Blues To You Inc. v. Auto-Owners Insurance Co.
Filing
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Memorandum Opinion and Order Because there are genuine disputes of material fact on the essential elements of Plaintiff's claims and Plaintiff has failed to demonstrate an absence of factual support on Defendant's affirmative defense s, the Court DENIES the parties' cross-motions for summary judgment. ECF Doc. 31 and ECF Doc. 45 . The parties have consented to the Magistrate Judge presiding over this case. Accordingly, this matter is transferred to the docket of Magistrate Judge Parker for further disposition. Signed by Judge Dan Aaron Polster on 11/18/2021. (K,K)
Case: 1:21-cv-00165-TMP Doc #: 50 Filed: 11/18/21 1 of 11. PageID #: 2694
IN THE UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
BLUES TO YOU, INC.,
Plaintiff,
v.
AUTO-OWNERS INS. CO.,
Defendant.
I.
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Case No. 1:21-cv-0165
JUDGE DAN AARON POLSTER
OPINION AND ORDER
Introduction
This case involves an insurance dispute over the amount owed by Defendant Auto-
Owners Ins. Co., (“Defendant”) to its insured, Plaintiff Blues to You, Inc. (“Plaintiff”), for
damages sustained to Plaintiff’s property as a result of two separate fires. It is undisputed that
Plaintiff’s’ property sustained damage and that this damage was, at least partially, covered by the
applicable insurance policies. The parties’ dispute centers on factual matters — the processing
of Plaintiff’s claims and the valuation of Plaintiff’s damages. The parties have hired competing
“adjusters” who both purport to have scrupulously calculated Plaintiff’s damages and arrived at
completely different numbers. See ECF Doc. 39-3. The parties have also submitted voluminous
evidence demonstrating genuine disputes of material facts. For this reason, the Court DENIES
both parties’ motions for summary judgment. ECF Doc. 31 and ECF Doc. 45.
Case: 1:21-cv-00165-TMP Doc #: 50 Filed: 11/18/21 2 of 11. PageID #: 2695
II.
Statement of Facts
Until September 2019, Plaintiff operated a bar and grill located at 812 Huron Rd., East,
Cleveland, Ohio. In association with its business, Plaintiff purchased two policies from
Defendant Auto-Owners Mutual Insurance Company (“Defendant”). The first policy, No.
134603-05426085-19, covered the period from March 11, 2019 to March 11, 2020, and the
second policy, No. 134603-05426085-20, covered the period from March 11, 2020 to March 11,
2021. ECF Doc. 31-2 at 5, ECF Doc. 31-13, and ECF Doc. 45 at 7.
On September 25, 2019, a fire destroyed and/or caused smoke and water damage to
Plaintiff’s business property. Plaintiff reported the loss to Defendant the following day,
September 26, 2019. Plaintiff submitted a Proof of Loss claim to Defendant under policy No.
134603-05426085-19, dated January 7, 2020 (“2019 Proof of Loss”). ECF Doc. 31-5.
Plaintiff’s public adjuster, Robert McEaneney, estimated the “Replacement Loss Value” to be
$491,562.37.
On October 11, 2019, Defendant acknowledged coverage under the above policy and
issued a payment to Plaintiff via two separate checks totaling $40,075.68. ECF Doc. 39-4. On
December 19, 2019 Defendant issued a third check in the amount of $42,201.77. ECF Doc. 395. Thus, the total amount paid by Defendant on Plaintiff’s first claim was $82,277.45.
On September 20, 2020, a second fire occurred — this time in the offices of Plaintiff’s
landlord directly above Plaintiff’s premises. The fire activated the sprinklers in the landlord’s
offices, resulting in water and flooding damage to Plaintiff’s premises below. Plaintiff submitted
a second Proof of Loss claim to Defendant under policy No. 134603-05426085-20, dated
November 9, 2020 (“2020 Proof of Loss”). ECF Doc. 31-13 and ECF Doc. 46-36. Plaintiff’s
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adjuster, Robert McEaneney, estimated the replacement cost for the second loss at $394,015.86.
ECF Doc. 31-13 and ECF Doc. 46-36.
Before Defendant processed the second claim, Plaintiff filed this lawsuit. There appears
to be no dispute concerning general coverage under the policies or that Plaintiff’s premises
sustained damages. But the parties disagree on the amount owed and whether portions of
Plaintiff’s property should be repaired, cleaned or replaced.
Despite the use of similar software and industry standard valuation algorithms to prepare
estimates (ECF Doc. 31-5 and 13; ECF Doc. 31-8 and 9), the parties’ estimates of the cost to
repair and/or restore the premises to its full working condition are significantly different. To
date, Defendant has paid a total of $82,277.45 for Plaintiff’s 2019 Proof of Loss claim. ECF
Doc. 45 at 9. Plaintiff claims its total sustained damages are close to one million dollars
($1,000,000). Defendant has not yet made a determination of loss valuation on Plaintiff’s
November 2020 Proof of Loss claim, in part, because it believes Plaintiff has duplicated some of
its losses in both claims. ECF Doc. 45 at 9-14.
