LGR Realty, Inc. v. Frank & London Ins. Agency

• Decision Date: 16 January 2018
• Docket Number: No. 2016–1307,2016–1307
• Citation: 152 Ohio St.3d 517,98 N.E.3d 241,2018 Ohio 334
• Parties: LGR Realty, Inc., Appellee, v. Frank and London Insurance Agency, Appellant.
• Court: Ohio Supreme Court

152 Ohio St.3d 517

98 N.E.3d 241

2018 Ohio 334

LGR Realty, Inc., Appellee,

v.Frank and London Insurance Agency, Appellant.

No. 2016–1307

Supreme Court of Ohio.

Submitted September 12, 2017

Decided January 16, 2018^* .

Hollern & Associates and Edwin J. Hollern, Westerville; and Barkan Meizlish, L.L.P., and Neal J. Barkan, Columbus, for appellee.

Marshall, Dennehey, Warner, Coleman, & Goggin, Samuel G. Casolari Jr., and David J. Oberly, Cincinnati; and Hunton & Williams, L.L.P., and Syed S. Ahmad, Washington, for appellant.

Rutter & Russin, L.L.C., and Robert P. Rutter, urging affirmance for amicus curiae, the Ohio Association for Justice.

Kennedy, J.{¶ 1} This discretionary appeal from the Tenth District Court of Appeals presents the question whether the delayed-damage rule, which modifies the general rule for when a cause of action accrues, is applicable to this cause of action alleging negligence related to the procuring of a professional-liability insurance policy. Because we agree with appellant, Frank and London Insurance Agency ("F & L"), that the delayed-damage rule does not apply and that the cause of action in this case accrued on the date the policy was issued, we reverse the judgment of the court of appeals and reinstate the trial court's judgment dismissing the complaint filed by appellee, LGR Realty, Inc. ("LGR"), as untimely.

I. Facts and Procedural History

{¶ 2} F & L procured for LGR a "Real Estate Agents Errors and Omissions Liability Insurance Policy" from the Continental Casualty Insurance Company ("Continental") that was effective from May 12, 2010, through May 12, 2011.

{¶ 3} A liability claim was made against LGR within the policy period in a complaint styled Milligan Communications, L.L.C. v. Plaza Properties, Inc. , Franklin C.P. case No. 10 CV 1471 ("Milligan lawsuit"). LGR made a claim against the policy for Continental to defend LGR against the Milligan lawsuit and to indemnify LGR for any damages that it might be liable for. However, on April 26, 2011, Continental denied the claim on the basis of an exclusion provision in the policy regarding Plaza Properties. LGR incurred over $420,000 in attorney fees and expenses defending against the Milligan lawsuit.

{¶ 4} On April 17, 2015, LGR brought an action against F & L alleging that F & L had been negligent in failing to procure an appropriate professional-liability insurance policy and had negligently misrepresented the coverage contained in the policy. As a result, LGR claimed, F & L had breached its duty to procure an appropriate insurance policy—one that would have provided coverage for defending and indemnifying LGR in the Milligan case. Attached to LGR's complaint was a copy of the policy, which included a specific-entity-exclusion endorsement explaining that the policy does not apply to any claim made against LGR by Plaza Properties. F & L filed a Civ.R. 12(B)(6) motion to dismiss LGR's complaint. Relying in large part on Flagstar Bank, F.S.B. v. Airline Union's Mtge. Co. , 128 Ohio St.3d 529, 2011-Ohio-1961, 947 N.E.2d 672, F & L argued that the cause of action accrued on the date the policy went into effect, May 12, 2010, and therefore, LGR's complaint, which was filed on April 17, 2015, was time barred by the four-year statute of limitations set forth in R.C. 2305.09.

{¶ 5} LGR, relying primarily on Kunz v. Buckeye Union Ins. Co. , 1 Ohio St.3d 79, 437 N.E.2d 1194 (1982), countered that under the delayed-damage rule, its cause of action did not accrue until it suffered an "injury," which occurred, at the earliest, when Continental denied LGR's claim for defense and indemnity on April 26, 2011. Therefore, LGR argued, its April 17, 2015 complaint was filed within four years of the accrual date and was not time barred.

{¶ 6} The trial court determined that LGR's cause of action accrued on the day the insurance policy went into effect, May 12, 2010, and it dismissed LGR's action on the basis that it had been filed outside the four-year statute-of-limitations period set forth in R.C. 2305.09(D). Concluding that Kunz had been "eroded" by subsequent cases, including Flagstar , the court "decline[d] to apply the delayed damages rule to this case involving insurance agents."

{¶ 7} The court of appeals, holding that Flagstar did not overrule Kunz , reversed the trial court's judgment. In its decision, the court of appeals noted that although language in the body of the Flagstar opinion suggests a broad holding that would overrule Kunz , the syllabus of Flagstar is written more narrowly, leaving Kunz intact.

