Jordan v. United Ohio Ins. Co.

[Cite as Jordan v. United Ohio Ins. Co., 2021-Ohio-2170.]

IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
SENECA COUNTY

GARY JORDAN, ET AL.,

PLAINTIFFS-APPELLANTS, CASE NO. 13-20-23

v.

UNITED OHIO INSURANCE COMPANY,
OPINION
DEFENDANT-APPELLEE.

Appeal from Seneca County Common Pleas Court
Trial Court No. 20-CV-0006

Judgment Reversed and Cause Remanded

Date of Decision: June 28, 2021

APPEARANCES:

James W. Fruth for Appellant

Matthew R. Planey for Appellee
Case No. 13-20-23

ZIMMERMAN, J.

{¶1} Plaintiffs-appellants, Gary Jordan (“Gary”) and Margaret Jordan

(“Margaret”) (collectively, “the Jordans”), appeal the November 17, 2020 judgment

of the Seneca County Court of Common Pleas granting summary judgment in favor

of defendant-appellee, United Ohio Insurance Company (“United Ohio”). For the

reasons that follow, we reverse.

{¶2} This case stems from an insurance policy that United Ohio issued the

Jordans for coverage of a rental property. Following a fire at the rental property,

the Jordans submitted a claim under the policy seeking payment for property

damage and lost rental income. Although connected, the property-damage claim

was resolved prior to the filing of the complaint. However, the Jordans’ lost-rental-

income claim remained unsettled.

{¶3} Accordingly, on January 7, 2020, the Jordans filed a complaint for

declaratory judgment under R.C. Chapter 2721 and breach of contract as to their

lost-rental-income-insurance claim. (Doc. No. 2). United Ohio filed an answer on

February 3, 2020. (Doc. No. 4).

{¶4} On September 16, 2020, United Ohio filed a motion for summary

judgment in which it argued that there is no genuine issue of material fact that the

Jordans are “entitled to three months of lost rents under the clear and unambiguous

terms of the Policy” and because there is no genuine issue of material fact that the

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Jordans “failed to mitigate their damages and comply with the terms of the Policy.”

(Doc. No. 10). On October 1, 2020, the Jordans filed a memorandum in opposition

to United Ohio’s motion for summary judgment in which they argued that summary

judgment is improper because “United Ohio’s actions served to intensify the

damages the Jordans have suffered” “[b]etween the delay occasioned by United

Ohio’s adjustor’s specific instructions, as well as the decision of United Ohio to

demand Court involvement with the selection of an independent umpire * * * .”

(Doc. No. 12).

{¶5} On November 17, 2020, the trial court granted summary judgment in

favor of United Ohio after concluding that no genuine issue of material fact

remained that United Ohio did not breach its policy with the Jordans and that there

is no genuine issue of material fact that the Jordans are “barred under Ohio law due

to [their] failure to mitigate their damages and to satisfy their obligations under the

Policy.” (Doc. No. 15).

{¶6} On December 9, 2020, the Jordans filed a notice of appeal. (Doc. No.

16). They raise one assignment of error for our review.

Assignment of Error

The Trial Court Abused its Discretion in Holding That There
Were No Genuine Issues of Material Fact and That the Defendant
Met the Standard for Summary Judgment.

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{¶7} In their assignment of error, the Jordans argue that the trial court erred

by granting summary judgment in favor of United Ohio because there is a genuine

issue of material fact they are entitled to lost rental income, plus charges and

expenses, that continued while the insured premises was unfit for use. Specifically,

the Jordans argue that there is a genuine issue of material fact that “United Ohio’s

actions served to increase and aggravate the Jordan’s damages” and that summary

judgment is precluded on “issues and disputes involving mitigation * * * .”

(Appellant’s Brief at 9-10).

Standard of Review

{¶8} We review a decision to grant summary judgment de novo. Doe v.

Shaffer, 90 Ohio St.3d 388, 390 (2000). “De novo review is independent and

without deference to the trial court’s determination.” ISHA, Inc. v. Risser, 3d Dist.

