Stark & Knoll Co., L.P.A. v. ProAssurance Casualty Company

Filing 24

Memorandum Opinion and Order: The defendant's motion to dismiss is GRANTED in PART and DENIED in PART. Count three is dismissed, but counts one and two remain pending. Plaintiff's motion for summary judgment is DENIED as other issues remain pending for a resolution of the claims. Judge Patricia A. Gaughan on 4/8/13. (LC,S) re 11 , 13

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

Stark & Knoll Co., L.P.A.,
Plaintiff,
Vs.
ProAssurance Casualty Co.,
Defendant.

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CASE NO. 12 CV 2669
JUDGE PATRICIA A. GAUGHAN

Memorandum of Opinion and Order

INTRODUCTION
This matter is before the Court upon Defendant ProAssurance Casualty Company’s
Motion to Dismiss with Prejudice (Doc. 11). Also pending is Plaintiff’s Motion for Summary
Judgment as to Counts One and Two of the Complaint (Doc. 13). This is an insurance coverage
dispute. For the reasons that follow, defendant’s motion to dismiss is GRANTED in PART and
DENIED in PART. Count three is dismissed, but counts one and two remain pending.
Plaintiff’s motion for summary judgment is DENIED as other issues must be addressed in order
to fully resolve the claims.

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FACTS
Plaintiff, Stark & Knoll Co., LPA, brings this lawsuit against defendant, Prossurance
Casualty Company, alleging that defendant wrongfully denied insurance coverage under
plaintiff’s malpractice insurance policy.
The facts of this case are undisputed.
Sometime prior to June 15, 2012, James L. Rench, an attorney employed by plaintiff,
received an email purportedly from an attorney located in Idaho. The email asked whether
Rench would be able to accept a collection matter on behalf of a client located in Germany.
Rench indicated he would accept the referral, subject to a conflict of interest check and certain
other matters. Rench was advised to contact the German client directly.
Thereafter, on June 18, 2012, Rench received an email from a “Mathis Traugott” of
ZeligSteel AG, in Krefeld, Germany. Traugott detailed the nature of the collection action and
advised Rench that the account debtor was Rable Machine, Inc., located in Ohio. A conflict of
interest check was run, and the matter was cleared of conflicts. Rench sent Traugott an
engagement letter, which Traugott signed.
On July 9, 2012, Rench received an email from Traugott, which contained a copy of a
Sales Agreement purportedly between ZeligSteel and Rable Machine. In addition, Traugott
advised Rench that Rable would be forwarding a partial payment on the account to Rench’s
attention. On July 17, 2012, Rench received by UPS overnight mail an envelope containing an
“Official Check of CitiBank, N.A.” in the amount of $295,960.00, payable to plaintiff. Rench
advised Traugott that the check would be deposited in the firm’s IOLTA account with FirstMerit
Bank and that Rench would await further instructions. Rench also emailed a receipt to Rable

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Machine indicating that the check had been received.
The following day, Rench received wiring instructions from Traugott directing that
$197,921.00 be wired to “Full House Trading Co. Japan’s account at the Johuku Shinkin Bank.”
Rench instructed the firm’s administrator to coordinate the wire transfer with FirstMerit Bank.
On July 19, 2012, Rench received additional wiring instructions directing Rench to wire
another $65,750.00 to be transferred to the Japanese bank. Rench again conveyed the
instructions to the firm’s administrator. Later that day, FirstMerit contacted plaintiff and
informed it that the check from Rable Machine was returned and marked “unable to locate
account.” FirstMerit further advised plaintiff that the check was a forgery. FirstMerit was able
to stop the $67,500 wire, but the $197,921.00 wire had already been sent.
That same day, Rench learned that the attorney located in Idaho had never requested a
referral and, in fact, the attorney believed that a fake email address was set up for his office.
Other attorneys previously contacted him regarding purported referrals. Rench also spoke with
Rable Machine and was advised that it did not remit a CitiBank check. Rench then reported the
matter, commonly referred to as a “phishing” scam, to the police.
On July 20, 2012, plaintiff transferred funds out of its general operating account in order
to cover the funds it wired out of its IOLTA account. According to the complaint, the Ohio
Rules of Professional Conduct require replenishment of the funds.
On August 14, 2012, plaintiff filed a claim with defendant seeking coverage for the loss
under its legal malpractice insurance policy. Plaintiff sent copies of two cases that it claims
support the position that coverage is required for the loss.
On September 14, 2012, defendant denied plaintiff’s claim and this lawsuit ensued. The

