2014 Ohio 2775
Ohio Ct. App.2014Background
- Will Repair (Ohio Office Solutions) discovered multiple manufacturing dies and numerous office components missing from its Cleveland warehouse; one die was recovered at a scrap yard and admitted stolen by employee Dan Copen.
- Other missing items (estimated replacement cost ~$780,766.50) were not recovered; there was no evidence of forced entry, alarm activation, or other physical signs of theft.
- Will Repair’s commercial property policy with Grange provided coverage for direct physical loss but excluded (a) theft by employees and (b) loss of property "where the only evidence of the loss or damage is a shortage disclosed on taking inventory" or where "there is no physical evidence to show what happened to the property."
- Will Repair filed suit for declaratory judgment and breach of contract after Grange denied the claim. Will Repair conceded the admitted-employee-theft die was excluded but argued the remaining loss should be covered.
- The trial court granted summary judgment for Grange, holding the employee-theft and missing-property/no-physical-evidence exclusions barred coverage; the court found no genuine issue of material fact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the policy covers the missing property given employee-theft and missing-property exclusions | Except for the one die Copen admitted to stealing, Will Repair says there is no evidence tying its employee to the other losses, so coverage for theft should apply | Grange says policy expressly excludes losses from employee theft and losses with no physical evidence of what happened to the property | Court held exclusions apply: employee-theft exclusion excludes the admitted die; missing-property/no-physical-evidence exclusion bars coverage for the remaining missing items because no physical evidence showed what happened |
| Whether the missing-property/no-physical-evidence exclusion renders theft coverage illusory | Will Repair contends the physical-evidence requirement makes theft coverage illusory because many real-world thefts leave no physical trace | Grange contends the exclusion requires some tangible evidence of loss but does not force insureds to solve thefts; policy still covers thefts where physical evidence exists (e.g., video, alarm, broken locks, documentation) | Court held the exclusion is not illusory; policy can and would provide coverage in scenarios with physical evidence, so exclusion is enforceable |
| Who bears the burden to prove an exclusion applies | Will Repair: insurer must prove applicability of exclusion | Grange: insurer invoked and supported exclusions; facts undisputed | Court noted insured bears initial burden to show coverage but insurer must prove exclusion; here facts undisputed and insurer met its burden |
| Whether summary judgment was appropriate | Will Repair: disputed who stole remaining property — factual dispute precludes summary judgment | Grange: facts are undisputed and policy language is clear; no physical evidence exists to show what happened | Court applied de novo review, found no genuine issue of material fact, and affirmed summary judgment for Grange |
Key Cases Cited
- Grafton v. Ohio Edison Co., 77 Ohio St.3d 102 (Ohio 1996) (summary judgment de novo review standard)
- Westfield Ins. Co. v. Custom Agri Sys., 133 Ohio St.3d 476 (Ohio 2012) (contract interpretation principles for insurance policies)
- Sharonville v. American Emp. Ins. Co., 109 Ohio St.3d 186 (Ohio 2006) (insurance exclusion construed to apply only to what is clearly intended to be excluded)
- Continental Ins. Co. v. Louis Marx & Co., 64 Ohio St.2d 399 (Ohio 1980) (insurer bears burden to prove applicability of an exclusion)
- CTSC Boston v. Continental Ins. Co., 25 Fed.Appx. 320 (6th Cir. 2001) (upholding physical-evidence requirement to deny coverage for missing property)
- Natl. Grange Mut. Ins. Co. v. Elegant Slumming, Inc., 59 A.3d 928 (Del. 2013) (interpreting "physical evidence" as tangible items, documents, or records)