MRR Partner, Steve Kelley, Senior Attorney, Cara Wright and Partner, Frank Scialdone recently obtained affirmance of the trial court’s grant of summary judgment to our legal malpractice client in the Eleventh District Court of Appeals.
While the trial court found the Plaintiff produced enough evidence to create a question of fact on an alleged breach of the standard of care, it found the Plaintiff failed to present any evidence that the alleged breach proximately caused damages.
Careful examination of all elements of a claim must be undertaken to properly defend any claim. MRR stands ready to defend any professional liability claim including claims against lawyers, architects, engineers, accountants, insurance agents/brokers and real estate professionals. Please contact our firm to let us know if we can be of service to you.
Mrs. Keene focuses her practice on insurance coverage issues and public sector law. She has a wide range of experience in various insurance defense practice areas, including Bad Faith and Commercial General Liability matters. Alyssa earned her Juris Doctorate from Cleveland-Marshall College of Law and received her Bachelor of Arts degree from John Carroll University. She is a member of the Ohio State Bar Association and Cleveland Metropolitan Bar Association.
Ms. Herman focuses her practice in the commercial trucking, premises liability and commercial general liability areas. She also represents public entities in a wide array of municipal matters. Amy earned her Juris Doctorate from the Cleveland-Marshall College of Law and received her Bachelor of Arts degree from University of Dayton. She is a member of the Ohio State Bar Association and Cleveland Metropolitan Bar Association, a Cleveland Marshall Law Alumni Association Trustee and Ladder Down Committee Member.
In the recent case of City of East Liverpool v. Owners Insurance Company, et al., 7th Dist. Columbiana No. 20 CO 0009, MRR Attorneys Joseph F. Nicholas, Jr., Frank H. Scialdone, George V. Pilat, and Michael P. Byrne demonstrated that our insurance agency clients properly procured the insurance coverage requested by their customer. It was the customer’s own failure to request coverage for a particular structure, and not ambiguity in what was being requested, that caused the lack of coverage. The Seventh District also offered some notable interpretation of the ever evolving application of the statute of limitations in matters of professional liability.
This appeal arose out of Plaintiff City of East Liverpool’s lawsuit against its insurer Defendant Auto-Owners Insurance; its insurance agencies and agent (the Agency Defendants); and Defendant Crounse Corporation. Specifically, a passing barge owned by Defendant Crounse Corporation crashed into a concrete water-intake structure owned by the City of East Liverpool and located dozens of yards off the shoreline in the Ohio River. The City’s claim against the tortfeasor Crounse Corporation was settled. Despite that resolution, the City tried to impose liability on the Agency Defendants even though it never specifically requested coverage for the Intake Structure. Indeed, over the three-plus decades the Agency Defendants provided insurance services for the City, the City never sought to obtain coverage and never paid premiums for the Intake Structure, until after it experienced the loss. Accordingly, the trial court granted the Agency Defendants’ motion for summary judgment, holding that the City could not impose liability on the Agency Defendants for its own failure to request coverage.
The City appealed alleging, among other things, that the term “Intake Well House” is reasonably susceptible to more than one interpretation, thereby creating a genuine issue of material fact. The Seventh District determined that reasonable minds could conclude that the language used was clear and unambiguous as the plain and ordinary meaning of “Intake Well House” is the well house that connects to the intake. This definition corresponded to the street address listed for the well house that is connected to the Intake Structure. Moreover, the City was the first party to use the term “Intake Well House” and specify that it was located at 2220 Michigan Avenue. The Court asserted that the City cannot now claim that its own term, first used by it, was ambiguous.
The Court further explained that even if it were to conclude the term “Intake Well House” was ambiguous, the use of parol or extrinsic evidence would still limit the coverage to the well house structure, not the intake. A third-party report generated at the City’s request to provide estimated replacement costs for the major structures owned by the Water Department lists the two (Intake Structure and Well House) separately. In addition, the replacement value of the Intake Structure listed in the report was $750,000. The replacement value of the Well House in that same report was $115,800. Despite the report’s separate listings, the insurance contract did not list the Well House and Intake Structure separately. The contract also did not insure the “Intake Well House” for the combined amount of the Well House and Intake Structure. Instead, the contract covered the “Intake Well House” for an amount equivalent to the amount of the Well House alone; the insurance coverage was for approximately $150,000. As such, the Court further concluded that given the difference in the values between what was covered and what the structures were worth, it is glaring as to what the intent of the parties was by the use of the phrase “Intake Well House”; it was to only cover the Well House where the intake connects. Had the intent been to also cover the Intake Structure, it would have been listed separately as it was in the report, or it would have been valued at a much higher amount. Accordingly, The Seventh District upheld the trial court’s holding that the City could not impose liability on the Agency Defendants for its own failure to request coverage.
