Fireman's Fund Ins. Co. v. Mitchell-Peterson, Inc.

• Decision Date: 19 June 1989
• Docket Number: INC,MITCHELL-PETERSO,No. CA88-07-100,CA88-07-100
• Citation: 578 N.E.2d 851,63 Ohio App.3d 319
• Parties: FIREMAN'S FUND INSURANCE COMPANY, Appellee, v., Appellant. *
• Court: Ohio Court of Appeals

Page 319

63 Ohio App.3d 319

578 N.E.2d 851

FIREMAN'S FUND INSURANCE COMPANY, Appellee, v. MITCHELL-PETERSON, INC., Appellant. ^*

No. CA88-07-100.

Court of Appeals of Ohio, Twelfth District, Butler County.

Decided June 19, 1989.

Thompson, Hine & Flory and Christopher Bechold, Cincinnati, for appellee.

Persky, Shapiro, Zamore, Salim, Arnoff & Nolfi Co., L.P.A., Joseph D. Zamore and Richard D. Bain, Cleveland, for appellant.

JONES, Presiding Judge.

Defendant-appellant, Mitchell-Peterson, Inc., was the owner-operator of Perkins Cake and Steak in Middletown, Ohio, on July 9, 1982, when a fire severely damaged the restaurant. Appellant had purchased a fire insurance policy containing a business interruption provision from the appellee, Fireman's Fund Insurance Company, through an independent agency. As a result of the fire, appellant sought recovery for loss of income and additional expenses under the "business interruption policy."

Negotiations between the parties ensued to no avail seemingly due to the appellant's belief that the business interruption policy covered more items than appellee would allow. Consequently, appellee brought a declaratory judgment action in the Butler County Court of Common Pleas on March 7, 1983, in order to ascertain the actual losses sustained by appellant and the extent to which such losses are covered under the business interruption policy.

On May 6, 1983, appellant counterclaimed against appellee alleging a breach of contract, bad faith, negligence and fraud in issuing the policy and failing to pay the claim. On September 5, 1984, appellant filed a motion for partial summary judgment on appellee's complaint. On October 5, 1984, appellee also moved for summary judgment.

The trial court in an advisory opinion, without deciding which party might prevail on the merits as to damages, held that the "business interruption policy" covered net sales less cost of purchasing and processing the merchandise, plus those expenses which are continuing in nature.

Due to the procedural nature of these proceedings it was incumbent on defendant-appellant in the first instance to prove his case at trial on the counterclaim per R.C. 2315.01(C). Although the lower court correctly proceeded with appellant's case-in-chief first, the parties were essentially transposed due to the court's partial summary judgment decision on the contract claim in favor of plaintiff-appellee. The tort claims raised in the counterclaim by appellant and evidence concerning contract damages were the only remaining matters for the trial court to adjudicate.

On May 11, 1988, the case was tried before the court without a jury. The court entered its findings of fact, conclusions of law and judgment entry on June 15, 1988. It dismissed appellant's claims of bad faith, negligence and malice, and found that appellant was entitled to only $83,425.66. The court further held that the "period of restoration" was fifty days shorter than appellant contended, disallowing additional business loss during such period of time. Appellant timely filed this appeal on July 8, 1988, setting forth the following assignments of error:

First Assignment of Error

"The trial court erred to the prejudice of defendant-appellant in failing to interpret the insurance policy strictly against the insurance carrier."

Second Assignment of Error

"The trial court erred to the prejudice of defendant-appellant in failing to grant partial summary judgment for the appellant."

Third Assignment of Error

"The trial court erred to the prejudice of defendant-appellant in not permitting the appellant to introduce evidence regarding the interpretation and construction of the insurance policy."

Fourth Assignment of Error

"The trial court erred to the prejudice of defendant-appellant in describing the statements of the insurance carrier's agent as hearsay and in prohibiting testimony regarding those statements."

Fifth Assignment of Error

"The trial court erred to the prejudice of appellant in refusing to permit the appellant to make an offer of proof pursuant to Ohio Rule of Evidence 103(A)(2)."

Sixth Assignment of Error

"It was an abuse of discretion for the trial court to limit the scope of cross-examination during rebuttal to specific questions regarding specific testimony."

Seventh Assignment of Error

"It was error for the trial court to grant a motion pursuant to Civ.R. 41(B)(2) when the preponderance of the evidence supported the allegations of the counterclaim and the court had precluded appellant from introducing further admissible evidence to support its claims."

Eighth Assignment of Error

"The trial court erred to the prejudice of defendant-appellant in failing to award appellant damages for additional expenses in excess of the normal cost of operation as a result of the fire pursuant to the requirements of the insurance policy."