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complaint contains three claims for relief. Count one is a claim seeking a declaratory judgment
regarding the parties’ rights under the insurance agreement. Counts two and three assert claims
for breach of contract and bad faith, respectively.
Defendant moves to dismiss the complaint. Plaintiff opposes the motion and moves for
summary judgment, which defendant opposes.
STANDARDS OF REVIEW
A.

Dismissal

When considering a motion to dismiss pursuant to Rule 12(b)(6) of the Federal Rules of
Civil Procedure, the allegations of the complaint must be taken as true and construed liberally in
favor of the plaintiff. Lawrence v. Chancery Court of Tenn., 188 F.3d 687, 691 (6th Cir. 1999).
Notice pleading requires only that the defendant be given “fair notice of what the plaintiff’s
claim is and the grounds upon which it rests.” Conley, 355 U.S. at 47. However, the complaint
must set forth “more than the bare assertion of legal conclusions.” Allard v. Weitzman (In Re
DeLorean Motor Co.), 991 F.2d 1236, 1240 (6th Cir. 1993). Legal conclusions and unwarranted
factual inferences are not accepted as true, nor are mere conclusions afforded liberal Rule
12(b)(6) review. Fingers v. Jackson-Madison County General Hospital District, 101 F.3d 702
(6th Cir. Nov. 21, 1996), unpublished. Dismissal is proper if the complaint lacks an allegation
regarding a required element necessary to obtain relief. Craighead v. E.F. Hutton & Co., 899
F.2d 485, 489-490 (6th Cir. 1990).
In addition, a claimant must provide “enough facts to state a claim to relief that is
plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 569 (2007). A pleading
that offers “labels and conclusions” or “a formulaic recitation of the elements of a cause of

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action will not do.” Ashcroft v. Iqbal, 129 S.Ct. 1937, 1955 (2009). Nor does a complaint suffice
if it tenders “naked assertion[s]” devoid of “further factual enhancement.” Id.
To survive a motion to dismiss, a complaint must contain sufficient factual matter,
accepted as true, to state a claim to relief that is plausible on its face. A claim has facial
plausibility when the plaintiff pleads factual content that allows the court to draw the
reasonable inference that the defendant is liable for the misconduct alleged. The
plausibility standard is not akin to a “probability requirement,” but it asks for more than a
sheer possibility that a defendant has acted unlawfully. Where a complaint pleads facts
that are “merely consistent with” a defendant's liability, it stops short of the line between
possibility and plausibility of ‘entitlement to relief.’
Id. at 1949 (citations and quotations omitted). See also, Hensley Mfg. v. ProPride, Inc., 579 F.3d
603 (6th Cir.2009).
B.

Summary Judgment

Rule 56(a) of the Federal Rules of Civil Procedure, as amended on December 1, 2010,
provides in relevant part that:
A party may move for summary judgment, identifying each claim or defense—or the part
of each claim or defense—on which summary judgment is sought. The court shall grant
summary judgment if the movant shows that there is no genuine dispute as to any
material fact and the movant is entitled to judgment as a matter of law.
Fed .R.Civ.P. 56(a).
Rule 56(e) provides in relevant part that “[i]f a party fails to properly support an assertion
of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the
court may ... consider the fact undisputed for purposes of the motion ... [and] grant summary
judgment if the motion and supporting materials—including the facts considered
undisputed-show that the movant is entitled to it.” Fed.R.Civ.P. 56(e).
Although Congress amended the summary judgment rule, the “standard for granting
summary judgment remain unchanged” and the amendment “will not affect continuing

