LTF 55 PROPERTIES, LTD., ET AL., v. CHARTER OAK FIRE INSURANCE CO., ET AL.,
No. 108956
COURT OF APPEALS OF OHIO, EIGHTH APPELLATE DISTRICT, COUNTY OF CUYAHOGA
September 3, 2020
[Cite as LTF 55 Prob. Ltd. v. Charter Oak Fire Ins. Co., 2020-Ohio-4294.]
JUDGMENT: REVERSED AND REMANDED
RELEASED AND JOURNALIZED: September 3, 2020
Civil Aрpeal from the Cuyahoga County Court of Common Pleas Case No. CV-18-905321
Appearances:
Paul W. Flowers Co., L.P.A., Paul W. Flowers, and Louis E. Grube; Plevin & Gallucci Co., L.P.A., David R. Grant, and Frank L. Gallucci, III, for appellants.
Gregory and Meyer, P.C., and Michele A. Chapnick, for appellee.
MARY EILEEN KILBANE, J.:
{¶ 1} Plaintiffs-appellants LTF 55 Properties, Ltd. (“LTF“) and Garda Arch Fab, LLC (“Garda“) (collectively, “Appellants“) appeal the grant of summary
I. FACTUAL BACKGROUND
A. The Parties
{¶ 2} LTF owns property, buildings, and certain contents at 1873 East 55th Street, Cleveland, OH 44103 and 1873 East 55th Street (Rear), Cleveland, OH 44103 (the “Property“). LTF leased the Property to Garda, which operated a business and owned certain contents there. Frank Tombazzi (“Tombazzi“) is the co-owner and manager of LTF and co-manager of Garda. LTF also leased a portion of the Property to another tenant, NEO Contractors (“NEO“), whose principal is Brian Petruccielli (“Petruccielli“). NEO is insured by Grange Mutual Casualty Company (“Grange“).
{¶ 3} Charter Oak is a corporation that sells insurance policies in Ohio. It is a property-casualty affiliate of Travelers Insurance, but the two are one-in-the-same for the purposes of this appeal. Charter Oak issued Commercial Insurance Policy No. Y-630-4924X027-COF-16 (the “Policy“) to Profac, Inc. d.b.a. Merritt Woodwork (“Profac“) as a Named Insured, with a policy period of March 1, 2016, to March 1, 2017, subject to various terms and conditions within the Policy. CBIZ Insurance Services (“CBIZ“) was the insurance agent or broker that arranged the Charter Oak coverage for Profac.
B. The Claim
{¶ 5} A fire occurred on the Property on October 19, 2016. The Cleveland Fire Department responded to the fire after being alerted by a fire alarm system. Rembiesia Dep. at exhibit No. 5. The Clevelаnd Fire Department‘s report states that the fire started in a vehicle that NEO kept on the Property; NEO‘s owner had left the truck connected to a snow plow battery that he had been repairing.
{¶ 6} Appellants were told about the fire that same day. They hired Alex N. Sill Company (“Sill“), a public adjuster, to advise them on how to handle the incident. Tombazzi, Appellants’ principal, testified that Sill repeatedly instructed Appellants to file an insurance claim with Charter Oak starting around October 24, 2016.
Please do not talk to anybody – Keith and Nick are on the way down. You are not to contact anyone – this is MY issue is [sic] it is MY insurance. My agent is advised and they will dispatch adjuster.
(Emphasis sic.) R. 16 at exhibit No. 1.
{¶ 8} Appellants waited five days after the incident to email Merritt because they knew Merritt “was going to be upset about it” and because they did not fully realize the extent of the damage. Tombazzi Dep. 102:18-22. Appellants did not notify Charter Oak in October 2016, so that Merritt, whose company had been paying the premiums, could decide how to handle the situation. Tombazzi Dep. 103:7-14.
{¶ 9} NEO‘s insurance cоmpany, Grange, hired EFI Global to investigate the fire. EFI Global documented its investigation, with a report and at least 65 photographs of the truck and the surrounding scene, but those materials are not available for consideration in this appeal.2 Charter Oak contends that EFI Global or Grange refused to share the investigation file with Charter Oak. However, Scott Rembiesa (“Rembiesa“), the Charter Oak claim professional assigned to Appellants’ claim, testified that a Grange representative did offer to provide EFI Global‘s
{¶ 10} On November 20, 2016, Appellants settled with NEO and its insurer, Grange, for $100,000 for fire damage to Appellants’ Property. Appellants believed that NEO‘s policy limit was $100,000. In exchange, Appellants released all claims against NEO, Petruccielli, and Grange. Appellants did not inform Charter Oak of the settlement and release before it was executed. They also did not notify Charter Oak of their claim in November 2016, believing that the settlement would cover all their damages. Id. at 104:13-105:2.
{¶ 11} At some point after the fire, Appellants’ business venture with Profac fell apart. Appellants realized that the total amount of the loss exceeded the $100,000 settlement amount around January 2017. However, Appellants did not notify Charter Oak in January 2017 in order to maintain the status quo with Profac until tax issues related to their business divorce were settled. Tombazzi Dep. at 106:6-24. The tax issues were resolved around the end of February or beginning of March 2017. Id. at 106:22-24. Following the resolution of the tax issue, Appellants notified Charter Oak of their loss and requested coverage under the Policy on March 23 2017, about five months after the fire.
{¶ 13} In the five months between the fire in October 2016 and Appellants’ notice to Charter Oak in March 2017, NEO and Garda employees had cleaned up the site of the fire at the Property. The NEO truck believed to have caused the fire wаs removed from the Property along with other items Appellants claimed were damaged in the fire. It is not clear from the record whether the truck is available somewhere for inspection.
{¶ 14} Charter Oak took the sworn testimony of Tombazzi and Merritt before issuing a decision on Appellants’ claim. Afterwards, Charter Oak denied the claim on December 20, 2017, citing Appellant‘s failure to provide timely notice. Appellants’ requested reconsideration of their claim. Charter Oak affirmed the denial by letter on March 30, 2018.
