Opinion
Case No. 1:06cv229.
September 9, 2008
OPINION ORDER
This matter is before the Court upon Defendant Ohio Fair Plan Underwriting Association's Motion for Summary Judgment. (Doc. 80) Plaintiffs filed a Response (Doc. 107), and Defendant filed a Reply. (Doc. 108)
I. BACKGROUND
Defendant Ohio Fair Plan is an entity created by the Ohio Legislature to assure the availability of property insurance for property that is not insurable in the normal insurance market. Ohio Rev. Code 3929.41, et. seq.
Plaintiff Jeanette Spangler is the owner of the property located at 21962 Fayetteville-Blanchester Road, Blanchester, Ohio. (Doc. 1, ¶ 4) Spangler purchased the property in 1996. While Spangler's name is on the deed to the property, she has never lived on the property. (Doc. 74, Jeanette Spangler Depo. (6/13/07) at 23-24, 26; Doc. 73, Jerrod Messer Depo. at 16-17) Spangler is the mother of Plaintiff Jerrod Messer. (Spangler Depo. (6/13/07) at 7) Messer lived on the property from approximately 1997 until 2003. (Spangler Depo. (6/13/07) at 26; Messer Depo. at 20-21)
Messer was responsible for obtaining insurance for the property. (Spangler Depo. (6/13/07) at 113) Messer submitted an initial application for insurance coverage to Defendant on April 26, 2003. (Doc. 80-1, T.A. Brininger Aff. (1/7/08), Ex. 1) The application also included a Homeowners Supplement in which Messer indicated that at the time of the application, he was occupying the home on the property. (Id.) The Homeowners Supplement states that if the applicant is not occupying the home, the property is not eligible for homeowners insurance coverage with the Ohio Fair Plan. (Id.) Based upon Messer's application, Defendant issued a homeowners policy ("Policy") for the property with effective dates of May 2, 2003 to May 2, 2004. (Id., Exs., 2, 3)
On June 13, 2003, Messer's insurance agency, Walter C. Doll Insurance Agency, sent a request to Defendant to add Spangler as an "additional insured" on the Policy. (Id., Ex. 4) On September 9, 2003, Walter C. Doll Insurance Agency sent another request to Defendant to delete Spangler as an "additional insured" and to place her as the "named insured" on the Policy. (Id., Ex. 5) This correspondence included a hand-written letter dated August 28, 2003 from Messer disclaiming any interest in the property and requesting that his mother be made the named insured under the Policy "as Jeanette G. Spangler holds the deed and currently resides there." (Id.) Messer also provided a "mailing address" for Spangler, which was a post office box address in Goshen, Ohio. (Id.) Based upon this request, Defendant issued an Amended Declaration to the Policy identifying Spangler as the named insured. (Id., Ex. 6)
Messer owned and operated a roofing business called All Pro Roofing on the property from approximately 1997-2000, and again from 2002-2003. (Messer Depo. at 266; Spangler Depo. (6/13/07) at 135-36) Messer used the property address as the primary address for his business, but he did not have the address on his driver's license. (Messer Depo. at 51-52)
Messer vacated the property in early 2003 to live with his father for a couple of months before going to prison in April of 2003. (Messer Depo. at 20) Messer moved his personal belongings from the property to his father's house. (Id. at 29) The remainder of Messer's personal property was kept in a pole barn and lean-to attached to the pole barn on the property. (Id. at 30, 34-35, 266-67) There were also six cars in the pole barn, two of which he owned. (Id. at 31) Messer does not recall leaving any property personally belonging to him in the house at the property when he left in 2003. (Id. at 33)
Plaintiffs' cousins, Kimberly and Rick McClure, moved into the house around the time that Messer was incarcerated and leased the property for almost a year. (Spangler Depo. (6/13/07) at 26-28) When the McClures moved out, Spangler leased the property through an oral lease to Jerry Courts, Jr. and Sr. for approximately $400 a month. (Id. at 27-28)
On April 27, 2004, authorities from the Brown County Sheriff's Office, the Clermont County Sheriff's Office, and the FBI conducted a search on the property pursuant to a search warrant. (Spangler Depo. (6/13/07) at 18-19; Doc. 77, John Dunn Depo. at 44) The search was for the body of a missing woman. (Id. at 38) The search began with the FBI drilling holes in the concrete floor of the pole barn. (Doc. 79, Stephen Grieger Depo., at 49-50) Law enforcement personnel removed some of the personal property stored inside the pole barn, and towed vehicles from inside the pole barn to the front of the property. (Dunn Depo. at 47-48, 189; Grieger Depo. at 54) The officers then began to remove concrete in the area where cadaver dogs had picked up scent. (Dunn Depo. at 48)