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development of the decisional law construing and applying” the standard. See, Fed.R.Civ.P. 56,
Committee Notes at 31.
Accordingly, summary judgment is appropriate when no genuine issues of material fact
exist and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett,
477 U.S. 317, 322-23 (1986) (citing Fed. R. Civ. P. 56(c)); see also LaPointe v. UAW, Local
600, 8 F.3d 376, 378 (6th Cir. 1993). The burden of showing the absence of any such genuine
issues of material facts rests with the moving party:
[A] party seeking summary judgment always bears the initial
responsibility of informing the district court of the basis for its
motion, and identifying those portions of “the pleadings,
depositions, answers to interrogatories, and admissions on file,
together with affidavits,” if any, which it believes demonstrates the
absence of a genuine issue of material fact.
Celotex, 477 U.S. at 323 (citing Fed. R. Civ. P. 56(c)). A fact is “material only if its resolution
will affect the outcome of the lawsuit.” Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
Once the moving party has satisfied its burden of proof, the burden then shifts to the
nonmoving party. The court must afford all reasonable inferences and construe the evidence in
the light most favorable to the nonmoving party. Cox v. Kentucky Dep’t. of Transp., 53 F.3d
146, 150 (6th Cir. 1995) (citation omitted); see also United States v. Hodges X-Ray, Inc., 759
F.2d 557, 562 (6th Cir. 1985). However, the nonmoving party may not simply rely on its
pleading, but must “produce evidence that results in a conflict of material fact to be solved by a
jury.” Cox, 53 F.3d at 150.
Summary judgment should be granted if a party who bears the burden of proof at trial
does not establish an essential element of his case. Tolton v. American Biodyne, Inc., 48 F.3d
937, 941 (6th Cir. 1995) (citing Celotex, 477 U.S. at 322). Accordingly, “the mere existence of a
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scintilla of evidence in support of plaintiff’s position will be insufficient; there must be evidence
on which the jury could reasonably find for the plaintiff.” Copeland v. Machulis, 57 F.3d 476,
479 (6th Cir. 1995) (quoting Anderson, 477 U.S. at 52 (1986)). Moreover, if the evidence is
“merely colorable” and not “significantly probative,” the court may decide the legal issue and
grant summary judgment. Anderson, 477 U.S. at 249-50 (citation omitted).
ANALYSIS
1. Coverage
Defendant argues that it is entitled to dismissal of the complaint because the plain and
unambiguous language in Policy No. LP51865 (“Policy”) demonstrates that the “phishing scam”
to which plaintiff fell prey is not a covered loss under the Policy, which covers legal malpractice.
Plaintiff responds that the Policy clearly and unambiguously covers the loss at issue in this case.
According to the Policy, defendant agreed to cover the following:
...[A]ll sums up to the Limit of Liability...and in excess of the Deductible...which the
Insured shall become legally obligated to pay as damages because of any claim or
claims...involving any act, error or omission in rendering or failing to render
professional services by the Insured or by any person for whose acts, errors, or
omissions the Insured is legally responsible....
In other words, for coverage to exist, there must be a “claim” for “damages” resulting
from the “rendering or failing to render professional services.” Each issue will be addressed in
turn.
“Claim” is defined as:
...[A] demand or suit for damages received by an Insured, including any arbitration
proceeding to which the Insured is required to submit or to which the insured has
submitted with the Company’s consent.
Plaintiff argues that a “claim” exists in this case as that term is defined in the Policy.