Allen No. 1-12-47, 2013-Ohio-2149, ¶ 25, citing Costner Consulting Co. v. U.S.

Bancorp, 195 Ohio App.3d 477, 2011-Ohio-3822, ¶ 10 (10th Dist.). Summary

judgment is proper where there is no genuine issue of material fact, the moving party

is entitled to judgment as a matter of law, and reasonable minds can reach but one

conclusion when viewing the evidence in favor of the non-moving party, and the

conclusion is adverse to the non-moving party. Civ.R. 56(C); State ex rel. Cassels

v. Dayton City School Dist. Bd. of Edn., 69 Ohio St.3d 217, 219 (1994).

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{¶9} “The party moving for summary judgment has the initial burden of

producing some evidence which demonstrates the lack of a genuine issue of material

fact.” Carnes v. Siferd, 3d Dist. Allen No. 1-10-88, 2011-Ohio-4467, ¶ 13, citing

Dresher v. Burt, 75 Ohio St.3d 280, 292 (1996). “In doing so, the moving party is

not required to produce any affirmative evidence, but must identify those portions

of the record which affirmatively support his argument.” Id., citing Dresher at 292.

“The nonmoving party must then rebut with specific facts showing the existence of

a genuine triable issue; he may not rest on the mere allegations or denials of his

pleadings.” Id., citing Dresher at 292 and Civ.R. 56(E).

Analysis

{¶10} In this case, the trial court concluded that the Jordans’ claims fail as a

matter of law because they “failed to mitigate their damages and committed a

material breach of the Policy.” (Doc. No. 15). We will begin by addressing the trial

court’s conclusion that the Jordans’ claims fail as a matter of law because they failed

to mitigate their damages.

{¶11} “Failure to mitigate damages is an affirmative defense that is waived

if it is not raised in a party’s pleading.” Portage Community Bank v. Fazio, 11th

Dist. Portage No. 2016-P-0056, 2017-Ohio-5774, ¶ 22, citing Windsor v. Riback,

11th Dist. Geauga Nos. 2007-G-2775 and 2007-G-2781, 2008-Ohio-2005, ¶ 57. See

also Young v. Frank’s Nursery & Crafts, Inc., 58 Ohio St.3d 242, 244 (1991). “The

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burden of proving a failure to mitigate damages lies with the party asserting the

defense.” Telecom Acquisition Corp. I v. Lucic Ents., Inc., 8th Dist. Cuyahoga No.

102119, 2016-Ohio-1466, ¶ 69, citing Hines v. Riley, 129 Ohio App.3d 379 (4th

Dist.1998). “‘Whether an injured party used reasonable care to avoid damages

presents a question of fact.’” PHH Mtge. Corp. v. Barker, 3d Dist. Van Wert No.

15-19-01, 2019-Ohio-5301, ¶ 24, quoting First Fin. Bank, N.A. v. Cooper, 1st Dist.

Hamilton No. C-150664, 2016-Ohio-3523, ¶ 23, citing Pinnacle Mgt. v. Smith, 12th

Dist. Butler No. CA2003-12-327, 2004-Ohio-6928, ¶ 12.

{¶12} Here, United Ohio failed to raise the affirmative defense of the failure

to mitigate damages in its answer. Accordingly, United Ohio waived the affirmative

defense. Accord Portage Community Bank at ¶ 22. Thus, the trial court erred by

concluding that the Jordans’ claims fail as a matter of law because they failed to

mitigate their damages.

{¶13} Having concluded that the trial court erred by concluding that the

Jordans’ claims fail as a matter of law because they failed to mitigate their damages,

we will turn to the trial court’s determination that the Jordans’ claims fail because

they committed a material breach of the policy. In order to determine whether the

trial court erred by granting summary judgment in favor of United Ohio, we must

interpret the terms of the insurance policy.

