ROBERT E. MACDONALD, ET AL., PLAINTIFFS-APPELLANTS, v. WEBB INSURANCE AGENCY, INC., DEFENDANT-APPELLEE.
CASE NO. 1-15-27
IN THE COURT OF APPEALS OF OHIO THIRD APPELLATE DISTRICT ALLEN COUNTY
Date of Decision: November 9, 2015
[Citе as MacDonald v. Webb Ins. Agency, Inc., 2015-Ohio-4623.]
Trial Court No. CV 2014 0223
Judgment Affirmed
APPEARANCES:
Michael A. Rumer and Victoria Maisch Rumer for Appellants
Robert B. Fitzgerald for Appellee
{¶1} Plaintiffs-Appellants, Robert E. MacDonald (“Robert”) and Jean E. MacDonald (“Jean”) (collectively “the MacDonalds”), appeal the judgment of the Court of Common Pleas of Allen County granting summary judgment in favor of Defendant-Appellee, Webb Insurance Agency, Inc. (“Webb Insurance”). On appeal, the MacDonalds argue that the trial court erred by (1) determining that they suffered no actual damages as necessary to establish a prima facie case for negligence; (2) determining that their alleged damages were barred by the economic loss rule; (3) determining that their alleged damages were precluded under
{¶2} The MacDonalds’ current claims stem from an earlier dispute between the MacDonalds and their insurance company concerning the terms of the MacDonalds’ insurance policy. As both suits concern the same generally undisputed facts, we refer, in relevant part, to the facts set forth in MacDonald v. Auto-Owners, 3d Dist. Allen No. 1-12-25, 2012-Ohio-5949.
{¶3} On March 23, 1961, the MacDonalds purchased a three-story home (“the Spencerville home”) located at 547 North Broadway Street in Spencerville, Ohio, where the couple lived and raised their four children. In 2006, Robert
{¶4} On or about December 8, 2008, Robert informed his insurance agent, Roger Stokes (“Stokes”) of Webb Insurance, that the Spencerville home would be leased for commercial purposes as of January 1, 2009. Stokеs informed Robert that he would need to obtain a commercial insurance policy to reflect the property’s change in use. Thereafter, Owners Insurance issued a new commercial insurance policy effective January 22, 2009. A few months later, on March 12, 2009, Stokes mailed a copy of the new commercial policy tо Robert, which included a provision excluding coverage for any water-related loss or damage if the building remained vacant for more than 60 consecutive days preceding the loss or damage.
{¶5} On July 1, 2009, the Spencerville home’s lessee vacated the premises. On or about September 25, 2009, Robert informed Stokes of the vacancy, and Stokes cautioned Robert that, as a result of the vacancy, Owners Insurance might not renew the commercial policy for the following year.
{¶6} On January 11, 2010, Webb Insurance notified Owners Insurance that the Spencerville home was vacant; nevertheless, Owners Insurance renewed the commercial policy on January 22, 2010.
{¶8} On June 3, 2010, Owners Insurance notified Webb Insurance that they would remain on the policy until January 22, 2011. Due to the Spencerville home’s vacancy, however, Owners Insurance stated that they would not renew the MacDonalds’ policy again.
{¶9} A few days later, on June 23, 2010, Robert visited the Spencerville home and discovered extensive water damage, originating from a water line rupture in the attic space near the third floor bathroom. Robert reported the damage to Webb Insurance.
{¶10} On June 24, 2010, Owners assigned the loss tо Crawford & Company (“Crawford”), an adjusting company, who assigned the claim to their employee, Shawn Burden (“Burden”).
{¶11} Over the course of the next few months, the Spencerville home underwent extensive demolition and repair. During that time, Burden continuously indicated to both the MacDonalds and their family that the Spencerville home would be fully restorеd under the terms of their insurance policy.
{¶13} On September 14, 2010, Robert called Stokes regarding the denial letter. Stokes informed Rоbert that he would be reimbursed for only the work Burden authorized.
{¶14} On January 25, 2011, the MacDonald’s filed a complaint in the Court of Common Pleas of Allen County seeking, in relevant part, a declaration from the trial court that Owners Insurance was obligated to cover the cost of repairs under the terms of their policy.1
{¶15} Ultimately, the trial court grantеd summary judgment in favor of the MacDonalds finding that Owners Insurance was estopped from asserting the vacancy provision due to the misrepresentations of its agent. On review, the trial court’s judgment was affirmed. MacDonald, 2012-Ohio-5949 at ¶ 60.
