Scott v. Allstate Indemnity Company

• Decision Date: 28 February 2006
• Docket Number: No. 4:05 CV 0076.,4:05 CV 0076.
• Citation: 417 F.Supp.2d 929
• Parties: Carol SCOTT, et al., Plaintiffs, v. ALLSTATE INDEMNITY COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Ohio

417 F.Supp.2d 929

Carol SCOTT, et al., Plaintiffs, v. ALLSTATE INDEMNITY COMPANY, Defendant.

No. 4:05 CV 0076.

United States District Court, N.D. Ohio, Eastern Division.

February 28, 2006.

Michael E. Grove, Warren, OH, for Plaintiff.

Gary S. Greenlee, Ulmer & Berne, Cleveland, OH, for Defendant.

MEMORANDUM OPINION AND ORDER

ECONOMUS, District Judge.

This matter is before the Court upon Defendant Allstate Indemnity Company's Motion for Summary Judgment (Dkt.# 57).

I. FACTS

In the spring of 2004, Plaintiffs, Derrick Scott and Carol Scott, renewed a homeowners insurance policy (the "Insurance Contract") with Defendant, Allstate Indemnity Corp. ("Allstate") for a policy period beginning March 21, 2004 with no fixed date of expiration. (Dkt. # 13, Ex. A, ("Insurance Policy")). On April 16, 2004 a fire occurred at Plaintiffs' house (the "Fire"), severely damaging the house and its contents. (Dkt. # 12, Ex. 1 ("Amended Complaint")). Derrick Scott reported the Fire to Allstate on April 19, 2004. (Dkt. # 60, Affidavit of Victoria L. Hoenigman ("Hoenigman Aff.") ¶5). Allstate subsequently commenced a full investigation of the Fire. (Hoenigman Aff. 116-12). As part of the investigation, Allstate employee, Charles Stemnock, inspected the house and fire damage on April 19; Allstate hired a certified fire investigator, Jason Wallace of SEA, Ltd., to conduct a fire investigation at the house and to render an opinion as to the origin and cause of the Fire; and Allstate retained independent insurance adjuster David A. Chipps to assist in investigating the Fire. (Id.). In addition, on July 9, counsel for Allstate examined Derrick Scott under oath. (Id.¶ 11).

During his Examination Under Oath ("EUO"), Derrick Scott stated that on the day of the Fire he noticed a "wet spot" on the floor of his garage. (Dkt. # 57, Ex. 1 Examination Under Oath of Derrick Scott ("Scott EUO") at 155-56). He determined to investigate the nature of the "wet spot" by lighting it with a match. (Scott EUO at 166-70). When he applied the lit match to the "wet spot" by dropping the match to the floor the liquid ignited and flames shot into the air. (Id. at 171-73). Derrick Scott then tried, unsuccessfully, to prevent the spread of the fire. (Id. at 174).¹

After evaluating the collected evidence regarding the Fire, Allstate denied Plaintiffs payment and liability for their claim. (Hoenigman Aff. ¶ 13). Allstate informed Plaintiffs of the decision to deny coverage via letter on September 22, 2004. (Hoenigman Aff., Ex. 1).

In December of 2004, Plaintiffs filed a complaint in the Court of Common Pleas of Trumbull County Ohio. (Dkt.# 1, Ex. B). Allstate, subsequently, removed the action to this court. (Dkt.# 1). On March 4, 2005, the Court granted Plaintiffs leave to file an Amended Complaint. Plaintiffs' Amended Complaint asserts a claim for breach of the Insurance Contract, a claim of bad faith by Allstate in declining Plaintiffs' coverage, and a demand for a declaratory judgment construing the Insurance Contract. (Dkt. # 12, Ex. 1) ("Amended Complaint").

II. STANDARD OF REVIEW

Summary judgment is proper where no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. FED. R. Civ. P. 56(c). "Rule 56(c) mandates the entry of summary judgment, after adequate time for discovery and upon motion, against a party who fails to make a showing sufficient to establish the existence of an element essential to that party's case, and on which that party will bear the burden of proof at trial." Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986).

In considering such a motion, the court must review all of the evidence in the record. See Reeves v. Sanderson Plumbing Prods., Inc., 530 U.S. 133, 150, 120 S.Ct. 2097, 147 L.Ed.2d 105 (2000) (citing Matsushita Elec. Indus. Co. v. Zenith Radio Corp., 475 U.S. 574, 587-88, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)). "Credibility determinations, the weighing of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not those of a judge . . . . The evidence of the non-movant is to be believed, and all justifiable inferences are to be drawn in his favor." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986); accord Graham-Humphreys v. Memphis Brooks Museum of Art, Inc., 209 F.3d 552, 556-57 n. 7 (6th Cir.2000). The central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505.