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{¶14} “‘An insurance policy is a contract whose interpretation is a matter of

law.’” Laboy v. Grange Indemn. Ins. Co., 144 Ohio St.3d 234, 2015-Ohio-3308, ¶

8, quoting Sharonville v. Am. Emp. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180,

¶ 6. “When interpreting an insurance policy, the fundamental goal is to ascertain

the intent of the parties.” Kean v. Cincinnati Ins. Co., 10th Dist. Franklin No. 20AP-

177, 2021-Ohio-490, ¶ 14, citing Laboy at ¶ 8. “The intent of the parties is

ascertained by reading the policy in its entirety and settling ‘upon a reasonable

interpretation of any disputed terms in a manner designed to give the contract its

intended effect.’” Id., quoting Laboy at ¶ 8. “Ordinary words in a written contract

must be ‘given their ordinary meaning unless manifest absurdity results, or unless

some other meaning is clearly evidenced from the face or overall contents of the

instrument.’” Nippon Life Ins. Co. of Am. v. One Source Mgt., Ltd., 6th Dist. Lucas

No. L-10-1247, 2011-Ohio-2175, ¶ 22, quoting Alexander v. Buckeye Pipe Line Co.,

53 Ohio St.2d 241 (1978), paragraph two of the syllabus.

{¶15} “‘If a contract is clear and unambiguous, then its interpretation is a

matter of law and there is no issue of fact to be determined.’” Barhorst, Inc. v.

Hanson Pipe & Prods. Ohio, Inc., 169 Ohio App.3d 778, 2006-Ohio-6858, ¶ 10 (3d

Dist.), quoting Inland Refuse Transfer Co. v. Browning-Ferris Industries of Ohio,

Inc., 15 Ohio St.3d 321, 322 (1984). In that case, we apply a de novo standard of

review. St. Marys v. Auglaize Cty. Bd. of Commrs., 115 Ohio St.3d 387, 2007-Ohio-

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5026, ¶ 38, citing Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio

St.3d 107, 108 (1995).

{¶16} “The meaning of an ambiguous contract, however, is an issue of fact

to be decided by the trier of fact.” Westlake v. VWS, Inc., 8th Dist. Cuyahoga No.

100180, 2014-Ohio-1833, ¶ 34, citing Brown v. Columbus All-Breed Training Club,

152 Ohio App.3d 567, 2003-Ohio-2057, ¶ 18 (10th Dist.). See also Inland Refuse

Transfer at 322 (“However, if a term cannot be determined from the four corners of

a contract, factual determination of intent or reasonableness may be necessary to

supply the missing term.”). “A contract is ambiguous if it is ‘susceptible to more

than one reasonable interpretation.’” Westlake at ¶ 34, quoting Michael A. Gerard,

Inc. v. Haffke, 8th Dist. Cuyahoga No. 98488, 2013-Ohio-168, ¶ 11, citing Hillsboro

v. Fraternal Order of Police, Ohio Labor Council, Inc., 52 Ohio St.3d 174, 177

(1990). See also Mulchin v. ZZZ Anesthesia, Inc., 6th Dist. Erie No. E-05-045,

2006-Ohio-5773, ¶ 36 (“Contract language is ambiguous ‘if it is unclear, indefinite,

and reasonably subject to dual interpretations * * * .’”), quoting Beverly v. Parilla,

165 Ohio App.3d 802, 2006-Ohio-1286, ¶ 24 (7th Dist.). Because the intent of the

parties becomes a question of fact when a court finds an ambiguity in the contract

language, the trier of fact may rely on extrinsic evidence to ascertain such intent.

Mulchin at ¶ 36, citing Beverly at ¶ 26.

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{¶17} “[P]rovisions in an insurance contract that are reasonably susceptible

of more than one interpretation will be construed liberally in favor of the insured.”

Laboy, 144 Ohio St.3d 234, 2015-Ohio-3308, at ¶ 9. “‘This rule, however, will not

be applied so as to provide an unreasonable interpretation of the words of the

policy.’” Id., quoting Cincinnati Ins. Co. v. CPS Holdings, Inc., 115 Ohio St.3d

306, 2007-Ohio-4917 ¶ 8.

