insurance agent’s negligence is a form of professional negligence to which Flagstar’s rule applies | LGR: agent’s failure is functionally like malpractice but the tort isn’t complete until actual loss—Kunz applies. | Frank & London: agent is a professional; Flagstar rejects delayed-damages in professional negligence. | Court treated the agent claim as professional negligence but found Kunz still good law and controlling here. |
| Whether immediate economic loss occurred at policy purchase (making delayed-damages inapplicable) | LGR: no actual legal harm until denial and expense of defense; mere expectancy/contract-like premium issue is not the tort injury. | Frank & London: paying for coverage that didn’t exist caused immediate economic damage at purchase. | Court: no actual tort injury until denial and defense costs; delayed-damages rule governs accrual. |
| Whether intermediate appellate court may disregard Kunz in light of Flagstar | LGR: Kunz has not been expressly overruled and remains binding. | Frank & London: Flagstar implicitly abrogated Kunz and discovery/delayed rules. | Court: cannot overrule Supreme Court precedent; Flagstar did not expressly overrule Kunz, so Kunz controls here. |
Key Cases Cited
- Kunz v. Buckeye Union Ins. Co., 1 Ohio St.3d 79 (1982) (applies delayed-damages rule: negligence to procure coverage accrues when insured suffers a loss)
- Velotta v. Leo Petronzio Landscaping, Inc., 69 Ohio St.2d 376 (1982) (tort does not accrue until actual injury when negligence is not immediately harmful)
- Flagstar Bank, F.S.B. v. Airline Union’s Mtge. Co., 128 Ohio St.3d 529 (2011) (professional-negligence claim accrues when negligent act committed; declines delayed-damages rule in that context)
- Investors REIT One v. Jacobs, 46 Ohio St.3d 176 (1989) (accrual principles referenced in professional-negligence context)