Helmick v. Republic-Franklin Ins. Co.

• Citation: 39 Ohio St.3d 71,529 N.E.2d 464
• Decision Date: 12 October 1988
• Docket Number: No. 87-1487,REPUBLIC-FRANKLIN,87-1487
• Parties: HELMICK et al., Appellees, v.INSURANCE COMPANY, Appellant.
• Court: United States State Supreme Court of Ohio

Page 71

39 Ohio St.3d 71

529 N.E.2d 464

HELMICK et al., Appellees, v. REPUBLIC-FRANKLIN INSURANCE COMPANY, Appellant.

No. 87-1487.

Supreme Court of Ohio.

Submitted May 11, 1988.

Decided Oct. 12, 1988.

Syllabus by the Court

1. When a motion for directed verdict is made by a defendant at the conclusion of the plaintiff's case and is overruled, the defendant's right to rely on the denial of that original motion as error is not waived when the defendant proceeds to present his evidence and defense as long as the motion is renewed at the conclusion of all the evidence. (Halkias v. Wilkoff Co. [1943], 141 Ohio St. 139, 25 O.O. 257, 47 N.E.2d 199, paragraphs two and three of the syllabus, overruled.)

2. Mere refusal to pay an insurance claim is not, in itself, conclusive of an insurer's bad faith. (Hoskins v. Aetna Life Ins. Co. [1983], 6 Ohio St.3d 272, 6 OBR 337, 452 N.E.2d 1315, approved and followed.)

On January 23 or 24, 1982, a fire totally destroyed the home owned by appellee Timothy A. Helmick. The home was located in Navarre, Ohio, and was insured against fire loss by appellant, Republic-Franklin Insurance Company. Helmick and his ex-wife, appellee Sandra E. Helmick, were the named insureds in the policy. The policy provided the following coverages: $70,000 for the dwelling, $7,000 for appurtenant structures, $35,000 for contents, and $14,000 for loss of use. On January 26, 1982, appellant paid Timothy Helmick $2,000 as partial payment for loss of contents and for temporary living expenses. On February 8, 1982, a reservation-of-rights agreement was entered into between Timothy Helmick and appellant. The agreement specifically stated that appellant questioned Helmick's claim of coverage in this matter.

The destroyed property was encumbered at the time of the fire by a first mortgage to the Navarre Deposit Bank Company and a blanket mortgage to the First National Bank of Massillon. In March 1982, appellant paid $28,426.89 to the Navarre Deposit Bank Company and received an assignment of Timothy Helmick's mortgage from said institution. In April 1982, appellant paid $36,314.97 to the First National Bank of Massillon and received an assignment of Timothy Helmick's mortgage from that bank.

On March 22, 1982, Timothy Helmick submitted proofs of loss to appellant for fire loss to dwelling, contents of the home and additional living expense. In a letter to Timothy Helmick dated May 18, 1982, appellant denied coverage. Appellant adhered to the position that the loss was caused by Timothy Helmick or under his direction and control. In other words, appellant suspected Timothy Helmick of having committed arson. Appellant's position was based in part upon a fire investigation report that concluded that the fire "was incendiary in origin with gasoline being used to further its progression."

On January 12, 1983, the Helmicks filed a complaint against appellant alleging breach of contract, breach of fiduciary duties and an intentional and malicious breach of good faith. The Helmicks sought compensatory damages, as well as punitive damages for alleged bad faith on the part of appellant.

Appellant orally moved for a directed verdict on the issue of punitive damages at the close of the appellees' case in chief and at the close of all the evidence. In both instances, appellant contended that appellees failed to prove any of the necessary elements required to maintain a bad-faith claim or for entitlement to punitive damages. The trial court denied each motion and presented the issue to the jury. The jury awarded the Helmicks approximately $19,000 in compensatory damages and approximately $15,000 in punitive damages. On appeal, the court of appeals affirmed.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Ronald E. Stocker and Thomas E. Stocker, Canton, for appellees.

Baker, Meekison & Dublikar, Jack R. Baker and Gregory A. Beck, Canton, for appellant.

LOCHER, Justice.

This action presents two issues for review: (1) whether appellant waived its right to preserve as error the denial of its motion for directed verdict presented at the conclusion of appellees' case in chief and (2) whether the trial court properly overruled appellant's motions for directed verdict on the issue of punitive damages. We hold in the negative on both issues and reverse the judgment of the court of appeals with regard to punitive damages.

