Lexington Ins. Co. v. Dunnwell, LLC

• Decision Date: 10 August 2016
• Docket Number: No. 27476.,27476.
• Citation: 2016 Ohio 5311,69 N.E.3d 1066
• Parties: LEXINGTON INSURANCE COMPANY, Plaintiff v. DUNNWELL, LLC, et al., Defendant/Appellee/Cross–Appellant v. West Bend Mutual Insurance Company, et al., Defendants/Appellees/ Cross–Appellants.
• Court: Ohio Court of Appeals

69 N.E.3d 1066

2016 Ohio 5311

LEXINGTON INSURANCE COMPANY, Plaintiff

v.DUNNWELL, LLC, et al., Defendant/Appellee/Cross–Appellant

v.West Bend Mutual Insurance Company, et al., Defendants/Appellees/ Cross–Appellants.

No. 27476.

Court of Appeals of Ohio, Ninth District, Summit County.

Aug. 10, 2016.

Thomas J. Connick, Attorney at Law, Cleveland, for Appellant/Cross–Appellee.

D. John Travis, Gary L. Nicholson, and Richard C.O. Rezie, Attorneys at Law, Cleveland, for Appellees/Cross–Appellants.

Robert P. Lynch, Attorney at Law, Cleveland, for Appellee/Cross–Appellant.

Michael R. Henry and Matthew R. Planey, Attorneys at Law, Columbus, for Plaintiff/Cross–Appellee.

CARR, Judge.

{¶ 1} Appellants, West Bend Mutual Insurance Co. and ABCO Fire Protection, Inc., and cross-appellants, DunnWell, LLC and Travelers Casualty Indemnity Co., appeal the judgment of the Summit County Court of Common Pleas. This Court affirms in part, reverses in part, and remands.

I.

{¶ 2} MAC Acquisition, LLC, dba Macaroni Grill, contracted with DunnWell to provide cleaning and inspection services to MAC's restaurant's kitchen exhaust systems. DunnWell subcontracted with ABCO to provide those services to MAC. ABCO agreed to add DunnWell as an additional insured on its commercial liability insurance policy relevant to its work as a subcontractor for DunnWell. West Bend as ABCO's insurance company, therefore, insured ABCO as its insured and DunnWell as an additional insured. Although DunnWell also maintained insurance coverage through its carrier Travelers, any applicable coverage through West Bend was designated as primary. Shortly after one of ABCO's scheduled maintenance and inspections at Macaroni Grill, a fire broke out at the restaurant, causing significant property damage. Lexington Insurance Co., which insured MAC, paid the restaurant's damages claim. Lexington then filed a complaint in case number 2012–03–1741 against DunnWell and Travelers, and ABCO and West Bend, alleging various negligence and breach claims, and seeking compensatory and consequential damages, as well as declaratory judgment. In addition to denying the allegations in Lexington's complaint, DunnWell and ABCO each filed cross-claims against the other, alleging, among other things, claims for indemnification and contribution. In addition, DunnWell prayed for a judgment that ABCO defend it against all of MAC's claims.

{¶ 3} Subsequently, in case number 2013–03–1400, ABCO and West Bend filed a complaint against DunnWell and Travelers, seeking declaratory judgment. Specifically, ABCO/West Bend sought declarations that DunnWell was not entitled to a defense, indemnification, or contribution under the subcontractor indemnification provision; or that in the case of ABCO's partial negligence, DunnWell was entitled to only partial defense, indemnification, or contribution; and that DunnWell was not entitled to coverage as an additional insured under the West Bend policy to the extent that Macaroni Grill put the oven exhaust systems to their intended use or because DunnWell's acts or omissions in connection with its general supervision of ABCO was the sole proximate cause of the fire. DunnWell answered and counterclaimed for declaratory judgment, seeking declarations that (1) ABCO owes DunnWell defense and indemnity pursuant to the parties' subcontractor agreement, and (2) West Bend owes DunnWell defense and indemnity pursuant to the insurance policy issued by West Bend to ABCO describing DunnWell as an additional insured. Travelers filed a separate answer to the ABCO/West Bend complaint but did not raise any counterclaims.

{¶ 4} The parties moved to consolidate case number 2013–03–1400 into case number 2012–03–1741, and the court granted the consolidation. Subsequently, DunnWell/Travelers and ABCO/West Bend filed competing motions for summary judgment solely on the issues of whether ABCO and West Bend owed DunnWell a defense and indemnity. The parties opposed each other's motions. The trial court issued a judgment in which it declared that the parties' March 3, 2009 subcontractor agreement was operative at the time of the fire; that the indemnification provision contained therein did not violate North Carolina's anti-indemnification statute; and that ABCO, therefore, was required to indemnify and defend DunnWell in the underlying litigation. The trial court declined to issue any declaration, however, regarding whether DunnWell was entitled to coverage (and presumably indemnity and defense) as an additional insured under the West Bend insurance policy. In declining to declare the parties' rights and obligations under the insurance policy, the trial court concluded that there were genuine issues of material fact as to whether ABCO's work caused the fire and whether one of the policy's exceptions to coverage applied to bar West Bend's duty to indemnify and defend DunnWell. The court certified the judgment pursuant to Civ.R. 54(B) as a final, appealable order.