After several days of digging inside of the pole barn, law enforcement personnel ran out of space to put the dirt from inside the pole barn. (Dunn Depo. at 183) The dirt and personal property removed from the pole barn was piled in such a way that law enforcement personnel were "boxed in" and had no room to pile extracted dirt. (Dunn Depo. at 189; Doc. 78, Dwayne Wenninger Depo. at 64-67) Law enforcement personnel decided to pile dirt on top of personal property outside the pole barn and drove the "Bobcat" excavator over the mounds of dirt, which compacted the dirt surrounding the personal property. (Wenninger Depo. at 48-49; Doc. 72, Mark Penn Depo. at 102; Doc. 97-4)
The search ended on May 11, 2004. (Dunn Depo. at 140-41; Wenninger Depo. at 100) The search left a hole inside the pole barn as deep as fifteen feet. (Dunn Depo. at 40-41; Doc. 97-4) When law enforcement personnel left the property, they did not fill the hole in the pole barn, did not uncover the personal property buried in the dirt, or secure the personal property. (Wennigner Depo. at 49) The Courts had already vacated the property in late May or early June of 2004 because the septic system had been damaged in the search. (Spangler Depo (6/13/07) at 28; Messer Depo. at 268, 273-74)
Spangler did not return to the property until August 15, 2004. (Spangler Depo. (6/13/07) at 162) While the property was empty, vandals broke into the residence and stripped the residence of all personal property. (Spangler Depo. (6/13/07) at 71-72, 134) Vandals also stole the personal property that had been placed outside the pole barn. (Spangler Depo. (6/30/08) at 51-52) Spangler took no action at that time because she thought it would not be worth the money to fix the property. (Id. at 132, 162-63) Messer returned to the property in November of 2005. (Messer Depo. at 54) Messer removed a couple of vehicles and tools at that time. (Id. at 57-58)
In her deposition, Spangler had some difficulty in recalling the first time she returned to the property. Spangler may have not returned until May of 2005. (Spangler Depo. (6/13/07) at 32)
In the course of the investigation of a unrelated claim submitted on August 9, 2004, Defendant learned that Spangler was not residing at the property. (Doc. 108-2, T.A. Brininger Aff. (4/8/08) ¶¶ 2-4) In a letter dated September 24, 2004, Defendant canceled the insurance coverage on the property. (Doc. 107-2, Jeannette Spangler Aff., Ex. 2) Defendant stated reason for cancellation is "dwelling is not owner occupied." (Id.) Cancellation was effective November 1, 2004, and Defendant returned the unused portion of the premiums paid.
On January 26, 2006, Plaintiffs submitted a claim to Defendant for the damage incurred during the execution of the search warrant. (Brininger Aff. (4/8/08) ¶ 6)
In their Complaint, Plaintiffs bring a claim under 42 U.S.C. § 1983 and state law claims against Defendants Sheriff Wenninger, Sheriff Rodenberg, the Clermont County Board of Commissioners, and the Brown County Board of Commissioners. (Doc. 1) Plaintiffs also bring a breach of contract, bad faith and declaratory judgment claim against Defendant Ohio Fair Plan Underwriting Association based upon its failure to pay Plaintiffs' claim under the insurance policy issued to them by Ohio Fair Plan Underwriting Association.
These Defendants have also filed a Motions for Summary Judgment (Docs. 70, 81), which are the subject of a separate Order.
II. ANALYSIS
A. Summary Judgment Standard
Summary judgment is appropriate "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." Fed.R.Civ.P. 56(c). A court must view the evidence and draw all reasonable inferences in favor of the nonmoving party. See Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587, (1986). The moving party bears the initial burden of showing the absence of a genuine issue of material fact, but then the nonmoving party must come forward with specific facts showing that there is a genuine issue for trial. Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Matsushita, 475 U.S. at 587. However, the nonmoving party may not rest on the mere allegations in the pleadings. Fed.R.Civ.P. 56(e); Celotex, 477 U.S. at 324.
