733 N.E.2d 1196 | Ohio Ct. App. | 1999
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[EDITORS' NOTE: THIS PAGE CONTAINS HEADNOTES. HEADNOTES ARE NOT AN OFFICIAL PRODUCT OF THE COURT, THEREFORE THEY ARE NOT DISPLAYED.] *321 Plaintiffs Robert and Charlene Carpenter ("the Carpenters") sued defendants Scherer-Mountain Insurance Agency and Richard Mountain ("Scherer-Mountain") after a flood damaged their home. The Carpenters alleged that Scherer-Mountain negligently issued an inadequate flood insurance policy and misrepresented the extent of the policy's coverage. Scherer-Mountain filed a third-party complaint against the Lawrence County Board of Commissioners ("Commissioners"), alleging that any damages the Carpenters suffered were due to the Commissioners' failure to properly implement policies under the National Flood Insurance Program ("NFIP"). The trial court granted summary judgment in favor of Scherer-Mountain on the Carpenters' complaint and in favor of the Commissioners on the third-party complaint. The Carpenters appeal and raise a single assignment of error: *322
"THE COURT BELOW ERRED IN GRANTING SUMMARY JUDGMENT IN FAVOR OF THE DEFENDANTS AND THIRD PARTY PLAINTIFFS, SCHERER-MOUNTAIN INSURANCE AGENCY, ET. AL., AGAINST THE PLAINTIFF-APPELLANTS, ROBERT L. CARPENTER AND CHARLENE CARPENTER."
In turn, Scherer-Mountain appeals the summary judgment granted to the Commissioners on its third-party complaint. Scherer-Mountain raises a single error:
"THE TRIAL COURT IMPROPERLY GRANTED THIRD PARTY DEFENDANT-APPELLEE'S MOTION FOR SUMMARY JUDGMENT AS THERE ARE GENUINE ISSUES OF MATERIAL FACT WHICH PRECLUDE THE ENTRY OF SUMMARY JUDGMENT AS A MATTER OF LAW."
We hold that the trial court erred in part in granting Scherer-Mountain's motion for summary judgment against the Carpenters, as genuine issues of material fact remain concerning the Carpenters' causes of action for misrepresentation. However, the trial court correctly granted summary judgment on the third-party complaint, as the Commissioners are immune from liability for the acts alleged by Scherer-Mountain.
Prior to the closing date for the purchase of the property, the Carpenters contacted Scherer-Mountain to obtain flood insurance. Scherer-Mountain quoted a yearly premium of $220 for the $75,000 of coverage desired by the Carpenters. Scherer-Mountain also told the Carpenters that further paperwork was necessary before it could issue a permanent policy. According to Scherer-Mountain, it explained to the Carpenters that all applications were subject to approval by the NFIP.
On the closing date, the Carpenters paid $220 to Scherer-Mountain to secure a flood insurance policy on their home. Scherer-Mountain accepted this payment and gave the Carpenters a copy of the flood insurance application, which *323 defendant Mountain had signed and completed. The application stated that the Carpenters were requesting coverage of $75,000 with an annual premium of $220. The application also noted that the policy period for the insurance applied for was from October 28, 1993 to October 28, 1994. Several months after the Carpenters applied for the policy, Scherer-Mountain discovered that the Carpenters' property was located in a flood area requiring a higher annual premium for the same level of coverage. Scherer-Mountain informed the Carpenters that the annual premium was $7,000 and not the $220 they had paid in 1993. The $7,000 premium was apparently the amount that Scherer-Mountain should have quoted when the Carpenters initially requested flood insurance coverage.
After Scherer-Mountain informed the Carpenters of the correct premium, the Carpenters filed their lawsuit in October 1994. The complaint alleged causes of action for negligence, misrepresentation, and breach of contract, as well as a cause of action entitled "detrimental reliance." The gravamen of the Carpenters' allegations was that Scherer-Mountain negligently and/or fraudulently quoted a $220 premium for $75,000 in flood insurance coverage when the $220 premium actually entitled them to only $3,700 in coverage. If not for the erroneous insurance quote, the Carpenters claim that they would not have purchased the insurance and would not have proceeded with closing their contract to purchase the property. In 1997, during the pendency of this case, a flood that caused $15,000 in uninsured losses to the Carpenters occurred.