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Defendant does not directly respond to this argument. Accordingly, the Court finds that this
Policy term is satisfied.
The parties dispute whether Rench was engaging in “professional services,” as that term
is defined. According to defendant, no attorney-client relationship existed between Rench and
Traugott (or ZeligSteel) and, therefore, no professional services could have been rendered. In
addition, defendant argues that the services performed by Rench on behalf of Traugott included
only ministerial actions, none of which required “specialized legal knowledge.” In response,
plaintiff argues that Rench performed “professional services” with respect to ZeligSteel.
Specifically, plaintiff claims that Rench researched the parties’ identities, performed a conflict
check, drafted an engagement letter, and reviewed the alleged Sales Agreement purportedly
between ZeligSteel and Rable Machine. Plaintiff further argues that Rench engaged in the
provision of “professional services” with respect to the management of the IOLTA account.
According to plaintiff, the Policy covers an attorney acting as a “fiduciary” or “trustee.” Thus,
actions involved in overseeing the disbursement of client funds fall within this definition. In
response to this argument, defendant argues only that if the Court accepts this argument, then the
deductible is not met.
“Professional Services” is defined as:
...[S]ervices rendered by an Insured as a provider of legal services in a lawyer-client
relationship. Professional Services shall also include activities of an Insured as a
mediator, arbitrator...administrator, conservator, receiver...trustee...or in any similar
fiduciary capacity....
Upon review, the Court finds that Rench engaged in the provision of “professional
services.” The Court finds that the arguments made by defendant regarding whether Rench acted
as an attorney vis à vis Traugott or ZeligSteel are off point. Rather, under these circumstances,
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the claim that would be made against the law firm for which it would seek coverage would be
made by existing clients whose funds were improperly disposed of by Rench. Based on the
language in the Policy, which includes actions taken as a “trustee” or in a “similar fiduciary
capacity,” the Court finds that plaintiff provided “professional services” as that term is defined
in the Policy. See, Nardella Chong v. Medmarc Casualty Ins Co., 642 F.3d 941, 942 (11th Cir.
2011)(reversing district court’s decision and holding that the management of client funds
constitutes “professional services” where policy definition includes actions taken as “trustee” or
“similar fiduciary capacity”).
The Court now turns to whether the Policy definition of “damages” is satisfied in this
case.
“Damages,” is defined as:
...monetary judgments, awards, and settlements, but does not include the return or
restitution of legal fees, costs and expenses charged by the Insured, or any allegedly
misappropriated client funds or interest thereon.
Defendant argues that the monies taken from the IOLTA account were “misappropriated”
and, as such, they do not meet the definition of “damages” contained in the Policy. Defendant
argues that “misappropriate” does not require that Rench intended to defraud the clients. Rather,
according to defendant, Rench misappropriated client funds by improperly removing funds and
wiring them overseas. Defendant argues that the Ohio ethics laws impose a duty on attorneys to
safeguard client funds and, regardless of whether the act is accidental or intentional, the
mishandling of client funds amounts to misappropriation. Alternatively, even if Rench did not
“misappropriate” client funds, there can be no argument that the client funds themselves were
misappropriated as a result of the fraudulent scheme. Because the language in the Policy

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precludes coverage for “any allegedly misappropriated client funds,” the loss is not covered.
On the other hand, plaintiff argues that the ordinary meaning of “misappropriation,” as
defined in Black’s Law dictionary is “[t]he application of another’s property or money
dishonestly to one’s own use.” (Black’s Law Dictionary, 9th Ed.) According to plaintiff, Rench
did not act dishonestly. Moreover, the Policy should not prevent coverage as a result of acts
taken by third parties. As such, even if an overseas third-party could “misappropriate” client
funds, the Policy does not contain specific language excluding coverage for third-party acts.
“The question of whether the language of an agreement is ambiguous is a question of
law.” United States v. Donovan, 348 F.3d 509, 512 (6th Cir. 2003) (citing Parrett v. Am. Ship
Bldg. Co., 990 F.2d 854, 858 (6th Cir. 1993)). Where the terms of a contract are clear and
unambiguous, the Court presumes that the parties’ intent resides in the words utilized in the
agreement. Gencorp, Inc. v. American Int’l Underwriters, 178 F.3d 804, 817-18 (6th Cir. 1999).
“[I]f the meaning of the contract is apparent, the terms of the agreement are to be applied, not
interpreted.” Id. “Only when the language of a contract is unclear or ambiguous, or when the
circumstances surrounding the agreement invest the language of the contract with a special
meaning will extrinsic evidence be considered to give effect to the parties’ intentions.” Shifrin v.
Forest City Enterprises, Inc., 597 N.E.2d 499, 501 (Ohio 1992). Under Ohio law, common
words appearing in the contract “will 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.” Id. (internal quotation and citation omitted).
As an initial matter, the Court finds that the word “misappropriate,” which is not defined
in the Policy, is ambiguous. In support of its position, defendant relies on the Black’s Law

