2016 Ohio 3473
Ohio Ct. App.2016Background
- In 2007 CMH Homes sold and arranged installation of a mobile home to the Beatties; structural defects (cracks, ceiling issues) manifested in early 2008 and persisted despite repairs.
- CMH sued Skyline (manufacturer) and others; CMH filed a third-party claim against Bob’s Home Services (Bob’s), alleging Bob’s performed the installation and seeking indemnity; arbitration clause in the contractor agreement sent CMH’s claims against Bob’s to arbitration.
- Bob’s obtained a commercial general liability policy from Lightning Rod effective Nov. 26, 2008–Nov. 26, 2012. The declarations named “Southworth Robert” (an individual); the policy contains a “loss-in-progress/known risk” clause stating coverage only applies if prior to the policy period no insured knew the property damage had occurred.
- Bob’s tendered defense to Lightning Rod in late 2013; Lightning Rod defended under reservation of rights and then sued for declaratory judgment (seeking determination it had no duty to defend or indemnify Bob’s).
- Cross-motions for summary judgment followed; the trial court granted Lightning Rod’s motion, concluding the alleged property damage first manifested before the policy period and therefore was excluded by the policy’s plain terms. CMH appealed.
Issues
| Issue | Plaintiff's Argument (CMH) | Defendant's Argument (Lightning Rod) | Held |
|---|---|---|---|
| Whether the policy was triggered where damage first manifested before the policy but reoccurred during it (continuous-trigger) | Continuous/ongoing damage reoccurred during the policy period so the policy is triggered and Lightning Rod must defend/indemnify | Policy requires property damage to first occur during policy period; continuation of pre-policy damage is excluded by the loss-in-progress clause | Held for Lightning Rod: continuation/resumption of damage that first manifested before the policy period does not trigger coverage under the policy’s plain language |
| Whether Bob’s was an insured under the policy as issued (naming/structure issue) | CMH argued reformation/mistake could add Bob’s as named insured | Lightning Rod pointed to declarations naming Southworth as individual and exclusions for LLCs/partnerships not named | Court resolved case on timing trigger and did not need to decide reformation; trial court found only Southworth named and excluded LLC conduct |
| Whether Lightning Rod had a duty to defend under the underlying claims | CMH: allegations could arguably be covered because some damage occurred during policy period | Lightning Rod: all alleged claims indisputably fall outside coverage per policy language | Held Lightning Rod had no duty to defend because no possibility of coverage exists under the policy terms |
| Whether CMH could amend its answer mid-litigation to assert reformation/mistake | CMH sought leave to amend to add mistake/reformation defenses to show Bob’s intended as insured | Lightning Rod opposed; trial court never expressly ruled but granted summary judgment for Lightning Rod | Moot — appellate court found the coverage exclusion dispositive and did not decide the amendment issue |
Key Cases Cited
- Granger v. Auto-Owners Ins., 144 Ohio St.3d 57 (2015) (insurer’s duty to defend is broad; insurer need not defend only when claims are clearly and indisputably outside coverage)
- Sharonville v. Am. Emps. Ins. Co., 109 Ohio St.3d 186 (2006) (duty-to-defend principles)
- Cincinnati Indemn. Co. v. Martin, 85 Ohio St.3d 604 (1999) (insurer need not defend if no set of facts alleged would invoke coverage)
- Westfield Ins. Co. v. Hunter, 128 Ohio St.3d 540 (2011) (de novo review applies to insurance contract interpretation)
- Laboy v. Grange Indemn. Ins. Co., 144 Ohio St.3d 234 (2015) (interpret insurance policy to ascertain parties’ intent; plain meaning controls)
- Cleveland Bd. of Edn. v. R.J. Stickle Internatl., 76 Ohio App.3d 432 (1991) (continuing damage that manifested before a later insurer’s policy period is not covered by that later policy)
- GenCorp, Inc. v. AIU Ins. Co., 104 F. Supp. 2d 740 (N.D. Ohio) (discussing trigger theories and applicability of continuous-trigger in certain long-tail injury cases)