Hackman et al v. Selective Insurance Company of America
OPINION AND ORDER granting #44 Defendant's Motion for Summary Judgment. Signed by Judge Sarah D. Morrison on 7/29/2022. (er)
UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
PAUL E. HACKMAN, et al.,
Case No. 2:21-cv-704
Judge Sarah D. Morrison
Magistrate Judge Elizabeth
COMPANY OF AMERICA,
OPINION AND ORDER
This matter is before the Court on Defendant Selective Insurance Company
of America’s Motion for Summary Judgment. (ECF No. 44.) The Motion is fully
briefed and ripe for consideration.1 (ECF Nos. 63, 66.)
Plaintiffs Bryden Road Properties, Inc. and its owner, Paul E. Hackman
entered a Commercial General Property Coverage Policy with Selective on October
12, 2018, to insure a building on East Broad Street in Columbus, Ohio, and a
warehouse on E. 5th Ave. in Columbus, Ohio. (ECF No. 63-1, Hackman Aff., PageID
4334.) The Policy was effective through October 12, 2019. (ECF No. 52-2, PageID
3394.) In the event of a loss, the Policy required Mr. Hackman to:
reply brief exceeded the 10-page length limit imposed by the
Court’s Standing Order No. 10. Defendant filed a Motion for Leave to File Excess
Pages (ECF No. 67) to address this defect. The Motion is GRANTED so as not to
unduly delay resolution of the pending Motion for Summary Judgment. However,
counsel are advised that leave to file excess pages in a reply should be sought before
a non-complying reply is filed.
(1) Notify the police if a law may have been broken; (2) Give us prompt
notice of the loss or damage. Include a description of the property
involved; (3) As soon as possible, give us a description of how, when
and where the loss or damage occurred . . . ; (5) At our request, give us
complete inventories of the damaged and undamaged property. Include
quantities, costs, values and amount of loss claimed . . . ; (7) Send us a
signed, sworn proof of loss containing the information we request to
investigate the claim. You must do this within 60 days after our
request. We will supply you with the necessary forms; (8) Cooperate
with us in the investigation or settlement of the claim.
(ECF No. 4-1, PageID 704–05.)
A. The East Broad Street Claim
On March 11, 2019, Mr. Hackman filed an insurance claim on the East Broad
Street property for water damage from a frozen pipe burst. (ECF No. 44-1,
Hackman Dep., PageID 1579.) The reported date of the damage and loss was
January 24, 2019. (Id.)
Mr. Hackman had filed a claim in 2017 with his previous insurance company,
Westfield Insurance, for water damage to the same property. (Id., PageID 1550.)
Westfield paid out approximately $20,000 for the claim. (Id.) Mr. Hackman
represented to Selective that the damage reported as part of the Westfield Claim
was fully repaired and that the property was being used as a business office. (Id.,
Selective undertook investigation and performed a physical inspection of the
property roughly a week after the March 2019 claim was filed. (Id.) Despite Mr.
Hackman’s representation that this was a commercial property, a man claiming to
be the sole residential tenant of the property accompanied Selective’s claim adjuster
during the inspection. (ECF No. 44-2, PageID 1673–74, 1678.) The adjuster testified
that the property “did not appear” to be “used as an office space.” (ECF No. 44-20,
PageID 1916.) Selective’s inspection also revealed that it was difficult to
differentiate any new damage from the damage under the Westfield Claim. (Id.,
On March 22, 2019, Selective sent Mr. Hackman a Reservation of Rights
Letter (“ROR Letter”) describing its preliminary observations of the property and
reserving its rights and defenses to coverage. (ECF No. 44-4, PageID 1700.) The
ROR Letter informed Mr. Hackman that pursuant to the Policy, he had to submit a
sworn proof of loss statement within 60 days. (Id., PageID 1705.) On May 6, 2019,
Selective sent a second ROR Letter to Mr. Hackman, warning that if he did not
submit the sworn proof of loss statement, Selective would close the claim. (ECF No.