{¶ 5} ABCO appealed, raising three assignments of error for review. DunnWell and Travelers filed a cross-appeal, raising one assignment of error for review.

Jurisdiction

{¶ 6} As a preliminary matter, this Court is obligated to raise sua sponte questions related to our jurisdiction. Whitaker–Merrell Co. v. Geupel Constr. Co., Inc., 29 Ohio St.2d 184, 186, 280 N.E.2d 922 (1972). This Court has jurisdiction to hear appeals only from final judgments. Article IV, Section 3(B)(2), Ohio Constitution ; R.C. 2501.02. "For a judgment to be final and appealable, the requirements of R.C. 2505.02 and Civ.R. 54(B), if applicable, must be satisfied." LEH Properties, Inc. v. Pheasant Run Assn., 9th Dist. Lorain No. 07CA009275, 2008-Ohio-4500, 2008 WL 4116369, ¶ 10, citing Chef Italiano Corp. v. Kent State Univ., 44 Ohio St.3d 86, 88, 541 N.E.2d 64 (1989). R.C. 2505.02(B)(2) states that "[a]n order that affects a substantial right made in a special proceeding" is a "final order that may be reviewed, affirmed, modified, or reversed[.]" Where a case involves multiple claims or multiple parties, Civ.R. 54(B) allows a trial court to issue a final judgment that can immediately be appealed "only upon an express determination that there is no just reason for delay." In the absence of a final, appealable order, this Court must dismiss the appeal for lack of subject matter jurisdiction. Lava Landscaping, Inc. v. Rayco Mfg., Inc., 9th Dist. No. 2930–M, 2000 WL 109108 (Jan. 26, 2000).

{¶ 7} The parties in this case sought declarations regarding their respective rights and obligations relating to the duty to indemnify and defend. The Ohio Supreme Court has held that "[t]he duty to defend involves a substantial right to both the insured and the insurer." Gen. Acc. Ins. Co. v. Ins. Co. of N. Am., 44 Ohio St.3d 17, 540 N.E.2d 266 (1989), paragraph one of the syllabus. The high court reasoned that the risk of adverse economic and other consequences arising from situations both (1) where the indemnitor wrongfully refuses to defend so that the indemnitee is forced to settle to mitigate costs or later pursue additional litigation to recoup its costs of pursuing its own defense, and (2) where the insurance company expends costs to defend an action later determined not to be within the terms of the insurance policy. Id. at 21–22, 540 N.E.2d 266. Further, the high court held that "a declaratory judgment action is a special proceeding pursuant to R.C. 2505.02 and, therefore, an order entered therein which affects a substantial right is a final appealable order." Id. at paragraph two of the syllabus.

{¶ 8} In this case, the trial court declared that ABCO must indemnify and assume the defense of DunnWell pursuant to the parties' subcontractor agreement, and it certified the judgment pursuant to Civ.R. 54(B). Accordingly, ABCO has appealed from a final, appealable order; and this Court has jurisdiction to consider ABCO's appeal.

{¶ 9} The trial court did not issue an express declaration as to whether West Bend has the duty to defend DunnWell pursuant to the additional insured provision of the insurance policy; instead, the trial court denied the competing motions for summary judgment on this issue upon finding that genuine issues of material fact existed. This Court concludes that this too constitutes a final, appealable order from which DunnWell can appeal.

{¶ 10} Normally, the denial of a motion for summary judgment is not a final, appealable order. Hunt v. Alderman, 9th Dist., 2015-Ohio-4667, 50 N.E.3d 253, ¶ 9. Moreover, this Court has held that an order entering judgment in a declaratory judgment action which fails to declare the parties' rights and obligations is not final and appealable. Bowers v. Craven,

9th Dist. Summit No. 25717, 2012-Ohio-332, 2012 WL 315052, ¶ 11. Where the denial of a motion for summary judgment in the context of declaratory judgment gives rise, however, to the reasonable and logical inference that one party has in fact prevailed, the requirements of finality are satisfied. See Indiana Ins. Co. v. Alloyd Insulation Co., 2d Dist. Montgomery No. 18979, 2002-Ohio-3916, 2002 WL 1770491, ¶ 4 (assuming jurisdiction to review the trial court's order denying summary judgment that "in the process suggested that its negative ruling supported a positive inference that [the insurance company] had a duty of coverage.").

{¶ 11} In this case, DunnWell/Travelers and ABCO/West Bend had competing motions for summary judgment, both seeking a declaration regarding whether West Bend had a duty under the terms of its insurance policy to defend and indemnify DunnWell. Although the trial court denied both motions on this issue, the court's ruling gives rise to the reasonable, positive inference that West Bend need not defend DunnWell in the underlying negligence suit. DunnWell has no legal recourse to compel West Bend to provide a defense, even under a reservation of rights, leaving it in a position where it must either absorb the full cost of its own defense and expend...