Frankenmuth Mutual Insurance Company v. Ohio Edison Company

Filing 48

Order denying Plaintiff's Motion in limine exclude Defendant Ohio Edison Company's anticipated introduction of certain evidence of reasonable cost of repairs and/or fair market value of the Everett Building. (Related Doc # 24 ). Judge John R. Adams on 10/11/18.(K,C)

UNITED STATES DISTRICT COURT
NORTHERN DISTRICT OF OHIO
EASTERN DIVISION
FRANKENMUTH MUTUAL
INSURANCE COMPANY,
Plaintiff,
v.
OHIO EDISON COMPANY,
Defendant.

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Case No. 5:17CV2013
JUDGE JOHN R. ADAMS

ORDER

This matter is before the Court on the motion in limine of Plaintiff Frankenmuth Mutual
Insurance Company (“Frankenmuth”) to exclude Defendant Ohio Edison Company’s (“Ohio
Edison”) anticipated introduction of certain evidence of reasonable cost of repairs and/or fair
market value of the Everett Building. Specifically, Frankenmuth seeks to exclude: (1) federal
income tax reporting records; (2) Summit County, Ohio real estate assessment records; and (3) a
Frankenmuth valuation report as evidence of reasonable cost of repairs and/or fair market value.
The Court has considered Frankenmuth’s motion and Ohio Edison’s opposition thereto. For the
following reasons, the motion (Doc.24) is DENIED.
I.

BACKGROUND
A detailed account of the background in this case is stated in the Court’s prior orders.

Accordingly, the Court will not recount that background in full here.
In brief, this matter arises from a fire that occurred on December 12, 2016 at the Everett
Building located at 39 East Market Street, Akron, Ohio (the “Everett Building”). The fire
damaged both the Everett Building and the adjacent Hermes Building located at 43 East Market
Street (the “Hermes Building”). Both the Everett Building and the Hermes Building are owned
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by Pointe View, Ltd. (“Pointe View”), and insured by Frankenmuth. See Amended Compl. ¶¶ 67. Ohio Edison supplied electricity and electrical services to both the Everett Building and the
Hermes Building. Id. at ¶¶ 8-9.
The fire originated from within a wall-mounted power tap box located in the basement
electrical room of the Everett Building. See id. at ¶ 11. The power tap box contained the Ohio
Edison conduit and secondary power supply lines (also known as phase conductors) which were
connected inside the power tap box to wiring which then ran from the power tap box to various
connections in the basement electrical room in order to supply electric power to the Everett
Building. See id. at ¶ 15. The post-fire loss investigation revealed that the fire was caused by the
failure of the power supply line wiring and connections within the power tap box.
Frankenmuth now seeks subrogated recovery against Ohio Edison for the damages
sustained by its insured Pointe View, for which Frankenmuth paid Pointe View pursuant to the
insurance policy Frankenmuth issued to Pointe View. See id. at ¶¶ 25-28. Frankenmuth pursues
recovery on the alleged basis that Ohio Edison failed to properly investigate, inspect, address,
repair and replace the power tap box, and the power supply wiring and connections within the
power tap box, when Ohio Edison was called to the Everett Building and went into the basement
electrical room during the week prior to the fire in response to reports of smoke and flickering
lights. See id. at ¶¶ 16-24. Frankenmuth argues that, in doing so, Ohio Edison failed to
recognize and address the conditions which led to the electrical fault and subsequent fire. See id.
Ohio Edison denies liability.
Frankenmuth anticipates that Ohio Edison will attempt to introduce evidence on
damages, and specifically evidence of the reasonable cost of repairs and/or fair market value of
the Everett Building, consisting of: (1) federal income tax reporting records; (2) Summit County,

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Ohio real estate assessment records; and (3) a Frankenmuth valuation report. In its motion in
limine, Frankenmuth seeks to exclude this evidence as irrelevant under Federal Rules of
Evidence 401 and 402, and as more prejudicial than probative under Federal Rule of Evidence
403. The Court turns to the merits of Frankenmuth’s motion.
II.

LEGAL STANDARD
The threshold requirement for admissibility of evidence is whether it is relevant.

Evidence is relevant if it has a tendency to make a fact more or less probable than it would be
without the evidence, and the fact is of consequence in determining the action. Fed. R. Evid.
401. The corollary is that irrelevant evidence is inadmissible. Fed. R. Evid. 402.
Federal Rule of Evidence 403 addresses circumstances under which the Court may
exclude relevant evidence. Rule 403 states, “The court may exclude relevant evidence if its
probative value is substantially outweighed by a danger of one or more of the following: unfair
prejudice, confusing the issues, misleading the jury, undue delay, wasting time, or needlessly
presenting cumulative evidence.” Fed. R. Evid. 403.
III.