After the Carpenters commenced their lawsuit, Scherer-Mountain filed a third-party complaint against the Commissioners. The third-party complaint alleged that the Commissioners failed to devise, implement, and enforce programs required of them by the NFIP. As a result, Scherer-Mountain alleged that the Commissioners were liable for any damages suffered by the Carpenters.
Scherer-Mountain moved for summary judgment on the Carpenters' complaint. The Commissioners also moved for summary judgment on Scherer-Mountain's third-party complaint, claiming that they were immune from liability under R.C. Chapter 2744. The trial court granted the Commissioners' summary judgment motion, finding that the Commissioners were immune from liability under R.C.
Significantly, none of the parties in this case has included a copy of any flood insurance policy issued by Scherer-Mountain to the Carpenters. Scherer-Mountain argues that there was no contract at all because it only gave the *325 Carpenters a "tentative quote" for a $220 insurance premium. Scherer-Mountain also argues that all flood insurance applications were subject to final approval by the NFIP before issuance.2 However, the record contains an application for flood insurance that recites a $220 premium for $75,000 in coverage. It is also undisputed that the Carpenters paid $220 to Scherer-Mountain and that Scherer-Mountain noted on a receipt that the payment was for an "Annual Premium — Flood Insurance." The Carpenters point to this document as evidence of the flood insurance contract's existence. Even without an insurance policy in the record, we agree with the Carpenters that the application and their payment of $220 provide evidence that a flood insurance contract existed. Nevertheless, we hold that summary judgment was appropriate on this cause of action because no breach of contract occurred as a matter of law.
The relationship between an insurer and an insured is contractual in nature. Nationwide Mut. Ins. Co. v. Marsh (1984),
The Carpenters argue that Scherer-Mountain had a duty to use due care in procuring flood insurance at the level the Carpenters sought. We agree. Because Scherer-Mountain did business with the Carpenters as an insurance agent, it owed a duty to act diligently in obtaining the insurance desired. See Minor, supra,
The elements of a cause of action for intentional misrepresentation are:
"(a) a representation or, where there is a duty to disclose, concealment of a fact,
"(b) which is material to the transaction at hand,
"(c) made falsely, with knowledge of its falsity, or with such utter disregard and recklessness as to whether it is true or false that knowledge may be inferred,
"(d) with the intent of misleading another into relying upon it,
"(e) justifiable reliance upon the representation or concealment, and
"(f) a resulting injury proximately caused by the reliance."
Burr v. Stark Cty. Bd. of Commrs. (1986),
The existence of fraud is generally a question of fact. Kungle v.Equitable Gen. Ins. Co. (1985),
A distinct cause of action for negligent misrepresentation lies against a party "who, in the course of his business, profession or employment, or in any other transaction in which he has a pecuniary interest, supplies false information for the guidance of others in their business transactions * * * if he fails to exercise reasonable care or competence in obtaining the information." Delman v. Cleveland Hts. (1989),
Scherer-Mountain first argues that the Carpenters are unable to establish the "false statement" element as a matter of law. In its answer to the Carpenters' complaint, Scherer-Mountain admitted that it misquoted the annual premium of a $75,000 insurance policy at $220 when it was actually $7,000. While Scherer-Mountain admits this mistake, it argues that this was not an actionable false statement, noting that it gave the Carpenters only a "tentative quote" for flood insurance. Therefore, Scherer-Mountain maintains that it never actually represented that a $220 premium could secure a $75,000 flood insurance policy. Scherer-Mountain's argument in this regard is insufficient to justify summary judgment. The Carpenters have disputed Scherer-Mountain's assertion that the premium quote was "tentative." In their depositions and in their affidavit in opposition to summary judgment, the Carpenters assert that there was nothing "tentative" about Scherer-Mountain's quote. According to the Carpenters, Scherer-Mountain represented that $220 was theactual quote for a $75,000 flood insurance policy. Further, the Carpenters presented summary judgment evidence that Scherer-Mountain accepted payment of $220 for what they believed to be a $75,000 flood insurance policy. In light of these contentions by the Carpenters, there remains a genuine issue of fact of whether Scherer-Mountain negligently or intentionally misrepresented the price of flood insurance to the Carpenters. *329
Scherer-Mountain also attempts to defend summary judgment in its favor by arguing that the Carpenters cannot prove materiality or justifiable reliance as a matter of law. Scherer-Mountain contends that its insurance quote was not material and that the Carpenters could not have relied to their detriment on it because: (1) they were obligated to purchase the Proctorville property regardless of whether they secured flood insurance; and (2) it was only a tentative quote. These are improper bases on which to grant summary judgment to Scherer-Mountain.