B. Breach of Contract and Declaratory Judgment
Defendant argues that it is entitled to summary judgment on Plaintiffs' claims for breach of contract and declaratory judgment because (1) Messer's misstatements in the insurance application are a warranty and therefore void the Policy; (2) Messer was not an insured under the Policy; (3) motor vehicles and accessories are not covered under the Policy; (4) the Policy limits the loss of business property to a total of $2500; (5) neither Plaintiff was living on the property at the time of the loss, and therefore there was no coverage under the Policy for claims related to the residence or pole barn; (6) Plaintiffs' losses resulting from the execution of the search warrant are excluded from coverage because they were the result of governmental action; and (7) Plaintiffs' losses resulting from the vandalism which occurred after the execution of the search warrant are excluded from coverage under the neglect exclusion and because the property remained vacant for more than sixty consecutive days following the loss.
1. Applicable law
The parties agree that the policies are governed by Ohio law. In Ohio, insurance policies are generally interpreted by applying rules of contract law. Burris v. Grange Mut. Cos., 545 N.E.2d 83, 88 (Ohio 1989). If the terms of a policy are clear and unambiguous, the interpretation of the contract is a matter of law. Inland Refuse Transfer Co. v. Browning-Ferris Industries of Ohio, Inc., 474 N.E.2d 271 (Ohio 1984).
2. Warranty
Defendant argues that Messer made misstatements regarding occupancy in the application for insurance which were warranties, thus rendering the Policy void. Defendant points out that the application included an applicant warranty, which provides: "The information furnished on the application is incorporated into and becomes a part of my contract of insurance provided by OFPUA." (Brininger Aff. (1/7/08), Ex. 1) Defendant also relies upon the Policy, which states:
Q. CONCEALMENT OR FRAUD
We provide coverage to no "insureds" under this policy if, whether before or after a loss, an "insured" has:
1. Intentionally concealed or misrepresented any material fact or circumstance;
2. Engaged in fraudulent conduct; or
3. Made false statements; relating to this insurance.
(Brininger Aff. (1/7/08), Ex. 3) Defendant argues that Messer made two misstatements. First, when Messer completed the application for insurance on April 26, 2003, he had already moved from the property and was living with his father. Second, Messer requested that Spangler be made the named insured and represented to Defendant that Spangler resided at the property, when she was in fact not living there.
Plaintiffs respond that Defendant is estopped from arguing that the Policy is void. Plaintiffs point out that Defendant only returned premiums paid past the date of the cancellation. Plaintiffs argue that upon learning that the Policy was void, Defendant was required to declare the Policy void and return all the premiums paid.
Plaintiffs, however, do not argue that they are entitled to the return of all the premiums paid.
Ohio courts have explained that upon learning of a violation of an insurance policy, an insurance company has a duty to declare the policy void and has no right to hold the premiums that were paid. Rice's Auto Leasing, Inc. v. Lee Paull Ins. Agency, 1986 WL 9119, *2 (Ohio Ct.App. Aug. 20, 1986) (unpublished), citing Slovenian Mut. Ben. Ass'n v. Knafelj, 173 N.E. 630, 632 (Ohio Ct.App. 1930). An insurance company which retains the premiums is estopped from denying liability. Id. at *4. In Slovenian Mut. Ben. Ass'n v. Knafelj, the plaintiff claimed the proceeds from her deceased husband's life insurance policy. 173 N.E. at 567. The insurance company refused the claim because the husband made false statements when he applied for the insurance. Id. However, the court explained:
Now there is another point. This man was insured. He paid his premiums for four or five years, and if the theory of the insurance company is right, the only effect of these answers would be to make the policy void ab initio if the answers were false, and, if false, then it would be the duty of the insurance company to declare the policy void, and, if the policy is void ab initio, the company had no right to hold the premiums that were paid. If their theory is correct, this policy might have gone on until the whole face of it had been paid, and then, when the time came to pay this policy, they would say it was void; and if the theory on which they tried this lawsuit is correct, they could keep the premiums and refuse to pay. Such a theory is contrary to public policy.Id. at 567-68. Accordingly, the Court finds that Defendant is estopped from arguing that the Policy is void based upon Messer's misstatements because Defendant did not return the premiums paid on the Policy before the cancellation of the Policy.
3. "Insured" under the Policy
Defendant argues that Messer was not an insured under the Policy at the time of the loss, and therefore Messer is not entitled to assert claims under the Policy. Plaintiffs failed to respond to this argument.