Finally, in addition to asserting that the City had failed to request coverage for the Intake Structure, the Agency Defendants also argued that the City’s claim was barred by the applicable statute of limitations. While the Court did not use the statute of limitations as the basis for its decision, it did provide some analysis of the application of the statute of limitations under the circumstances. This analysis added some interesting legal dicta to the ever evolving application of the statute of limitations in matters of professional liability. Specifically, the Ohio Supreme Court in LGR Realty, Inc. v. Franks, London Ins. Agency, 152 Ohio St.3d 517, 2018-Ohio-334, 98 N.E.3d 24 addressed the four-year statute of limitations for professional-negligence claims. Therein, the Ohio Supreme Court concluded that the “delayed damages rule” does not apply to negligent procurement or negligent misrepresentation claims where the terms of the policy when issued contained a provision specifically excluding the type of claim that the insured alleged it believed was covered by the policy. In other words, when negligent procurement and misrepresentation claims are alleged, the alleged damage occurs the moment the contract is entered and the insured becomes obligated to pay a premium for the insurance policy that provided less coverage than it believed it would receive.
The Agency Defendants argued that based upon LGR Realty, the damage to the City occurred in 1986 when insurance was procured that did not include coverage for the Intake Structure as the City alleged it requested, and as such, the four-year statute of limitations had long since expired before the City filed suit in 2018. In analyzing LGR Realty, the Seventh District commented that a renewal policy could represent a new contract separate from the initial policy, indicating that damage could occur not only upon procurement of the initial policy, but later upon renewal as well. However, while again, the Court did not rely on the statute of limitations to arrive at its decision, it did determine that even though the policy had renewed many times, the coverage for the “Intake Well House,” and the lack of coverage for the Intake Structure, was constant, and opined that “[t]his seems to indicate that the action is barred by the statute of limitations.”
This legal dicta interpreting the LGR Realty decision supports the proposition that so long as the pertinent portion of the policy remains constant for the requisite 4 years, the statute of limitations will function to bar a claim arising from that portion of the policy. This subject has the potential for further development as additional appellate courts interpret and apply LGR Realty to various professional liability matters.
More details about this case can be found in The Opinion & Judgement Entry. If you have questions related to this case or need legal advice, please contact Michael Byrne, Joe Nicholas, George Pilat, or Frank Scialdone at the law offices of Mazanec, Raskin & Ryder Co., L.P.A.
On March 16, 2021, Governor DeWine signed into law Senate Bill 13 which has four significant implications on civil causes of action in Ohio; the creation of a statute of repose for legal malpractice actions, a shortened statute of limitations for causes of action based on contracts, the creation of a statute of limitations for causes of action arising out of consumer transactions, and modification of Ohio’s “Borrowing Statute.”
Statute of Repose for Legal Malpractice
Currently, Ohio law includes a statute of limitations for claims of legal malpractice that requires those causes of action to be brought within one (1) year of the date of discovery of the alleged malpractice. However, depending upon when the alleged malpractice is discovered, a claim for legal malpractice could be made against a lawyer at any time for the rest of their life, and up to one (1) year after they die. The passage of this law establishes a statute of repose of four (4) years for malpractice actions against attorneys in the state, affording them time limit protections already afforded to other licensed professionals, such as physicians, nurses, and architects who practice in Ohio.
A statute of repose, in contrast to a statute of limitations, does not take in to consideration when the injury is discovered, but instead will bar claims after the passage of a period of time. As such, if an injury is discovered five (5) years after the act or omission occurred, it would be barred by the statute of repose. This provides certainty to legal professionals who will no longer have perpetual fear of suit because a former client could theoretically discover an injury at any time. Similar to other statutes of repose in Ohio, there would be exceptions for certain disabilities, and additional time to file if a party discovers the injury in the last year that could not have been discovered earlier.