Plaintiff, on the other hand, denies any such duplication. ECF Doc. 48 at 2-4. Its
adjuster, Robert McEaneney, has now broken down his estimate to show Plaintiff’s losses both
individually and aggregately, as follows:
Component of Damage
Business Interruption
Food Loss
Kitchen & Equipment
Bar Area Structure
Bar Area Contents
Wood Flooring
Hall
Back Hall
Office
Men’s Room
Store Room
9/26/19 Loss
$ 50, 000
$ 10,000
$ 303,672
$0
$0
$ 56,781
$ 2,944
$ 1,192
$ 1,152
$ 14,137
$0
9/20/20 Loss
$ 40,000
$0
$ 155,136
$ 114,743
$ 40,089
$ 13,141
$0
$0
$0
$0
$ 2,880
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Total
$ 90,000
$ 10,000
$ 458,808
$ 114,743
$ 40,089
$ 69,922
$ 2,944
$ 1,192
$ 1,152
$ 14,137
$ 2,880
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HVAC
Misc. Exp.
$ 56,530
$ 978
$ 46,711
$ 13,712
$ 103,241
$ 14,690
TOTAL
$ 497,386
$ 426,412
$ 923,798
ECF Doc. 48 at 3.
On January 21, 2021, Plaintiff filed a complaint for breach of contract (Claim Number
One), breach of implied covenants of good faith and fair dealing (Claim Number Two), and bad
faith (Claim Number Three). ECF Doc. 1. Defendant filed an answer on March 18, 2021 and
asserted a barrage of “affirmative defenses.” 1 ECF Doc. 7. Of those defenses, it appears that
Defendant is abandoning the defenses stated in paragraphs 64, 67, 68, 69 and 71. ECF Doc. 39
at 9-13.
III.
Standard of Review
Under Fed. R. Civ. P. 56, summary judgment is warranted if “the movant shows that
there is no genuine dispute as to any material fact and that the movant is entitled to judgment as a
matter of law.” Fed. R. Civ. P. 56(a). A dispute of fact is “genuine” if “the [record] evidence is
such that a reasonable jury could return a verdict for the nonmoving party.” Anderson v. Liberty
Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed. 2d 202 (1986). As a result,
“‘[c]onclusory and unsupported allegations, rooted in speculation are insufficient to create a
genuine dispute of material fact for trial.” Gunn v. Senior Servs of N. Ky., 632 F. App’x 839, 847
(6th Cir. 2015), citing Bell v. Ohio St. Univ., 351 F.3d 240, 253 (6th Cir. 2003); see also Fed. R.
Civ. P. 56 (e)(2). As the Supreme Court has explained, “[the non-moving party] must do more
than simply show that there is metaphysical doubt as to the material facts.” Matsushita Elec.,
Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585 –86, 106 S.Ct. 1348, 89 L.Ed.2d 538
It is questionable whether some of the remaining defenses are actually affirmative ones on which
defendant would bear the burden of proof. Some of these “affirmative defenses” actually go to the
elements of Plaintiff’s claims. See e.g., ECF Doc. 7 at ¶ 73.
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(1986). As for the materiality requirement, a dispute of fact is “material” if it “might affect the
outcome of the suit under the governing law.” Anderson, 477 U.S. at 248. “Factual disputes that
are irrelevant or unnecessary will not be counted.” Id.
In determining whether genuine issues of material fact exist, the court must resolve all
ambiguities and draw all reasonable inferences against the moving party. Anderson, 477 U.S. at
255. In addition, “[the moving party] bears the initial responsibility of informing the district
court of the basis for its motion, and identifying those portions of the [record] which it believes
demonstrate the absence of any genuine issue of material fact.” Celotex v. Catrett, 477 U.S. 317,
323 –24, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986); see also Fed. R. Civ. P. 56(c), (e). However,
when the moving party has met this initial burden of establishing the absence of any genuine
issue of material fact, the nonmoving party must come forward with specific facts showing a
genuine dispute of material fact for trial. Fed R. Civ. P. 56(c), (e). And unsupported, selfserving affidavits are insufficient to create an issue of fact sufficient to survive summary
judgment. Brooks v. American Broadcasting Companies, 999 F.2d 167, 172 (6th Cir. 1993);
Wolfe v. Vill. of Brice, Ohio, 37 F.Supp.2d 1021, 1026 (S.D. Ohio 1999).
IV.
Law & Analysis
A.
