State Auto Prop. & Cas. Ins. Co. v. ABCO Fire Prot., Inc.
| Decision Date | 08 April 2021 |
| Docket Number | No. 109627,109627 |
| Citation | 170 N.E.3d 1255 |
| Court | Ohio Court of Appeals |
| Parties | STATE AUTO PROPERTY & CASUALTY INSURANCE COMPANY, et al., Plaintiffs-Appellants, v. ABCO FIRE PROTECTION, INC., Defendant-Appellee. |
Collins, Roche, Utley & Garner, L.L.C., David L. Lester, and Paul D. Eklund, for appellant Charter Oak Fire Insurance Company.
Connick Law, L.L.C., and Thomas J. Connick, Beachwood, for appellee.
JOURNAL ENTRY AND OPINION
{¶ 1} Charter Oak Fire Insurance Company appeals from the jury verdict rendered in its favor, and against ABCO Fire Protection, Inc., totaling $5,324.09 upon its claim for negligence and $6,594.08 upon its claim for breach of contract.1 For the following reasons, we affirm.
{¶ 2} In January 2016, a fire broke out in a chimney used to exhaust smoke and heat from a wood-fired oven installed in a restaurant in the Tremont neighborhood of Cleveland — Lolita, owned by celebrity chef Michael Symon. Following the fire, Lolita permanently ceased operations. The fire was believed to have started from a spark or floating ember that ignited creosote in the chimney. The type of chimney installed in the restaurant is designed to contain any fires that start from within; however, in this case, the fire escaped and heavily damaged the second story of the structure, and the first floor suffered water and smoke damage. It was alleged that access panels and a spark arrestor (that would have prevented the spark from igniting the creosote) in the chimney ductwork were not properly secured or were missing and that the chimney was improperly installed in close proximity to combustible materials in violation of the requisite standards. Lolita contracted with ABCO to clean the restaurant's chimneys once a month. The fire occurred two weeks after a monthly cleaning was performed.
{¶ 3} Charter Oak insured Lolita under a commercial policy. The insurance company paid $989,998.92 to the owners of Lolita based on the damages sustained during the fire, demonstrated by the following chart:
| Tenant's Improvements and Betterments | $479,276.26 |
| Damaged Contents | $340,127.99 |
| Personal Property of Others | $3,285.98 |
| Art Restoration | $3,487.24 |
| Computer Restoration | $23,745.86 |
| Contents storage | $2,073.60 |
| Subtotal | $851,996.93 |
| Less Deductible | -$2,500.00 |
| Subtotal | $849,496.93 |
| Plus Business Interruption | $140,502.00 |
| Total Loss Payment | $989,998.92 |
Thereafter, Charter Oak filed its complaint against ABCO, asserting its right to subrogation. "Subrogation is defined as ‘the substitution of one party for another whose debt the party pays, entitling the paying party to rights, remedies, or securities that would otherwise belong to the debtor.’ " Indiana Ins. Co. v. Barnes , 165 Ohio App.3d 262, 2005-Ohio-6474, 846 N.E.2d 73, ¶ 17 (10th Dist.), quoting Black's Law Dictionary 101 (8th Ed.2004).
{¶ 4} In this case, Charter Oak claims it was obligated under the terms of its insurance contract with the restaurant owners to cover the damages caused by a breach of contract between the insured and a hired contractor — based on allegations of breaches of a warranty or failing to perform services in a workmanlike manner — and the "negligent" performance of those contractual services.
{¶ 5} At trial, Charter Oak's adjuster generally testified that the above amounts were paid to the restaurant owners based on the standard claims process. The adjuster did not provide a valuation on the property damaged but simply reiterated what was paid to the insured based on evaluations submitted by outside venders or computer-generated estimates produced by a program generally used in the insurance industry. A content appraiser provided some evidence of the fair market value of 30 items of personal property included in the above summarization. According to the appraiser, those items were valued at $56,634.99, although $118,523.50 was paid to Lolita.
{¶ 6} According to Charter Oak, ABCO breached its monthly contract to clean exhaust hoods, for which it charged $600 to clean three hoods, by failing to clean the chimney to bare metal two weeks before the fire and that ABCO was responsible for removing the access panels and spark arrestor that it was allegedly obligated to maintain, although Lolita representatives testified that ABCO's responsibility did not include the fire suppression systems.
