Granger v. Auto-Owners Ins.

• Decision Date: 18 August 2015
• Docket Number: No. 2013–1527.,2013–1527.
• Citation: 2015 Ohio 3279,40 N.E.3d 1110,144 Ohio St.3d 57
• Parties: GRANGER et al., Appellees, v. AUTO–OWNERS INSURANCE et al.; Auto–Owners (Mutual) Insurance Co. et al., Appellants.
• Court: Ohio Supreme Court

144 Ohio St.3d 57

40 N.E.3d 1110

2015 Ohio 3279

GRANGER et al., Appellees,

v.AUTO–OWNERS INSURANCE et al.; Auto–Owners (Mutual) Insurance Co. et al., Appellants.

No. 2013–1527.

Supreme Court of Ohio.

Submitted June 25, 2014.

Decided Aug. 18, 2015.

Thomas C. Loepp Law Offices Co. and Thomas C. Loepp, for appellees.

McNeal, Schick, Archibald & Biro Co., L.P.A., Brian T. Winchester, and Patrick J. Gump, Cleveland, for appellants.

PFEIFER, J.

{¶ 1} In this case, we address whether an umbrella insurance policy's intentional-acts exclusion—through application of the inferred-intent doctrine—obviates the insurer's duty to defend an insured against claims based on alleged acts of pre-leasing housing discrimination that result in alleged emotional distress. We hold that the particular umbrella policy at issue arguably provides coverage for emotional-distress damages through its coverage for humiliation. We further hold that emotional-distress damages are not inherent in a claim for discrimination and that the inferred-intent doctrine is thus inapplicable in this case.

Factual and Procedural Background

{¶ 2} Steve Granger and Paul Steigerwald, appellees, established a trust together to hold certain assets; one of the assets is a rental property in Akron that they rent to tenants on a month-to-month basis. That property consists of four units: three in the main house and a fourth above a three-car garage that they call a carriage house. Granger refers to himself as "the rules Nazi" and will terminate a lease at the end of the following month if a tenant is too loud. Granger paraphrases a clause in the rental agreement as stating, "[I]f you make noise to disturb other tenants, your month-to-month lease will not be renewed."

{¶ 3} Valerie Kozera alleged that she called Granger on June 7, 2010, to inquire about renting one of the units of the property. She wanted to move closer to her disabled mother. Granger asked Kozera who would be living in the apartment, and she responded that she and her six-year-old son would live there. Granger told Kozera that he does not rent to people with children and ended the phone call. Granger maintains that he did not specifically state that he would not lease to Kozera, but that he told her instead that the apartment "wasn't conducive to children." He said, "I didn't want her—I told her, now, if you come all the way here and then you do rent, I said, and there's noise, I said, you can only be here for one month. I tell everybody that."

{¶ 4} Kozera contacted the Fair Housing Contact Service, Inc. ("FHCS"), which investigated Kozera's claims by using trained testers to interact with Granger. One tester inquired about the property by e-mail, and Granger replied, "Truely [sic] a lovely and large apartment and in a very well keep [sic] apartment house. No pets or children." Granger later sent an additional e-mail to the same tester, stating, "Yes it is still available as I am selective as to who [sic] I rent to and I run a background check on any possible tenant, just so you know. It is an adult apartment house so it is quite [sic] and very will keep [sic] with no children or pets permitted." He sent a proposed lease to at least one tester; one of its terms was "No children or pets are permitted—period." Further, FHCS related that Granger told only an African–American tester that he ran background checks on prospective tenants because "he didn't want a rapist in the building"; he did not make the same comment to a Caucasian tester.

{¶ 5} Based on information from Kozera and the testers, FHCS contended that Granger had discriminated against Kozera, an African–American, on the basis of familial status and race in violation of 42 U.S.C. 3604 and R.C. 4112.02(H). In March 2011, Kozera and FHCS filed a complaint in federal court against Granger and Steigerwald, individually and in their capacities as trustees of the trust. Kozera claimed that she had "experienced out of pocket costs and emotional distress as a result of Defendants' conduct"; FHCS alleged that it had "expended its resources and was harmed in its mission by Defendants' conduct."

{¶ 6} There was potential coverage under two separate Auto–Owners Insurance Group policies. Appellant Auto Owners (Mutual) Insurance Company covered Granger, Steigerwald, and their trust under a dwelling policy that included landlord-liability coverage. The second policy is the one at issue in this appeal; it is an umbrella policy issued by appellant Owners Insurance Company under which Granger is the named insured. For ease of reference, we refer to appellants collectively as "Auto–Owners."

