Carpenter et al v. Liberty Insurance Corporation

Filing 88

ENTRY AND ORDER DENYING PLAINTIFFS' MOTION FOR PARTIAL SUMMARY JUDGMENT, ECF 49 , DENYING PLAINTIFFS' MOTION FOR RECONSIDERATION OF PARTIAL SUMMARY JUDGMENT, ECF 70 , GRANTING DEFENDANTS' MOTION FOR PARTIAL SUMMARY JUDGMENTREGARDING COUNTS II AND III, ECF 72 , AND DENYING PLAINTIFFS' SECOND MOTION FOR SUMMARY JUDGMENT. ECF 83 : The matter will be reset for trial solely on Plaintiffs' breach of contract, within the parameters of the Court's earlier Entry. ECF 67 . Signed by Judge Thomas M. Rose on 4/2/20. (ep)

UNITED STATES DISTRICT COURT
SOUTHERN DISTRICT OF OHIO
WESTERN DIVISION AT DAYTON
Mindy Carpenter, et al.,
Plaintiffs,
v.

Case No. 3:17-cv-228
Judge Thomas M. Rose

Liberty Insurance Corporation,
Defendant.

ENTRY AND ORDER DENYING PLAINTIFFS’ MOTION
FOR PARTIAL SUMMARY JUDGMENT, ECF 49,
DENYING
PLAINTIFFS’
MOTION
FOR
RECONSIDERATION
OF
PARTIAL
SUMMARY
JUDGMENT, ECF 70, GRANTING DEFENDANTS’
MOTION FOR PARTIAL SUMMARY JUDGMENT
REGARDING COUNTS II AND III, ECF 72, AND DENYING
PLAINTIFFS’ SECOND MOTION FOR SUMMARY
JUDGMENT. ECF 83.

Pending before the Court are Plaintiffs’ Motion for Partial Summary Judgment, ECF 49,
Plaintiffs’ Motion for Reconsideration of Partial Summary Judgment, ECF 70, Defendants’
Motion for Partial Summary Judgment Regarding Counts II and III, ECF 72, and Plaintiffs’
Second Motion for Summary Judgment. ECF 83. These motions are now ripe. See ECF 61, 63,
71, 73, 86, and 87. In their motions, Plaintiffs request summary judgment on their claims for
breach of contract, bad faith and “severe emotional distress/inconvenience/punitive damages,” as
well as a reversal of the Court’s earlier award of summary judgment in favor of Defendant on
certain questions of law. See ECF 67.
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The evidence viewed in a light most favorable to Plaintiffs was described in the Court’s
order of September 20, 2019. ECF 67. As described in the Court’s order, Plaintiffs do not have
evidence that would support a finding that Defendant had perpetrated an act of bad faith or any
action that would support a finding of emotional distress or an award of punitive damages. It
remains unclear, that is to say, there is a genuine issue of material fact that needs to be
determined before a finder of fact could decide, whether Defendant breached its contract with
Plaintiffs.
Defendants’ Motion for Partial Summary Judgment Regarding Counts II and III, ECF 72,
warrants further attention. The Court will begin with a brief recounting of applicable law.
An insurance policy is a contract and must be interpreted by utilizing “the familiar rules
of construction and interpretation applicable to contracts generally.” Whitt Mach., Inc. v. Essex
Ins. Co., 377 Fed. App’x 492, 496 (6th Cir. 2010), citing Gomolka v. State Auto. Mut. Ins. Co.,
436 N.E.2d 1347, 1348 (Ohio 1982) and Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd., 597
N.E.2d 1096 (Ohio 1992).
An insurance contract “is to be given a reasonable construction in conformity with the
intention of the parties as gathered from the ordinary and commonly understood meaning of the
language employed.” Whitt, 377 Fed. App’x at 496, citing Andersen v. Highland House Co., 757
N.E.2d 329, 332 (Ohio 2001); see also Hybud, 597 N.E.2d at 1102 (“[T]he most critical rule is
that which stops this court from rewriting the contract when the intent of the parties is evident,
i.e., if the language of the policy's provisions is clear and unambiguous, this court may not
‘resort to construction of that language.’”). “[A] court cannot create ambiguity in a contract
where there is none,” and “[a]mbiguity exists only when a provision at issue is susceptible of