I

Appellant's first assignment of error in the court of appeals was as follows:

"The trial court erred in overruling the appellant's motions for directed verdict on the issues of bad faith and punitive damages, in that the trial was devoid of evidence which would support a finding that the appellant acted in bad faith in denying coverage."

After reviewing the denial of appellant's motion for a directed verdict at the end of appellees' case in chief, the court of appeals concluded:

"Appellant's argument is that since appellees presented no evidence of bad faith in their case-in-chief, the appellant could make his [sic ] motion for directed verdict, and after same had been, according to appellant, erroneously overruled, proceed to offer evidence in his [sic ] case and not waive his [sic ] right to rely on the denial of his [sic ] original motion.

"The law is to the contra. * * * "

The court of appeals reached this conclusion by substantially relying upon the second and third syllabus paragraphs of Halkias v. Wilkoff Co. (1943), 141 Ohio St. 139, 25 O.O. 257, 47 N.E.2d 199, which provide:

"2. When a motion of a defendant for a directed verdict is made at the conclusion of plaintiff's evidence and overruled, the defendant has an election either to stand on his exception to the ruling or to proceed with his defense; and if he accepts the ruling, however erroneous it may be, and proceeds with his defense, introducing evidence on his own behalf, he thereby waives his right to rely on the denial of his original motion.

"3. The renewal of defendant's motion to direct a verdict at the close of all the evidence, challenges, not the sufficiency of the evidence that was alone before the court and jury at the time the original motion was made, but the evidence and the state of the record as it exists at the conclusion of all the evidence."

Appellant maintains that this "waiver doctrine" is outdated and eviscerates the fundamental requirement that a plaintiff must sustain his burden of proof before any defense is necessary. We agree and find such doctrine to be illogical as well. Therefore, based on the following, we overrule paragraphs two and three of the syllabus of the Halkias decision.

Under Halkias, a defendant is forced to simply rest his case in order to preserve error when the trial court fails to grant a motion for directed verdict at the close of the plaintiff's case in chief. Thus, the defendant risks an adverse verdict and must hope for reversal on appeal. If he proceeds to present a defense, he is forever barred from arguing the trial court's ruling as error no matter how egregious the trial court's determination might have been. Finally, while a renewal of the motion at the close of all the evidence would entitle the defendant to a review of the ruling based on the record of the entire trial, the defendant has still forever lost the opportunity for review of the previous ruling on the portion of the record toward which the original motion was directed. To force any party involved in litigation into this position defies logic and soundly defeats the basic principle that a party wishing to preserve an error for appeal may do so by means of a timely objection.

Furthermore, a thorough review of the Halkias decision itself reveals a fatal flaw which merits additional justification for overruling syllabus paragraphs two and three thereof. In arriving at its conclusion, Halkias relied upon Cincinnati Traction Co. v. Durack (1908), 78 Ohio St. 243, 85 N.E. 38; Zanesville v. Stotts (1913), 88 Ohio St. 557, 106 N.E. 1051; and Youngstown & Suburban Ry. Co. v. Faulk (1926), 114 Ohio St. 572, 151 N.E. 747. In each of these cases, the defendant moved for a directed verdict at the conclusion of the plaintiff's case. The motion was overruled by the trial court. Following such adverse ruling, the defendant offered evidence in its defense. However, in each of these cases, the defendant did not renew his motion for directed verdict at the conclusion of all the evidence. On appeal, the reviewing courts held that the original motion for directed verdict and any appeal therefrom were waived because the defendant failed to renew the motion at the conclusion of all the evidence. The Halkias court neglected to recognize that it was not the defendant's presentation of a defense which constituted a waiver--it was the defendant's failure to renew the motion at the close of all the evidence.

"Without renewing the motion for [directed] verdict, which would challenge the action of the court on the whole evidence adduced, the defendant consents that the issues go to the jury for decision on the facts, and leaves no question of fact or law to be determined by the court." Durack, supra, 78 Ohio St. at 248, 85 N.E. at 39. The cases relied upon in Halkias present a completely different set of facts from those of the cause sub judice. Appellant renewed its motion at the conclusion of all the evidence in the instant case.

Finally, we find a conflict between the decision in Halkias and Civ.R. 50(A)(2). That rule provides in pertinent part:

"A party who moves for a directed verdict at the close of the evidence offered by an opponent may offer evidence in the event that the motion is not granted * * * to the same extent as if the motion had not been made * * *." (Emphasis added.)

To the contrary, the rule established in Halkias does not allow the party making the motion to proceed but forces that party to choose between the risks of standing on the trial court's initial...