Virginia Whitman, et al v. Foremost Insurance Company

Filing

OPINION filed : AFFIRMED, decision not for publication. Richard F. Suhrheinrich (Authoring), John M. Rogers and Richard Allen Griffin, Circuit Judges.

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NOT RECOMMENDED FOR FULL-TEXT PUBLICATION
File Name: 16a0419n.06

FILED

No. 15-4303

Jul 27, 2016
DEBORAH S. HUNT, Clerk

UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
VIRGINIA WHITMAN; BRUCE WHITMAN;
ANDREW WHITMAN; JACOB WHITMAN,
Plaintiffs-Appellants,
v.
FOREMOST INSURANCE COMPANY,
Defendant-Appellee.

BEFORE:

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ON APPEAL FROM THE
UNITED STATES DISTRICT
COURT FOR THE SOUTHERN
DISTRICT OF OHIO

SUHRHEINRICH, ROGERS, and GRIFFIN, Circuit Judges.

SUHRHEINRICH, Circuit Judge.
Plaintiffs-Appellants, Virginia Whitman, her husband, and her two sons (collectively,
“the Whitmans”), filed this declaratory judgment action seeking a declaration that an insurance
policy issued by Defendant-Appellee, Foremost Insurance Company (“Foremost”), covered the
owners of the Cincinnati property where Virginia Whitman was injured in a dog attack. The
district court granted summary judgment to Foremost, holding that the plain terms of the
insurance agreement did not provide coverage. We AFFIRM.
I.

BACKGROUND

Virginia Whitman was injured in a dog attack that occurred on September 22, 2012 at
4870 Winton Road, Cincinnati, Ohio (“Winton Road property”). At the time of the attack, the

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Winton Road property was owned and occupied by Charles and Kimberly Toran, subject to a
mortgage held by the Gerson Company, an Ohio LLC. Also at that time, the premises were
insured under a policy issued by Foremost to the Gerson Company.
In the years preceding and following the dog attack, ownership of the Winton Road
property shifted several times between the Gerson Company and the Toran family. These
transactions grew out of the Torans’ relationship with Michael Gerson (“Gerson”), who is one of
two members in the Gerson Company. Gerson first met Charles Toran through Charles’ mother,
who cared for Gerson’s parents at the end of their lives. Charles and his wife, Kimberly, later
worked as property managers for Kings Court—another LLC in which Gerson was a member.
Gerson, however, sold his interest in Kings Court in 2007, and the Torans ceased their
employment as property managers sometime before 2012. Charles and Kimberly Toran were
also the Gerson Company’s first tenants at the Winton Road property.
The Gerson Company attempted to transfer the Winton Road property to Charles and
Kimberly Toran in October 2003 under a land installment contract. The Torans, however, never
made any payments under the land sale contract, and the title to the property remained with the
Gerson Company. In August 2008, the Gerson Company sold the Winton Road property to
Charles and Kimberly Toran for $120,000, this time by general warranty deed. The Torans, in
turn, executed a promissory note and a mortgage to the Gerson Company for $120,000. The
Torans made only about a year’s worth of mortgage payments. Despite the Torans’ chronic
default, Gerson never took action to foreclose on the property. He did, however, deliver letters
and make phone calls to the Torans asking for payment. Gerson denied that he and the Torans
formed any agreement to waive mortgage payments.

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In addition to defaulting on their mortgage payments, the Torans also failed to pay
property taxes. As a result, a tax lien was issued. Woods Cove, LLC purchased the lien and sent
notice of its intent to foreclose sometime in late September or early October of 2012. At that
time, the Torans agreed to transfer the Winton Road property back to the Gerson Company by a
deed in lieu of foreclosure dated October 11, 2012. Gerson reacquired title to the property on
behalf of the Gerson Company and paid the tax lien.
Therefore, at the time of the dog attack on September 22, 2012, the Torans still held title
to the Winton Road property. Also at that time, the premises were insured under a “Dwelling
Fire Three Policy Landlord” issued by Foremost to the Gerson Company. The policy included
liability coverage for claims brought against the insured “for damages because of bodily
injury . . . caused by an accident on your premises to which this coverage applies.” The named
insured on the policy’s Declarations Page was “the Gerson Companies.” The policy specified
that it covered the named insured and “any employees of the person, persons or organization
named on the Declarations Page for acts that occur on the premises and are within the course of
their employment.” The policy did not define “employee.” It did, however, define “residence
employee” as “an employee of yours who performs duties in connection with the maintenance or
use of your premises, including household or domestic services.”
Charles Toran and his son, Marcus, testified that, during the time frame when Charles
and Kimberly Toran held title to the Winton Road property, they controlled the property, Gerson
never told them how to use the property, and Gerson was not involved in the ownership or care
of the dogs that lived on the property. While occupying the house as titleholders, the Torans
mowed the lawn, arranged for plumbing repairs, and painted the house when needed.