DISCUSSION
In this case, the damage to the Everett Building and the Hermes Building as a result of

the fire was not permanent. Instead, both buildings were restored to their original condition.
Frankenmuth, as subrogee of Pointe View, seeks to recover the reasonable cost of the necessary
repairs.
Ohio law is clear that damage to commercial property should be valued in reference to
the fair market value of the property. The Ohio Supreme Court has set forth the black-letter
syllabus law regarding the proper measure of damages for injury to real property:
If the injury is of a permanent or irreparable nature, the
measure of damages is the difference in the market value of
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the property as a whole, including the improvements
thereon, before and after the injury. If the injury is
susceptible of repair, the measure of damages is the
reasonable cost of restoration, plus reasonable compensation
for the loss of the use of the property between the time of
the injury and the restoration, unless such cost of restoration
exceeds the difference in the market value of the property
before and after the injury, in which case the difference in
market value becomes the measure.
Ohio Collieries s Co. v. Cocke, 107 Ohio St.238 (1923). The Collieries rule is routinely applied
in cases involving damage to commercial property, and is reflected in the joint jury instructions
proposed by the parties in this matter. As applied, the rule means that a successful plaintiff is
entitled to reasonable repair costs plus direct incidental damages, or diminution in the fair market
value of the property due to the accident, whichever is lower. See id.
Here, Frankenmuth claims that the “relevant” evidence shows that the Everett Building
and the Hermes Building had a fair market value, not including the loss of rents, of
$4,541,151.69. (Doc. 24, pp. 3-4.) Frankenmuth contends that the jury should consider the
relevant evidence of fair market value in relation to the costs of repair of the Everett Building
and the Hermes Building, without explaining in its motion what the universe of relevant
evidence would be. (Doc. 24, p. 24.)
Frankenmuth further argues that that federal income tax records submitted for the Everett
Building, “and in particular one of [the] federal income tax records” showing a $2,000,000 stated
value, should be excluded because “valuation of commercial income generating property for
federal income tax reporting purposes has nothing to do with the determination of the fair market
value of property in the real estate market.” Frankenmuth contends that this is “readily
demonstrated” by the tax records themselves. (Doc. 24, p. 4.)

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Frankenmuth also seeks to exclude Summit County real estate tax assessment records for
the Everett Building, which state an “appraised value” for the Everett Building of $708,250.00,
and a “taxable value” of $247,890.00. Frankenmuth argues that the “appraised value” and
“taxable value” are irrelevant because there is no foundation laid for the determinations within
the assessment records themselves. Frankenmuth further argues that the real estate tax records
would be more prejudicial than probative.
Lastly, Frankenmuth moves to exclude from evidence a Frankenmuth valuation report
that reflects an estimated replacement cost value of $4,962,137.76, and an actual cash value of
$798,054.96. Frankenmuth advances the theory that this document, which is “utilized by
Frankenmuth for evaluating the insurance coverage and values specific to insurance coverage for
properties it insures as per policy requirements,” has “nothing to do with fair market valuation of
the Everett Building at the time of the fire loss.” (Doc. 24, p. 7.)
Ohio Edison counters that all of the documents Frankenmuth seeks to exclude are
relevant regarding the issue of damages, and in particular fair market value, because they were
collected by Frankenmuth’s own witnesses as part of their analysis of the insurance claim. Ohio
Edison argues that Frankenmuth cannot be permitted to let these witnesses testify regarding
damages without permitting Ohio Edison to cross examine the very same witnesses with
documents that come from their files or files belonging to Pointe View. (Doc. 28, p. 7.) Ohio
Edison argues that “Frankenmuth significantly overpaid in settling Pointe View’s insurance
claim vis-à-vis the measure for third-party tort claims” and is now “trying to prohibit Ohio
Edison from demonstrating this fact using documents and data from Frankenmuth’s and
ultimately Pointe View’s own files.” (Id., p. 2.)

