2020 Ohio 4294
Ohio Ct. App.2020Background
- LTF 55 Properties and Garda were additional insureds on a Charter Oak commercial policy issued to Profac; Profac (Merritt) paid premiums and told Appellants not to contact insurers after an October 19, 2016 fire.
- Appellants learned of the fire Oct. 19–24, 2016; they waited ~5 months and did not notify Charter Oak until March 23, 2017.
- Appellants settled with tenant NEO and its insurer Grange for $100,000 on November 20, 2016 and released NEO/Grange; Appellants later claimed additional damages totaling ~$366,000.
- Charter Oak denied coverage (Dec. 20, 2017; affirmed Mar. 30, 2018) based on late notice and alleged impairment of subrogation rights; Appellants sued for breach of contract, bad faith, and declaratory relief.
- In the trial court Charter Oak moved for summary judgment relying in part on an affidavit by its claims professional; Appellants sought additional discovery after his deposition showed gaps in his personal knowledge and moved to compel; the trial court granted Charter Oak summary judgment and declared the motion to compel moot.
- The court of appeals reversed and remanded, finding genuine issues of material fact about notice, subrogation/prejudice, bad faith, and that the trial court abused its discretion by resolving summary judgment while a discovery dispute was unresolved.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether five-month delay breached policy’s “prompt notice” requirement | Delay was reasonable under the circumstances (Profac told Appellants Profac/agent would handle claim; Appellants only later realized loss exceeded NEO settlement) | Five-month delay was deliberate/self‑serving and unreasonable as a matter of law | Reversed: reasonableness is a factual inquiry; genuine issue of material fact exists as to whether notice was timely |
| Whether Appellants’ settlement/release and cleanup impaired Charter Oak’s subrogation rights | Settlement with tenant (permitted by policy) and cleanup did not necessarily impair subrogation; truck may have been available elsewhere; insurer could have pursued EFI Global materials | Release and site alteration prevented Charter Oak’s investigation and impaired subrogation as a matter of law | Reversed: policy allowed waiving tenant claims; factual disputes exist about impairment and truck/EFI materials availability |
| Whether Charter Oak was prejudiced (and thus justified in denying coverage) | Any prejudice is disputed; Charter Oak allegedly failed to pursue available EFI Global investigation materials and thus cannot establish prejudice | Delay and cleanup prejudiced insurer’s ability to investigate and right to subrogate | Reversed: insurer failed to show prejudice as a matter of law; factual issues remain, especially given claimant’s evidence that EFI Global materials were available and insurer did not obtain them |
| Whether summary judgment should have been entered while Appellants’ motion to compel was pending | Trial court granted Civ.R.56(F) time for discovery; Appellants timely deposed insurer’s witness and then sought targeted additional discovery; ruling on SJ while motion to compel pending prejudiced Appellants | Insurer refused further discovery pending SJ ruling; trial court allowed SJ | Reversed: trial court abused discretion by ruling before resolving discovery dispute; Appellants were prejudiced and the motion to compel remains for resolution on remand |
Key Cases Cited
- Ferrando v. Auto-Owners Mut. Ins. Co., 98 Ohio St.3d 186 (establishes two‑step Ferrando test for late notice: whether notice was reasonable under all circumstances, then whether insurer was prejudiced)
- Ormet Primary Aluminum Corp. v. Employers Ins. of Wausau, 88 Ohio St.3d 292 (reasonableness of late notice can be decided as a matter of law only when delay is extreme and unexcused)
- Ruby v. Midwestern Indemn. Co., 40 Ohio St.3d 159 (recognizes notice protects subrogation and investigation; prejudice analysis required)
- Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552 (sets standard for insurer bad‑faith: denial lacking reasonable justification constitutes bad faith)
- Sharonville v. Am. Emp. Ins. Co., 109 Ohio St.3d 186 (insurance‑policy interpretation is a question of law; ambiguities construed against insurer)
- Gomolka v. State Auto. Mut. Ins. Co., 70 Ohio St.2d 166 (contract language given its ordinary meaning; ambiguities resolved for insured)