{¶ 8} On appeal to this court, F & L presents two propositions of law for consideration. The first proposition of law asserts that the delayed-damage rule enunciated in Kunz was abrogated by Flagstar and therefore "[a] cause of action for insurance agent or agency negligence accrues for purposes of the four-year R.C. 2305.09(D) statute of limitations when the allegedly wrongful act is committed." F & L's second proposition of law quotes Rep.Op.R. 2.2, which provides that the law in an opinion of the Supreme Court is "contained in its text, including its syllabus, if one is provided, and footnotes," and asserts that under this rule, all parts of the decision are coequal, "with no part of the decision taking precedence."

{¶ 9} In response to F & L's first proposition of law, LGR argues that Kunz has not been overruled and that its holding is determinative in this case. In response to F & L's second proposition of law, LGR agrees that this court's entire opinion sets forth the law but it argues that Kunz is distinguishable from Flagstar and that Kunz controls in this case.

II. Standard of Review

{¶ 10} "An order granting a Civ.R. 12(B)(6) motion to dismiss is subject to de novo review." Perrysburg Twp. v. Rossford , 103 Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d 44, ¶ 5. In reviewing a motion to dismiss for failure to state a claim, we accept as true all factual allegations in the complaint. Mitchell v. Lawson Milk Co. , 40 Ohio St.3d 190, 192, 532 N.E.2d 753 (1988). A complaint should not be dismissed unless it appears "beyond doubt from the complaint that the plaintiff can prove no set of facts entitling him to recovery." O'Brien v. Univ. Community Tenants Union, Inc. , 42 Ohio St.2d 242, 327 N.E.2d 753 (1975), syllabus. Under Civ.R. 10(C), "[s]tatements in a pleading may be adopted by reference in a different part of the same pleading or in another pleading or in any motion. A copy of any written instrument attached to a pleading is a part of the pleading for all purposes." A motion to dismiss based upon a statute of limitations may be granted only when the complaint shows conclusively on its face that the action is time-barred. Velotta v. Leo Petronzio Landscaping, Inc. , 69 Ohio St.2d 376, 433 N.E.2d 147 (1982), paragraph three of the syllabus.

III. Law and Analysis

{¶ 11} The parties do not dispute that R.C. 2305.09(D) provides a four-year statute-of-limitations period for tort actions not specifically covered by other sections of the Revised Code. Nor do the parties dispute that the professional-negligence claims at issue here are governed by R.C. 2305.09(D). See also Investors REIT One v. Jacobs , 46 Ohio St.3d 176, 179, 546 N.E.2d 206 (1989) (" R.C. 2305.09 provides a general limitations period of four years for tort actions not specifically covered by other sections of the Ohio Revised Code" [footnote deleted] ).

{¶ 12} The parties do not agree, however, on when the negligent-procurement and negligent-misrepresentation claims in this case accrued, triggering the start of the statute of limitations. F & L argues that the claims accrued and the four-year statute-of-limitations period began to run when the professional-liability insurance policy containing the exclusion was issued, and it directs the court's attention to Investors REIT and Flagstar , 128 Ohio St.3d 529, 2011-Ohio-1961, 947 N.E.2d 672.

{¶ 13} LGR argues that the claims accrued and the four-year statute-of-limitations period began to run when the claim to defend and indemnify was denied, and it directs our attention to the application of the delayed-damage rule in Kunz, 1 Ohio St.3d 79, 437 N.E.2d 1194.

{¶ 14} This court has long recognized that a "[s]tatute of limitations commences to run so soon as the injurious act complained of is perpetrated, although the actual injury is subsequent * * *." Kerns v. Schoonmaker , 4 Ohio 331 (1831), syllabus. While this remains the general rule in Ohio today, see O'Stricker v. Jim Walter Corp. , 4 Ohio St.3d 84, 87, 447 N.E.2d 727 (1983), and Flagstar at ¶ 13, there are two primary exceptions to the rule.

{¶ 15} One exception to the general rule is the discovery rule, which provides that "[w]hen an injury does not manifest itself immediately, the cause of action does not arise until the plaintiff knows or by the exercise of reasonable diligence should have known, that he had been injured by the conduct of the defendant, for purposes of the statute of limitations." O'Stricker at paragraph two of the syllabus.

{¶ 16} The second exception to the general rule is the delayed-damage rule, which this court first adopted in Velotta v. Leo Petronzio Landscaping, Inc. , 69 Ohio St.2d 376, 433 N.E.2d 147 (1982). Under the delayed-damage rule, "where the wrongful conduct complained of is not presently harmful, the cause of action does not accrue until actual damage occurs." Id. at 379, 433 N.E.2d 147.

{¶ 17} In reversing the trial court's judgment granting the motion to dismiss, the Tenth District Court of Appeals agreed with LGR that Kunz is still good law, and it relied on Kunz in holding that the delayed-damage rule was applicable in this case. Therefore, an examination of Kunz is central to resolving this matter. However, we first turn our attention to F & L's second proposition of law regarding the Rules for Reporting Opinions.

A. Rep.Op.R. 2.2

{¶ 18} Neither party disputes the import of Rep.Op.R. 2.2 as it is currently written, and F & L's second propositi...