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Dictionary definition of “appropriation,” which means the “exercise of control over property.”
Defendant further argues that the phrase “misappropriate” means to “apply wrongly.” Therefore,
according to defendant, the plain and ordinary meaning of “misappropriation” is the “wrongful
exercise of control over property.” As plaintiff points out, however, defendant wholly ignores
the Black’s Law Dictionary definition of “misappropriation,” which is defined as “[t]he
application of another’s property or money dishonestly to one’s own use.” Because it is not clear
whether the word “misappropriation” as used in the Policy requires a dishonest act–as opposed
to a negligent act–the Court finds that under well-settled law, the phrase must be construed
against the insurer. Accordingly, the Court finds that in order to fall outside the definition of
“damages,” the “misappropriator” must have acted dishonestly.
Defendant next argues that even if “misappropriation” is defined to require a dishonest
act, the Policy clearly and unambiguously provides that “damages” does not include “any
allegedly misappropriated client funds.” According to defendant, all words in the Policy must be
afforded some meaning. Here, according to defendant, “any” means precisely what it
suggests–that any alleged misappropriation of funds is not considered “damages.” Defendant
argues that it cannot be disputed that the funds at issue were misappropriated by the overseas
third-party. Thus, because a “misappropriation” of funds occurred, the Policy does not cover the
loss.
On the other hand, plaintiff argues that where an insurer seeks to exclude coverage based
on the acts of a third-party, the policy must specifically so state. Similarly, because the language
can be interpreted two ways, it is ambiguous and must be construed against defendant. Plaintiff
also argues that all of the language in the definition of “damages” relates to the insured. Thus,

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the Court must presume that the phrase “misappropriation of client funds” also relates to the
insured. Plaintiff further claims that the word “client” modifies “funds” and because the
overseas third-party actor has no “clients,” he could not misappropriate “client” funds.
The Court finds plaintiff’s citation to Westport Ins. Corp. v. Energy Fin. Services, 2007
WL 4365373 (W.D.Ky. Dec. 11, 2007), aff’d, 2009 WL 775881 (6th Cir. March 24, 2009)
particularly instructive. In Westport, the insured was hired to administer health insurance on
behalf of a client. In so doing, the insured recommended that its client utilize the services of a
third-party claims administrator. Ultimately, the third-party co-mingled funds and was unable to
pay the health insurance claims. The insured was sued by its client for negligently
recommending the third-party claims administrator. The insurer denied coverage on the grounds
that the policy at issue foreclosed coverage for “any claim...arising out of...the conversion [or]
misappropriation of client funds....” According to the district court, Kentucky law provides that,
“where an insurance company intends an exclusion to exclude coverage in situations that arise
due to the acts of a third-party, and not the insured, the insurance company has a duty to
explicitly so provide.” Id. at *5. The court concluded that because the clause did not “tell[] the
agent that there will be no coverage for negligence even if [it] is a third-party that commingles
funds or causes the insolvency, irrespective of whether the agent had anything to do with it or
not,” the language was ambiguous and therefore, must be construed against the insurance
company. See also, HR Knowledge, Inc. v. Professional Ins. & Risk Brokerage, LLC, 888
N.E.2d 385 (Ct. App. Mass. 2008).
Although the court in Westport interpreted Kentucky law, defendant does not indicate