Plaintiff’s Motion for Summary Judgment
Plaintiff has moved for summary judgment on its breach of contract claim, its bad faith
claim and all of Defendants’ affirmative defenses.
1.
Breach of Contract Claim
Plaintiff argues it is entitled to summary judgment on its breach of contract claim because
it paid its premiums, its property was covered by Defendant’s policies, and it sustained damages
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to its property during the coverage period. Plaintiff identifies the following clause in the
insurance policy as relevant to this claim:
Denial of and Good Faith Processing of Claims:
COMMERCIAL PROPERTY COVERAGE PART
A.
Paragraphs c. and g. of the Loss Payment Loss Condition are replaced by
the following except as provided in Paragraph B:
c. We will give you notice, within 21 days after we receive a properly
executed proof of loss, that we;
(1) Accept your claim;
(2) Deny your claim; or
(3) Need more time to investigate your claim. If we need more time to
investigate you claim, we will provide an explanation for our need for
more time. We will continue to notify you again in writing, at least every
45 days, of the status of the investigation and of the continued time needed
for the investigation.
ECF Doc. 31-2 at 56. Plaintiff contends that Defendant breached the terms of the policy by
failing to deny its claim(s), to request more time to investigate the claim(s), and/or to timely
adjust the claim(s).
Defendant argues it did fulfill its contractual obligations by accepting and paying
Plaintiff’s first claim and informing Plaintiff that it would need additional time for review before
a response could be provided to Plaintiffs’ second claim. ECF Doc. 39 at 8-9. Defendant also
argues that, even if Plaintiff could show that there has been undue delay with Plaintiff’s second
claim, Plaintiff has not shown any damages caused by this delay. And, because damages are a
necessary element of the breach of contract claim, defendant contends summary judgment would
be inappropriate. The Court agrees.
The issues identified in Plaintiff’s motion for summary judgment on its breach of contract
claim are factual in nature and highly disputed. The parties agree that Plaintiff paid insurance
premiums, and that the parties were bound by the terms of the insurance policies. They do not
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agree on their opponent’s alleged performance under the policies and/or the amount owed to
Plaintiff. Both sides have submitted evidence in support of their arguments. This evidence
demonstrates, at a minimum, the existence of genuine issues of material fact on the essential
elements of performance and damages. See Lucarell v. Nationwide Mut. Ins. Co., 152 Ohio
St.3d 453, 2018-Ohio-15, ¶ 41, 97 N.E.3d 458; Jarupan v. Hanna, 173 Ohio App.3d 284, 2007Ohio-5081, ¶ 18, 878 N.E.2d 66. For example, Defendant contends Plaintiff did not submit
accurate proofs of loss; Plaintiff argues Defendant did not properly adjust the claim. These are
fact dependent issues for the trier of fact. Plaintiff is not entitled to summary judgment on its
breach of contract claim.
2.
Bad Faith
Plaintiff also argues it is entitled to summary judgment on its bad faith claim. In Ohio, an
insurer has a duty to act in good faith in the handling of the claims of its insured. Hoskins v.
Aetna Life Ins. Co. (1983). In Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 1994-Ohio-461,
644 N.E.2d 397, the Ohio Supreme Court determined that an insurer “fails to exercise good faith
in processing a claim of its insured, whereas refusal to pay the claim is not predicated upon
circumstances that furnish reasonable justification thereof. A lack of reasonable justification
exists where an insurer refuses to pay a claim in an arbitrary or capricious manner.” See Horak
v. Nationwide Ins. Co., 2007-Ohio-3744, *21 (9th Dist. July 25, 2007). Plaintiff contends
Defendant has processed its claims in an arbitrary or capricious manner. Plaintiff has submitted
evidence arguably showing Defendant has intentionally and unreasonably delayed paying
Plaintiff’s claims. ECF Doc. 31-45. Defendant argues otherwise and has submitted its own
adjuster’s affidavit. ECF Doc. 39-3. Based on these affidavits alone, there is no question that
there are genuine disputes as to material facts regarding the bad faith claim.
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3.
Affirmative Defenses
Finally, Plaintiff contends it is entitled to summary judgment on Defendant’s affirmative
defenses. As noted above, Defendant appears to have abandoned some of these “affirmative
defenses,” as it should. As to the remaining “affirmative defenses,” it is Plaintiff’s burden to
show that there is an absence of evidence to support Defendant’s affirmative defenses. See
Tankersley v. Lynch, No. 11-12847, 2012 U.S. Dist. LEXIS 27762 *33 (E.D. Mich. Mar. 2,
2012). To meet this burden, Plaintiff’s motion for summary judgment stated, “the record is
totally devoid of a single fact that would satisfy the elements of a single Affirmative Defense that
Auto Owners has raised.” ECF Doc. 31-1. Plaintiff provided no further argument or factual
support. This blanket statement for all of Defendant’s affirmative defenses is insufficient to
meet Plaintiff’s burden, and it is likely not true. Defendant has asserted every possible
affirmative defense, including some of which this Court has never heard. It is unlikely that this
case’s robust record does not contain a single fact that might support one of those affirmative
defenses. Because Plaintiff has not met its burden to show that there is an absence of evidence to
support any of Defendant’s affirmative defenses, it is not entitled to summary judgment on those
defenses. However, Defendant is encouraged to proceed with only the affirmative defenses on
which it will be able to produce evidence at trial.