"A party seeking summary judgment always bears the initial responsibility of informing the court of the basis for its motion, and identifying those portions of the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any,' which it believes demonstrate the absence of a genuine issue of material fact." Celotex, 477 U.S. at 323, 106 S.Ct. 2548 (quoting FED. R. Civ. P. 56(c)). The movant meets this burden "by `showing'—that is, pointing out to the district court—that there is an absence of evidence to support the nonmoving party's case." Clayton v. Meijer, Inc., 281 F.3d 605, 609 (6th Cir.2002) (quoting Celotex, 477 U.S. at 324-25, 106 S.Ct. 2548). The non-movant then "must set forth specific facts showing that there is a genuine issue for trial." Anderson, 477 U.S. at 250, 106 S.Ct. 2505.

"The respondent cannot rely on the hope that the trier of fact will disbelieve the movant's denial of a disputed fact, but must `present affirmative evidence in order to defeat a properly supported motion for summary judgment.'" Street v. J.C. Bradford & Co., 886 F.2d 1472, 1479 (6th Cir.1989) (quoting Anderson, 477 U.S. at 250, 106 S.Ct. 2505). "A mere scintilla of evidence is insufficient; there must be evidence on which the jury could reasonably find for the [non-movant]." Anderson, 477 U.S. at 250, 106 S.Ct. 2505.

III. LAW AND ANALYSIS

In diversity actions, a federal court applies the forum state's choice-of-law provisions. See Erie R.R. Co. v. Tompkins, 304 U.S. 64, 58 S.Ct. 817, 82 L.Ed. 1188 (1938); Spence v. Miles Laboratories, Inc., 37 F.3d 1185, 1188 (6th Cir.1994). Ohio has adopted the Restatement (Second) of Conflict of Laws to determine choice-of-law questions. See Gries Sports Ent., Inc. v. Modell, 15 Ohio St.3d 284, 473 N.E.2d 807, syllabus (1984). The Restatement presents the following factors as indicative of the appropriate choice-of-law: (a) the place of contracting, (b) the place of negotiation, (c) the place of performance, (d) the location of the subject matter, and (e) the domicile, residence, nationality, place of incorporation, and place of business of the parties. See RESTATEMENT (SECOND) OF CONFLICT OF LAWS § 188 (1971).

The parties concur that Ohio law governs this action as evidenced by their utilization of the laws of the state of Ohio, and the authorities interpreting Ohio law, when addressing the instant motion. Accordingly, the Court shall apply Ohio law to claims at issue.

A. Breach of the Insurance Contract

In Ohio, insurance contracts are construed as any other written contract. See Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd., 64 Ohio St.3d 657, 597 N.E.2d 1096, 1102 (1992); Gomolka v. State Auto. Mut. Ins., 70 Ohio St.2d 166, 436 N.E.2d 1347, 1347-49 (1982). An insurance contract will only require interpretation if the applicable language is ambiguous—that is, open to more than one interpretation. See Faruque v. Provident Life & Ace. Ins. Co., 31 Ohio St.3d 34, 508 N.E.2d 949, 952 (1987). Because it is typically the insurance carrier that drafts the contract, ambiguous language within an insurance contract must be construed strictly against the insurer and liberally in favor of the insured. See United States Fidelity & Guaranty Co. v. Lightning Rod Mutual Ins. Co., 80 Ohio St.3d 584, 687 N.E.2d 717, 719 (1997); Butche v. Ohio Casualty Ins. Co., 174 Ohio St. 144, 187 N.E.2d 20 (1962). It should be emphasized, however, that provisions are to be strictly construed against the insurer only when they are ambiguous. See GenCorp, Inc. v. American Intern. Underwriters, 178 F.3d 804, 818 (6th Cir.1999); University of Cincinnati v. Arkwright Mut. Ins. Co., 51 F.3d 1277, 1280 (6th Cir.1995). And the general rule of liberal construction cannot be used to create an ambiguity where one does not exist. See Karabin v. State Auto. Mut. Ins. Co., 10 Ohio St.3d 163, 462 N.E.2d 403, 406 (1984).

Whether an insurance policy is unambiguous or requires interpretation is a question of law. See Inland Refuse Transfer Co. v. Browning-Ferris Industries, Inc., 15 Ohio St.3d 321, 474 N.E.2d 271, 272-73 (1984) ("If a contract is clear and unambiguous, then its interpretation is a matter of law and there is no issue of fact to be determined."). If the terms of a policy are clear and unambiguous, a court must enforce the contract as written, giving words used in the contract their plain and ordinary meaning. See Cincinnati Indemn. Co. v. Martin, 85 Ohio St.3d 604, 710 N.E.2d 677, 679 (1999). Likewise, where an exclusionary clause in an insurance contract is unambiguous, Ohio law requires that the plain language of the clause be given effect. See Thomas Noe, Inc. v. Homestead Ins. Co., 173 F.3d 581 (6th Cir.1999).

Allstate argues it denied Plaintiffs coverage because the fire damage to their home was not "accidental" and, therefore, was not covered under the Insurance Contract and that, furthermore, coverage for Plaintiffs' insurance claim is expressly excluded under the Insurance Contract. The Insurance Contract provides in relevant part:

Losses We Cover Under Coverages A and B

We will cover sudden and accidental direct physical loss to property described in Coverage A—Dwelling Protection and Coverage B—Other Structures Protection except as limited or excluded in this policy.

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