44-5, PageID 1708.) When Mr. Hackman did not submit a statement, Selective sent
a third ROR Letter on June 6, 2019, informing him that it was terminating the
claim. (ECF No. 44-6, PageID 1712.) Plaintiffs admit that Mr. Hackman did not
submit a sworn proof of loss statement in response to any of the Letters. (ECF No.
44-9, Hackman Admissions, PageID 1776–77.)
Mr. Hackman’s obligation to provide a sworn proof of loss statement is
detailed in Policy Section E(3)(a)(7):
3. Duties In The Event Of Loss or Damage
a. You must see that the following are done in the event of loss
or damage to Covered Property:
(7) Send us a signed, sworn proof of loss containing the
information we request to investigate the claim. You must
do this within 60 days after our request. We will supply
you with the necessary forms.
(ECF No. 4-1, PageID 704–05.)
B. The Warehouse Claim
On August 24, 2020, Mr. Hackman filed a separate claim for theft from his
commercial warehouse; the reported date of loss was January 30, 2019 – roughly 19
months before he filed the claim. (Hackman Dep., PageID 1608.)
As part of its investigation into the Warehouse Claim, Selective requested an
“inventory [worksheet], a repair invoice for the door through which entrance was
gained, a photo of the door, any original purchase receipts or proof of purchase for
the allegedly stolen items, and a police report.” (Martin Decl., PageID 1761–62.) Mr.
Hackman responded with photos of the broken door and repair invoices, photos of a
partially empty tire storage rack, and an email from the neighboring business
owner advising that the door to the warehouse was off its hinges. (Martin Decl.,
PageID 1762.) Mr. Hackman also provided a police report dated August 26, 2020, in
which he claimed a loss of 50 aluminum wheels valued at $30,000, damage to an
antique washer totaling $2,000, and damages to a vandalized door of $4,000. (Id.)
Mr. Hackman delayed filing the police report because he had thought that one was
filed by his neighbor on the day of theft. (Hackman Dep., PageID 1604, 1608.)
On September 18, 2020, Selective sent Mr. Hackman a ROR Letter reserving
its rights and defenses to coverage and advising him of his contractual duty to
cooperate with the investigation, to provide a sworn proof of loss statement within
60 days of the request, and to provide additional supporting documentation. (Martin
Decl., PageID 1762.)
In November 2020, after correspondence between Mr. Hackman, his lawyer,
and Selective’s claims adjuster, Mr. Hackman represented that the total value of
the loss was actually $56,000 and provided a “Property Worksheet” detailing the
alleged losses based on what he “had . . . in [his] head.” (Id., PageID 1763; Hackman
Dep., PageID 1614.) He did not, however, provide purchase receipts, invoices, or
other documents pertaining to the specific inventory he claimed had been stolen.
(Martin Decl., PageID 1763.) In fact, Mr. Hackman testified that he did not
maintain an inventory ledger, had no accounts payable or accounts receivable
ledgers, and had no tax returns reflecting business activity at the Warehouse.
(Hackman Dep., PageID 1598–1600.)
Selective heard nothing else from Mr. Hackman until he called a month later
and asked when he could expect payment. (Martin Decl., PageID 1763.) Selective
informed him that the documents provided were insufficient. (Id.) Attempting to
remedy this defect, Mr. Hackman sent photos of a car with the notation “bought for
1,200”; an invoice from “Wheel Medic” dated 6/7/2018 for $540 with email exchanges
about wheels and no dollar amount specified; and a handwritten “Bill of Sale” dated
10/17/2017 for a 1987 Mercedes 560 SL for $5,800, including a note “Wheels valued
at $1,800.” (Id., PageID 1763–64.)
Finally, on January 12, 2021, Mr. Hackman submitted a sworn proof of loss,
claiming the total loss to be $59,717.59 – more than either of the previous two
amounts claimed. (Id., PageID 1763–64.)
