Safway Services, LLC v. Anthony Filo Construction, Inc.
| Decision Date | 26 December 2013 |
| Docket Number | CV 12 781207 |
| Parties | SAFWAY [1] SERVICES, LLC, Plaintiff v. ANTHONY FILO CONSTRUCTION, INC., Defendant/third-party plaintiff v. AUTO-OWNERS (MUTUAL) INSURANCE, Third-party defendant |
| Court | Ohio Court of Common Pleas |
JOURNAL ENTRY
This case began as a lawsuit by plaintiff Safway Services, LLC against defendant Anthony Filo Construction, Inc. to collect unpaid rent due under a lease for scaffolds and related equipment, as well as the value of the equipment, which Filo never returned.[2]
Filo then filed a third-party complaint against its insurance carrier, Auto-Owners (Mutual) Insurance. The third-party complaint avers that Filo was in possession of the building and land at 1662 Cherry Street, Youngstown, pursuant to a land contract. On October 16, 2010, the building and its contents were destroyed by a fire.[3] The third-party complaint alleges that Auto-Owners insured the premises under two liability policies -- one for commercial general liability, the other an umbrella policy -- and breached those contracts by failing to pay claims for the damaged building and its contents. The third-party complaint also includes causes of action for 1) a declaratory judgment to the effect that Auto-Owners owes coverage to Filo and 2) bad faith denial of coverage.
Auto-Owners asserted a counterclaim[4] to the third-party complaint. The counterclaim seeks a declaratory judgment that Auto-Owners does not owe Filo indemnity and a defense for Safway's claims. The counterclaim seeks a further declaration that Auto-Owners is not required to indemnify Filo for claims against Filo by the building's owner for damage to the structure and its other contents.
On April 23, 2013, Safway's complaint against Filo was resolved by a stipulated judgment. On that same date, counsel for Auto-Owners and Filo agreed that Auto-Owners's pending motion for summary declaratory judgment would be decided and that, after that ruling, whatever genuine issues of material fact that remained on the counterclaim for declaratory judgment would be decided by the court, as a fact finder, based on all of the record evidence: the insurance policies attached to the pleadings, the documents submitted in connection with the January 22, 2013, motion for summary judgment, the evidence attached to Filo's March 1 brief in opposition and Auto-Owners's March 8 reply brief, and a stipulation of undisputed facts filed on May 2, 2013.
In the meantime, with no objection by Auto-Owners and with the consent of the court, the third-party complaint was voluntarily dismissed.
Hence, this entry constitutes my ruling on the motion for summary declaratory judgment and, where issues of fact remain, my findings of fact and conclusions of law on Auto-Owners's counterclaim for a declaratory judgment.
STATEMENT OF FACTS[5]
The property at 1662 Cherry Street in Youngstown is owned by the Florence E. Hirt Family Trust. As of October 16, 2010, Filo was in possession of the premises under a lease, with a purchase option, from the trust.
The building and all its contents were destroyed by a fire on October 16, 2010. The night before the fire, Filo employee David Oracio was in the building using a mechanical saw to cut metal rebar. The process generated a lot of sparks in the old building. Because that process created a risk of fire, Anthony Filo, the owner of Filo Construction, had previously warned his workers not to cut rebar inside the building. This is the only evidence of the fire's cause.
On October 15, 2012, the trust filed a lawsuit in the Mahoning County Court of Common Pleas[6] against Filo alleging that Filo or its employees negligently started the fire and caused damage equal to the value of the building.
At the time of the fire, Filo had two insurance policies through Auto-Owners: a commercial general liability policy and a commercial umbrella policy. When Filo was sued by the trust, it tendered the lawsuit to Auto-Owners with a request that Auto-Owners provide a defense and, if necessary, indemnify Filo for the trust's claimed damages. Auto-Owners has provided for Filo's defense against the Mahoning County negligence lawsuit while reserving its right to disclaim coverage.
In the meantime, about six months earlier, Safway had filed this lawsuit alleging only breach of contract and unjust enrichment.[7] Auto-Owners did not provide for Filo's defense against Safway's lawsuit, prompting the third-party complaint by Filo and the September 13, 2012, counterclaim for declaratory judgment.
The CGL policy and Safway's claims
The commercial general liability contract between Auto-Owners and Filo is policy number 062303-05069130-09. The policy includes several provisions that are implicated by Safway's claims.