As we noted above, the issue of whether the insurance quote given by Scherer-Mountain was "tentative" is disputed by the Carpenters. Thus, whether the Carpenters could have reasonably relied upon the quote when purchasing insurance from Scherer-Mountain is not an issue we can resolve at the summary judgment stage.
We also reject Scherer-Mountain's arguments regarding the Carpenters' obligation to purchase the Proctorville property regardless of whether the insurance premium quote was accurate. Scherer-Mountain seeks to dispel the notion that the Carpenters would not have purchased the property had they known that the actual cost of flood insurance was $7,000 per year. Because the Carpenters already had a binding real estate contract before they approached Scherer-Mountain about buying flood insurance, Scherer-Mountain argues there could be neither materiality nor justifiable reliance associated with its mistaken insurance quote. However, the Carpenters dispute Scherer-Mountain's argument. The Carpenters' depositions indicate that purchasing flood insurance was a condition of obtaining their loan; in turn, obtaining the loan was a condition to the real estate contract closing. Ordinarily, we would decide the meaning of the Carpenters' loan contract with their mortgage lender as a matter of law and determine whether the agreement was actually conditioned on the purchase of flood insurance. However, the parties have not included the loan agreement in the record. Thus, the Carpenters have raised a genuine issue concerning reliance by arguing that they would not have proceeded with the closing if they had known that the correct flood insurance premium was $7,000. If the Carpenters could not secure flood insurance at this price, they may not have been able to obtain the loan. In turn, their failure to obtain a loan would have prevented the real estate contract from closing. Instead, the Carpenters received a flood insurance quote that was affordable and enabled them to obtain the loan from National City, which led them to proceed with the closing. The law of misrepresentation protects a plaintiff's interest in "formulating business judgments without being misled by others into making unwise decisions [that] result in financial loss * * *." Davidson v. Haves (1990),
In granting summary judgment on Scherer-Mountain's third-party complaint, the trial court found that the Commissioners were entitled to "sovereign immunity" under R.C.
As a political subdivision, the Commissioners are entitled to the immunities from tort liability provided in R.C. Chapter 2744.4 This chapter sets forth a three-tiered analysis for determining whether a political subdivision is immune from liability. Cater v. Cleveland (1998),
"For purposes of this chapter, the functions of political subdivisions are hereby classified as governmental functions and proprietary functions. Except as provided in division (B) of this section, a political subdivision is not liable in damages in a civil action for injury, death, or loss to person or property allegedly caused by an act or omission of the political subdivision or an employee of the political subdivision in connection with a governmental or proprietary function."
By its own terms, R.C.
"Subject to sections
2744.03 and2744.05 of the Revised Code, a political subdivision is liable in damages in a civil action for injury, death, or loss to person or property allegedly caused by an act or omission of the political subdivision or its employees in connection with a governmental or proprietary function, as follows * * *."
In turn, R.C.
Scherer-Mountain contends that the exception contained in R.C.
"Except as otherwise provided in section
3746.24 of the Revised Code, political subdivisions are liable for injury, death, or loss to person or property caused by the negligent performance of acts by their employees with respect to proprietary functions of the political subdivision."5
While the R.C.
R.C.
"* * * a function of a political subdivision that is specified in division (C)(2) of this section or that satisfies any of the following:
"(a) A function that is imposed upon the state as an obligation of sovereignty and that is performed by a political subdivision voluntarily or pursuant to legislative requirement;
"(b) A function that is for the common good of all citizens of the state;
"(c) A function that promotes or preserves the public peace, health, safety, or welfare; that involves activities that are not engaged in or not customarily engaged in by nongovernmental persons; and that is not specified in division (G)(2) of this section."
R.C.
On the other hand, R.C.