{¶16} Based on these events, on April 7, 2015, the MacDonalds filed a complaint in the Court of Common Pleas of Allen County asserting claims of negligenсe and negligent misrepresentation against Webb Insurance. The complaint alleged that Webb Insurance was liable to the MacDonalds for money
{¶17} On May 20, 2014, Webb Insurance filed its answer denying liability and raising several affirmative defenses.
{¶18} Due to the nature of the MacDonalds’ claims, on January 27, 2015, the trial court ordered that discovery from the MacDonalds’ earlier suit against Owners Insurance be transferred and inсorporated into the present suit against Webb Insurance.2
{¶19} On February 6, 2015, Webb Insurance filed a motion for summary judgment. In its motion, Webb Insurance argued that the MacDonalds’ alleged damages (i.e., attorney fees accrued in connection with seeking declaratory relief) were purely economic and therefore barred under the well-established economic loss rule. Attached to Webb Insurance’s motion was (1) the trial court’s entry granting summary judgment in favor of the MacDonalds in their earlier suit against Owners Insurance; (2) this court’s opinion and entry affirming the trial court’s judgment; and (3) supporting case law.
{¶21} On March 19, 2015, Webb Insurance filed a reply noting the MacDonаlds had an independent duty to read the terms of their policy, including the vacancy provision, and again reemphasizing that there was no legal basis for the recovery of their attorney fees.
{¶22} On April 23, 2015, the trial court granted summary judgment in favor of Webb Insurance. In doing so, the trial court found that (1) the MacDonalds lacked actual damages bеcause the damage to their home was fully covered under the terms of their insurance policy; (2) their alleged damages were purely economic and therefore barred by the economic loss rule; and (3) irrespective of the economic loss rule, the MacDonalds were not entitled to attorney fees under
{¶23} It is from this judgment that the MacDonalds appeal, presenting the following assignments of error for our review.
THE TRIAL COURT ERRED IN FINDING, AS A MATTER OF LAW, THAT NO GENUINE ISSUES OF MATERIAL FACT EXISTED IN THE CASE AT BAR SINCE “DAMAGE NO LONGER EXIST” AS TO PLAINTIFFS’ NEGLIGENCE CLAIM.
Assignment of Error No. II
THE TRIAL COURT ERRED IN DETERMINING THAT THE ECONOMIC-LOSS RULE PREVENTS PLAINTIFFS’ RECOVERY OF DAMAGES UNDER THEIR NEGLIGENCE CLAIM BECAUSE “[T]HE LOSS SUFFERED BY THE ALLEGED NEGLIGENCE OF DEFENDANT WAS PURELY ECONOMIC.”
Assignment of Error No. III
THE TRIAL COURT ERRED IN APPLYING
Assignment of Error No. IV
THE TRIAL COURT ERRED IN GRANTING DEFENDANT SUMMARY JUDGMENT AND DISMISSING PLAINTIFFS’ CLAIM FOR NEGLIGENT MISREPRESENTATION WHEN THERE ARE GENUINE ISSUES OF MATERIAL FACT AS TO WHETHER DEFENDANT’S AGENT USED REASONABLE CARE IN COMMUNICATING POLICY INFORMATION TO PLAINTIFFS REGARDING COVERAGE UNDER PLAINTIFFS’ 2009 AND 2010 INSURANCE POLICIES.
{¶24} Due to the nature of the MacDonalds’ assignments of error, we elect to address some of them together and out of order.
{¶25} In their first and fourth assignments of error, the MacDonalds argue that the trial court erred in granting summary judgment in favor of Webb Insuranсe. We disagree.
{¶26} An appellate court reviews a summary judgment order de novo. Hillyer v. State Farm Mut. Auto. Ins. Co., 131 Ohio App.3d 172, 175 (8th Dist.1999). Accordingly, a reviewing court will not reverse an otherwise correct judgment merely because the lower court utilized different or erroneous reasons as the basis for its determination. Diamond Wine & Spirits, Inc. v. Dayton Heidelberg Distrib. Co., Inc., 148 Ohio App.3d 596, 2002-Ohio-3932, ¶ 25 (3d Dist.), citing State ex rel. Cassels v. Dayton City School Dist. Bd. of Edn., 69 Ohio St.3d 217, 222 (1994). Summary judgment is appropriate when, looking at the evidence as a whole: (1) there is no genuine issue as to any material fact, and (2) the moving party is entitled to judgment as a matter of law.
