*1 Appellee. Zoppo Company, al., Appellants, et v. Homestead Insurance (1994), 71 v. Homestead Ins. Co. Zoppo 552.] [Cite (No. 1994.) 93-1616 Submitted November 1994 Decided December *2 Rutter, P. for appellants. Robert Petrov, Norman, Cheryl Alan D. Atwell Fulton & M.
Gallagher, Sharp, Timothy Fitzgerald, appellee. J. for L.P.A.,
Clark, Perdue, Co., K. L. and Dale & Scott Edward Clark Roberts Krernbs, Perdue; Plevin, P. urging Heller and Andrew Nurenberg, McCarthy & curiae, Academy Lawyers. of Trial for amicus Ohio reversal Sr., Bovi, L.P.A., Co., Murray, E. and Kirk J. Delli Murray Murray & Dennis curiae, County Erie Board of Commissioners. reversal for amicus urging Pease, Kloss, Sater, N. D. Robert Webner Vorys, Seymour & William curiae, Insurance Institute. urging A. affirmance for amicus Schafer, Julie Hallinan; Co., L.P.A., R. and Paul G. Young & Alexander Mark Chilson Hentemann, Co., L.P.A., Hentemann, A. and Henry Schneider & Rea Meyers, curiae, Companies. Farm Insurance affirmance amicus State urging Johnson, Weston, Hurd, Fallon, D. H. Paisley Howley, Timothy William & O’Brien, Jr., urging E. affirmance Gregory Robert D. Rosewater and Baughman, curiae, Attorneys. Association of Civil Trial for amicus (1) this court are: J. The issues before E. Sweeney, Sr., Francis contract with the insured is to refuse to fulfill its intent the insurer actual Said; whether R.C. bad faith as held element of the tort of requisite even the court to set the amount requiring follow, trials, For the reasons by jury. is violative of the of bad intent is not an element the tort overrule and hold that actual Said by jury. violates the to trial faith. further hold that R.C. We judgment appeals. of the court of Accordingly, we reverse
Bad Faith
used to decide whether
initially
proper
This court must
determine the
standard
In deciding
to act in
faith.
an insurer has breached its
its insured
*3
issue,
our decision in Motorists Mut. Ins. Co. v.
necessary
this
it is
revisit
Said,
690,
In we held that: breaches, “A an cause of action arises for tort of bad faith when insurer an claim where good by intentionally refusing satisfy faith insured’s (1) coupled no lawful basis for the refusal with actual knowledge there is either any fact or an failure to determine there was lawful that intentional refusal. that caused the failure be inferred and may basis for such Intent imputed proof to the insurer when there is a reckless indifference to facts or added.) reasonably considering to it in claim.” (Emphasis available syllabus. three of the paragraph clarify proof
Rather than the standard of in the area of faith required bad do, set litigation greater as the Said decision out this court has caused by erroneously making confusion intent an element of the tort of bad faith. Said, notably Until the element of intent had been absent from this court’s fact, an acts in faith. In exception definition of when insurer bad with the of Said (1962), and the four-to-three decision of Slater v. Motorists Mut. Ins. Co. 148, 420, 45, past forty-five years O.O.2d 187 N.E.2d over the this St. justification” consistently applied court has the “reasonable standard to bad faith standard, in in According cases. to this first announced the case of Hart v. 185, 465, 347, Mut. Ins. Co. 152 Ohio St. 39 O.O. 87 N.E.2d and Republic 337, v. Aetna Ins. reaffirmed Hoskins Ohio St.3d OBR Life Builders, Armstrong and Inc. v. 37 Staff “an insurer fails to exercise faith in the of a processing predicated upon claim of its insured where its refusal to the claim is not pay justification that furnish reasonable therefor.” Id. at circumstances element of the reasonable never been an is not has N.E.2d at 788. Intent Said, Hence, relying deciding supra, standard. justification years precedent. decision, forty-five from departed this court Slater erroneous Slater, logical following be will overruling Said and By expressly years. over the developed that of case law progression decisis, we of stare under the doctrine contention that reject appellee’s We was aberration in Said. The Said decision to our decision must adhere v. Hallock Helvering As stated precedent. established clearly failed to follow decisis is 612: L.Ed. 60 S.Ct. 309 U.S. “fSJtare to the latest formula of adherence and not mechanical principle policy collision adherence involves decision, when such questionable, however recent sounder, and intrinsically in its embracing scope, more prior with a doctrine our case, that we correct In this stare decisis dictates by experience.” verified justification standard. mistakes reinstate the reasonable previous correctly instructed indicates the court Our review the record justification standard. There was using bad the reasonable on the law of faith conduct an that Homestead