{¶ 7} On May 18, 2011, Granger and Steigerwald forwarded the complaint to their insurance agent at the Church Agency. The agency contacted Auto–Owners, seeking coverage under the dwelling policy only. On June 8, 2011, Auto–Owners sent a letter to Granger and Steigerwald explaining that the dwelling policy did not provide coverage to them. Auto–Owners pointed out that the discrimination lawsuit did not allege any bodily injury, property damage, or personal injury that was covered by the policy. Auto–Owners stated that discrimination did not fall under the policy's definition of personal injury. The letter quoted the definition of "personal injury" from the policy:

c. Personal injury means:

(1) libel, slander, or defamation of character;

(2) false arrest, detention or imprisonment, or malicious prosecution;

(3) invasion of privacy; or

(4) wrongful eviction or wrongful entry.

{¶ 8} The letter denying coverage did not mention the umbrella policy. After the denial under the dwelling policy, Granger's insurance agent, Michael Coudriet, determined that the agency should submit a claim to Auto–Owners on Granger's behalf under the umbrella policy. The agency submitted the claim on June 9, 2011. Granger and Steigerwald did not hear from Auto–Owners on the question of coverage under the umbrella policy.

{¶ 9} On July 11, 2011, Granger and Steigerwald settled the federal case with Kozera and FHCS for $32,500. Separate payments went to the two plaintiffs: $5,000 to Kozera and $27,500 to FHCS.

{¶ 10} On July 22, 2011, appellees sued Auto–Owners, the Church Agency, Inc., and Mike Coudriet for claims relating to Auto–Owners' failure to provide coverage. In this appeal, we address only appellees' claim regarding Auto–Owners' duty to defend Granger under the umbrella policy.

{¶ 11} The umbrella policy states:

DEFENSE—SETTLEMENT

With respect to any occurrence:

(a) not covered by underlying insurance; but

(b) covered by this policy except for the retained limit;

we will:

(a) defend any suit against the insured at our expense, using lawyers of our choice. * * *

(b) investigate or settle any claim or suit as we think appropriate.

{¶ 12} The policy also states that Auto Owners "will pay on behalf of the insured the ultimate net loss in excess of the retained limit which the insured becomes legally obligated to pay as damages because of personal injury."

{¶ 13} The definition of "personal injury" is broader in the umbrella policy than in the dwelling policy—it includes particular damages rather than only particular causes of action:

"Personal injury" means:

(a) bodily injury, sickness, disease, disability or shock;

(b) mental anguish or mental injury;

(c) false arrest, false imprisonment, wrongful eviction, wrongful detention, malicious prosecution or humiliation; and

(d) libel, slander, defamation of character or invasion of rights of privacy;

including resulting death, sustained by any person * * *.

{¶ 14} The umbrella policy excludes coverage for intentional acts, stating, "We do not cover * * * [p]ersonal injury or property damage expected or intended by the insured."

{¶ 15} Appellees filed a motion for summary judgment in the trial court on the issue of Auto–Owners' duty to defend Granger under the umbrella policy. Auto–Owners filed a motion seeking summary judgment on its duty to defend and indemnify the appellees under the policies. The trial court denied appellees' motion and granted that of Auto–Owners.

{¶ 16} Appellees appealed, arguing that the trial court erred in granting Auto–Owners' motion for summary judgment on the issue of its duty to defend Granger under the umbrella policy. The Ninth District Court of Appeals reversed. The appellate court pointed out that "Auto–Owners defined personal injury both in terms of certain claims, such as malicious prosecution, and in terms of resulting harms, such as humiliation or mental anguish."

2013-Ohio-2792, 991 N.E.2d 1254, ¶ 13 (9th Dist.). The court concluded that because Kozera claimed that she had suffered emotional distress, "she arguably suffered humiliation, which is a personal injury covered under the policy," and that, therefore, "it would appear that the federal complaint alleges a personal injury as contemplated by the umbrella policy." Id. at ¶ 14.

{¶ 17} The appellate court next addressed the policy's intentional-acts exclusion. The court drew a distinction between Granger's intent to discriminate and his intent to cause personal injury. The court held that the argument that the exclusion applies because Granger intended the discrimination "ignores the plain language of the policy"; instead, the court reasoned, "[t]he relevant inquiry under the exclusion portion of the policy * * * is whether Mr. Granger expected or intended Ms. Kozera to be humiliated by his conduct." Id. at ¶ 15. The court found that Auto–Owners had not yet made an argument on that point, let alone introduced evidence. Id. The court also rejected the idea that the intent to injure could be inferred from Granger's acts: " ‘An insurer's motion for summary judgment may be properly granted when intent may be inferred as a matter of law. In cases such as this one, where the insured's act does not necessarily result in harm, we cannot infer an intent to cause injury as a matter of law.’ " Id., quoting Allstate Ins. Co. v. Campbell, 128 Ohio St.3d 186, 2010-Ohio-6312, 942 N.E.2d...