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The Whitmans filed a lawsuit against the Torans in Ohio state court for the injuries
caused by the dog attack. They ultimately obtained a default judgment of $696,954.98. When
Foremost declined to satisfy the Whitmans’ judgment against the Torans, the Whitmans brought
this declaratory judgment action against Foremost. Foremost moved for summary judgment on
the grounds that the Torans were not insureds or covered employees under the Gerson
Company’s insurance policy. The Whitmans responded that the insurance policy covered the
Torans because the Torans were “residence employees” by virtue of the acts they performed in
connection with the premises, including mowing the lawn, arranging for repairs, and painting.
The district court granted summary judgment to Foremost, finding that the term “employee” was
not ambiguous under the Ohio Supreme Court’s decision in Nationwide Mutual Fire Insurance
Co. v. Guman Bros. Farm, 652 N.E.2d 684 (Ohio 1995), and that the Torans were indisputably
not employees of the Gerson Company. The Whitmans now appeal.
The district court had jurisdiction under 28 U.S.C. § 1332(a) because the parties have
diverse citizenship—the Whitmans are Ohio citizens,1 and Foremost is a Michigan citizen2—and
the amount in controversy exceeds $75,000. We have jurisdiction under 28 U.S.C. § 1291.
II.

STANDARD OF REVIEW

We review the district court’s grant of summary judgment de novo. Burniac v. Wells
Fargo, 810 F.3d 429, 432 (6th Cir. 2016). Summary judgment is proper where the “the movant
shows that there is no genuine dispute as to any material fact and the movant is entitled to
1

Jacob Whitman is a citizen of Pennsylvania.
The “direct action” exception to determining insurer citizenship under 28 U.S.C. § 1332(c)(1) does not apply
because the Whitmans first obtained a judgment against the purportedly insured party, the Torans, before suing the
liability insurer. This lawsuit is therefore not a “direct action.” See Peterson v. TIG Specialty Ins. Co., 211 F. Supp.
2d 1013, 1015 (S.D. Ohio 2002) (defining a “direct action” under § 1332(c)(1) as one “in which a party suffering
injuries or damage for which another is legally responsible is entitled to bring suit against the other’s liability
insurance without joining the insured or first obtaining a judgment against him.” (quoting Vargas v. Cal. State Auto.
Ass’n Inter-Ins. Bureau, 788 F. Supp. 462, 463 (D. Nev. 1992)).
2

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judgment as a matter of law.” Fed. R. Civ. P. 56(a). The court must determine “whether there is
the need for a trial—whether, in other words, there are any genuine factual issues that properly
can be resolved only by a finder of fact because they may reasonably be resolved in favor of
either party.” Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986). If the facts in a case
are undisputed, one of the parties is entitled to judgment as a matter of law. Coles ex rel. Coles
v. Cleveland Bd. of Educ., 171 F.3d 369, 376 (6th Cir. 1999). Here, the parties do not offer
opposing factual stories but, rather, dispute whether the agreed-upon facts justify a legal
conclusion that the Torans acted as the Gerson Company’s employees.
III.

ANALYSIS

The parties agree that Ohio law governs this dispute. When the language of a written
contract is clear and unambiguous, Ohio law dictates that the court “look no further than the
writing itself to find the intent of the parties.” Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256,
1261 (Ohio 2003); see also Toledo-Lucas Cty. Port Auth. v. Axa Marine & Aviation Ins., Ltd.,
368 F.3d 524, 530 (6th Cir. 2004) (“When the ‘terms of an insurance policy are clear and
unambiguous,’ Ohio law requires a court to ‘appl[y] [them] to the facts without engaging in any
construction.’” (quoting Ledyard v. Auto-Owners Mut. Ins. Co., 739 N.E.2d 1, 3 (Ohio 2000))).
Under Ohio law, a contract is unambiguous as a matter of law if it can be given definite legal
meaning. Westfield, 797 N.E.2d at 1261. “The mere absence of a definition in an insurance
contract does not make the meaning of the term ambiguous.” Guman, 652 N.E.2d at 686.
Rather, a court must lend undefined terms their plain and ordinary meaning. Id.
The only issue before both the district court and this court is whether the Torans were
employees of the Gerson Company at the time of the dog attack. If not, there is no genuine issue
for trial because the Foremost insurance policy covers only the liabilities of the Gerson Company