C. The Policy
{¶ 15} Charter Oak attached a copy of the Policy to its summary judgment motion and authenticated it by affidavit. Pursuant to
{¶ 17} The Policy also contained a subrogation provision titled “Transfer of Rights of Recovery Against Others to Us.” Charter Oak claimed that Appellants’ delayed notice prohibited it from exercising its subrogation rights under the Policy. The section provides, in relevant part:
If any person оr organization to or for whom we make payment under this Coverage Part has rights to recover damages from another, those rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after loss to impair them. But you may waive your rights against another party in writing:
* * *
(b) After a loss under this Coverage Part only if, at time of loss, that party is one of the following:
* * *
(3) Your tenant.
* * *
As required by the loss conditions and additional conditions referenced above, it is your responsibility to provide Charter Oak with prompt notice of the loss and not to impair Charter Oak‘s subrogation rights.
{¶ 18} Appellants filed a complaint against Charter Oak, Profac, and CBIZ on October 12, 2018. They raised three causes of action against Charter Oak: (1) breach of contract; (2) bad faith; and (3) declaratory judgment.
{¶ 19} Charter Oak answered the complaint on December 14, 2018, and then moved for summary judgment on January 11, 2019. Charter Oak‘s motion for summary judgment attached the following: (1) Appellants’ complaint, which attached (a) the declarations pages of the Policy, (b) a copy of the change endorsement that added Appellants as additional named insureds to the Policy, and (c) the October 24, 2016 emails between Appellant and Profac instructing Appellants not to contact anyone else about the claim and stating that Profac had informed its insurance agent of the fire; (2) the transcript of the examination under oath of Tombazzi, taken on October 17, 2017; and (3) the affidavit of Rembiesa, which attached (a) copies of Appellants’ settlement and release with NEO and its insurer, (b) the $100,000 settlement check from Grange to Appellants, (c) a copy of Grange‘s declaration page, (d) Appellants’ sworn statement in proof of loss dated September 15, 2017, (e) the December 20, 2017 denial of claim letter from Charter Oak to Appellants, (f) the March 30, 2018 letter reaffirming the denial of the claim; and (4) the affidavit of Kenneth Kupec (“Kupec“), Second Vice President of Document Management for Travelers Indemnity Company, which is affiliated with Charter Oak. Kupec‘s affidavit authenticated and attached the Policy.
{¶ 21} In that time, Appellants served Charter Oak with written discovery requests on April 24, 2019. Charter Oаk responded to those requests on May 22, 2019, claiming to have provided all nonprivileged or protected records. Appellants deposed Rembiesa on May 30, 2019, which they claim was the first mutually agreeable date. On June 10, 2019, Appellants requested dates to depose three additional Charter Oak employees sometime after their opposition to summary judgment was due.
{¶ 22} Appellants filed a brief in opposition to Charter Oak‘s motion for summary judgment on June 11, 2019. Appellants’ opposition brief attached the following evidence: (1) the affidavit of David R. Grant, lead counsel for Appellants, which attached (a) a November 18, 2016 email from Grange stating that NEO‘s policy limits were $100,000, (b) a February 4, 2019 email from Grange stating the same, (c) documents regarding EFI Global‘s investigation of NEO‘s fire loss claim that was conducted before Appellants settled with NEO; and (2) two reports prepared by the Cleveland Fire Department regarding its investigation of the fire at the Property.
{¶ 24} On July 16, 2019, more than one month after filing their opposition to summary judgment, Appellants moved to compel discovery against Charter Oak pursuant to
{¶ 25} Charter Oak did not agree to conduct additional depositions until after the court ruled on its summary judgment motion. In their brief opposing the July 22, 2019 motion to compel, Charter Oak claimed that Appellants were not entitled
{¶ 26} On August 2, 2019, the trial court granted Charter Oak‘s motion for summary judgment, dismissing all claims against Charter Oak and declaring no just cause for delay. The trial court denied the motion to compel as moot on August 5, 2019, based upon its order granting summary judgment. This appeal follows. Appellants have presented two assignments of error for our review:
Assignment of Error No. 1
The trial court erred as a matter of law, and otherwise committed an abuse of discretion, by declaring that Plaintiff-Appellants’ motion to compel was moot after summary judgment was granted.
Assignment of Error No. 2
The trial court erred, as a matter of law, by granting summary judgment upon the claim for insurance coverage in favor of Defendant-Appellee, Charter Oak Fire Insurance Company.
III. LAW AND ANALYSIS
{¶ 27} We will discuss Appellants’ second assignment of error first for ease of discussion.
A. Summary Judgment
{¶ 28} Appellants brought three claims against Charter Oak: (1) breach of contract; (2) bad faith; and (3) declaratory judgment. The trial court granted summary judgment to Charter Oak on each of Appellants’ claims. We will review each claim in turn.
{¶ 29} “Summary judgment is a procedural device designed to terminate litigation and to avoid a formal trial where there is nothing to try.” Burkes v. Stidham, 107 Ohio App.3d 363, 370, 668 N.E.2d 982 (8th Dist.1995), citing Norris v. Ohio Std. Oil Co., 70 Ohio St. 2d 1, 433 N.E.2d 615 (1982). “Summary judgment is not appropriate where the facts are subject to reasonable dispute when viewed in a light favorable to the nonmoving party.” Burkes at 370, citing Mers v. Dispatch Printing Co., 19 Ohio St. 3d 100, 104, 483 N.E.2d 150 (1985).