In the Policy, "you" or "yours" refers to the named insured. After August 29, 2003, Spangler was the only named insured. The Policy defines "insured" as follows:
a. You and residents of your household who are:
(1) Your relatives; or
(2) Other persons under the age of 21 and in the care of any person named above;
(Brininger Aff. (1/7/08), Ex. 3) While Messer is a relative of Spanger, it is undisputed that Messer was not living on the property at the time of the loss. Accordingly, the Court finds that Messer was not an "insured" under the Policy. Therefore, Defendant is entitled to summary judgment on any claim Messer brings as an "insured" under the Policy. 4. Plaintiffs' residence
As a result, the Court finds it unnecessary to address Defendant's arguments related to Messer's claim under the Policy for the damage to his vehicles and loss of his business property.
Defendant argues that neither Plaintiff was living on the property at the time of the loss, and therefore there was no coverage for claims related to the residence or pole barn. Defendant explains that the Policy requires that the named insured in the Policy actually reside or occupy the "residence premises" at the time of a loss for coverage to be available under "Coverage A — Dwelling" and "Coverage B — Other Structures."
The Policy states, in part:
A. Coverage A — Dwelling
1. We cover:
a. The dwelling on the "residence premises" shown in the Declarations, including structures attached to the dwelling;
. . .
B. Coverage B — Other Structures
1. We cover other structures on the "residence premises" set apart from the dwelling by clear space. This includes structures connected to the dwelling by only a fence, utility line, or similar connection.
2. We do not cover:
a. Land, including land on which the other structures are located;
. . .
c. Other structures from which any "business" is conducted; or
d. Other structures used to store "business" property. However, we do cover a structure that contains "business" property solely owned by an "insured" or a tenant of the dwelling provided that "business" property does not include gaseous or liquid fuel, other than fuel in a permanently installed fuel tank of a vehicle or craft parked or stored in the structure.
(Brininger Aff. (1/7/08), Ex. 3) The Policy also provides that the "insured location" means the "residence premises;" and the "residence premises" is defined as "[t]he one family dwelling where you reside; . . . and which is shown as the `residence premises' in the Declarations." (Id.) There is no dispute that the "insured location" was the property at 21962 Fayetteville-Blanchester Road. There is also no dispute that Spangler did not live at the property at the time of the loss.
Spangler responds that Defendant knew or should have known that Spangler was not residing on the property. Spangler points out that when she was added as an insured, she provided a different address from that of the property. Spangler argues that as a consequence, Defendant waived any defense based upon the non-residential exclusion.
The Court finds that Defendant did not have sufficient notice that Spangler was not residing at the property at the time of the loss. The Court notes that in his handwritten letter of August 28, 2003, Messer did notify Defendant that the named insured should be changed to Spangler and provided a mailing address for Spangler different from that of the property. However, providing a mailing address different from that of the property is not necessarily an indication that Spangler was not living at the address, especially since the mailing address was a post office box address. Moreover, in the same notice, Messer made an affirmative statement that Spangler "currently resides" at the property.
Spangler also argues that the insurance agent, Walter C. Doll Insurance Agency, was aware that she was not living at the property. However, due to the unique nature of the Ohio Fair Plan, this agency had no authority to bind Defendant. See Ohio Adm. Code 3901-1-18(D)(2) ("No licensed agent, although licensed to represent one or more member insurers of the association, shall hold himself out as an agent of the association or have any authority to bind any risk with for association."). Therefore, any notice to the Walter C. Doll Insurance Agency was insufficient. As a consequence, the Court finds that there was no coverage for claims related to the residence or pole barn, and Defendant is entitled to summary judgment on any such claims.
5. Exclusion for governmental action
Defendant argues that Plaintiffs' losses are excluded from coverage because they were the result of governmental action.
The Policy provides:
SECTION I — EXCLUSIONS
A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
. . .
9. Governmental Action
Governmental Action means the destruction, confiscation or seizure of property described in Coverage A, B or C by order of any governmental or public authority. . . .
Defendant argues that all the claims submitted by Spangler are either the direct or indirect result of the execution of the search warrant. Spangler responds that the search was not governmental action, but was "vandalism under the color of law."
In Abdoo v. LMI Prudential Ins. Co., the plaintiff submitted a claim for loss of personal property as a result of the execution of a search warrant at his business. 669 N.E.2d 870, 871 (Ohio Ct. App. 1995). Under the plaintiff's policy, there was an exclusion for "Governmental Action Seizure or destruction of property by order of governmental authority." Id. at 873. The court found that the execution of a search warrant was a governmental action, and therefore the resulting loss resulting was excluded from coverage under the policy. Id. at 873-74.