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and, in some situations, its employees. The Whitmans attempt to sidestep this threshold issue by
looking solely at the insurance policy’s defined term “residence employee” (i.e. “an employee of
yours who performs duties in connection with the maintenance or use of your premises”) and
focusing on the Torans’ activities that contributed to the “maintenance” and “use” of the Winton
Road property. The problem with this approach is that the definition of “residence employee”
itself incorporates the term “employee.” The Whitmans overlook this prerequisite language and,
in doing so, place undue significance on the Torans’ maintenance and use of the property. But
the Torans cannot be “residence employees” merely by virtue of maintaining and using the
Winton Road property without first meeting the plain and ordinary definition of “employee.”
Although the Foremost policy does not define the term “employee,” the Ohio Supreme
Court unanimously held in Guman that the term “employee” in an insurance policy is not
ambiguous but, rather, conveys a plain and ordinary meaning. 652 N.E.2d at 686. The Ohio
Supreme Court turned to Black’s Law Dictionary for the plain and ordinary meaning of
“employee” and adopted the following definition:
[A] person in the service of another . . . where the employer has the power or right
to control and direct the employee in the material details of how the work is to be
performed. . . . One who works for an employer; a person working for salary or
wages.
Id. at 686-87. In Guman, the court concluded that a high school student working on a farm for
$3/hour satisfied this definition, even though his work on the farm also qualified for school
credit, because the farm controlled the jobs he performed and directed his work, whereas the
school’s supervision was minimal. Id. at 687. Ohio courts continue to apply Guman’s plain and
ordinary meaning of “employee” to insurance contract disputes. See Am. Motorists Ins. Co. v.
Unger, No. 4-02-30, 2003 WL 1873258, at *4-5 (Ohio Ct. App. 2003) (holding that a former
employee on lay-off status was not an “employee” under the employer’s insurance contract
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because he was no longer paid wages, was not required to report to work, and was free to seek
other employment); W. World Ins. Co. v. Spevco, Inc., 671 N.E.2d 1100, 1102-03 (Ohio Ct. App.
1996) (holding that a contractor was an “employee” under an insurance contract because the
insured party, rather than the contractor, controlled and directed the contractor in the material
details of the work).
No facts in the record suggest that the Torans fall into the Ohio courts’ accepted
definition of “employee” for insurance contracts. The Whitmans cannot identify any facts that
demonstrate: (1) the Gerson Company’s right to control the Torans in their use and maintenance
of the property, and (2) compensation to the Torans in exchange for their maintenance activities.
See Guman, 652 N.E.2d at 686-87. As the district court noted, “[i]t is not disputed that at the
time of [the dog attack], none of the Torans was formally employed by [t]he Gerson Company,
Michael Gerson, or any other of Gerson’s businesses.” While the Torans were at one time
employed as property managers by one of Gerson’s businesses, Gerson’s interest in that business
ended in 2007—long before the dog attack in 2012. Nor is there any indication that after the
conclusion of their formal employment relationship, Gerson (or the Gerson Company) and the
Torans developed an “informal” employment relationship that meets the definition set forth in
Guman. There is no evidence that the Gerson Company controlled or instructed the Torans in
their use of the Winton Road property. On the contrary, Charles Toran testified that Gerson
never exerted any control over their use of the premises: “My wife and I controlled the property.
Mr. Gerson didn’t have any right to tell us how we could use the property or take care of my dog,
and Mr. Gerson never told us how we could use the property.” The Whitmans have not
presented any evidence that, following the transfer of title in 2008, Gerson contacted the Torans

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for any reason other than to inquire about the mortgage payments and, later, the impending tax
foreclosure.
The Whitmans also have not pointed to any evidence that the Gerson Company paid the
Torans a salary, wages, or any other form of remuneration in exchange for their occupancy and
maintenance of the Winton Road property.3

There is also no indication that the Gerson

Company agreed to waive the Torans’ mortgage payments or delay foreclosure in exchange for
the Torans’ habitation and maintenance of the property. The mere fact that the Torans defaulted
on their mortgage payments yet continued to live on and maintain the property does not imply an
employment relationship with their mortgagee. As the district court correctly noted, prior to
foreclosure the Torans “retained all ownership rights in the Winton Road property and any
upkeep and maintenance they did on the premises can only reasonably be considered to have
been done for their own benefit.” See generally Hausman v. Dayton, 653 N.E.2d 1190, 1194
(Ohio 1995) (“[U]ntil a mortgage is foreclosed and a sale consummated, or until a mortgagee
obtains possession by ejectment proceedings, the fee to mortgaged real estate . . . remains in the
mortgagor.” (internal quotation marks omitted)); Levin v. Carney, 120 N.E.2d 92, 97 (Ohio
1954) (holding that the “real and beneficial use” of the property belongs to the mortgagor until
foreclosure and sale).
IV.

CONCLUSION

Because the Whitmans raise no genuine issue of material fact that the Torans were
employees of the Gerson Company, Foremost has no obligation to satisfy the Whitmans’ default
judgment against the Torans. We therefore AFFIRM the district court’s grant of summary
judgment to Foremost.
3

Thus, we have no need to address the possibility that an independent contractor hired to provide a maintenance
service might be an employee under the insurance contract.

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