B.
Defendant’s Motion for Summary Judgment
Defendant filed a motion for summary judgment on November 1, 2021. ECF Doc. 45.
Defendant contends it is entitled to summary judgment on all of Plaintiff’s claims because:
1) Plaintiff made material misrepresentations regarding the value of its claim; 2) Plaintiff failed
to mitigate; and 3) Plaintiff has failed to articulate facts supporting its bad faith claim. There are
genuine disputes on each of these points and Defendant is not entitled to summary judgment.
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1.
Misrepresentations
Defendant argues that Plaintiff’s adjuster, Robert McEaneney has misrepresented the
value of Plaintiff’s claims. Defendant argues that the following portion of the policy governs 2:
Misrepresentation or Fraud and Bad Faith Claims:
COMMERICAL PROPERTY CONDITIONS
This Coverage Part is subject to the following conditions, the Common Policy
Conditions and applicable Loss Conditions and Additional Conditions in
Commercial Property Coverage Forms.
A.
CONCEALMENT, MISREPRESENTATION OR FRAUD
This coverage Part is void in any case of fraud by you as it relates to this Coverage Part at
any time. It is also void if you or any other insured, at any time, intentionally conceal or
misrepresent a material fact concerning:
1.
2.
3.
4.
This Coverage Part;
The Covered Property;
Your interest in the Covered Property; or
A claim under this Coverage Part.
ECF Doc. 39 at 10 and ECF Doc. 45 at 13.
But Plaintiff’s adjuster, Mr. McEaneney, has submitted a detailed affidavit (ECF Doc.
31-45), and has further attempted to clarify his estimates in Plaintiff’s filings. See ECF Doc. 48
at 3. Mr. McEaneney contends he has not made any such misrepresentations. As explained
above, the competing adjuster’s affidavits demonstrate that there exist genuine disputes of
material fact on the valuation of Plaintiff’s claims. Defendant has not shown, as a matter of law,
that Plaintiff has made material misrepresentations in submitting its claims. Defendant is not
entitled to summary judgment on this basis.
Plaintiff contends Defendant cannot maintain a cause of action for fraud under Ohio law. ECF Doc. 48
at 5. This argument is misplaced. Rather than asserting a counterclaim for fraud against Plaintiff,
Defendant is alleging misrepresentation and fraud as a bar to recovery under the terms of the governing
insurance policy.
2
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2.
Mitigation of Damages
Similarly, Defendant has not shown that Plaintiff failed to mitigate its damages.
Defendant argues that Plaintiff was required to mitigate its damages in very specific ways — by
abating rent payments and/or allowing certain repairs to be made. But Defendant has not cited
any authority requiring Plaintiff to mitigate in these specific ways. Plaintiff did take some
mitigative steps when its property was initially damaged. Whether it should have also taken the
specific mitigative steps proposed by Defendant is a question for the trier of fact. Defendant is
not entitled to summary judgment on Plaintiff’s claims on this basis.
3.
Bad Faith/Take Two
Finally, the Court has already addressed Plaintiff’s bad faith claim, and neither party is
entitled to summary judgment on this claim. As stated above, the parties have both submitted
affidavits from adjusters potentially supporting or disproving the elements of Plaintiff’s bad faith
claim. ECF Doc. 31-45; ECF Doc. 39-3. There are genuine disputes of material facts regarding
the bad faith claim and Defendant is not entitled to summary judgment on it.
V.
Conclusion
Because there are genuine disputes of material fact on the essential elements of
Plaintiff’s claims and Plaintiff has failed to demonstrate an absence of factual support on
Defendant’s affirmative defenses, the Court DENIES the parties’ cross-motions for summary
judgment. ECF Doc. 31 and ECF Doc. 45.
The parties have consented to the Magistrate Judge presiding over this case.
Accordingly, this matter is transferred to the docket of Magistrate Judge Parker for further
disposition.
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Case: 1:21-cv-00165-TMP Doc #: 50 Filed: 11/18/21 11 of 11. PageID #: 2704
IT IS SO ORDERED.
Dated: November 18, 2021
s/Dan Aaron Polster
United States District Judge
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