{¶ 30} We review summary judgment appeals de novo:
We review the trial court‘s decision on summary judgment de novo. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 1996-Ohio-336, 671 N.E.2d 241 (1996). In so doing, we use the same standard as the trial court. Lorain Natl. Bank v. Saratoga Apts., 61 Ohio App.3d 127, 129, 572 N.E.2d 198 (9th Dist.1989). The party moving for summary judgment bears the initial burden of apprising the trial court of the basis of its motion and identifying those portions of the record which demonstrate the absence of a genuine issue of fact on an essential element of the nonmoving party‘s claim. Dresher v. Burt, 75 Ohio St.3d 280, 293, 1996-Ohio-107, 662 N.E.2d 264 (1996). Once the moving party meets its burden, the burden shifts to the nonmoving party to set forth specific facts demonstrating a genuine issue of material fact exists. Id. To satisfy this burden, the nonmoving party must submit evidentiary materials showing a genuine dispute over material facts. PNC Bank, N.A. v. Bhandari, 6th Dist. Lucas No. L-12-1335, 2013-Ohio-2477, ¶ 9.
Kaplan Trucking Co. v. Grizzly Falls Inc., 2017-Ohio-926, 86 N.E.3d 845, ¶ 15 (8th Dist.), quoting Lillie & Holderman v. Dimora, 8th Dist. Cuyahoga No. 100989, 2015-Ohio-301, ¶ 9.
{¶ 31} The following elements must be established to support a grant of summary judgment:
The motion for summary judgment may only be granted when the following are established: (1) that there is no genuine issue as to any material fact; (2) that the moving party is entitled to judgment as a matter of law; and (3) that reasonable minds can come to but one conclusion, and that conclusion is adverse to the party against whom the motion for summary judgment is made, who is entitled to have the evidence construed most strongly in its favor. Harless v. Willis Day Warehousing Co., 54 Ohio St.2d 64, 67, 375 N.E.2d 46 (1978);
Civ.R. 56(C) .
Kaplan Trucking at ¶ 16, quoting Lillie & Holderman at ¶ 9.
2. Evidentiary Materials
{¶ 32}
{¶ 33} Under
{¶ 34} However, “[f]ailure to move to strike or otherwise object to documentary evidence submitted by a party in support of, or in opposition to, a
{¶ 35} Appellants raised the issue below and in their appeal that portions of Rembiesa‘s affidavit, submitted in support of Charter Oak‘s motion for summary judgment, are objectionable because the statements were not made with personal knowledge. Charter Oak also objected to three documents submittеd with Appellants’ opposition to summary judgment by way of a motion to strike. The trial court did not expressly rule on any of these objections and there is no indication the trial court limited its review to certain materials. Accordingly, we must presume the trial court denied these evidentiary objections. See Sarrough v. Budzar, 2015-Ohio-3674, 38 N.E.3d 921, ¶ 42 (8th Dist.), citing Mayfair Village Condominium Owners Assn. v. Grynko, 8th Dist. Cuyahoga No. 99264, 2013-Ohio-2100, ¶ 4, fn. 2 (“Although the trial court never ruled on the motion, if a motion is not expressly decided by the trial court when the case has concluded, the motion is presumed to have been denied.“), citing Kostelnik v. Helper, 96 Ohio St.3d 1, 2002-Ohio-2985, 770 N.E.2d 58.
{¶ 36} In our de novo review, we will only review the admissibility of the documents to which Charter Oak and Appellants specifically objected. Of those documents, we will only consider those that comply with
a) Charter Oak‘s Evidentiary Objections
{¶ 37} Charter Oak moved to strike three exhibits attached to Appellants’ opposition to summary judgment: the two emails from Grange representing that NEO‘s policy limit was $100,000 and materials summarizing EFI Global‘s investigation of the fire that were attached to Appellants’ counsel‘s affidavit. The documents were authenticated through an affidavit executed by Appellants’ counsel. Charter Oak first objected to the admissibility of the documents on the grounds that Appellants’ counsel lacked personal knowledge of their preparation and, therefore, could not authenticate the documents. It further argued that emails regarding the policy limits were inadmissible opinions. Charter Oak did not raise specific objections regarding any other exhibits or documents.
{¶ 38} Appellants responded to the motion to strike, arguing that counsel was able to personally authenticate email messages he received and that none of the exhibits were offered as opinion evidence. Rather, Appellants asserted the exhibits were offered to demonstrate that (1) Grange represented NEO‘s policy limit as $100,000 to Appellants and (2) Grange had conducted an investigation before
{¶ 39} The November 18, 2016 email from Grange and the materials related to EFI Global‘s investigation attached to Appellants’ counsel‘s affidavit were not properly authenticated under
{¶ 40} Appellants’ counsel was not included on the November 18, 2016 email from Grange and cannot authenticate it. The EFI Global documents do not appear
b) Appellants’ Evidentiary Objection
{¶ 41} Appellants did not file a motion to strike, but otherwise objected to the affidavit of Rembiesa that Charter Oak submitted in support of its motion for summary judgment. In its opposition brief, Appellants demonstrated that several assertions in Rembiesa‘s affidavit attached to Charter Oak‘s motion for summary judgment were not based on his own personal knowledge or were inaccurate. Appellants reiterated their objections two more times, in their surreply in opposition to summary judgment and in their motion to compel.
{¶ 42} The trial court appears to have relied on Rembiesa‘s affidavit in granting summary judgment. It found that the truck had been disposed of and that Charter Oak had been prevented from adequately investigating the claim because the site had been cleaned before Appellants provided notice. The only evidentiary support for these conclusions are the statements in Rembiesa‘s affidavit.
{¶ 44} Finally, we note that even if we consider the inadmissible evidence, as the trial court appeared to do, we still find that Charter Oak is not entitled to summary judgment.
3. Summary of the Arguments
{¶ 45} The Policy required Appellants to provide “prompt” notice of any loss or claim. In addition, Appellants were required to do everything necessary to not “impair” defendant‘s subrogation rights. According to Charter Oak, Appellants’ five-month delay in providing notice of the fire breached the notice and subrogation provisions and allowed it to deny coverage in good faith. Chartеr Oak further argues that the delay prejudiced it because the fire damage had been cleaned up before Charter Oak itself was able to investigate the claim and because Appellants entered
{¶ 46} The trial court granted summary judgment on the basis that Appellants breached the notice provision of the Policy and that the breach caused prejudice to Charter Oak. In its order granting summary judgment, the trial court found that Appellants’ delay in providing notice “was unreasonable and deliberate” where they “chose not to make a claim in order to protect their own prospective business deal and to avoid paying some taxes.” The trial court held that the delay “was a breach of the prompt notice provision * * *.”