Shortened Statute of Limitations for Contracts
In order to provide more certainty for business owners, more opportunity for business growth, and thus, make Ohio more business friendly, the law also shortens the statute of limitations for causes of action based upon written contracts from eight to six years, and causes of action for oral contracts from six (6) to four (4) years. The Ohio legislature has now reduced the amount of time for bringing causes of action based upon written contracts twice in the past decade, whereas prior to 2012, Ohio had maintained a fifteen (15) year statute of limitations on such causes of action. While this seems to be drastic change over a short period, it is in keeping with the average, as Ohio will now be in line with twenty-two other states with the same six (6) year limitation period. The provisions will become effective on June 14, 2021. However, for causes of action that have accrued prior to this effective date, the period of limitations shall be six (6) or four (4) years from the effective date of the bill or the expiration of the period of limitations in effect prior to the effective date, whichever occurs first.
Statute of Limitations for Consumer Transactions
The law further creates a six (6) year statute of limitations for contracts in consumer transactions, whether or not they are in writing. This limitations period will be added to O.R.C. 2305.07 and would begin accruing thirty (30) days from the last charge or payment by the consumer. Exceptions to the new and shortened statute of limitations periods include actions relative to real property and commercial paper.
Modifications to Ohio’s “Borrowing Statute”
In causes of action arising from another state where the other state’s statute of limitations has already expired, the Ohio Borrowing Statute (O.R.C. 2305.03) applies to allow Ohio courts to “borrow” the statute of limitations from the other state to bar the cause of action and prevent forum shopping. The new law narrows the applicability of the statute by limiting its applicability to only tort actions, whereas it was previously applicable to all civil actions. In other words, only actions seeking damages for injury, death, or loss to person or property, and not damages for breach of contract.
The law further adds sections relative to post-default and post charge-off interest in consumer transactions in an effort to reduce claims brought in Ohio attempting to use a neighboring state’s interest rate if that state’s statute of limitations has run. Notably, the modifications to the borrowing statute would take retroactive effect to the dates of the passing of the Ohio Tort Reform Act, April 7, 2005.
With these new changes shortening the time in which claimants can bring a cause of action, it is important to consult with an attorney to ensure that a potential action is commenced timely. Please feel free to contact any of our attorneys with any questions you might have.
Throughout the country and due to the impacts of the current COVID-19 pandemic, business owners are presenting business interruption claims to their commercial insurance carriers. With fair regularity, insurers are denying these claims based upon a “Virus Exclusion” within the insured’s policy.
These claim denials then are being made the subject of declaratory actions, with the courts being asked to determine the issue of coverage.
Confronted with such situations, jurists in two separate cases pending in the Federal District Court, Northern District of Ohio, recently arrived at conflicting conclusions with regard to whether the state’s COVID-19 shutdowns of restaurants created valid claims for business interruption insurance coverage. Weighing fundamentally identical facts and policy language, one court found for the insurer, upholding a denial of coverage, while the other found for the insured restaurant, holding that coverage existed under the particular policy. The disparity in these decisions will certainly result in further appellate activity in Ohio with significant implications as the consequences of the COVID-19 pandemic continue to be revealed.
The question has now been certified to the Ohio Supreme Court.
Santo’s Italian Café, LLC v. Acuity Ins. Co., (Dec. 20, 2020), N.D. Ohio No. 1:20-CV-01192
In Santo’s, Judge Pamela Barker relied upon two separate basis when finding in favor of the insurer, and dismissing Santo’s claims for business interruption coverage. First and foremost, the Court concluded that the insured had failed to demonstrate any “tangible” or “structural” damage beyond mere “economic losses” that would establish “direct physical loss of or damage to” the insured premises. This is not an uncommon basis for denial of coverage in such situations; i.e., a very strict interpretation and application of the language of a typical Virus Exclusion. Specifically, the Court noted the language of the Property Coverage Form which read, “We will pay for direct physical loss of or damage to Covered Property at the premises described in the Declarations caused by or resulting from any Covered Cause of Loss.” Further, the form included the following in “additional coverages”:
g. Business Income and Extra Expense
(1) We will pay for the actual loss of Business Income you sustain due to the necessary suspension of your operations during the period of restoration. The suspension must be caused by direct physical loss of or damage to property at the described premises. The loss or damage must be caused by or result from a Covered Cause of Loss.