C. Procedural Background
Plaintiffs bring two claims against Selective for breach of contract and one
claim for bad faith. (ECF No. 2, Compl., PageID 209–10.) Selective brings two
counterclaims for breach of contract and two for declaratory judgment. (ECF No. 4,
Answer, PageID 633–54.) Selective moves for summary judgment on all claims.
Summary judgment is appropriate when “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). The movant has the burden of establishing there are no genuine
issues of material fact, which may be achieved by demonstrating the nonmoving
party lacks evidence to support an essential element of its claim. Celotex Corp. v.
Catrett, 477 U.S. 317, 322–23 (1986); Barnhart v. Pickrel, Schaeffer & Ebeling Co.,
12 F.3d 1382, 1388–89 (6th Cir. 1993). The burden then shifts to the nonmoving
party to “set forth specific facts showing that there is a genuine issue for trial.”
Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 250 (1986) (quoting Fed. R. Civ. P.
56). When evaluating a motion for summary judgment, the evidence must be viewed
in the light most favorable to the non-moving party. Adickes v. S.H. Kress & Co.,
398 U.S. 144, 157 (1970).
A genuine issue exists if the nonmoving party can present “significant
probative evidence” to show that “there is [more than] some metaphysical doubt as
to the material facts.” Moore v. Philip Morris Cos., 8 F.3d 335, 339–40 (6th Cir.
1993). In other words, “the evidence is such that a reasonable jury could return a
verdict for the non-moving party.” Anderson, 477 U.S. at 248; see also Matsushita
Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587 (1986) (concluding that
summary judgment is appropriate when the evidence could not lead the trier of fact
to find for the non-moving party).
Because this action is before the Court under diversity jurisdiction, state law
governs the substantive issues. Issuer Advisory Grp. LLC v. Tech. Consumer Prod.,
Inc., 2015 WL 458113, at *3 (N.D. Ohio Feb. 3, 2015) (citation omitted). The parties
do not dispute that Ohio law governs Plaintiffs’ claims and Selective’s
counterclaims, so the Court applies Ohio law. See Savedoff v. Access Grp., Inc., 524
F.3d 754, 762 (6th Cir. 2008).
Selective argues that it is entitled to judgment on Plaintiffs’ claims and its
counterclaims because Plaintiffs did not fulfill their contractual obligations and
breached the Policy.
A. East Broad Street Claim
Selective moves for summary judgment on Plaintiffs’ breach of contract claim
(Count I) and on its own counterclaim for breach of contract (Counterclaim, Count I)
as to the East Broad Street Claim.
Ohio law is clear that “an insured’s failure to submit a sworn proof of loss
statement as required by a policy of insurance precludes payment of a claimed loss.”
Chong v. American Fam. Ins., 2005 WL 2334506, at *3 (Ohio Ct. App. 2000) (citing
Home Ins. Co. v. Lindsey, 26 Ohio St. 348, 356 (1875)). Here, the Policy required
Plaintiffs to submit a sworn proof of loss statement within 60 days of receiving
Selective’s request for the same. Policy Section E(3)(a)(7).
Selective requested a loss statement on March 22, 2019, informing Mr.
Hackman that he had 60 days to submit it. In a second letter, Selective reminded
Mr. Hackman to submit the statement by May 22, 2019, and warned that it would
close the claim if the statement was not submitted. (ECF No. 44-5, PageID 1708.)
Finally, on June 6, 2019, Selective informed Mr. Hackman that it was closing the
claim for his failure to provide the sworn proof of loss statement as required by the
Policy. (ECF No. 44-6, PageID 1711–12.)