{¶ 47} The trial court next determined that the unreasonable delay actually prejudiced Charter Oak because Appellants settled with NEO and its insurer, Grange, and provided a full release from liability. The court reasoned that there was some evidence that the settlemеnt was below NEO‘s policy limits and that the fire damage had been cleaned up, which prevented Charter Oak from assessing the claim and exercising its subrogation rights against NEO or any other possible tortfeasors.
{¶ 48} As Charter Oak has not argued that Appellants otherwise breached the subrogation provision in its briefs, we will only consider whether Appellants’ notice breached the notice and subrogation provisions of the Policy. See State ex rel. Dunlap v. Sarko, 135 Ohio St.3d 171, 2013-Ohio-67, 985 N.E.2d 450, ¶ 3 (“We will not address the propositions and claims for which relator does not present any argument.“); State v. Kirk, 8th Dist. Cuyahoga No. 108136, 2019-Ohio-4890, ¶ 43,
{¶ 49} Charter Oak‘s initial burden on summary judgment is to demonstrate the absence of a genuine issue of material fact. The information Charter Oak directs us to does the opposite. Although many underlying facts appear to be undisputed, Charter Oak has not directed us to anything in the record or case law that allows us to find, as a matter of law, that Appellants’ notice was unreasonable or that Appellants’ action or inaction prejudiced Charter Oak.
{¶ 50} Based on our determinations regarding Appellants’ breach of contract claim, we also find that the trial court erred in granting summary judgment on Appellants’ bad faith and declaratory judgment actions. Accordingly, we must reverse the ruling of the trial court.
4. Breach of Contract
{¶ 51} Provisions requiring prompt notice of a claim or occurrence are generally considered valid. Ferrando v. Auto-Owners Mut. Ins. Co., 98 Ohio St.3d 186, 2002-Ohio-7217, 781 N.E.2d 927, ¶ 30. The Ohio Supreme Court has explained the general reasons underlying notice provisions in insurance policies:
Notice provisions in insurance contracts serve many purposes. Notice provisions allow the insurer to become aware of occurrences early enough that it can have a meaningful opportunity to investigate. Ruby v. Midwestern Indemn. Co., 40 Ohio St. 3d 159, 161, 532 N.E.2d 730, 732 (1988). In addition, it provides the insurer the ability to determine whether the allegations state a claim that is covered by the policy. See In re Texas E. Transm. Corp. PCB Contamination Ins. Coverage Litigation (E.D.Pa.1992), 870 F. Supp. 1293. It allows the insurer to step in and control the potential litigation, protect its own interests, maintain the proper reserves in its accounts, and pursue possible
{52} In late-notice cases, we must engage in a two-step analysis to determine whether the late notice bars recovery. Ferrando at ¶ 89. First, we must determine whether the insured breached the notice provision by failing to provide prompt noticе. Id. Where, as here, a policy requires prompt notice, the insurer is entitled to notice “within a reasonable time in light of all the surrounding facts and circumstances.” Ferrando at ¶ 90, quoting Ruby, syllabus.
{53} Second, if we find a breach of the notice provision, we must determine whether the breach prejudiced the insurer so that coverage must be forfeited. Ferrando at 89. “Unreasonable notice gives rise to a presumption of prejudice to the insurer, which the insured bears the burden of presenting evidence to rebut.” Ferrando at ¶ 90.
{54} We engage in the same two-step analysis to determine whether an insured‘s breach of a subrogation provision bars recovery under a policy. Ferrando, 98 Ohio St.3d 186, 2002-Ohio-7217, 781 N.E.2d 927, at ¶ 91. First, we consider whether the subrogation provision was breached. Id. Second, we consider whether the breach was prejudicial to the insurer. Id. A breach gives rise to a presumption of prejudice that the insured must rebut. Id. In either case, if the provision at issue
{55} We first find a genuine issue of material fact as to whether Appellants complied with the prompt notice provision by giving notice “within a reasonable time ‘in light of all the surrounding facts and circumstances.‘” Ferrando at 92, quoting Ruby, syllabus. We also find genuine issues of material fact regarding whether Appellants breached the subrogation prоvision. Further, even if we assume Appellants breached one or both provisions, factual issues exist as to whether Appellants prejudiced Charter Oak.
a) The Prompt Notice Provision
{56} Charter Oak argues that Appellants’ five-month delay in notifying Charter Oak of the claim was unreasonable as a matter of law because the delay was allegedly deliberate and based solely on Appellants’ desire for self-preservation, avoiding taxes, and salvaging their failed business deal with Profac. Appellants argue that the reasonableness of the five-month delay requires a factual determination not appropriate for summary judgment. The trial court agreed with Charter Oak and held:
The delay in this matter was unreasonable and deliberate. Plaintiffs were informed of the need to file a claim * * * the day after the fire. They chose not to make a claim in order to protect their own prospective business deal and to avoid paying some taxes.
{57} “Under Ferrando, a court must consider all the facts and circumstances surrounding the notice to determine whether the insurance company received it within a reasonable time.” Thomas v. Nationwide Mut. Ins. Co., 177 Ohio App.3d 502, 2008-Ohio-3662, 895 N.E.2d 217, ¶ 87 (8th Dist.). Under the summary judgment standard, Charter Oak must identify the basis of its motion and identify portions of the record that demonstrate the absence of a genuine issue of material fact.
{58} We find that whether Appellants’ notice to Charter Oak was reasonable under all the circumstances is a factual determination that cannot be determined on summary judgment. That the circumstances of Appellants’ notice appear to be undisputed does not mean that the reasonableness of their notice can be determined as a matter of law.