failed to jury’s finding ample support evidence claim. reasonably justified Zoppo’s investigation denying and was not adequate outset, Zoppo, focused who claimed inquiry primarily Homestead’s From of the fire. Homestead’s at the time Pennsylvania hunting that he was individuals, who were explore evidence that other seriously did not investigators had to burn the bar down. by Zoppo, ousted from the bar threatened previously bar on fire. Two fact, made set the previous attempt there attempted fire bragged they responsible *4 men that were public ousted fire, job.” Following the the actual said he be back “to finish one would arson, the the one of ousted attempted three weeks after which occurred fire. he had the group patrons men of bar that set told that to have been a leads, despite appeared the fact there these Despite (machines one of the windows was break-in were broken into and robbery and failed investigators the broken), at trial that Homestead there was evidence alibis, go with or up witnesses key suspects, verify follow locate certain fire. the Zoppo’s morning whereabouts on Pennsylvania alleged perpe- fact, interviewing that when some the was presented evidence cursory questions than such as trators, did more ask the little investigators negatively, they the fire. When answered they responsible were for their ceased. questioning statements Zoppo’s focused on the inconsistencies investigators instead
The morning of the fire and the statement of events the concerning sequence the that theory initially corroborated Pogue. Pogue Dave patron, bar fire, Zoppo. Howev- implicated but he later responsible ousted men were statement. for this later er, paid evidence that he was there was Zoppo belief that Claimwas based denial of the Part of Homestead’s financial Homestead namely, gain. destroying building, for his had a motive money. losing and that it was that the bar was overinsured argued the bar six Zoppo purchased had contrary. Although there was evidence Homestead, $50,000, $10,000 it and had insured months to the fire for prior had a market value building had stated that the underwriting report, its initial Furthermore, actually improvements no and had made $95,798. Zoppo had debts claim, Moreover, Zoppo before the denial of the to the fire. prior to the bar that he could rebuild the bar. demolition so attempted prevent consultant, the Homestead a claims testified Finally, Zoppo’s expert, justified denying and that Homestead was investigation inadequate claim. finding the trial court’s of bad
Hence, we reinstate foregoing, based on faith.
II Damages 2315.21(C)(2) right violates the The next issue to be addressed is whether R.C. by jury. provides: court, action, or the if the trier of “In a tort whether the trier of fact is a exemplary damages, is liable for any fact determines that defendant by the court.” the amount of those shall be determined which derives by jury right to a trial is a fundamental constitutional 127 Ohio St. Ry. Halliday Carta. Cleveland Magna from Article I of the Ohio Section guaranteed 188 N.E. guaranteed to a trial is not Although the constitutional Constitution. cases, existed at extends to those causes of action where all N.E.2d v. Thevenir common law. Sorrell (1929), 121 N.E. 510; rel. Ohio St. Belding State ex Heifner syllabus. one of the paragraph
Thus, in we must first determine analyzing validity for a to assess the amount of whether there existed a common-law *5 punitive damages. in v. damages Wilkes Woods English recognized punitive courts first Thereafter, 1791, juries began as American Eng.Rep. early 489. as Colbaugh assessing and their amount. Corvell
awarding punitive damages
1859,
juries award
right
punitive
In
common-law
to have
Prior to the
enactment
when
of
integral
determining
in this state had the
role
juries
of such
assessing
but
of
the amount
justified
were
stems from
punitive damages by
jury
the
of
the
Clearly,
assessment
damages.
jury.
to trial
encompassed
right
by
the
law and is
within the
common
2315.21(C)(2)
court
only the
to
by
by permitting
R.C.
legislature,
enacting
the
the common-
damages, has in effect
abrogated
the amount of
determine
the
jury
punitive damages.
law
to assess
amount of
right
“
‘cannot
invaded or violated
right
by jury
that the
be
It is well settled
”
Thevenir, supra,
judicial order or decree.’
Sorrell v.
by
legislative
either
act or
88 Ohio
at
v. Girard
quoting
at
633 N.E.2d
Gibbs
Ohio St.3d
2315.21(C)(2)
syllabus.
N.E.
two
the
Since
paragraph
St.
determining the
amount
jury
appropriate
function of the
impairs the traditional
by jury
to trial
right
hold that R.C.
violates
damages,
we
the Ohio
Article
Constitution.
under Section
by appellee’s
unpersuaded
considered
were
Finally,
ruling,
so
but
(1992), 63
Corp.
Supply
&
v. N.