Similarly, this Court finds that the loss to the residence, pole barn, and personal property claimed by Spangler was directly and indirectly caused by governmental action. The law enforcement officers removed concrete from the inside of the pole barn, left a hole inside the pole barn as deep as fifteen feet, and buried personal property with the dirt removed from the pole barn. There is no dispute that these actions were taken as part of the execution of the search warrant. Therefore, the Court finds that Defendant is entitled to summary judgment on Spangler's claims to the extent that the loss was caused by this governmental action.
However, the Court finds that it is not clear whether all the claimed loss is attributable to the execution of the search warrant, or the vandalism which took place after the search ended. There is no dispute that the septic system was damaged as a result of the search, and this caused the tenants to vacate the property. There is also no dispute that while the property was vacant, vandals came onto the property and caused more damage and loss. The Court finds the loss caused by the vandals is too "indirect" to be said to be attributable to the governmental action. Therefore, Defendant is not entitled to summary judgment on that portion of Spangler's claim under this section of the Policy.
6. Losses due to vandalism
Defendant argues that Spangler's losses resulting from the vandalism which occurred after the execution of the search warrant are excluded from coverage under the neglect exclusion and because the property remained vacant for more than sixty consecutive days following the loss.
Defendant argues that the neglect exclusion applies, which provides:
SECTION I — EXCLUSIONS
A. We do not insure for loss caused directly or indirectly by any of the following. Such loss is excluded regardless of any other cause or event contributing concurrently or in any sequence to the loss. These exclusions apply whether or not the loss event results in widespread damage or affects a substantial area.
. . .
5. Neglect
Neglect means neglect of an "insured" to use all reasonable means to save and preserve property at and after the time of loss.
Spangler responds that she believed she was not permitted to enter the property, but cites nothing in support of this position. Instead, law enforcement personnel testified that Spangler was never prohibited from entering the Property. (Penn Depo. at 213; Dunn Depo. at 227) Moreover, Spangler testified that once she did enter the property and surveyed the damage, she did not take any action because she did not think it would be worth the money to fix the property. Based on the foregoing, the Court finds that any loss caused by the vandals is excluded under the neglect provision. There is no evidence in the record that after the search ended that Spangler used all reasonable means to save and preserve property. Therefore, the Court finds that Defendant is entitled to summary judgment on any claim by Spangler based upon loss after the search ended on May 11, 2004. C. Bad Faith
Accordingly, the Court finds it unnecessary to address Defendant's arguments related to the vacancy exclusion.
Defendant argues that the denial of Plaintiffs' claims was based upon an analysis of the law and Plaintiffs' policy terms and conditions. Defendant argues further that even if Defendant's interpretation is ultimately determined to be incorrect, there is no evidence of bad faith on the part of Defendant.
The relationship between an insurer and its insured creates a duty on the part of an insurer to act in good faith in the handling and payment of the claims of its insured. Hoskins v. Aetna Life Ins. Co., 452 N.E.2d 1315, 1319 (Ohio 1983). "[A]n insurer fails to exercise good faith in the processing of 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., 644 N.E.2d 397, 400 (Ohio 1994). To prevail on a claim of bad faith, the insured "must prove that the insurer's refusal to pay a claim was totally arbitrary and capricious." Spremulli's Am. Serv. v. Cincinnati Ins. Co., 632 N.E.2d 599, 602 (Ohio Ct.App. 1992).
Plaintiffs have not responded to Defendant's arguments that it is entitled to summary judgment. Moreover, Plaintiffs have not presented any evidence that Defendant's refusal to pay was arbitrary and capricious. In ruling on a motion for summary judgment, "[a] district court is not required to speculate on which portion of the record the nonmoving party relies, nor is it obligated to wade through and search the entire record for some specific facts that might support the nonmoving party's claim." InterRoyal Corp. v. Sponseller, 889 F.2d 108, 111 (6th Cir. 1989), cert. denied, 494 U.S. 1091 (1990). Accordingly, the Court finds that Defendant is entitled to summary judgment on Plaintiffs' claim of bad faith.
III. CONCLUSION
Based on the foregoing, it is hereby ORDERED that Defendant Ohio Fair Plan Underwriting Association's Motion for Summary Judgment (Doc. 80) is hereby GRANTED. Accordingly, Defendant Ohio Fair Plan Underwriting Association shall be dismissed as a party from this action.