{59} To attempt to demonstrate the absence of a genuine issue of material fact as to the reasonableness of Appellants’ notice, Charter Oak has primarily focused on Tombazzi‘s testimony that Appellants waited to notify Charter Oak, in part, because they wanted to keep peace with Profac during their business divorce. Charter Oak argues that the reason for Appellants’ delayed notice renders the notice unreasonable as a matter of law, but has not identified any legal authority that allows us to determine the reasonableness of Appellants’ notice as a matter of law. Accordingly, we find that the trial court erred in granting summary judgment based on a breach of the notice provision.
{60} Whether it was reasonable for Appellants to delay notice until March 2017 is a material issue of fact for a jury to determinе after considering all the circumstances, including that Appellants, at some point, thought Merritt was properly handling the claim and had submitted the requisite notice. A mere four
{61} Charter Oak relies on many cases in support of its argument, but none demonstrate the absence of a material fact as to whether Appellants’ notice was reasonable. Charter Oak first contends that “Ohio courts have repeatedly rejected the notion that delays predicated on expediency or self-interest are somehow acceptable or ‘reasonable‘” and that Appellants’ notice in March 2017, was therefore unreasonable because they delayed notice to preserve a business relationship with Profac. Charter Oak directs us to four cases that purportedly support its argument that delays predicated on expediency or self-interest are per se unreasonable: Am. Emps. Ins. Co. v. Metro Regional Transit Auth., 12 F.3d 591 (6th Cir. 1993) (applying Ohio law); Gidley v. Cincinnati Ins. Co., 9th Dist. Summit No. 20813, 2002-Ohio-1740; Smith v. Liberty Mut. Ins. Co., 9th Dist. Summit No. 21311, 2003-Ohio-3160; MBE Collection, Inc. v. Westfield Cos., Inc., 8th Dist. Cuyahoga No. 79585, 2002-Ohio-1789. Having reviewed each of these cases, we decline to read them as broadly as Charter Oak urges us to.
{63} Gidley and Smith are likewise not analogous to the circumstances of the case before us. In Gidley, the policy imposed a duty to promptly notify the insurer prior to settling with a tortfeasor if the insured intended to seek underinsured motorist coverage. Gidley at *10. The insured failed to give notice of the accident until approximately four years after it occurred and two years after she settled with the tortfeasor. Id. at *11. The reason she gave for the delay was that she could not have filed a claim until after the Ohio Supreme Court decided Scott-Pontzer v. Liberty Mut. Fire Ins. Co., 85 Ohio St.3d 660, 710 N.E.2d 1116 (1999). The Scott-Pontzer case allowed employees and family members to recover
{64} In Smith, 9th Dist. Summit No. 21311, 2003-Ohio-3160, the insureds were required to provide prompt notice, but waited eight years until after the accident and six years after settling with the tortfeasor to do so. Smith at ¶ 61. As in Gidley, 9th Dist. Summit No. 20813, 2002-Ohio-1740, which the Smith court relied on, the insureds’ reason for the delay was that they could not have brought a claim until the Scott-Pontzer decision had been decided. Id. In light of the holding in Gidley, the court concluded that the eight-year delay was unreasonable. Id. at ¶ 63. Here, Appellants are not claiming that they were awaiting new case law before providing notice. Accordingly, neither Gidley nor Smith render Appellants’ notice unreasonable as a matter of law.
{65} Charter Oak also directs us to our decision in MBE Collection, Inc. v. Westfield Cos., Inc., 8th Dist. Cuyahoga No. 79585, 2002-Ohio-1789. Charter Oak claims that it cannot be responsible for Appellants’ claimed loss where Appellants failed to notify Charter Oak despite knowledge that its claim was likely covered
{66} In MBE Collection, the insured received a cease and desist letter dated June 22, 1998, and was named defendant in a lawsuit for copyright infringement and unfair competition on July 30, 1998. MBE at ¶ 36. The case proceeded through December 1998, when the parties settled. Id. The insured still did not provide notice until July 1999. Id. The insured believed her insurance covered the lawsuit, but simply failed to provide notice until seven months after settling the claim against her. Id. at 37. Unlike here, the insured in MBE Collection apparently did not advance any justification for the seven-month delay. Although Charter Oak believes Appellants’ justification for nоt providing notice for five months renders the notice unreasonable, a reasonable mind considering all the circumstances could come to the opposite conclusion.
{67} Charter Oak also overlooks that each of the foregoing cases involved a delay much greater than five months. Am. Emps. Ins. Co., 12 F.3d 591 (6th Cir. 1993), involved a two-year delay. Id. at 592. Gidley involved a delay of four years. Gidley at *11. Smith involved an eight-year delay. Smith at ¶ 61. MBE Collection involved a delay over one year after receiving notice of a potential claim and seven months after settling the claim. MBE Collection at ¶ 36. Thus, they
{68} Charter Oak also asks us to conflate the first Ferrando inquiry with the second. That is, it asks us to find that Appellants’ notice was unreasonable as a matter of law because Charter Oak was allegedly prejudiced by the delay. Such a holding would violate the analysis set forth in Ferrando. Ferrando, 98 Ohio St.3d 186, 2002-Ohio-7217, 781 N.E.2d 927 at ¶ 100 (“[T]he reasonableness inquiry and the prejudice inquiry are separate and distinct.“). In support, Charter Oak directs us to a Sixth Circuit case that applied Michigan law, Steelcase, Inc. v. Am. Motorists Ins. Co., 6th Cir. No. 89-1344, 1990 U.S. App. LEXIS 11310 (July 3, 1990). Charter Oak claims Steelcase is analogous to the instant case and demonstrates that there are no fact issues here. We disagree.