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that Ohio would adopt a different view.1 This is especially so given that the basic tenants of
insurance contract interpretation appear to be the same. Although a close call, the Court finds
that the language at issue is ambiguous. On the one hand, a reasonable reading of the language
indicates that “any” appropriation, including one by a third-party, is not a covered “damage.”
That reading, however, is not the only reasonable reading of the definition. The Court agrees
with plaintiff that all of the other language in the phrase is directed at the insured. Further,
plaintiff correctly notes that a third-party cannot “misappropriate” client funds, as the third-party
has no clients. On the whole, the Court cannot say that this reading of the provision is incorrect.
As such, the Court construes the language against defendant and finds that the acts of the
overseas third-party do not preclude coverage.
Defendant next argues that coverage is not available because the “deductible” for “each
claim” is not satisfied. Defendant relies on the following Policy provision:
5.1 Limit of Liability–Each Claim

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The Court notes that defendant relies on an Ohio case discussing
an “assault and battery” exclusion. See, Colter v. Spanky’s Doll
House, 2006 WL 235045 (Ohio Ct. App. Jan. 27, 2006). In that
case, the court held that an exclusion that excepted coverage for
“any assault and battery” prevented coverage for injuries sustained
by a patron that were caused by another patron. On the other hand,
policy language excepting “the actual or threatened assault or
battery or the failure to suppress or prevent such action by the
insured or by anyone else for whom the insured is legally
responsible” has been held in Ohio to be ambiguous. See, Lock v.
Oney’s Pub, 1996 WL 648357 (Ohio Ct. App. Nov. 8, 1996).
Although these cases are not directly on point, it appears that both
stand for the proposition that this Court must carefully review the
precise nature of the language in order to determine whether it is
ambiguous.
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The Each Claim limit in Item 4 of the Declarations is the most the Company will pay for
the sum of all damages and claim expenses involving a single act, error or omission or a
series of related acts, errors or omissions, regardless of the number of claims made or the
number of Insureds involved in the claim(s) or the number of persons or entities making
the claim(s).
(Emphasis omitted).
5.4 Deductible
The Deductible amounts shown in Item 5 of the Declarations apply to each claim and in
the Aggregate for the policy period and shall be paid by the Named Insured. The Per
Claim Deductible applies to the sum of all damages and claim expenses.... The
Aggregate Deductible is the most the Insured shall pay for the sum of all damages and
claims expenses for all claims first made and reported to the Company during the policy
period....
(Emphasis omitted).
According to defendant, the “each claim” deductible is $25,000. Because each client
who had money in the firm’s IOLTA account had a “claim” against plaintiff, and because the
firm held money in its IOLTA account for 51 clients, no coverage is available.2
In response, plaintiff argues that the Policy is ambiguous. According to plaintiff, the
Declarations page shows that the “per claim” deductible is $25,000, but the “aggregate
deductible” is listed as $0. Plaintiff argues that these two figures cannot be reconciled. Because
the Policy provides that the “most the Insured shall pay” is $0, plaintiff cannot at the same time
pay $25,000 per claim. Plaintiff further argues that if the Court is able to reconcile the language
such that plaintiff is responsible for paying a per claim deductible of $25,000, the nature of the
situation requires that the deductible apply only once. Plaintiff argues that the Court should

2

In other words, defendant would only provide coverage if the
damages totaled more than $1,275,000, i.e., the $25,000 per claim
deductible multiplied by 51 (the number of “claims”).
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reject defendant’s position that each client would file a lawsuit against defendant seeking money
from the IOLTA account. According to plaintiff, at least one client had funds in the IOLTA
account totaling well over the amount the firm seeks to recover. Since it is possible that this
client may be paid last out of the existing funds, the deductible would apply only once.
Upon review, the Court finds that the Policy language is ambiguous as to whether a “per
claim” deductible applies. Although the Court recognizes that the Policy appears to provide as
such, the language simply cannot be reconciled in any cogent way with an “aggregate
deductible” of $0. The Policy expressly states that the “most the insured shall pay” is $0.
Because the Policy is ambiguous, the Court will construe it against defendant. As such, no
deductible applies and the Court need not reach the parties’ remaining arguments regarding how
to apply the “per claim” deductible.
Having concluded that the Policy affords coverage provided that Rench did not act
dishonestly in connection with the phishing scam, defendant’s motion to dismiss must be denied
as to counts one and two. The Court, however, concludes that summary judgment is not
appropriate at this time. Defendant argues that “questions of fact” exist as to whether Rench
acted dishonestly. Although not specifically so requesting, the Court will liberally construe
defendant’s arguments regarding “questions of fact” to mean that discovery may assist in
resolving these issues. Because discovery is not set to close for five months, the Court finds that
summary judgment is not appropriate at this time.
2.