First, by Section 1, Coverage A, Auto-Owners agrees to pay " those sums that [Filo] becomes legally obligated to pay as damages" because of " 'property damage' to which this insurance applies." [8] This coverage applies only where the damage is caused by an " occurrence, " defined in the policy as an accident.[9] But the liability coverage is limited by several exclusions. Two of those exceptions from coverage are for damages that Filo is responsible for under a contract and damage to certain property in Filo's possession.[10]
The first of these exclusions provides, in pertinent part:
The second relevant exclusion is for damage to " [p]roperty you own, rent, occupy or use" and personal property " in the care, custody or control" [11] of Filo.
The CGL policy goes on to include Auto-Owners's agreement to pay for Filo's defense against any lawsuit claiming damages covered under the policy. Specifically, the policy provides:
We will have the right and duty to defend [Filo] against any " suit" seeking [covered] damages.[12]
The umbrella policy and Safway's claims
Although the language of the umbrella policy is not identical to the CGL policy, its essence is the same. By the policy, Auto Owners agrees to pay -- after underlying insurance is exhausted, or, if it does not apply, after the amount of Filo's retained limit is used up -- property damage that Filo " becomes legally obligated to pay." [13]
As in the CGL policy, coverage is excluded under several circumstances. Relevant to this case, the umbrella policy excludes coverage for property damage that Filo is " obligated to pay" because of a contract.[14] The umbrella policy also requires Auto-Owners to defend any suit seeking recovery for property damage, but only where the claim is based upon an occurrence.
Are Safway's claims covered for indemnity or a defense?
Safway's complaint asserts two causes of action against Filo. The first is for breach of the contract to pay rent under the lease. Filo is not entitled to indemnification for this claim under either policy for several reasons. First, unpaid rent is not " property damage" covered by the policy. Second, the unpaid rent did not arise from an " occurrence." Finally, coverage for rent under a lease is unequivocally excluded by both policies' exclusions for contractual liability.
Safway's second cause of action is for the value of the unreturned equipment. To the extent that claim arises from the lease or another contract (Safway's complaint includes an invoice for the cost of the equipment), there is no indemnity coverage for the same reasons the rent is not covered. Otherwise, as a claim for unjust enrichment, it is still not covered.
Unjust enrichment occurs when a plaintiff confers a benefit upon a defendant, with the defendant's knowledge, and the defendant retains the benefit under circumstances where it would be unjust to do so without payment. Pomeroy v. Schwartz , 8th Dist. No. 99638, 2013-Ohio-4920, ¶ 41. Safway supports this claim by alleging that Filo " failed and refused to deliver the equipment back." [15] The claim for unjust enrichment does not allege covered physical damage to tangible property. Moreover, even if the complaint can be interpreted to allege covered " loss of use to tangible property that is not physically injured, " [16] nowhere does Safway describe a covered " occurrence" as the reason Filo did not return the equipment. As with the claim for rent under the lease, Safway's claim for unjust enrichment is not covered under the indemnity provisions of either policy.
Auto-Owners is also not required to provide Filo a defense against Safway's lawsuit. An insurer's duty to defend is broader and distinct from its duty to indemnify. Socony-Vacuum Oil Co. v. Continental Cas. Co ., 144 Ohio St. 382, 59 N.E.2d 199 (1945), at syllabus 1. The scope of the allegations in Safway's complaint against Filo determines whether Auto-Owners has a duty to defend Filo. Motorists Mut. Ins. Co. v. Trainor , 33 Ohio St. 2d 41, 294 N.E.2d 874 (1973), at syllabus 2. Auto-Owners must provide a defense for Filo against Safway's lawsuit if it states a claim that " potentially or arguably falls within the liability insurance coverage." Willoughby Hills v. Cincinnati Ins. Co ., 9 Ohio St.3d 177, 179, 9 Ohio B. 463, 459 N.E.2d 555 (1984). On the other hand, Auto-Owners does not owe a defense if Safway's claims " are clearly and indisputably outside the contracted coverage." Preferred Risk Ins. Co. v. Gill , 30 Ohio St.3d 108, 113, 30 Ohio B. 424, 507 N.E.2d 1118 (1987).
Filo, in its brief in opposition to Auto-Owners's motion for summary judgment, concedes that Safway's claim " that Filo assumed liability for the Safway equipment pursuant to the terms and conditions of the rental agreement" [17] is not covered by the CGL...
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