Ohio Security Insurance Company v. Best Inn Midwest, LLC
23-1696
| 7th Cir. | Jul 10, 2025Background
- Best Inn Midwest, LLC owned and operated a hotel in Indianapolis and insured it under a commercial property policy from Ohio Security Insurance Company.
- The insurance policy excluded coverage for vandalism if the building was "vacant" for 60 consecutive days, defined as less than 31% occupancy or use in customary operations.
- Following air conditioning vandalism, Ohio Security asked Best Inn for occupancy records to determine vacancy but received minimal or no cooperation.
- Ohio Security sued for a declaratory judgment of non-coverage due to vacancy; Best Inn counterclaimed alleging bad faith denial.
- Best Inn repeatedly failed to comply with numerous court-ordered discovery requests for records showing occupancy, resulting in sanctions.
- The district court sanctioned Best Inn by deeming the hotel vacant, granting summary judgment to Ohio Security on Best Inn’s bad faith claim. Best Inn appealed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Discovery Sanctions Validity | Best Inn’s noncompliance, bad faith justified severe sanction | Noncompliance was mainly counsel’s fault, not Best Inn | Sanction was appropriate and not an abuse of discretion |
| Whether Hotel Was Vacant Under Policy | Records unproduced; should be deemed vacant | Hotel was not vacant, some documents lost to fire or theft | Affirmed hotel was vacant as matter of law |
| Summary Judgment on Bad Faith Counterclaim | No coverage owed due to vacancy, so no bad faith | Denial was in bad faith due to adjuster error | No bad faith; summary judgment was proper |
| Causation for Discovery Failures | Best Inn ultimately responsible for records regardless of lawyer | Unfair to blame Best Inn for lawyer’s errors | Litigants are bound by their lawyers’ actions |
Key Cases Cited
- Chambers v. NASCO, Inc., 501 U.S. 32 (federal courts’ inherent sanctioning authority)
- Anderson v. City of Bessemer City, N.C., 470 U.S. 564 (credibility determinations left to trial courts)
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Choice Hotels Int'l, Inc. v. Grover, 792 F.3d 753 (litigants are bound by attorney actions)
- Rice v. City of Chicago, 333 F.3d 780 (factors for imposing discovery sanctions)