{¶18} The portions of the insurance policy at issue is as follows:

Coverage D – Additional Living Expense and Loss of Rent
Coverage

***

We pay for the rent you lose if the part of the insured premises rented
or held for rental to others is made unfit for use by a covered loss. We
only pay for the period of time reasonably required to make the
insured premises fit for use or until your household is permanently
relocated, whichever is less. Loss of rent is the amount you would
have received less the charges and expenses that do not continue while
the insured premises is unfit for use. This period of time is not
limited by the policy period.

Our limit each month for * * * Rent Coverage shall not exceed one-
twelfth of the Coverage D limit shown in the declarations.1

***

EXCLUSIONS

***

1
The Coverage D limit shown in the declarations is $18,200. (Doc. No. 2, Ex. A).

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6. Neglect – We do not pay for loss which results from neglect of
an insured to use all reasonable means to save and preserve covered
property at and after the time of a loss.

WHAT YOU MUST DO IN CASE OF LOSS

***

4. Repairs – The insured must take all reasonable steps to protect
covered property at and after a covered loss to avoid further loss. We
pay the reasonable costs incurred by you for necessary repairs or
emergency measures performed solely to protect covered property
from further damage by a peril insured against if a peril insured
against has already caused a loss to covered property. The insured
must keep an accurate record of such costs. This does not increase
our limit.

(Emphasis sic.). (Doc. No. 2, Ex. A).

{¶19} We conclude that the trial court erred by concluding that the Jordans’

claims fail as a matter of law because the Jordans committed a material breach of

the policy by “fail[ing] to take ‘all reasonable steps to protect [the] covered property

at and after a covered loss to avoid further loss.’” (Doc. No. 15, quoting Doc. No.

2, Ex. A). This policy term, commonly interpreted as a neglect exclusion, applies

“‘to situations where no proper diligence was used by the insured at the time of, or

following a fire, to save property from destruction.’” Evergreen Recycle, L.L.C. v.

Indiana Lumbermens Mut. Ins. Co., 51 Kan.App.2d 459, 491 (2015), quoting

Tuchman v. Aetna Cas. & Sur. Co., 44 Cal.App.4th 1607, 1615 (1996). In other

words, the neglect-exclusion term of the policy can reasonably be interpreted to

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mean that the Jordans must take reasonable steps to protect the property from

suffering additional loss, not mitigate all damages covered by the insurance policy.

{¶20} Indeed, the policy specifically excludes neglect, which it defines as

requiring the “insured to use all reasonable means to save and preserve covered

property at and after the time of a loss.” (Doc. No. 2, Ex. A). Later, the policy

instructs the insured to “take all reasonable steps to protect covered property at and

after a covered loss to avoid further loss.” (Id.). That is, the action which must be

taken to avoid a loss from being excluded from coverage due to neglect. Because

there is no dispute whether the Jordans took reasonable steps to protect the property

from further destruction, the trial court erred by concluding that the Jordans

materially breached the policy. (Doc. No. 15, quoting Doc. No. 2, Ex. A).

{¶21} Turning to the lost-rent term of the policy, the trial court concluded

that there is no genuine issue of material fact that United Ohio did not breach the

policy because it “paid [the Jordans] the entirety of what they are owed under the

Policy, including lost rents ‘for the period of time reasonably required to make the

insured premises fit for use,’ which the [Jordans] have conceded is equal to $1,950.”

(Id.). On appeal, however, the Jordans argue that there is a genuine issue of material

fact that United Ohio breached the policy by failing to meet its obligation under the

policy to cover lost rental income, plus charges and expenses, that continued while

the amount of the claim was being resolved and the insured premises were unfit for

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use. Conversely, United Ohio contends that there is no genuine issue of material

fact that it did not breach the policy because it “timely and fully paid [the Jordans]

for three months’ [sic] worth of lost rent * * * .” (Appellee’s Brief at 9).