Plaintiffs admit they did not submit a sworn proof of loss statement. (ECF
No. 44-9, Hackman Admissions, PageID 1776–77.) However, they contend that their
failure to submit a proof of loss statement is not dispositive because Selective
waived the proof-of-loss requirement by undertaking an investigation into the
claim. At least one Ohio court has found that “an insurance company may be found
to have waived the failure to file a notice of proof of loss if the company rejects the
insured’s claims upon grounds other than the failure to furnish a proof of loss or
otherwise undertakes an investigation of the noticed loss.” Reasor v. Leader
National Insurance Company, 1991 WL 58414, *2 (Ohio Ct. App. 1991) (citation
omitted). However, the Reasor decision is distinguishable and is not applicable here
– that court considered this exception in the context of an insurance company that
did not raise the proof-of-loss issue with the claimant during the investigation, and
instead first raised the issue on summary judgment. Here, Selective timely raised
Mr. Hackman’s obligation to comply with the proof-of-loss requirement during its
investigation and prior to the filing of this lawsuit.
Moreover, Selective’s investigation into the East Broad Street claim did not
constitute a waiver of the Policy’s proof-of-loss requirement because Selective
reserved its right to assert all defenses to coverage. See Transamerica Ins. Group v.
Beem, 652 F.2d 663, 666 (6th Cir. 1981) (If an insurer “gives proper notice that it is
reserving its rights, in spite of investigating the claim . . . such investigation . . . will
not waive its right to rely on the breach of condition.”) Selective sent three ROR
letters to Plaintiffs regarding the claim, the first letter included language expressly
“reserve[ing] all of our available rights while we investigate . . . and make a
determination as to . . . coverage.” (ECF No. 44-4, PageID 1705–06.)
Nor is Plaintiffs’ obligation to comply with the proof-of-loss requirement
negated by Mr. Hackman contacting the claims adjuster and inquiring about what
to include in the statement. Rather, the plain language of the Policy requires a
sworn proof of loss statement, and mere communication with Selective does not
fulfill this contractual obligation. Evanoff v. The Standard Fire Ins. Co., 2007 WL
2407069, at *4 (N.D. Ohio Aug. 21, 2007) (citing Neuser v. Hocker, 246 F.3d 508, 510
(6th Cir. 2001)) (The Sixth Circuit has consistently held that “the proof of loss
requirement is to be strictly enforced.”)
Plaintiffs breached the Policy provision requiring a sworn proof of loss
statement. Accordingly, Selective’s Motion on Plaintiffs’ Count I and its own
Counterclaim Count I is GRANTED.
B. Warehouse Claim
Selective also moves for summary judgment on Plaintiffs’ breach of contract
claim (Count II) and on its own counterclaim for breach of contract (Counterclaim,
Count II) as to the Warehouse claim. Selective raises several arguments as to why
the undisputed facts establish Plaintiffs’ breach of the Policy, but the central
ground for summary judgment is Mr. Hackman’s failure to cooperate with
Ohio courts routinely enforce “cooperation clauses,” which require the insured
“to make a fair frank disclosure of information demanded by the company.” Gourmet
Cafe v. Travelers Indem. Co. of Am., 2003 WL 27381210, at *8 (N.D. Ohio June 10,
2003) (citation omitted). An insured’s failure to comply with a cooperation clause
“lets the insurer off the hook if the insured’s noncooperation ‘result[s] in material
and substantial prejudice to the insurance company.’ ” Ngoc Tran v. Federal Ins.
Co., 728 F. App’x. 576, 577 (6th Cir. 2018) (citations omitted). A party’s
noncooperation is generally a question of fact for the jury, but “where the material
facts are undisputed . . . the court may decide the question as a matter of law.” Id.
In Ngoc Tran, the Sixth Circuit affirmed summary judgment for the
insurance company where the insured failed to provide the information requested
by the insurer in its investigation of alleged jewelry theft, including financial
records and tax returns. Id. at 577–78. This failure negatively affected the
insurance company’s “ability to complete a full and fair investigation of the claim.”
Id. at 578.
