155 N. High Ltd. v. Cincinnati Ins. Co.

• Decision Date: 25 June 1991
• Docket Number: No. 90AP-1285,90AP-1285
• Citation: 599 N.E.2d 352,75 Ohio App.3d 253
• Parties: 155 N. HIGH LIMITED, Appellee and Cross-Appellant, v. CINCINNATI INSURANCE COMPANY, Appellant and Cross-Appellee. *
• Court: Ohio Court of Appeals

Page 253

75 Ohio App.3d 253

599 N.E.2d 352

155 N. HIGH LIMITED, Appellee and Cross-Appellant, v. CINCINNATI INSURANCE COMPANY, Appellant and Cross-Appellee. ^*

No. 90AP-1285.

Court of Appeals of Ohio, Tenth District, Franklin County.

Decided June 25, 1991.

Wiles, Doucher, Van Buren & Boyle Co., L.P.A., James M. Wiles and James J. Brudny, Jr., Columbus, for appellee and cross-appellant.

Lane, Alton & Horst, Gregory D. Rankin and Karen K. Rosenberg, Columbus, for appellant and cross-appellee.

PEGGY L. BRYANT, Judge.

Defendant-appellant, Cincinnati Insurance Company, appeals from a judgment of the Franklin County Court of Common Pleas in favor of plaintiff-appellee, 155 North High Limited.

The facts as described herein are those found by the trial court referee. Defendant insured plaintiff's office building under a policy that provided coverage for property damage, with provision for business interruption and an endorsement for loss of rental value. When the office building was destroyed by fire on July 25, 1987, plaintiff claimed losses under the property damage and rental value provisions of the policy.

The property damage provisions of the policy specified that, subject to the policy limit, the amount of plaintiff's loss was to be determined by the replacement cost of the building if plaintiff chose to rebuild, or by the actual cash value of the building if plaintiff chose not to rebuild. Plaintiff notified defendant on August 11, 1987 that it would not rebuild, and claimed a loss measured by the actual cash value of the building. In mid-September 1987, defendant retained an expert to determine the replacement value of the building. Defendant did not retain an expert to determine the building's actual cash value until November 16, 1987; approximately two weeks later, this expert determined that the building's value exceeded the property damage policy limit. On December 16, 1987, defendant paid to plaintiff the property damage policy limit of $1,030,000.

As to rental value, plaintiff claimed a $198,433 loss. By mid-November 1987, defendant made three payments to plaintiff totalling $92,000 under the policy's rental value insurance ("RVI") coverage, but the parties were unable to agree on the total amount plaintiff was entitled to recover. In particular, the parties disagreed both as to the rental income anticipated from the portions of the building which were vacant at the time of the fire, as well as the nature and amount of noncontinuing expenses that were to be subtracted from the rental value in determining plaintiff's actual loss.

In December 1987, defendant retained an accountant to assist in determining the amount of plaintiff's RVI claim. The accountant submitted an incomplete report in April 1988, and ultimately was unable to complete the report. Defendant therefore retained a second accountant in August 1988, who submitted a complete report in October 1988.

The second accountant raised for the first time the issue of whether depreciation was to be considered in determining plaintiff's RVI loss. With the assent of defendant's agent, Michael Gagnon, the second accountant's report treated depreciation as a noncontinuing expense, thereby significantly reducing the amount of plaintiff's RVI loss. Thus, fourteen months after the fire, defendant valued plaintiff's rental value loss at $47,751, approximately one fourth of the amount plaintiff claimed and $44,249 less than the amount defendant had previously advanced to plaintiff on the claim.

Despite defendant's determination that it had already paid plaintiff more than the amount of its RVI loss, defendant offered plaintiff an additional $18,000 to settle the claim. Plaintiff rejected the settlement offer, and brought suit against defendant alleging breach of contract, breach of the duty of good faith, and intentional tort. Defendant brought counterclaims alleging fraud and misrepresentation.

The case was tried to a referee, who found that defendant's delay in paying plaintiff on the property damage claim breached the insurance contract. The referee further found that defendant's delay in settling the RVI claim and its treatment of depreciation as a noncontinuing expense under the RVI provision breached both the insurance contract and defendant's duty of good faith, and that defendant's lack of good faith was sufficient to warrant punitive as well as compensatory damages. The trial court adopted the referee's report, granting judgment in favor of plaintiff.