Acuity asserted there had been no “direct physical loss of or damage to property,” because there were no allegations of “demonstrable, physical alteration” or “tangible alteration” of the property. To the contrary, Santo’s argued the policy was subject to interpretation in that “physical loss” can include a “loss of functionality,” “lost operations or inability to use the business.”
Relying upon Mastellone v. Lightning Rod Mut. Ins. Co., 175 Ohio App. 3d 23, 40 (Ohio 8th Dist. Ct. App. 2008) (denying coverage for mold stains) and Universal Image Prods., Inc. v. Federal Ins. Co., 475 Fed. App’x 569, 573 (6th Cir. 2012) (denying coverage for an odor caused by mold or bacteria) the Court concluded that under Ohio law, the terms of the policy required Santo’s to allege and prove a “distinct, demonstrable physical alteration” of its property, beyond “mere economic effects.”
Alternatively, the Court determined that even if Santo’s had alleged a viable claim, coverage was further precluded by the “virus exclusion” in the coverage forms, which states:
1. We will not pay for loss or damage caused directly or indirectly by any of the following. Such loss or damage is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the loss…
i. Virus or Bacteria
(1) Any virus, bacterium, or other microorganisms that induces or is capable of inducing physical distress, illness or disease.
To this point, Santo’s argued that it was not the COVID-19 virus, but the Ohio Closure Orders that caused the loss, and that the exclusion is ambiguous because it does not specifically reference the term “pandemic.” The Court was not persuaded by these arguments since in its Complaint Santo’s acknowledged that the Closure Orders were issued due to the spread of the COVID-19 virus and the pandemic arose from the virus. It also relied upon the anti-concurrent causation language, which excludes damage caused “direct or indirectly” by the cited causes “regardless of any other cause or event that contributes” to it.
For these several reasons, the Santo’s Court held that no coverage existed under the particular policy.
Henderson Road Restaurant Systems, Inc., v. Zurich Am. Ins. Co., (Jan. 19, 2021), N.D. Ohio No. 1:20-CV-1239
In contrast, in Henderson, Judge Dan Polster granted the insured’s motion for summary judgment, finding that business interruption insurance coverage was available under virtually identical policy language and on the basis of the same arguments that Judge Barker had rejected in Santo’s. Specifically, the pertinent portion of the policy in Henderson reads:
Business Income Coverage Form
We will pay for the actual loss of ‘business income’ you sustain due to the necessary ‘suspension’ of your ‘operations’ during the ‘period of restoration.’ The ‘suspension’ must be caused by direct physical loss of or damage to property at a ‘premises.’ … The loss or damage must be directly caused by a ‘Covered cause of loss.’”
The Henderson Court was receptive to the insured’s argument that ambiguity existed with regard to the phrase “direct physical loss of or damage to” property. Construing these ambiguities in favor of the insured, the Court agreed that the phrase could mean something other than “damage to” the real property because, otherwise, why would “physical loss of” and “damage to” appear side-by-side separated by the disjunctive conjunction “or”? Accordingly, the Court agreed that the insured could have “lost their real property” under the terms of the policy “when the state governments ordered that the properties could no longer be used for their intended purpose.”
Zurich, the insurer, argued that coverage was otherwise barred by operation of the following “microorganisms” exclusion in the policy:
We will not pay for loss or damage consisting of, directly or indirectly caused by, contributed to, or aggravated by the presence, growth, proliferation, spread, or any activity of ‘microorganisms,’ unless resulting from fire or lightning. Such loss or damage is excluded regardless of any other cause or event, including a ‘mistake’ or ‘malfunction,’ or weather condition, that contributes concurrently or in any sequence to the loss, even if such other cause or event would otherwise be covered.
However, the Henderson Court rejected this argument, stating: “Plaintiffs’ restaurants were not closed because there was an outbreak of COVID-19 at their properties; they were closed as a result of governmental orders.” The Court further noted the stipulation that none of Plaintiffs’ Insured Premises had been closed as a result of a known or confirmed presence of COVID-19 at any of the Insured Premises, and that the microorganisms exclusion “did not clearly exclude loss of property caused by a government closure.”
Future Appellate Activity in Ohio
The Santo’s and Henderson decisions addressing the question of the availability of business interruption insurance coverage for COVID-19 business shutdowns were each issued by the Ohio Northern District within a month of one another, but arrive at differing conclusions. Santo’s determined that business interruption coverage requires “structural” or “tangible” damage beyond “economic loss.” Henderson found that a “physical loss” occurs when a property cannot be used for its intended purposes during a pandemic-related shutdown. By the same token, one decided that government closure orders are sufficiently related to COVID-19 to fall under a virus exclusion, while the other found that an exclusion for microorganisms is inapplicable because the losses were caused by the government closure orders, as opposed to the virus itself.