{¶28} The fundаmental question in this case is whether attorney fees accrued in connection with a claim or proceeding for declaratory relief can serve as sufficient damages in a subsequent action in negligence. As this is a case of first impression, we necessarily must address the juxtaposition between the American Rule governing the recovery of attorney fees and Ohio tort law.
{¶29} “Ohio has long adhered to the ‘American Rule’ with respect to the recovery of attorney fees: a prevailing party in a civil action may not recover attorney fees as part of the costs of litigation.” Wilborn v. Bank One Corp., 121 Ohio St.3d 546, 2009-Ohio-306, ¶ 7. Exceptions to the rule allow for recovery “when a statute or an enforceable contract specifically provides for the losing party to pay the prevailing party‘s attorney fees, * * * or when the prevailing party demonstrates bad faith on the part of the unsuccessful litigant * * *.” Id.
{¶31} In 1999, in order to perpetuate adherence to the “American Rule,” the General Assembly enacted
{¶32} In the cаse sub judice, the MacDonalds’ alleged damages consists entirely of attorney fees accrued in connection with their pursuit of declaratory relief against their insurance company concerning the extent of their policy’s coverage. By application of the American Rule, the MacDonalds are responsible for these fees unless a statute or contract provides otherwise.
{¶34} With this in mind, we next consider whether the MacDonalds can recover these fees through an action in negligence. It is well settled that the elements of an ordinary negligence are (1) the existence of a legal duty, (2) the defendant‘s breach of that duty, and (3) damages resulting proximately therefrom. Hartings v. Xu, 3d Dist. Mercer No. 10-13-11, 2014-Ohio-1794, ¶ 72. Proof of damages is also an essential element in a claim of negligеnt misrepresentation. See, e.g., Textron Fin. Corp. v. Nationwide Mut. Ins. Co., 115 Ohio App.3d 137, 150 (9th Dist.1996).
{¶35} The MacDonalds aver that their attorney fees constitute sufficient damages in a negligence action under a theory analogous to legal malpractice, which permits the recovery of attorney fees where an attorney commits professional misconduct. Specifically, the MacDonalds allege that Webb Insurance committed professional misconduct by indicating that their insurance policy was effective despite the Spencerville home’s vacancy.
{¶37} The MacDonalds further argue that the trial court erred in dismissing their claim for negligent misrepresentation. Specifically, the MacDonalds claim that attorney fees are sufficient damages in a negligent misrepresentation action pursuant to the Ohio Supreme Court’s finding in Haddon View Inv. Co. v. Coopers & Lybrand, 70 Ohio St.2d 154 (1982). In Haddon View, the court found that “an accountant may be liable for purely economic damages based upon negligent misrepresentation to third parties ‘when that third party is a member of a limited class whose reliance on the accountant‘s representation is specifically foreseen.’ ” Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc., 106 Ohio St.
{¶39} However, the issue in this case is not whether the MacDonalds’ negligence claim is analogous to a malpractice action, or whether their alleged damages are subject to an exception to the economic loss rule suсh as the one delineated in Haddon View. Rather, the relevant inquiry is whether attorney fees accrued in connection with seeking declaratory relief can, as a matter of law, serve as sufficient damages in a later negligence-based action. The MacDonalds cite to no case law supporting this proposition.
{¶40} The General Assembly has made clear that attorney fees accrued in connection with seeking declaratory relief are not recoverable. In enacting
{¶41} In light of the foregoing, we cannot say that the trial court erred in granting summary judgment in favor of Webb Insuranсe, as the MacDonalds
Assignments of Error Nos. II & III
{¶42} In light of our disposition of the MacDonalds’ First and Fourth Assignments of Error, their remaining assignments of error are rendered moot and need not be considered.
{¶43} Having found no error prejudicial to the appellants, in the particulars assigned and argued, we affirm the judgment of the trial court.
Judgment Affirmed
SHAW and PRESTON, J.J., concur.
/hlo