{69} In Steelcase, the Sixth Circuit affirmed the grant of summary judgment to the defendant insurance companies where the insured failed to give timely notice. The policy provision required the insured to provide notice “as soon as praсticable,” but the court did not consider whether notice two years after the loss was reasonable. Rather, it only considered whether the delay caused prejudice. Steelcase at *5-6. Once again, Ohio‘s two-step analysis requires us to first determine whether Appellants’ delay in providing notice was unreasonable. In addition, Steelcase involved a two-year delay. Id. at 3.
{70} Similarly, the court in Downing v. Rockford Dist. Mut. Tornado Ins. Co., 112 Ill.App.2d 340, 250 N.E.2d 827 (1969), cited by Charter Oak, did not apply
{71} Charter Oak also cites to Triple Invest. Group, LLC v. Hartford Steam Boiler Insp. & Ins. Co., 71 F. Supp.3d 733 (E.D.Mich. 2014), another out-of-state case, to attempt to argue that Appellants’ notice was unreasonable because it arrived five months after the fire had occurred and the Property had been altered during the interim. Triple Invest. Group held that there was no question of fact as to whether the insured breached the prompt notice provision by notifying the insurer 30 days after the loss. Triple Invest. Group at 741, citing ABO Petroleum, Inc. v. Colony Ins. Co., E.D.Mich. No. 04-CV-72090-DT, 2005 U.S. Dist. LEXIS 44352 (Apr. 19, 2005). Neither Triple Invest. Group nor ABO Petroleum held that a 30-day delay was per se unreasonable in all instances or should be presumed prejudicial and the alleged justification for the delay in those cases is not analogous here.
{72} Moreover, both cases applied Michigan law and it is clear that Ohio considers reasonablе notice to primarily be an issue of fact for the jury. Ormet at 299; Ferrando, 98 Ohio St.3d 186, 2002-Ohio-7217, 781 N.E.2d 927 at ¶ 99. See also Kaplan Trucking Co. v. Grizzly Falls Inc., 2017-Ohio-926, 86 N.E.3d 845, ¶ 42-43 (8th Dist.) (finding issue of fact as to “the scope of the agency relationship between the parties, required to determine the sufficiency of the notice“); Thomas v. Nationwide Mut. Ins. Co., 177 Ohio App.3d 502, 2008-Ohio-3662, 895 N.E.2d 217, ¶ 102-103 (8th Dist.) (directed verdict was improper where, based on the evidence, reasonable minds could have reached different conclusions regarding whether notice was “prompt“). In Ferrando, Ohio‘s leading case on this issue, the Ohio Supreme Court declined to create a rule that a particular delay was unreasonable and instead held that notice given three and a half years after the accident “was not so late to be unreasonable as a matter of law.” Ferrando at ¶ 6, 93. We must also conclude that Appellants’ five-month delay is not so late to be unreasonable as a matter of law.
{73} Charter Oak also relies on two Ohio cases that predate Ferrando, Ormet Primary Aluminum Corp. v. Emps. Ins. of Wausau, 88 Ohio St.3d 292, 2000-Ohio-330, 725 N.E.2d 646 and Ruby v. Midwestern Indemn. Co., 40 Ohio St.3d 159, 532 N.E.2d 730 (1988). Although the insurers prevailed in both of those cases, neither changes our conclusion here.
{74} The policy in Ormet required the insured to provide notice “as soon as practicable,” which the court determined was synonymous with prompt notice. Ormet at 303. The court concluded that the insured‘s notice, which came 16 years after knowledge of the claim, was unreasonably late as a matter of law and affirmed summary judgment for the insurer. Id. at 305. Ormet acknowledged that reasonable nоtice is usually an issue of fact for the jury, but narrowly held that it could be determined as a matter of law if the delay was significant and unexcused. Ormet at 299. The facts and circumstances in Ormet do not render Appellants’ delay unreasonable as a matter of law.
{76} First and foremost, Appellants did not wait 16 years to provide notice, as in Ormet. They waited five months. Further, Appellants are not advancing the same justification for the 16-year delay that was rejected in Ormet. Rather, Appellants argue that they did not provide notice to Charter Oak until March 2017, because Profac told Appellants that it would handle the claim itself, instructed Appellants not to make a claim, and told Appellants that it had notified its insurance agent of the loss in October 2016. In addition, Appellants claim they were not aware until January 2017 that their losses from the fire exceeded the amount of the settlement with NEO. Thus, Ormet, which dealt with a 16-year delay, does not render Appellants’ notice unreasonable as a matter of law.
{77} In Ruby, the insured was to provide prompt notice of an accident to protect the insurer‘s subrogation rights. Ruby at 161. The insured delayed notice until 11 months after the accident. Id. The court held: “We need not decide whether an eleven-month delay is so unreasonable that prejudice should be presumed, as there is ample evidence that Midwestern was in fact prejudiced by the delay.” Id.
{78} Finally, we will briefly address Charter Oak‘s argument that Profac‘s notice to its insurance agent, CBIZ, in October 2016, did not constitute notice to Charter Oak, as required under the Policy. In making this argument, Charter Oak conclusively states that CBIZ was not Charter Oak‘s disclosed or apparent agent for purposes of notice of loss and therefore could not satisfy the Policy‘s requirement that Charter Oak itself be notified of the claim.
