Scott Fetzer Company v. Zurich American Insurance Company

Filing 55

Memorandum Opinion and Order: Report and Recommendation is adopted. Zurich's Motion for Summary Judgment (ECF # 16 , # 17 ) is granted and Fetzer's Motion for Partial Summary Judgment (ECF # 18 , # 19 ) is denied. Moreover, because it has been determined that Zurich correctly assessed three deductibles, Fetzer's Motion to Lift Stay of Bad Faith Claim (ECF # 32 ) is denied. This action is terminated. Signed by Judge Donald C. Nugent on 12/18/2017. (S,SR)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF OHIO
EASTERN DIVISION

THE SCOTT FETZER COMPANY,
Plaintiff,
v.
ZURICH AMERICAN INSURANCE
COMPANY,
Defendant.

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CASE NO. 1: 16 CV 1570
JUDGE DONALD C. NUGENT

MEMORANDUM OPINION
AND ORDER

This matter comes before the Court upon the Report and Recommendation of Magistrate
Judge Thomas M. Parker. The Report and Recommendation (ECF # 51) recommends that the
Motion of Defendant Zurich American Insurance Company (“Zurich”) for Summary Judgment
(ECF #16, #17)) be granted on all claims and that the Motion of Plaintiff, The Scott Fetzer
Company (“Scott Fetzer” or “Fetzer”), for Partial Summary Judgment on its First Claim for
Declaratory Judgment and Breach of Contract (ECF #18, #19) be denied. Further, Magistrate
Judge Parker recommends that if the Court adopts the recommendations above, Plaintiff’s
Motion to Lift Stay of Bad Faith Claim (ECF #32) should necessarily be denied. Scott Fetzer has
filed an Objection to the Report and Recommendation and Zurich has filed a Response to
Fetzer’s Objection. For the reasons set forth below, the Report and Recommendation is of
Magistrate Judge Thomas is adopted.
Procedural and Factual Background
Scott Fetzer filed this action against its insurer Zurich in the Court of Common Pleas for
Cuyahoga County asserting claims for Declaratory Judgment and Breach of Contract (Count 1)
and bad faith (Count 2). Zurich removed the action to this Court pursuant to 28 U.S.C. § 1441

and § 1332 because complete diversity exists between the parties.
Scott Fetzer is an insured under two policies providing general liability insurance issued
by Zurich. The first was policy no. GLO8979229-09 for the period of January 1, 2012 to January
1, 2013. The second was policy no. GLO8979229-10 for the period of January 1, 2013 to
January 1, 2014. All material terms of the Policies are identical.
In 2015, three women, Kristl Thompson, Ashley Raby, and Corbie Leslie, filed suit in
Missouri state court alleging that they had been sexually harassed and assaulted by a co-worker,
John Fields, while selling Kirby vacuums door to door for Fetzer.1 The plaintiffs asserted three
claims against the Scott Fetzer defendants. The first claim for fraudulent misrepresentation
asserted that Scott Fetzer was vicariously liable for Field’s false promises in inducing the
Plaintiffs to work with him. The second claim, for fraudulent concealment, asserted theories of
direct and vicarious liability. The direct liability allegations stated that the Fetzer Defendants
failed to inform the Plaintiffs of Mr. Field’s criminal history, his sexually deviant propensities,
his sexually deviant activities with other Kirby employees, and that he was forbidden from
selling vacuums door-to-door without supervision because he was a sex offender. The third
claim, negligence, asserted that Scott Fetzer negligently hired, retained and supervised Mr.
Field. Each Plaintiff asserted that the injuries alleged in the complaint were the direct and
proximate result of the Scott Fetzer Defendants. Zurich accepted coverage under the policies for
the Missouri case which was captioned Kristl Thompson, et al., v. The Scott Fetzer Company
d/b/a The Kirby Company, et al., Case No. 1316 CV26862 in the Circuit Court of Jackson
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Fetzer operates and does business as The Kirby Company manufacturing vacuum
systems for home use. The Kirby vacuumes are sold exclusively door to door through a
network of independent distributors and dealers.
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County, Missouri at Independence. Ultimately, Scott Fetzer and Zurich settled the claims
asserted in the Missouri lawsuit. Other than the settlement amounts to be paid, the three
settlement agreements, filed under seal, were basically the same. One settlement amount reached
with one of the Missouri Plaintiffs reached or exceeded the deductible amount set forth in the
policies and Zurich paid a portion of that settlement. Zurich did not reimburse Scott Fetzer for
the amounts paid in settlement to the other two Missouri Plaintiffs because it applied new
deductibles, treating each Plaintiff’s claim as a separate “occurrence.”
Thereafter, Scott Fetzer filed the instant action. Scott Fetzer claims that Zurich breached
the Policies by applying three deductibles instead of one deductible to the settlements reached
with the Missouri Plaintiffs. As a result of this alleged breach, Fetzer asserts that it has been
damaged in the sum of two of the settlements, plus interest. Fetzer’s second claim is for bad
faith. The bad faith claim was bifurcated and discovery on that claim was stayed pending
resolution of the first claim. Both Zurich and Scott Fetzer moved for summary judgment–Zurich
seeking summary judgment on both claims and Fetzer seeking summary judgment on Count 1.
The summary judgment motions were referred to Magistrate Judge Parker for a Report and
Recommendation.
Standard of Review for a Magistrate Judge’s Report and Recommendation
The applicable district court standard of review for a magistrate’s report and
recommendation depends upon whether objections were made to that report. When objections
are made to a report and recommendation of a magistrate judge, the district court reviews the
case de novo. FED. R. CIV. P. 72(b) provides this standard of review. It states, in pertinent part,
the following:

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The district judge to whom the case is assigned shall make a de
novo determination upon the record, or after additional evidence,
of any portion of the magistrate judge’s disposition to which
specific written objection has been made in accordance with this
rule. The district judge may accept, reject, or modify the
recommended decision, receive further evidence, or recommit the
matter to the magistrate judge with instructions.
Accordingly, this Court will review the Report and Recommendation, to which timely
objections have been filed, de novo. See Dacas Nursing Support Sys., Inc. v. NLRB, 7
F.3d 511 (6th Cir. 1993).
Analysis
The parties agreed that this case presents a single issue–how many occurrences,
and therefor how many deductibles, were involved in the Missouri lawsuit and the three
settlements. Scott Fetzer argued that the Missouri lawsuit and settlements involved one
occurrence–the purported negligence of Scott Fetzer in connection with the hiring,
retention, and supervision of Mr. Fields. Thus, Fetzer was only required to pay one
deductible. Zurich contends that the Missouri lawsuit involved three occurrences because
the claims involved different persons, locations, situations and policy years. As such,
Zurich contends that Fetzer was required to pay three deductibles.
The Policies at issue define the term “occurrence” to mean “an accident,
including continuous or repeated exposure to substantially the same general harmful
conditions.” The deductible endorsement defines “occurrence” as follows:
For any coverage described in the Schedule to which the each
“occurrence” basis applies, to all sums payable for other than
“ALAE” as the result of an accident, including continuous or
repeated exposure to substantially the same harmful conditions,
regardless of the number of persons or organizations who sustain
damages or to whom sums are payable because of that
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“occurrence.”
In his well researched and written Report, Magistrate Judge Parker answered two
questions–what constitutes an “occurrence” and how many “occurrences” under the
Policies were involved here.
In defining “occurrence,” Magistrate Judge Parker followed a line of cases in
which courts have held that “[w]hen a liability insurance policy defines an ‘occurrence’ as
an ‘accident,’ a negligent act committed by an insured that is predicated on the
commission of an intentional tort by another person, e.g., negligent hiring or negligent
supervision, qualifies as an ‘occurrence.’” Safeco Ins. Co. of Am. v. White, 122 Ohio St.3d
562, 2009 Ohio 3718, 913 N.E.2d 426, paragraph one of syllabus. Thus, Magistrate Judge
Parker found that the intentional torts that the Missouri Plaintiffs allege that Fields
committed against them resulted from Fetzer’s negligence, and thus, were accidental when
considered from Fetzer’s viewpoint. Consequently, Magistrate Judge Parker determined
that the “occurrence(s)” at issue under the Policies here are the negligent acts of Fetzer
alleged in the Complaint in the underlying Missouri lawsuit. There were no objections to
this determination.
While Fetzer argued in its briefing on the summary judgment motions, and again in
its Objection to the Report and Recommendation, that the Missouri lawsuit and settlements
represent a single “occurrence” of purported negligence of Scott Fetzer in connection with
the hiring, retention, and supervision of Fields, Magistrate Judge Parker found that there
was no single “occurrence” that was the proximate cause of all of the Missouri Plaintiffs’
injuries. Rather, Magistrate Judge Parker correctly determined that the claims in the

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underlying Missouri Complaint show that the negligence of Fetzer with respect to each
Plaintiff constitutes three separate occurrences under the Policies. Clearly, the Missouri
Plaintiffs’ Complaint alleged more than one negligent act attributed to Fetzer.– each
Missouri Plaintiff alleged that Fetzer was negligent in supervising Fields’ conduct
regarding each separate Missouri Plaintiff. The Missouri Plaintiffs’ contended that because
of Fetzer’s acts of negligence, each Missouri Plaintiff was assaulted under different
circumstances, at different locations, at different times, and sometimes in different policy
years. As the Seventh Circuit stated in Lee v. Interstate Fire & Cas. Co., when declining
to hold that a Roman Catholic diocese’s negligent supervision of a priest was one
occurrence, “ negligent supervision is not invariably one “occurrence,”... the same kind of
negligent act can occur several times with separate injuries, producing several
occurrences.” 86 F.3d 101, 104-05 (7th Cir. 1996).
Conclusion
Based upon a de novo review of the motions and all related filings, the Report and
Recommendation, Fetzer’s Objection and Zurich’s Response, it is clear that Magistrate
Judge Parker’s findings are consistent with the language of the Policies at issue and with
applicable law. Fetzer’s Objection does not offer any argument that was not fully
addressed by Magistrate Judge Thomas. As such, the Report and Recommendation is
adopted. Zurich’s Motion for Summary Judgment (ECF #16, #17) is granted and Fetzer’s
Motion for Partial Summary Judgment (ECF #18, #19) is denied. Moreover, because it has
been determined that Zurich correctly assessed three deductibles, Fetzer’s Motion to Lift
Stay of Bad Faith Claim (ECF #32) is denied. This action is terminated.

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IT IS SO ORDERED.
__/s/Donald C. Nugent_____
DONALD C. NUGENT
United States District Judge
DATED: __December 18, 2017___

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