Bad faith

Defendant argues that its decision to deny coverage was correct and, therefore, the bad
faith claim fails. Defendant further argues that it did not act “arbitrarily or capriciously” in

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denying plaintiff’s claim for coverage. Plaintiff responds that there is coverage here and
defendant acted improperly in denying the claim. Plaintiff points out that it provided defendant
with case law establishing that the claim is covered in this case.
Under Ohio law, “an insurer has the duty 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, syllabus ¶ 1 (Ohio
1983). “An 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, syllabus ¶ 1 (Ohio 1994).
The inquiry under this standard is whether “the decision to deny benefits was arbitrary or
capricious, and there existed a reasonable justification for the denial,” not whether the insurance
company’s decision to deny benefits was correct. Rauh Rubber, Inc. v. Berkshire Life Ins. Co.,
1999 WL 1253062 (6th Cir. Dec. 16, 1999) (citing Thomas v. Allstate Ins. Co., 974 F.2d 706,
711 (6th Cir.1992)); see also Hart v. Republic Mut. Ins. Co., 87 N.E.2d 347, 349 (Ohio 1949).
“Where a claim is fairly debatable, the insurer is entitled to refuse the claim as long as such
refusal is premised on a genuine dispute over either the status of the law at the time of the denial
or the facts giving rise to the claim.” Tokles & Son, Inc. v. Midwestern Indemnity Co., 65 Ohio
St.3d 621, 630 (Ohio 1992). “As part of its duty, the insurer must ‘assess claims after an
appropriate and careful investigation’ and reach conclusions as a result of ‘the weighing of
probabilities in a fair and honest way.’” Dorsey v. Campbell Hauling, 2003 WL 21469132 at *4
(Ohio Ct. App. 10th Dist. June 26, 2003) citing Motorist Mut. Ins. Co. v. Said, 590 N.E.2d 1228
(Ohio 1992), overruled on other grounds, Zoppo v. Homestead Ins. Co., 644 N.E.2d 397 (Ohio
1995).

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Upon review, the Court finds that dismissal of the bad faith claim is warranted. As an
initial matter, the case law cited by plaintiff and provided to defendant is not directly on point.
Rather, the primary dispute in this case centers on whether the “damages” provision is satisfied.
However, neither Nardella Chong v. Medmarc Casualty Ins Co., 642 F.3d 941, 942 (11th Cir.
2011) nor O’Brien & Wolf, LLP v. Liberty Ins. Underwriters, Inc., 2012 WL 3156802 (D. Minn.
Aug. 3, 2012), involved the damages provision at issue in this case. Moreover, the Court finds
the issue of whether the damages provision is satisfied to be a close call. Accordingly, because
the decision was “reasonably debatable” and because plaintiff alleges no additional facts on
which the claim could be based, defendant is entitled to dismissal of count three.
CONCLUSION
For the foregoing reasons, the defendant’s motion to dismiss is GRANTED in PART and
DENIED in PART. Count three is dismissed, but counts one and two remain pending.
Plaintiff’s motion for summary judgment is DENIED as other issues remain pending for a
resolution of the claims.
IT IS SO ORDERED.

/s/ Patricia A. Gaughan
PATRICIA A. GAUGHAN
United States District Judge
Dated: 4/8/13

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