Under the first and second assignments of error, appellant contends that the trial court erred to its prejudice by strictly interpreting the contract of insurance when such policy was ambiguous. We disagree.

Well-established rules of contract construction require that common words appearing in a written instrument are to be given their plain and ordinary meaning unless manifest absurdity results or unless some other meaning is clearly intended from the face or overall contents of the instrument. First Natl. Bank v. Houtzer (1917), 96 Ohio St. 404, 406-407, 117 N.E. 383, 383-384; Olmstead v. Lumbermens Mut. Ins. Co. (1970), 22 Ohio St.2d 212, 216, 51 O.O.2d 285, 288, 259 N.E.2d 123, 126-127. Further, where the terms in an existing contract are clear and unambiguous, a court cannot in effect create a new contract by finding an intent not expressed in the clear language employed by the parties. Blosser v. Enderlin (1925), 113 Ohio St 121, 148 N.E. 393; Fidelity & Casualty Co. of New York v. Hartzell Bros. Co. (1924), 109 Ohio St. 566, 569, 143 N.E. 137, 137-138.

Appellant argues that the term "income" is properly defined as net sales of merchandise less the cost of merchandise. Such explanation is far too simplistic, since operating expenses employed to prepare Perkins food goods for consumer consumption are not included. In order to properly determine income loss as a result of a business interruption, appellant must allocate direct labor and manufacturing overhead when calculating its net income from operations. ¹ Otherwise, a windfall would occur, since the costs of manufacturing and/or preparing foodstuff would in effect be improperly borne by the insurer.

"The purpose of a business interruption policy is to 'do for the insured in event of a business interruption * * * just what the business itself would have done if no interruption had occurred.' " American Alliance Ins. Co. v. Keleket X-Ray Corp. (C.A. 6, 1957), 248 F.2d 920, 928, 6 O.O.2d 373, 380 (applying Ohio law); National Union Fire Ins. Co. v. Anderson-Prichard Oil Corp. (C.A. 10, 1944), 141 F.2d 443, 445. Therefore, the trial court's determination on cross-motions for summary judgment that the "actual loss sustained" is net sales less the cost of goods sold, preparation costs, and selling and administrative expenses is consistent with the intent and purpose of the business interruption policy in question. Furthermore, the exclusion of various "additional expenses" which were found to be of a noncontinuing nature was proper since such expenses do not amount to an actual loss incurred by appellant.

Appellant, in the first and second assignments of error, claims that the "business interruption policy of insurance" is ambiguous on its face and, therefore, must be construed against appellee-insurer in favor of appellant-insured. It is unquestionably true that ambiguous insurance contracts are to be liberally construed in favor of the insured and strictly against the insurer. American Policyholders Ins. Co. v. Michota (1952), 156 Ohio St. 578, 46 O.O 476, 103 N.E.2d 817; American Alliance Ins. Co., supra, 248 F.2d at 928, 6 O.O.2d at 380. However, the business interruption policy in question does not have such an attribute of ambiguity and, therefore, it was not necessary for the trial court to consider such rule of construction.

In Associated Photographers, Inc. v. Aetna Cas. & Sur. Co. (C.A. 8, 1982), 677 F.2d 1251, the court held that the policy language setting forth the amount of recovery was not ambiguous despite repeated efforts of appellant to show otherwise. ² Thus, the court stated that the rules of contract construction were unnecessary since the policy was clear on its face.

The instant policy contains a similar clause, thereby compelling this court to agree with the trial court and conclude that the policy in question was unambiguously clear in favor of appellee.

The resolution of the contract issue by the trial court was effectively deemed a Civ.R. 56(D) ruling although the court did not designate its opinion a partial summary judgment by journal entry. A partial summary judgment or ruling is the proper method of determining the meaning of a written contract since such questions are a matter of law. Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 241, 7 O.O.3d 403, 374 N.E.2d 146, paragraph one of the syllabus. Additionally, summary proceedings are appropriate in those cases where the meaning of a contract is unambiguous. Inland Refuse Transfer Co. v. Browning-Ferris Industries of Ohio, Inc. (1984), 15 Ohio St.3d 321, 322, 15 OBR 448, 448-449, 474 N.E.2d 271, 272; Alexander, supra.

Accordingly, due to the fact that no genuine issue of material fact exists as to the interpretation of the "business interruption policy" at issue, appellant's assignments of error one and two are not well taken.

Appellant, in the third and fourth assignments of error, attacks the trial court's exclusion of testimony concerning the interpretation and construction of the "business interruption policy."

In effect, appellant argues that...