Here, Policy Section E(3)(a)(8) required Plaintiffs to “[c]ooperate with
[Selective] in the investigation or settlement of the claim.” (ECF No. 4-1, PageID
704–05.) The undisputed material facts show that they failed to do so.
Selective repeatedly requested documentation that would corroborate the
theft and claimed loss amount, but Plaintiffs did not provide it. Plaintiffs did not
maintain an inventory ledger, had no accounts payable or accounts receivable
ledgers, and had no tax returns reflecting business activity at the Warehouse.
(Hackman Dep., PageID 1598–1600.) Plaintiffs also failed to provide receipts,
invoices, or other sufficient documentation of losses from the alleged theft. This
noncooperation was “material and substantial.” See Ngoc Tran, 728 F. App’x at 578
(finding that repeated failures to provide the specific requested information
materially and substantially prejudiced the insurer). Mr. Hackman’s
noncooperation impeded Selective’s ability to investigate the claim.
Plaintiffs nonetheless insist that Mr. Hackman’s attempted compliance was
enough. They argue that he provided some information about the inventory: photos,
piecemeal receipts, and a “Property Worksheet” detailing the alleged losses based
on what he “had . . . in [his] head.” (Hackman Dep., PageID 1614.) However,
compliance with some of a policy’s requirements or the insurer’s requests “does not
excuse the party’s material failure to comply with others.” Ngoc Tran, 728 F. App’x
at 578; See also Gourmet Cafe, 2003 WL 27381210, at *9 (providing a general list of
items based on memory, and not providing any supporting documentation until over
11 months after the theft, is insufficient to satisfy an insurer’s request). And here,
Plaintiffs did not cooperate with Selective’s investigation; that lack of cooperation
was a breach of the Policy terms.
Because Mr. Hackman’s noncooperation with Selective’s investigation alone
is sufficient grounds to resolve the Motion, the Court need not address Mr.
Hackman’s purported breaches of other Policy provisions.
Accordingly, Selective’s Motion on Plaintiffs’ Count II and its own
Counterclaim Count II is GRANTED.
C. Bad Faith Claim
Plaintiffs cannot prevail on their bad faith claim because there are no valid
underlying claims for coverage. See Gaston v. Allstate Ins. Co., 2008 WL 5716525, at
*5 (N.D. Ohio July 31, 2008) (finding there is no viable bad faith claim when the
insured “materially breached his obligations under the policy by failing to
cooperate”); Bob Schmitt Homes, Inc. v. Cincinnati Ins. Co., 2000 WL 218379, *4
(Ohio Ct. App. 2000). Thus, Selective’s Motion on Plaintiffs’ Count III is
D. Selective’s Counterclaims for Declaratory Judgment
As to the East Broad Street claim, Selective moves for summary judgment on
Counterclaim Count III for a declaratory judgment that: “Selective was denied the
rights to which it was entitled under the Policy; (2) Selective’s investigation of the
East Broad Street claim was reasonable and in good faith; and (3) Selective had no
duty to pay the claim for the East Broad Street property.”
Similarly, as to the Warehouse claim, Selective moves for summary judgment
on its Counterclaim Count IV for declaratory judgment that: (1) Selective was
denied the rights to which it was entitled under the Policy; (2) Selective’s
investigation of the [Warehouse] property was reasonable and in good faith; and (3)
Selective has no duty to pay the claim for the [Warehouse] property.
As discussed above, Plaintiffs breached the Policy. Accordingly, Selective has
no duty to pay either claim. Selective’s Motion on its own Counterclaims Counts III
and IV is GRANTED.
Defendant’s Motion for Summary Judgment (ECF No. 44) is GRANTED. The
Clerk is DIRECTED to TERMINATE this case from the docket of the United
States District Court for the Southern District of Ohio.
IT IS SO ORDERED.
/s/ Sarah D. Morrison
SARAH D. MORRISON
UNITED STATES DISTRICT JUDGE
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