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more than one reasonable interpretation.” Whitt, 377 Fed. App’x at 496, citing Lager v. MillerGonzalez, 896 N.E.2d 666, 669 (Ohio 2008).
To act in good faith an insurer must have a reasonable justification for its conduct. “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, 400 (Ohio 1994). “An insurer lacks reasonable
justification when it denies an insurer’s claim in an arbitrary and capricious manner.” Barbour v.
Household Life Ins. Co., 2012 WL 1109993 at *5 (N.D. Ohio Case No. 1:11-cv-110, April 2,
2012), citing Hoskins v. Aetna Life Ins. Co., 452 N.E.2d 1315, 1320 (Ohio 1983), and Thomas v.
Allstate Ins. Co., 974 F.2d 706, 711 (6th Cir.1992).
When a claim is “fairly debatable and the refusal is premised on either the status of the
law at the time of the denial or the facts that gave rise to the claim,” a denial is reasonably
justified. Tokles & Sons, Inc. v. Midwestern Indemn. Co., 605 N.E.2d 936 (Ohio 1992). “The
test, therefore, is not whether the defendant's conclusion to deny benefits was correct, but
whether the decision to deny benefits was arbitrary or capricious, and there existed a reasonable
justification for the denial.” Thomas, 974 F.2d at 711; Barbour, 2012 WL 1109993 at *5.
In order for an insurer to deny a fire loss claim under an intentional loss exclusion, there
must be: “(1) a fire of incendiary origin; (2) the motive to cause the fire; and (3) opportunity to
cause, or participate in causing, the fire.” Thomas, 974 F.2d at 711 and Corbo Properties, Ltd. v.
Seneca Ins. Co., Inc., 771 F.Supp.3d 877, 881 (N.D. Ohio 2011), both citing Caserta v. Allstate
Ins. Co., 470 N.E.2d 430, 433 (Ohio App. 1983). “On a motion for summary judgment, Ohio
law directs courts to assess bad-faith-denial-of-coverage claims from the perspective of what
information motivated the insurer's denial.” Smith v. Allstate Indem. Co., 304 Fed. App’x 430,
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432 (6th Cir. 2008). To defeat such a motion, “[a]n aggrieved insured must respond to the
insurer's motion ‘with evidence which tends to show that the insurer had no reasonable
justification for refusing the claim[.]’” Id., citing Tokles, 605 N.E.2d at 943.
Whether the insurer is also entitled to judgment on the breach of contract claim is of no
consequence when determining that an insurer is entitled to summary judgment on the bad faith
claim:
A reasonable jury could find that denial of Plaintiff's claim for
benefits was incorrect. However, the key to denial of Plaintiff's
claim is Defendant's finding that Plaintiff cannot collect the
proceeds of an insurance policy providing coverage for loss by fire
for the reason that the decision was based on reasonable evidence
that was neither arbitrary nor capricious.
Hague v. Allstate Prop. & Cas. Ins. Co., 2014 WL 5465841, *9 (N.D. Ohio Case No. 3:13cv2677, Oct. 28, 2014). An insurer “d[oes] not have to conclusively establish arson; it c[an]
deny coverage in good faith so long as the claim was ‘fairly debatable.’” Smith, 304 Fed. App’x
at 432.
While Plaintiffs’ claim was fairly debatable, Defendant premised its denial on a
reasonable consideration of the facts that gave rise to the claim. As the Court explained, while
a jury could find that Plaintiffs had not made material misrepresentations, the opposite is also
true: reasonable minds could very likely find that Plaintiffs had breached the policy. Plaintiff
has marshalled no evidence that the insurer did not reasonably consider the facts that gave rise to
Plaintiffs’ claim, or impulsively made a decision regarding Plaintiffs’ claim. Instead, the
available evidence is that following its investigation, the insurer considered the evidence it had
obtained and, rightly or wrongly, concluded that Plaintiffs had engaged in actions rendering the
Policy void. While reasonable minds may differ as to whether this conclusion was correct,
there is no evidence that Defendant’s decision was not based on the evidence produced by its
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investigation. Compare Brewer v. State Farm Fire & Cas. Co., 2014 WL 1263359 (S.D. Ohio
Case No. 2:11-cv889, Sept. 30, 2014)(Watson, J.).
While Plaintiffs’ breach of contract claim is “fairly debatable,” Liberty is entitled to
judgment on Plaintiffs’ bad faith claim. The facts of this case satisfy the criteria for denying
Plaintiffs’ fire loss claim in good faith as an intentionally set fire.
First, there is evidence that would indicate that this was an intentionally set fire. The
Ohio State Fire Marshal concluded that there were multiple points of origin and this was an
incendiary fire. (Aff. of E. Mitchell, ¶ 4 and State Fire Marshal’s Report at LM 001327LM001352.) Chuck Strader, IAAI-CFI, CFEI, CVFI, also investigated the fire, and after
performing a cause and origin investigation, Strader likewise determined that there were multiple
points of origin and this was an incendiary fire. (Aff. of E. Mitchell, ¶ 5 and Strader’s Report at
LM 001909-LM001972).
Second, evidence indicates Plaintiffs arguably had a motive to set the fire. While
Plaintiffs contest whether this amounts to motive, Liberty’s investigation revealed that Plaintiffs’
home had sustained water damage and heavy mold growth prior to the July 2016 fire. (Aff. of E.