{79} We first note that CBIZ‘s agency status has no impact on what we have already determined, which is that reasonable minds might conclude that Appellants’ notice was reasonable under the circumstances regardless of whether CBIZ was an agent who could accept notice on Charter Oak‘s behalf. Even so, agency status at the time of notice can also be an issue of fact that precludes summary judgment. Kaplan Trucking Co. v. Grizzly Falls Inc., 2017-Ohio-926, 86 N.E.3d 845, ¶ 42-43 (8th Dist.). See also Thomas v. Nationwide Mut. Ins. Co., 177 Ohio App.3d 502, 519, 2008-Ohio-3662, 895 N.E.2d 217 (8th Dist.), quoting Helman v. Hartford Fire Ins. Co., 105 Ohio App.3d 617, 623, 664 N.E.2d 991 (9th Dist. 1995), citing Hartford Cas. Ins. Co. v. Easley, 90 Ohio App.3d 525, 531, 630 N.E.2d 6 (10th Dist. 1993),
{80} Regardless of CBIZ‘s potential agency status, we find a genuine issue of material fact regarding whether Appellants’ notice was reasonable under all the circumstances. Accordingly, we must conclude that the trial court erred in granting summary judgment based on its factual determination that Appellants breached the notice provision.
b) The Subrogation Provision
{81} Charter Oak also appears to argue that Appellants’ actions between the fire in October 2016 and providing notice in March 2017, including failing to inform Charter Oak of its settlement and release with NEO‘s insurer and allowing the Property to be cleaned before Charter Oak had a chance to conduct its own investigation, also bars Appellants’ recovery as a matter of law. Charter Oak argues that Appellants failed to “do everything necessary to secure [Charter Oak‘s] rights and must do nothing after loss to impair them,” as required in the Policy. Appellants counter that they were permitted to execute a settlement and release with its tenant, NEO, and NEO‘s insurer, Garda, and that the cleanup did not impair Charter Oak‘s subrogation rights.
{82} The subrogation provision in the Policy states:
If any person or organization to or for whom we make payment under this Coverage Part has rights to recover damages from another, those
rights are transferred to us to the extent of our payment. That person or organization must do everything necessary to secure our rights and must do nothing after loss to impair them. But you may waive your rights against another party in writing: * * *
After a loss under this Coverage Part only if, at time of loss, that party is one of the following:
* * *
Your tenant.
{83} When interpreting an insurance contract, the Supreme Court of Ohio has explained:
“An insurance policy is a contract whose interpretation is a matter of law.” Sharonville v. Am. Emp. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 N.E.2d 833, ¶ 6. “[W]ords and phrases used in an insurance policy must be given their natural and commonly accepted meaning, where they in fact possess such meaning, to the end that а reasonable interpretation of the insurance contract consistent with the apparent object and plain intent of the parties may be determined.” Gomolka v. State Auto. Mut. Ins. Co., 70 Ohio St.2d 166, 167-168, 436 N.E.2d 1347 (1982), citing Dealers Dairy Prods. Co. v. Royal Ins. Co., 170 Ohio St. 336, 164 N.E.2d 745 (1960), paragraph one of the syllabus.
* * *
Furthermore, “[i]f provisions are susceptible of more than one interpretation, they ‘will be construed strictly against the insurer and liberally in favor of the insured.‘” Sharonville at ¶ 6, quoting King v. Nationwide Ins. Co., 35 Ohio St.3d 208, 519 N.E.2d 1380 (1988), syllabus.
Sauer v. Crews, 140 Ohio St.3d 314, 2014-Ohio-3655, 18 N.E.3d 410, ¶ 10-11.
{84} We first consider whether Appellants breached the Policy by releasing NEO and Grange and find they did not. We find no ambiguity in the subrogation provision regarding Appellants’ ability to waive its rights against its tenant, NEO.
{85} Also, the release of Grange, NEO‘s insurer, could not have impaired Charter Oak‘s subrogation rights because Appellant could not have sued Grange itself for the claimed loss. As Appellants point out, there is no indication that Grange caused the fire and Charter Oak has not directed us to anything in the record to support that it would have had subrogation rights against Grange directly.
{86} We next consider whether Appellants impaired Charter Oak‘s contractual subrogation rights against other third parties, such as the truck manufacturer, by allowing the truck to be disposed and the Property cleaned before Charter Oak itself had a chance to investigate the damage and determine the cause of the fire.
{87} Having reviewed the record, we cannot conclude as a matter of law that Charter Oak‘s subrogation rights were impaired against potential tortfeasors other than NEO. The Cleveland Fire Department report attributed the cause of the fire to the tenant‘s working on his truck battery and plow and gives no indication of another possible cause. The report, therefore, provides some indication that the tenant was the only party against whom Charter Oak could have pursued a subrogation claim, but for the contractual provision allowing for the tenant‘s release. Rembiesa Dep. at exhibit No. 5.
{89} At best, Rembiesa‘s testimony on this point is inadmissible hearsay that does not establish that the truck could not have been inspected in March 2018. Without evidence that the truck was not available for inspection, there is nothing in the record that allows us to conclude that Charter Oak was deprived of the opportunity to inspect the truck or that its subrogation rights were impaired by Appellants’ delayed notice. Accordingly, we find issues of fact as to whether Charter Oak‘s subrogation rights were impaired and, therefore, whether Appellants breached the subrogation clause.
c) Prejudice
{90} Having found genuine issues of material fact as to whether Appellants breached the Policy, summary judgment is not appropriate and we need not consider whether Charter Oak was prejudiced. Ferrando at ¶ 100. Even if we could conclude that Appellants breached the Policy, there is a genuine issue of material fact as to whether either alleged breach caused Charter Oak prejudice.
{92} Charter Oak‘s position is based on the affidavit of Rembiesa, but his deposition testimony reveals that he did not have personal knowledge regarding whether Charter Oak asked for EFI Global‘s files. Rembiesa Dep. at 47:9-48:11; 54:12-22. Moreover, he testified that EFI Global indicated to him that it was willing to share information about its investigation and he stated that EFI Global‘s documents and photos may have been helpful in investigating and evaluating Appellants’ claim. Rembiesa Dep. at 52:19-53:7; 66:18-67:3; 148:5-13. The record further indicates that the EFI Global investigation materials, including 65 photos of the truck and surrounding area, were available to Charter Oak, but Charter Oak made no attempt to obtain and review them before denying Appellants’ claim.