Specifically, United Ohio argues that the policy clearly and unambiguously

provided for the Jordans to “recover lost rents for the amount of time it takes to

render the rental property fit for use, which [the Jordans] admitted was three months

in the Settlement Request they filed with the Trial Court.” (Id.).

{¶22} However, liberally construing the insurance policy in favor of the

Jordans (as we must do), we conclude that the trial court erred by concluding that

“United Ohio is entitled to judgment as a matter of law” because it “paid [the

Jordans] the entirety of what they are owed under the Policy, including lost rents

‘for the period of time reasonably required to make the insured premises fit for use,’

* * * .” (Emphasis added.) (Doc. No. 15, quoiting Doc. No. 2, Ex. A). Specifically,

we disagree with the limitation that the trial court placed on the word “reasonably,”

and conclude that the lost-rent term of the policy can reasonably be interpreted to

include the period of time during which the parties disputed the appraisal. See

Laboy, 144 Ohio St.3d 234, 2015-Ohio-3308, at ¶ 10 (“If a reasonable interpretation

of the language exists, then we should give the agreement its intended legal effect.”).

See also Riethmiller v. Bedford Cty. Grange Mut. Ins. Co., 52 Pa.D.&C.4th 190,

202 (2001) (Defendant’s assertions that the dispute in the valuation of plaintiffs’

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additional living expenses claim resulted from plaintiffs’ frustration of defendant’s

investigation may prove to be correct.”).

{¶23} Importantly, based on the specific facts and circumstances of this case

the lost-rent term of the policy can reasonably be interpreted to include the period

of time during which the parties disputed the appraisal. Specifically, the record

reveals that the Jordans disagreed with United Ohio’s preliminary valuation—

initially United Ohio awarded the Jordans $17,530.10 on January 25, 2018 and

awarded them an additional $1,230.11 on February 9, 2019 after it met with the

Jordans to re-inspect the property. (Doc. No. 10, Exs. A at 15-16, B at 9, D, E). As

a result, the Jordans followed the appraisal process prescribed by the policy and

hired an appraiser who notified United Ohio on April 6, 2018 that the Jordans “were

invoking the appraisal process * * * .” (Doc. No. 10, Ex. A at 15). The record

reflects that the appraisal process was completed in August 2019 but that it was

delayed because the parties’ appraisers disagreed on the appointment of an umpire.

(Doc. No. 10, Exs. A at 21, B at 10).

{¶24} Because the parties’ appraisers disagreed on the appointment of an

umpire, United Ohio filed a complaint in the trial court on December 31, 2018 to

appoint an umpire. (Doc. No. 10, Ex. E). (See also Doc. No. 10, Ex. B at 10-11).

The trial court did not appoint an umpire until March 1, 2019; however, that person

declined the appointment on March 8, 2019. (Doc. No. 10, Ex. H). Accordingly,

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the trial court appointed a second umpire April 16, 2019. (Doc. No. 10, Exs. D, H).

The second umpire awarded the Jordans an appraisal award for $52,000 on August

13, 2019, which United Ohio promptly paid. (Id.). Gary testified that the repairs

of the rental property commenced in November 2019 after the claim was settled in

September 2019. (Doc. No. 10, Ex. A at 9-10). This increased-repair award assists

in justifying the Jordans’ refusal to agree with United Ohio’s repair appraisals.

{¶25} Consequently, a genuine issue of material fact regarding the period of

time that was reasonably required to make the premises fit for use remains.

Therefore, the trial court erred by granting summary judgment in favor of United

Ohio.

{¶26} For these reasons, the Jordans’ assignment of error is sustained.

{¶27} Having found error prejudicial to the appellant herein in the particulars

assigned and argued, we reverse the judgment of the trial court and remand for

further proceedings.

Judgment Reversed and
Cause Remanded
MILLER and SHAW, J.J., concur.

/jlr

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