Digital Analog Design
reliance on
not have a
litigant
737. In
this court held that
does
Digital,
discussion in
attorney
the amount of
fees. The
right
by jury
to trial
2315.21(C)
since, in
dicta
validity
merely
Digital pertaining
However, we
not at issue.
do
Digital,
the assessment of
jury
to trial
in-
reject
reasoning
Digital
which treats
espoused
cases
assessing attorney
fees the same
cases
662-663,
have a
assess
We Builders, Inc. v. punitive damages. consider an award of Staff two of the paragraph Armstrong an insurer damages may against “Punitive be recovered syllabus, we stated that: insured pay a claim of its refusing faith that breaches case, In this malice, of the insurer.” part or insult actual fraud proof *6 claim, question fraudulently denying Zoppo’s in not act Homestead did since defined “Actual malice” is actual malice. Homestead acted with becomes by conduct is characterized “(1) person’s which a of mind under that state rights disregard or a conscious hatred, revenge, spirit ill will or a causing substantial probability has a great that safety persons and of other sic.) Murty Preston v. (Emphasis harm.”
1174, syllabus. Thus, hatred, spirit revenge. ill will or a here of
There is no evidence evidence that there was sufficient to determine obligation trial court had the The record reveals rights. disregarded Zoppo’s consciously Homestead did They to who was at fault. investigators as by Homestead inquiry one-sided Homestead breached its up follow on leads. suspects or adequately question conduct, The award of adequate investigation. affirmative justified. damages was fees, attorney damages and compensatory the issue of
Finally, regarding compensatory faith is liable for those an insurer who acts bad hold that the insurer and caused the bad faith conduct of flowing from damages contract. insurer’s breach of automatically is not position, an insured contrary appellants’ An who interest attorney prejudgment fees. insured seeks
entitled to interest Attorney set forth in R.C. 1343.03. statutory procedures the specific must follow where the compensatory as an element of may fees be awarded Finance, Inc. v. Howard are warranted. Columbus finds that 174, 177, O.O.2d reasons, appeals of the court of judgment we reverse the following For the 2315.21(C)(2) and constitutionality and the the issues of bad faith attorney and fees. We remand jury’s finding reinstate the the amount of for a for a hearing this cause to the trial court n Judgment reversed
and cause remanded. Douglas Resnick, JJ., concur. Sweeney, J., judgment only. syllabus concurs
A.W. J., Pfeifer, part part. concurs in and dissents J., C.J., Moyer, Wright, dissent. I J., concur with dissenting part.
Pfeifer, concurring part I Because holding opinion. and the Part syllabus paragraphs majority’s however, I dissent awarding punitive damages, does not merit the this case opinion. in Part II of the majority’s from the result reached “consciously Zoppo’s majority disregarded” concludes that Homestead indicates that Homestead’s collect for his loss. disagree. record *7 conduct any but does not reveal conscious thorough, was less than investigation court should Zoppo to of his insurance benefits. trial by deprive Homestead damages jury. to the not have submitted the issue J., With majority opinion. I dissent from the dissenting. respectfully Wright, I, I bad faith as articulated in respect apply to Part would continue to test for 690, See, (1992), 1228. Mut. Ins. v. Motorists Co. Said 337, (1983), 272, 452 also, 6 6 v. Aetna Ins. Co. OBR Hoskins Life N.E.2d 1315. II that majority’s Part disagree unhappy with the determination to Though majority is unconstitutional. seems determined unconstitutional, I legislation of tort reform believe important piece
declare an
requires
opposite
that we reach the
and traditional
accepted
jurisprudence
in this
and other recent cases which the
analysis
result. The
used
matter
Assembly
accomplish
tort
majority has thwarted the efforts of
General
krum,
iz
bring
proverb:
to mind a marvelous Yiddish
“az di ershte shure
reforms
letter
toyg
kapores,
briv
‘If the first line is crooked the whole
gantser
oyf
der
”1
begun,
‘111
undone.’
nothing,’
all
5,
a
I of the
right
by jury
to trial
under Section Article
Ohio Constitution
had
to a
applies only
right
jury
to those causes of action in which
individual
a
adopted. Willyard
trial at the time the 1802 Ohio Constitution was
v. Hamilton
111,
(1836),
115-116;