Aware of this dichotomy, the Henderson court provided for interlocutory appeal of its coverage ruling.
Similarly, in Neuro-Communication Services Inc., etc., v. The Cincinnati Insurance Co., N.D. Ohio No. 4:20-CV-1275, yet a third case from the Ohio Northern District, Judge Benita Pearson issued the following certified questions of law to the Ohio Supreme Court:
Does the general presence in the community, or on surfaces at a premises, of the novel coronavirus known as SARS-CoV-2, constitute direct physical loss or damage to property; or does the presence on a premises of a person infected with COVID-19 constitute direct physical loss or damage to property at that premises?
Within the Order of Certification, Judge Pearson states that “Dozens, if not hundreds, of cases seeking coverage for losses related to the pandemic under policies similar or identical to that at issue in this case have been filed in both federal and state courts in Ohio,” and that “The certification procedure invoked here will allow the Supreme Court of Ohio to decide these questions and bring uniformity to the application of state law to these policies…”
In the meantime, insurers and insureds in Ohio must anxiously await the interpretation and resolution of these issues by the Sixth Circuit or the Ohio Supreme Court and the potentially far reaching implications they will have.
If you have questions related to this topic or need legal advice, please contact Michael Byrne (Cleveland, OH) email@example.com, Doug Holthus (Columbus, OH) firstname.lastname@example.org, or Joe Nicholas (Cleveland, OH) email@example.com at the law offices of Mazanec, Raskin & Ryder Co., L.P.A.
On January 12, 2021, Governor DeWine signed into law H.B. 352 (the “Employment Law Uniformity Act”) which makes overdue changes and provides long-awaited clarifications to Ohio’s employment discrimination statutes.
Subject to two exceptions described below, an employee who wishes to pursue a claim for employment discrimination will now be required to exhaust administrative remedies by filing a charge of discrimination with the Ohio Civil Rights Commission within 2 years of the allegedly discriminatory practice. A charge can be filed against an employer, an employment agency, personnel placement service, labor organization, or a person who is allegedly liable under R.C. 4112.02(I) (retaliation) or R.C. 4112.02(J) (unlawful employment practices or aiding/abetting discrimination). The OCRC exhaustion requirement does not apply to employees who intend to pursue injunctive relief only, or to employees who timely filed a charge with both OCRC and EEOC and received a notice of right to sue from the EEOC.
The new law also reduces Ohio’s existing 6-year statute of limitations (for most employment discriminations claims) to a uniform 2-year statute. However, the 2-year statute of limitations will be tolled by OCRC’s administrative proceedings from the date the charge is filed until no more than 60 days after the charge is no longer pending with the OCRC.
Additions to the Ohio Civil Rights Acts include an express adoption and codification of the Faragher/Ellerth defense from federal common law. Thus, unless an employee experiences a tangible employment action, an employer may assert an affirmative defense to a hostile work environment sexual harassment claim (and apparently only a sexual harassment hostile work environment claim) by proving that: (1) the employer used reasonable care to prevent and promptly correct sexually harassing behavior; and (2) the employee unreasonably failed to take advantage of the preventive or corrective opportunities provided by the employer, or failed to otherwise avoid harm.
Importantly, the new law supersedes the Ohio Supreme Court’s decision in Genaro v. Central Transp. Co., which held that a supervisor or manager could be held personally liable for discrimination as an “employer” under Section 4112.02. The new law relieves supervisors, managers and employees from personal liability under Section 4112.02(A) through (F) unless the supervisor, manager or employee is also the employer. However, personal liability is still a risk for supervisors, managers and other persons who act outside the scope of their employment, retaliate against an employee (R.C. 4112.02(I)) or aid, abet, coerce, compel or personally engage in an unlawful discriminatory practice (R.C. 4112.02(J)).
The new law makes the act’s statutory procedures and remedies the sole and exclusive procedures and remedies for employees who allege discrimination actionable under Chapter 4112; however, other statutory and common law claims that already can be brought against employers, supervisors, managers and employees remain unaffected, including public policy torts permitted by Collins v. Rizkana.