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With respect to the federal income tax records and related documents, Ohio Edison
explains that Frankenmuth hired a company called Vericlaim to assist in analyzing Pointe
View’s putative insurance claim. As part of analyzing the claim, Frankenmuth and Vericlaim
gathered certain information from Pointe View, including Pointe View’s tax records for tax year
2015, which were prepared in the fall of 2016, just before the fire. According to Ohio Edison,
“[t]here is no better information concerning the valuation and income details surrounding Pointe
View and the Everett and Hermes building than these tax documents * * * prepared prior to the
fire – without the taint of pending litigation incentivized to drive figures higher – and submitted
under penalty of perjury.” (Id., p. 6.) Ohio Edison contends that all of the information in these
documents is relevant to exploring the reasonableness of Frankenmuth’s claimed damages
(regarding both the reasonableness of repairs in the first instance, and the diminution in fair
market value). (Id.)
Regarding the Summit County assessment records, Ohio Edison points out that these
documents were part of Frankenmuth’s own adjusting file, and were authenticated at deposition
by the owner of the buildings at issue. Thus, according to Ohio Edison, “this piece of
information was relevant to Frankenmuth’s team to at least consider as part of adjusting the
claim.” (Id., p. 5.)
Ohio Edison also argues that Frankenmuth’s own valuation report is directly relevant to
the issue of damages. According to Ohio Edison, Frankenmuth produces a “Valuation Report”
estimating the value of the property at issue (here, the Everett Building). The Valuation Report
offers two conclusions: (1) an “Estimated Replacement Cost” representing the cost to rebuild the
entire building from scratch, and (2) an “Actual Cash Value.” Allegedly, an insured can choose
to have its property insured at either number. Frankenmuth estimated the “actual cash value” of

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the Everett Building at $798,054.96. Citing Ohio case law, Ohio Edison argues that “actual cash
value” is a term of art in insurance law, meaning either fair market value, or the cost of repairs
minus depreciation. Thus, Ohio Edison posits that the Frankenmuth Valuation Report is
inarguably relevant to Frankenmuth’s claim for damages, both as to the reasonableness of the
cost of repairs in the first instance, and as to estimating the diminution in fair market value that
serves as a cap on the cost of repairs. (Id.)
The Court agrees with Ohio Edison that the documents at issue – the federal income tax
records, the Summit County assessment records, and Frankenmuth’s Valuation Report – are
relevant to the issue of damages in this matter. It is undisputed that the documents were obtained
from the files of Pointe View and/or Frankenmuth’s witnesses. At a minimum, Ohio Edison
should be permitted to examine witnesses at trial about the documents’ presence in the files and
their relationship to cost of repairs and the diminution of fair market value. The Court does not
agree, with respect to any of the records, that they are irrelevant on their face. Nor should they
be excluded at this juncture for lack of foundation, though such objection may be renewed at
trial. With respect to Frankenmuth’s Valuation Report, inclusive of its estimated “actual cash
value,” it is a document created by the plaintiff for purposes of assessing the value of the claim,
and therefore is directly relevant to the damages at issue. Though Frankenmuth insists that the
report, the tax records, and the assessment are irrelevant, Frankenmuth has not cited any caselaw
whatsoever to support its position under these circumstances. Accordingly, the records at issue
are admissible under Federal Rules of Civil Procedure 401 and 402.
Likewise, the Court cannot conclude that introducing the records into evidence would be
more prejudicial than probative, so as to render them inadmissible under Rule 403. Although tax
and real estate assessment records are not dispositive of cost of repairs or fair market value

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before or after the fire, they contain some information that the jury may consider. Similarly, the
Frankenmuth Valuation Report contains valuations that the jury may weigh as it sees fit to
determine damages. If Frankenmuth believes that the information contained in these documents
is wholly unrelated to the reasonableness of repairs and/or the diminution of fair market value,
Frankenmuth is free to elicit that testimony from the witnesses at trial. A jury should be able to
sort through the competing and sometimes complicated evidence and testimony without undue
confusion.
For all of these reasons, Frankenmuth’s motion in limine to exclude tax records, real
estate assessment records, and Frankenmuth’s Valuation report is denied. The records are
admissible at trial under Federal Rules of Evidence 401, 402, and 403.

IV.

CONCLUSION
For the reasons stated, the Court DENIES Frankenmuth’s motion in limine (Doc. 24) to

exclude: (1) federal income tax reporting records; (2) Summit County, Ohio real estate
assessment records; and (3) a Frankenmuth valuation report as evidence of reasonable cost of
repairs and/or fair market value of Pointe View’s property damaged in the fire. These records
are admissible at trial under Federal Rules of Evidence 401, 402, and 403.

IT IS SO ORDERED.
s/John R. Adams________________________
JOHN R. ADAMS
UNITED STATES DISTRICT JUDGE
DATED: __10/11/18_____________

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