Defendant appeals therefrom, assigning the following errors:

"I. The trial court erred by concluding, as a matter of law, that defendant-appellant breached its contract by omitting to timely perform a contractual obligation, to wit: the payment of policy limits for the loss of the building within a reasonable period of time.

"II. The trial court erred by finding that the actual loss sustained by plaintiff-appellee, for purposes of the rental value insurance endorsement, was $158,016.00.

"A. The trial court's finding that depreciation was not properly included in the calculation of the actual loss sustained by plaintiff-appellee was against the manifest weight of the evidence.

"B. The trial court's finding that depreciation was not in the category of 'charges and expenses which do not necessarily continue during the period of untenantability' was against the manifest weight of the evidence.

"III. The trial court erred by failing to conclude, as a matter of law, that depreciation was properly included in the calculation of the actual loss sustained by plaintiff-appellee, and that depreciation was an expense that did not necessarily continue after destruction of plaintiff-appellee's building.

"IV. The trial court erred by concluding, as a matter of law, that defendant-appellant breached the terms of the rental value insurance endorsement and thereby breached its insurance contract with plaintiff-appellee.

"V. The trial court erred by finding (a) that the insurance company breached its duty of good faith, justifying compensatory damages, and (b) that such conduct was sufficiently outrageous as to justify an award of punitive damages.

"A. The trial court's finding that defendant-appellant breached its duty of good faith was against the manifest weight of the evidence.

"B. The trial court erred in concluding that plaintiff-appellee sustained compensatory damages in the amount of $25,000 as a result of the alleged bad faith conduct of defendant-appellant.

"C. The trial court erred in concluding that the actions of defendant-appellant through its employees was outrageous beyond any notion of mere bad faith and justifies punitive damages.

"VI. The trial court committed numerous errors in the conduct of the trial which prejudiced defendant-appellant and deprived it of a fair trial.

"A. The trial court erred in permitting the testimony of James Wiles for the reason that Mr. Wiles was plaintiff-appellee's counsel and further he was not timely disclosed as a witness which prejudiced defendant-appellant.

"B. The trial court erred in precluding defendant-appellant from cross-examining Ed Overmeyer regarding Cincinnati Insurance Company's claim regarding the adjustment of the claim and further erred in permitting plaintiff-appellee Charles J. Ruma to testify as to these matters.

"C. The trial court erred in admitting the opinion testimony of Donald S. Malecki.

"VII. The trial court erred by imposing the burden of proof upon defendant-appellant regarding the actual loss sustained by the insured.

"VIII. The trial court erred in failing to grant judgment in favor of defendant-appellant on its counter-claim."

Plaintiff cross-appeals, assigning the following errors:

"I. The trial court erred in adopting that portion of the referee's report which concluded as a matter of law that the amount of compensatory damages ($25,000) was adequate for the finding of bad faith against Cincinnati Insurance Company; such amount being prima facie inadequate.

"II. The trial court erred in adopting that portion of the referee's report which concluded as a matter of law that the amount of punitive damages ($100,000) was adequate for the actual malice, fraud, and insult committed by Cincinnati Insurance Company; such amount being prima facie inadequate to punish and deter."

Defendant's first assignment of error asserts that the trial court erred in determining, as a matter of law, that defendant's delay in paying plaintiff's property damage claim breached an implied contract term that payment be made within a reasonable time. Defendant first argues that the trial court improperly implied a contractual term fixing a reasonable time for payment, when the contract contained no express provision regarding time of payment. The law implies that performance take place within a reasonable time when a contract is silent as to the time for performance. Stewart v. Herron (1907), 77 Ohio St. 130, 147, 82 N.E. 956, 959; see, also, Clarke v. Hartley (1982), 7 Ohio App.3d 147, 150, 7 OBR 190, 193-194, 454 N.E.2d 1322, 1326-1327. Thus, the trial court did not err in implying a reasonable time in the absence of a specific time for defendant's payment under the policy.

Defendant further argues that even if a contractual term fixing a reasonable time for payment properly may be implied, defendant's delay in paying plaintiff's property damage, as a matter of law, was not unreasonable; and, therefore, defendant did not breach its insurance contract with plaintiff.

The trial court referee found that "it became clear to everyone right away that plaintiff's office building, prior to the loss, had had a value far in excess of the $1,030,000 insurance policy limits," citing in support thereof defendant's field adjuster's July 29, 1987 report that the replacement value of the building would be $2,000,000, and that the actual cash value was $2,000,000. Ultimately, defendant hired an expert who on December 2, 1987 reported an...