(1929),
v. State ex
121 Ohio St.
Belding
7
rel. Heifner
393,
adopted,
“ ‘ * * * fundamental, as inherent are Only regarded those incidents which beyond reach by jury, placed of trial system of the essence of the ’ ”* * * at fn. 11 at 37 L.Ed.2d S.Ct. legislature. [1918], Scott, Procedure Jury Trial and the Reform of Civil (quoting 671). Harv.L.Rev. fully compensate of a tort action is to purpose
It is axiomatic that the Allberry App.3d 88 Ohio plaintiff. Bailey See purpose N.E.2d 501. Given App.3d Miller v. Irvin action, liability questions the fundamental role of a is to decide a tort reason, plaintiff For this has a to have compensation. the extent of nature accept principle compensatory I can that the liability. *8 jury a to have the plaintiff also extends to the with provide tort action Sandusky amount of actual See Fantozzi v. Cement damages. determine the (actual 601, 612, (1992), damages Prod. 64 Ohio St.3d 597 N.E.2d Co. injury). supported by proposi- for his This conclusion is the compensate plaintiff fact, damages solely findings of actual relies of tion the determination Mix, jury uniquely Ready for which the is suited. See Shamblin’s something (C.A.4, 1989), Inc. 873 F.2d 741. Corp. v. Eaton a a plaintiff the central issue this case is whether a has to A of the amount of in a tort action. review jury punitive damages determination conclusion that a appropriate inescapable plaintiff of the case law leads to the a right.3 does not have such punitive damages compensate plaintiff,
The
of
is not to
the
but rather
purpose
policy
awarding punitive damages
to
the defendant.
“The
for
punish
‘ * * *
* * * as that of
the
recognized
punishing
offending party
has been
they might
him
to others that
be deterred from similar
setting
up
example
”
334, 335,
Murty
Preston v.
conduct.’
Constitution,
Although
interpreting the Seventh Amendment
to the United States
2.
these cases are
similarity
provision
I of
makes their
the
between that
and Section Article
the Ohio Constitution
analyses
persuasive.
Digital
Analog Design Corp.
Supply
particularly
See
&
v. N.
657, 662,
737, 742,
1.
fn.
plaintiff
the determination as to whether a
is entitled to
3. Because the statute at issue leaves
damages
jury,
plaintiff
a
punitive
the
we do not need to consider whether a
has
to have a
with
plaintiff
jury
jury
is
a
has
to have a
make that determination.
issue
responsibility
punitive damages,
placed
amount of
a
the
determine the
trial court.
134, 136,
[1982],
24 O.O.3d
Chockley
Detling v.
(quoting
St.
209).
64 Ohio
Tel.
Smith
Co. v.
N.E.2d
See W. Union
underlying
are outside the
such,
damages
punitive
N.E.
As
Printup
Smith v.
jury.
role of the
See
tort
and the essential
of a
action
purpose
of
Court
325-326,
994. The United States
Kan.
866 P.2d
Ready
result
Shamblin’s
the same
the Fourth Circuit reached
Appeals of
amount
742:
clear that the
Mix,
F.2d at
“It is
supra,
Eaton
Corp.,
Inc. v.
remedy in
trial.
It is a
element of the
not a fundamental
damages is
exemplary
reprehensible conduct.”
and deter
penalty designed
punish
of a
to
the nature
requires
award
the
punitive damages
of a
The nature
the determination
determine the
to have
that a
does not have
plaintiff
conclusion
entirely
which
fact
actual
damages,
Unlike
punitive
amount of
contemplates
damages
sensitive,
determination as
the amount
the
a fair
In order to reach
the
hand
the immediate trial.
more than
facts at
the
conduct
wrongful
be able
compare
the decision-maker must
punishment,
a broad
Additionally, such
this
conduct in other cases.
against
case
similar
fair,
which,
will
in order
a level of
while
is essential
to set
perspective
perspective,
in the
This broad
wrongful
deter
conduct
future.
adequately
such
makes the
damages,
necessary
give
purposes
which is
effect to the
knowledge
not the
decision-maker.
appropriate
judge
judge
effectively are
experience
punitive damages
unique
to set
necessary
fact,
punitive damages
of a
determining
amount
process
alone.
trial.
sentencing
judge
of a
a criminal
directly analogous
role
award
such,
discretionary
As
decision as to
amount
jury system.
particular
in a
case is
a “fundamental” element
award
to have a
plaintiff
does not have a constitutional
Consequently,
Assembly
the General
amount
*9
the judiciary.
perfect right
place
responsibility
addition,
“right”
no
plaintiffs
general
punitive
have
permissive
and not
of our
shows that
language
cases
courts,
Preston,
early
since as
mandatory.
supra:
As we stated
“Ohio
in tort actions which involve
allowed
to be awarded
have
added.)
at
N.E.2d at
fraud, malice,
(Emphasis
insult.”
(“No
Kan. at
866 P.2d at
Printup,
Smith
supra,
1175. See
v.
punitive damages.”).
law for
This
separate
of action existed at common
Scalia,
legislatures
noted:
recently
who
“State
supported by
conclusion is
Justice
* * * punitive damages.”
have
to restrict or abolish
power
and courts
1, 39, U.S.
S.Ct.
Haslip
Mut.
Ins. Co.
Life
Pacific
(Scalia, J.,
legislature
concurring).
Because
L.Ed.2d
may
regulate
it
them. See Smith
damages,
to abolish
authority
such, 331-332,
enactment
Moyer, C.J., dissenting opinion. in the foregoing concurs