Mitchell at ¶ 7). Plaintiffs explained that a sump pump failure in January 2016—six months
prior to the fire—allowed the basement to flood, causing water damage and mold. (Aff. of E.
Mitchell at ¶ 7; EUO Transcripts at LM 000388). There is also evidence Plaintiffs were also
under financial pressure prior to the fire. Credit reports run on Plaintiffs revealed a history of
liens and accounts in collections: Shawn Carpenter had two state tax liens released in 2014 and
in 2016 had three outstanding tax liens against him from 2013, 2014 and 2016 (for $579, $1,219
and $250, respectively); Carpenter’s Capital One card, opened in January 2015, showed a history
of five late payments; Carpenter had an automobile loan opened in November 2013 showing
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three late payments; Mindy Carpenter had six accounts in collections including a Rumpke trash
collections bill, two Capital One accounts opened in January and February 2016, a medical bill
from March 2016 and an AT&T bill in 2013; and she had two additional tax liens for 2016 of
$265 and $409. (Aff. of E. Mitchell, ¶ 8.) In the Spring of 2016 Shawn Carpenter had left his
job to begin a new lawn care business, while Mindy Carpenter did not work outside the home.
(Aff. of E. Mitchell, ¶ 9 and Transcripts from Plaintiffs’ Examination Under Oath at LM 00031819.)
Third, evidence indicates that Plaintiffs had an opportunity to cause, or participate in
causing, the fire. There was no sign of forced entry at the Carpenters’ home. (State Fire
Marshal’s Report, LM 001327). No one besides the Carpenter family had keys to the
Carpenters’ home, and Shawn Carpenter told the Ohio State Fire Marshal that he had to unlock
the front door when he arrived the morning of July 7, 2016 in order to open the front door. (State
Fire Marshal’s Report, LM 001329). When the State Fire Marshal’s investigator asked
Carpenter to undergo a voice stress analysis, he refused. (Id.) Neither Plaintiffs nor Liberty
identified anyone other than Plaintiffs with any motive to set the fire. (Aff. of E. Mitchell, ¶¶ 11,
12.)
Plaintiffs have not presented evidence the insurer had no reasonable justification for
refusing their claim. Liberty is therefore entitled to summary judgment on Plaintiffs’ Count II
bad faith claim. While Plaintiffs can offer rebuttal evidence which suggests they did not
participate in causing the fire, this is not a defense to a claim of bad faith denial of an insurance
claim. Liberty “d[oes] not have to conclusively establish arson; it could deny coverage in good
faith so long as the claim was ‘fairly debatable.’” Smith, 304 Fed. App’x at 432. Because
Liberty had at least some reasonable justification for denying the claim, as a matter of law,
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Plaintiffs cannot “show that [Liberty] had no reasonable justification for refusing the claim[.]”
Id.
In Count III, Plaintiffs allege that they are entitled to severe emotional distress /
inconvenience / punitive damages. Because Plaintiffs have no viable bad faith claim, they also
have no viable claim for severe emotional distress / inconvenience / punitive damages. While
pleaded as a separate count, these damages can only stem from prevailing on the bad faith claim.
Because Plaintiffs have no viable bad faith claim, Plaintiffs cannot recover these damages in this
case.
Moreover, the Court has already determined that Plaintiffs’ breach of contract claim
cannot give rise to emotional distress-type damages. ECF 67. See also Hartman v. Conseco
Senior Health Ins. Co., 2010 WL 1981004, *7 (S.D. Ohio Civil Action No. 3:08-cv099, May 18,
2010). Absent being able to prevail on their bad faith claim, Plaintiffs cannot recover
emotional distress or inconvenience damages. Plaintiffs also cannot recover punitive damages
on their breach of contract claim. Olbrich v. Shelby Mut. Ins. Co., 469 N.E.2d 892, 895 (Ohio
App. 1983). Under Ohio law, “it is no tort to breach a contract, regardless of motive.” Canderm
Pharmacal, Ltd. v. Elder Pharmaceuticals, Inc., 862 F.2d 597, 602 (6th Cir. 1988) (citations
omitted).
Because Liberty is entitled to summary judgment on Count II bad faith, Liberty is also
entitled to summary judgment on Count III’s efforts to recoup emotional distress / inconvenience
/ punitive damages. “Plaintiffs are potentially entitled to emotional distress damages and
attorney fees if they first prove their bad faith claim.” ECF 67, PageID# 1536.
Conclusion

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Plaintiffs’ Motion for Partial Summary Judgment, ECF 49, Plaintiffs’ Motion for
Reconsideration of Partial Summary Judgment, ECF 70, and Plaintiffs’ Second Motion for
Summary Judgment, ECF 83, are DENIED. Defendants’ Motion for Partial Summary
Judgment Regarding Counts II and III, ECF 72, is GRANTED. The matter will be reset for
trial solely on Plaintiffs’ breach of contract, within the parameters of the Court’s earlier Entry.
ECF 67. The courtroom deputy will contact counsel to set a telephone conference to set the
remaining trial schedule.
DONE and ORDERED in Dayton, Ohio, this Thursday, April 2, 2020.

s/Thomas M. Rose
________________________________
THOMAS M. ROSE
UNITED STATES DISTRICT JUDGE

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