{¶ 7} ABCO claims that the restaurant owners were at fault in failing to maintain the chimney's access panels and safety devices because the contract was not for safety consulting services and the installation was negligently performed because the chimney was installed too near combustible materials. The jury largely agreed with ABCO, apportioning 90 percent of the tort liability to the restaurant owners and the nonparty installation company under R.C. 2307.23(A)(2). The jury also concluded that ABCO was in breach of its contract with the restaurant owners by failing to perform its services in a workmanlike manner, the damages for which Charter Oak claimed under a right to subrogation.
{¶ 8} This case presents a confusing theory of liability and damages that cannot be ignored. The complaint included duplicative claims sounding in tort and contract. Charter Oak alleged that ABCO breached its express or implied warranties in the contract, or failed to perform the services in a workmanlike manner as obligated under the contractual relationship. The factual allegations supporting those breach of contract claims are nearly identical to the ones advanced in support of the negligence claim.
{¶ 9} Generally in Ohio, a "breach of contract does not create a tort claim." Textron Fin. Corp. v. Nationwide Mut. Ins. Co. , 115 Ohio App.3d 137, 151, 684 N.E.2d 1261 (9th Dist.1996), citing Wolfe v. Continental Cas. Co. , 647 F.2d 705, 710 (6th Cir. 1981) ; Dayton Children's Hosp. v. Garrett Day, L.L.C., 2019-Ohio-4875, 149 N.E.3d 1004, ¶ 111 (2d Dist.), citing Kott v. Gleneagles Professional Builders & Remodelers, Inc. , 197 Ohio App.3d 699, 2012-Ohio-287, 968 N.E.2d 593, ¶ 15 (6th Dist.), and Med. Billing, Inc. v. Med. Mgt. Sciences, Inc. , 212 F.3d 332, 338 (6th Cir. 2000). A tort claim can only exist independent of the contract if the plaintiff can establish the existence of a duty created outside that which was created by the terms of the contract. Textron Fin. Corp. Corporex Dev. & Constr. Mgt., Inc. v. Shook, Inc. , 106 Ohio St.3d 412, 2005-Ohio-5409, 835 N.E.2d 701, ¶ 10.
{¶ 10} During trial a disagreement arose as to the scope of damages available in contract, after ABCO sought to dismiss the negligence claims based on the aforementioned principle of black-letter law, in the attempt to winnow the issues for trial. In seeking a directed verdict, ABCO claimed that the proposed instructions and interrogatories broadly permitted Charter Oak to recover the same measure of damages as between the breach of contract and negligence claims without presenting the claims as being in the alternative to one another. ABCO also sought a directed verdict, in part, claiming that Charter Oak was seeking duplicative claims of negligence that solely arose from obligations created through contract. During that discussion, Charter Oak conceded that its negligence and breach of contract claims were identical. Tr. 297:10-13. Charter Oak later claimed that the tort and breach of contract claims were independent of each other, although it was still conceded that the damages from the breach of contract claim were the same "if not wholly the same" as the damages alleged to have occurred as a result of the negligence claim. Tr. 1049:11-15; 1051:15-17. The trial court denied the motion for a directed verdict on Charter Oak's negligence claim, expressly permitting both claims to be presented to the jury despite the conceded fact that the claims were identical in both establishment of the duty and the resulting damages.
{¶ 11} Compounding this confusion, the jury instructions, ultimately given over ABCO's objection, essentially permitted Charter Oak to recover damages without differentiation as between the breach of contract and negligence claims. The jury instruction provided, at the request of Charter Oak, that the jury could award damages "that would be the natural and probable result of the breach of the contract or that would [be] reasonably within the contemplation of the parties as the probable result of the breach of the contract." This instruction harkens back to Hadley v. Baxendal , 156 Eng. Rep. 145 (1854), that consequential damages for breach of contract are subject to the rule that a plaintiff is only "entitled to recover such damages as may reasonably be supposed to have been in the contemplation of the parties at the time they made the contract * * *." Devereux v. Buckley & Co. , 34 Ohio St. 16, 21 (1877), quoting Hadley. At no time did Charter Oak attempt to provide the jury with a differentiation of the damages or liability attributable to the breach of contract claims and that of the negligence claim — seamlessly interchanging the damages as between claims. In fact, in closing, Charter Oak specifically asked the jury to enter a verdict solely based on what it paid to Lolita's owners without any distinction between the tort and contract claims. Tr. 1257:4-14. In light of Charter Oak's argument against directing a verdict on the negligence claim, the jury was left to sort the difference between the claims and the appropriate measure of damages on its own.
{¶ 12} With respect to the evidence of damages, Charter Oak's evidence at trial was limited to the documentation of what it paid to the restaurant owners as a result of the insurance claim, as presented through the adjuster who collected and categorized the information on the damaged property. Charter Oak presented only two other...
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