Oak Hill Inv. IV LLC v. State Farm Fire & Cas. Co., Case No. 15-cv-1996

CourtUnited States District Courts. 6th Circuit. United States District Court of Northern District of Ohio
Writing for the CourtJeffrey J. Helmick United States District Judge
PartiesOak Hill Investment IV LLC, et al., Plaintiffs v. State Farm Fire and Casualty Company, Defendant
Docket NumberCase No. 15-cv-1996
Decision Date27 September 2017

Oak Hill Investment IV LLC, et al., Plaintiffs
State Farm Fire and Casualty Company, Defendant

Case No. 15-cv-1996


September 27, 2017



Before me are: (1) Defendant State Farm Fire and Casualty Company's motion for summary judgment (Doc. No. 15); (2) Plaintiff Oak Hill Investment IV LLC's motion for partial summary judgment. (Doc. No. 16); (3) Plaintiff's response in opposition of Defendant's motion for summary judgment (Doc. No. 17); and (4) Defendant's reply in support of its motion for summary judgment. (Doc. No. 18).


Plaintiff Oak Hill Investment IV LLC owns a two-story office building located in Toledo, Ohio. Defendant State Farm Fire and Casualty Company insured the building and business personal property in it under the Businessowners Coverage Form ("Policy"). (Doc. No. 15-2). On June 27, 2015, there was a severe rainstorm in the area. Because one of the scupper drains on the roof was clogged with windblown debris, water began to rise and eventually entered an open air conditioning unit. The water flowed through the HVAC ductwork and damaged the interior of the building. After the storm, a State Farm representative inspected the property twice. Both times he found the damage to the interior of the building was not covered under the Policy. State Farm paid for some

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personal property of the business covered by an Inland Marine Endorsement to the Policy. Id. at 65-73. Oak Hill filed suit against State Farm asserting claims for declaratory judgment, breach of contract, and bad faith, and requesting punitive damages.


Summary judgment is appropriate if the movant demonstrates there is no genuine dispute of material fact and that the movant is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(a). All evidence must be viewed in the light most favorable to the nonmovant, White v. Baxter Healthcare Corp., 533 F.3d 381, 390 (6th Cir. 2008), and all reasonable inferences are drawn in the nonmovant's favor. Rose v. State Farm Fire & Cas. Co., 766 F.3d 532, 535 (6th Cir. 2014). A factual dispute is genuine if a reasonable jury could resolve the dispute and return a verdict in the nonmovant's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). A disputed fact is material only if its resolution might affect the outcome of the case under the governing substantive law. Rogers v. O'Donnell, 737 F.3d 1026, 1030 (6th Cir. 2013).


Both Oak Hill and State Farm move for summary judgment on the declaratory judgment and breach of contract claims. State Farm also moves for summary judgment on the claim of bad faith and the request for punitive damages.

A. Breach of Contract

The parties dispute whether or not State Farm properly denied Oak Hill's insurance claim under the terms of the Policy. State Farm contends that the damaged property was not covered by the policy and, alternatively, that the cause of the loss was excluded from the coverage of the policy. Oak Hill disagrees.

"A policy of insurance is a contract and like any other contract is to be given a reasonable construction in conformity with the intention of the parties as gathered from the ordinary and commonly understood meaning of the language employed." Dealers Dairy Prods. Co. v. Royal Ins. Co.,

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170 Ohio St. 336, 339 (1960). If a provision of the insurance policy is ambiguous, it is to be construed in favor of the insured, allowing coverage exclusions only when "clearly intended to be excluded." Westfield Ins. Co. v. Hunter, 128 Ohio St. 3d 540, 543 (2011) (citations omitted). But if there is no ambiguity and the "words used in [the] policy of insurance have a plain and ordinary meaning, it is neither necessary nor permissible to resort to construction unless the plain meaning would lead to an absurd result." Olmstead v. Lumbermens Mut. Ins. Co., 22 Ohio St. 2d 212, 216 (1970).

1. Property Subject to Limitations (1)(e)

Although the Policy covers buildings under Coverage A, it states that:

1. We will not pay for loss to:
e. The interior of any building or structure, or the property inside any building or structure, caused by rain, snow, sleet, ice, sand or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a Covered Cause Of Loss to its roof, outside walls, or outside building glass through which the rain, snow, sleet, ice, sand or dust enters; or
(2) The loss is caused by thawing of snow, sleet or ice on the building or structure.

(Doc. No. 15-2 at 6). This language is not ambiguous. By the plain language of the contract, damage to the interior of the building will only be covered if the roof is damaged by a Covered Cause of Loss and then rainwater comes through the area of the roof that is damaged. Although Oak Hill argues that grammatical rules should be applied to find another meaning in the language, this construction is prohibited unless the plain meaning of the limitation would lead to an absurd result. The limitation does not bar all water damage to the interior, but instead confines coverage to a scenario when the exterior of the building was damaged in a way that would let water into the building such as a puncture to the roof by a fallen tree branch. I do not find this to be an absurd result. See, e.g., Eagle West Ins. Co. v. SAT, 2400, LLC, 187 F.Supp.3d 1231, 1239-40 (W.D. Wash. 2016) (interpreting a clause with nearly identical language as barring "coverage for loss to the building's interior unless rain first damages, and then enters through, the building's exterior").

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The water that caused the damage to the interior of the building entered through an air conditioning unit on the roof. The unit through which it entered was not damaged. Instead, it was the scupper drain, clogged with debris, which caused the water to rise on the roof and enter the unit. Since the water did not enter the interior of the building through the damaged drain but instead the undamaged air conditioning unit, Limitation 1(e) bars coverage for the water damage to the interior of the building.

2. Section I—Exclusions (1)(h)

While State Farm "will pay for accidental direct physical loss to [the] Covered Property," the Policy excludes coverage for losses caused by:

h. Water
(1) Flood, surface water, waves (including tidal waves, tsunami, and seiche), tides, tidal water, overflow of any body of water, or spray or surge from any

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