"* * * a function of a political subdivision that is specified in division (G)(2) of this section or that satisfies both of the following:
"(a) The function is not one described in division (C)(1)(a) or (b) of this section and is not one specified in division (C)(2) of this section;
"(b) The function is one that promotes or preserves the public peace, health, safety, or welfare and that involves activities that are customarily engaged in by nongovernmental persons."
R.C.
The statutory definition of a "governmental function" includes any function that "promotes or preserves the public peace, health, safety, or welfare" *333
and that "involves activities that are not * * * customarily engaged in by nongovernmental persons * * *." R.C.
While not directly on point, R.C.
"The provision or nonprovision of inspection services of all types, including, but not limited to, inspections in connection with building, zoning, sanitation, fire, plumbing, and electrical codes, and the taking of actions in connection with those types of codes, including, but not limited to, the approval of plans for the construction of buildings or structures and the issuance or revocation of building permits * * *."
The crux of Scherer-Mountain's third-party complaint is that the Commissioners failed to timely carry out two "mandatory" NFIP requirements: (1) hiring a *334
Flood Plan Administrator, which the Commissioners did not do until 1993, and (2) implementing a permit program to scrutinize development in flood-prone areas. See Section 59.22(b), Title 44, C.F.R. (requiring appointment of a local flood plan official) and Section 60.3, Title 44, C.F.R. (listing minimum requirements for flood plain regulations that political subdivision must implement). Thus, Scherer-Mountain's allegations challenge only the Commissioners' failure to implement permit and inspection programs that would have prevented the Carpenters' home from being built in a flood plain, at least in the manner it was ultimately constructed. These functions are akin to the "inspection services" defined as governmental functions in R.C.
Ohio case law prior to R.C. Chapter 2744 illustrating the distinction between governmental and proprietary functions bolsters our conclusion that the Commissioners' participation in the NFIP was a governmental function. The Ohio common law rule extended the state's sovereign immunity to counties as political subdivisions of the state. Schenkolewski v. Cleveland MetroparksSystem (1981),
When it undertook participation in the NFIP, the Commissioners acted in the exercise of sovereign interests and therefore acted in a governmental capacity. The NFIP is designed to provide for the welfare of citizens and protect against property losses from flooding. Although the Commissioners' participation in the NFIP benefits local interests, it is also the type of public safety and welfare measure in which the state has an interest as sovereign. Indeed, starting in 1991, Ohio's Chief of the Division of Water became responsible for reviewing floodplain management plans for each municipal corporation or county for compliance with the NFIP. See R.C.
Even if the Commissioners engaged in a governmental function, however, Scherer-Mountain argues that immunity cannot be applied because their actions were not "discretionary" in nature. When the Commissioners enacted a resolution to participate in the NFIP, Scherer-Mountain notes that they became subject to the various requirements imposed by the federal regulations governing the program. Scherer-Mountain contends that immunity is afforded only for governmental functions "characterized by the exercise of a high degree of discretion." Thus, while the Commissioners would be immune from liability for making the policy decision not to join the NFIP, they are liable for failing to properly implement their duties under the program after making the decision to join. This argument is also meritless.
Scherer-Mountain's argument attempts to draw a distinction between policymaking and implementation. Prior to the General Assembly's enactment of R.C. Chapter 2744, the Ohio Supreme Court partially abrogated sovereign immunity for both cities and counties, drawing a distinction between basic policy functions and implementation functions. The Supreme Court held that no tort action could lie against a county for acts or omissions involving executive or planning functions or the making of a basic policy decision characterized by a high degree of official judgment or discretion. Zents v. Bd. of *336 Commrs. (1984),
As an additional ground for summary judgment, the trial court also held that the Commissioners were immune from liability because their alleged failure to implement and enforce the NFIP programs was a "discretionary action" falling within the parameters of R.C.
In a final argument that the Commissioners are not immune from liability, Scherer-Mountain invokes R.C.
Scherer-Mountain's assignment of error is overruled.
AFFIRMED IN PART, REVERSED IN PART, AND REMANDED.
The Court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this Court directing the Lawrence County Common Pleas Court to carry this judgment into execution.
Any stay previously granted by this Court is hereby terminated as of the date of this entry.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions.
Kline, P.J. and Abele, J.: Concur in Judgment and Opinion.
For the Court
BY: ___________________________ William H. Harsha, Judge