{93} Instead of making any effort to review these potentially helpful investigative materials, Charter Oak discredited them without even seeing them. Charter Oak claims EFI Global did not complete a sufficient fire cause and origin report to allow Charter Oak to determine the cause and evaluate Appellants’
5. Bad Faith
{94} Appellants alleged that Charter Oak denied its claim in bad faith. Charter Oak argued on summary judgment that its denial was based upon Appellants’ breaches of the notice and subrogation provisions of the Policy and, therefore, in good faith and reasonably justified. Appellants countered that any delay in notice or postfire cleanup would have only justified a reduction in recovery rather than a complete denial. The trial court‘s judgment entry regarding summary judgment does not expressly address Appellants’ bad faith claim.
{95} The Ohio Supreme Court has determined that an insurer “fails to exercise goоd faith in processing a claim of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification therefor.” Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 644 N.E.2d 397 (1994), paragraph one of the syllabus. Reasonable justification does not exist where an insurer‘s refusal to pay a claim is arbitrary or capricious. Hart v. Republic Mut. Ins. Co., 152 Ohio St. 185, 188, 87 N.E.2d 347 (1949).
6. Declaratory Judgment
{97} Appellants also sought declaratory judgment in its complaint against Charter Oak. The trial court‘s function in granting summary judgment in a declaratory judgment action is to expressly declare the parties’ respective rights and obligations. Haberley v. Nationwide Mut. Fire Ins. Co., 142 Ohio App.3d 312, 313-314, 755 N.E.2d 455 (8th Dist. 2001). The trial court determined that Appellants were not entitled to recover under the Policy because they had breached the notice provision and the breach resulted in prejudice to Charter Oak. Having found issues of fact regarding whether Appellants breached the Policy and, if so, whether that
{98} Appellants’ second assignment of error is sustained.
B. Motion to Compel
{99} In their first assignment of error, Appellants argue that the trial court erred or abused its discretion by granting summary judgment to Charter Oak without first considering their pending motion to compel. We will apply an abuse of discretion standard to review whether summary judgment should have been granted when Appellants’ discovery motion was pending. State ex rel. Dept. of Mental Health Office of Support v. Levine, 8th Dist. Cuyahoga No. 51708, 1987 Ohio App. LEXIS 6874, *4 (Mar. 19, 1987). However, “[e]ven when an abuse of discretion results, a judgment preventing further discovery will not be reversed unless the ruling causes substantial prejudice.” Braswell v. Duncan, 8th Dist. Cuyahoga No. 72038, 1997 Ohio App. LEXIS 5310, *16 (Nov. 26, 1997), citing Shaver v. Std. Oil Co., 6th Dist. Huron No. H-89-58, 1990 Ohio App. LEXIS 6010 (Oct. 19, 1990).
{100} We first clarify that only the pendency of the motion to compel is before us. The merit of the motion is not up for our review as the trial court merely declared it moot. This opinion should not be construed as a review of the merit of Appellants’ motion to compel. See Bridge v. Midas Auto Experts, 8th Dist. Cuyahoga No. 94115, 2010-Ohio-4681, ¶ 12 (refusing to review motion that trial court declared moot); Canfield v. Columbia Gas Transm., LLC, 9th Dist. Lorain No. 15CA010838, 2016-Ohio-5662, ¶ 20 (declining to review implied dismissal of
{101} With that in mind, we consider whether the trial court erred in granting summary judgment while Appellants’ motion to compel was pending. Based on the facts before us, we find that the trial court abused its discretion and that the trial court‘s failure to consider the motion to compel prejudiced Appellants.
{102} Appellants’ complaint was filed on December 14, 2018. Less than one month later, on January 11, 2019, Charter Oak moved for summary judgment. The summary judgment motion largely relied on statements averred in Rembiesa‘s affidavit. Appellants timely moved for a continuance under
{103} After requesting some written discovery, Appellants deposed Rembiesa on May 30, 2019. Rembiesa‘s deposition revealed that his affidavit was largely based on hearsay from other Charter Oak employees. By letter on June 10, 2019, Appellants requested the production of certain documents not yet produced and dates to depose three employees Rembiesa identified. Charter Oak did not
{104} Appellants contacted Charter Oak on July 9, 2019, this time by email, again seeking the discovery they sought on June 10, 2019. Citing the June 11, 2019 summary judgment deadline, Charter Oak refused to engage in further discovery while the summary judgment motions were pending. Appellants sent another email to Charter Oak on July 10, 2019. Charter Oak replied the next day, again refusing to conduct further discovery.
{105} Appellants moved to compel discovery from Charter Oak pursuant to
{106} Although Appellants should have at least notified the trial court of the discrepancy between Rembiesa‘s affidavit and deposition immediately, it raised the issue in three separate filings beginning with its opposition on June 11, 2019.
{107} “The Ohio Rules of Civil Procedure provide a right to the ‘liberal discovery of information.‘” Allied Debt Collection of Virginia, L.L.C. v. Nautica Entertainment, L.L.C., 8th Dist. Cuyahoga No. 107678, 2019-Ohio-4055, ¶ 23, quoting Ward v. Summa Health Sys., 128 Ohio St.3d 212, 2010-Ohio-6275, 943 N.E.2d 514, ¶ 9. This liberal policy applies to depositions upon oral examination and the other discovery methods listed in
{108} Appellants properly used
{110} Charter Oak argues that Appellants’ motion to compel was an attempt to indefinitely prolong summary judgment by repeatedly extending discovery. We disagree. The docket does not reflect a discovery deadline and Appellants were granted time to conduct discovery to adequately respond to summary judgment. Appellants discovered that Rembiesa‘s affidavit was unreliable within the time allotted to it under
{111} Appellants’ first assignment of error is sustained. Given our resolution of Appellants’ sеcond assignment of error, in which we reverse the award of summary judgment, and that the trial court declared Appellants’ motion to compel moot based on its summary judgment ruling, the motion to compel will still be pending before the trial court on remand. Upon remand, the trial court should resolve Appellants’ motion to compel.
{112} Judgement reversed and remanded.
It is ordered that appellants recover from appellees costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure.
MARY EILEEN KILBANE, JUDGE
PATRICIA ANN BLACKMON, P.J., and
RAYMOND C. HEADEN, J., CONCUR