Case ID: ohio-misc-2d_100/html/0031-01.html
Source: Caselaw Access Project
Author: {"author": "Joseph E. CirigliaNO, Judge.", "license": "Public Domain", "url": "https://static.case.law/"}
Date Created: 2024-08-24T03:29:51.129683

LANDIS et al. v. GRANGE MUTUAL INSURANCE CO. 
    Court of Common Pleas of Ohio, Erie County.
    No. 88-CV-360.
    Decided July 21, 1999.
    
      
      Murray & Murray Co., L.P.A., James T. Murray and Joseph Zannieri, for plaintiffs.
    
      Buckingham, Doolittle & Burroughs and Donald A. Powell, for defendant.
   Joseph E. CirigliaNO, Judge.

The facts presented herein are, for the most part, not in dispute. On June 5, 1988, the plaintiff Frederick O. Landis was walking on the west side of Columbus Avenue in Sandusky, Ohio. An underinsured drunk driver left the highway and struck him, causing severe injuries.

Landis presented an underinsured motorist (“UIM”) claim to Grange Mutual Insurance Company (“Grange”) at some time prior to August 8,1988. On August 8, 1988, Grange wrote him a letter denying coverage, claiming that he was not a designated insured.

On August 11, 1988, after Grange denied coverage, Landis retained attorney James T. Murray of Sandusky, Ohio to pursue his UIM claim. The contingent fee arrangement was a typical fee arrangement wherein the attorney was to be paid one third of any amount recovered, but was to receive no compensation if there was no recovery. Grange stipulated that the fee arrangement was normal, ordinary, and customary.

On August 17, 1988, an action was commenced in Erie County Common Pleas Court, requesting that the court declare that UIM coverage was available to cover losses sustained by Fred and Ruthann Landis. On September 9, 1988, Murray formally requested Grange to proceed -with arbitration pending the resolution of the declaratory judgment action. Grange refused.

By June 30, 1988, the hospital bill alone was $58,950.19. Medical bills in the amount of $63,865.70 were submitted to Grange no later than October 14, 1988. Grange continued to deny underinsured motorist benefits and refused to participate in any type of arbitration proceedings. Since coverage was denied on the basis that Landis was not a designated insured, Landis’s attorney requested production of policy documents. These documents established that Landis, contrary to Grange’s denial, was a designated insured. Thereafter, Grange continued to deny coverage based on a series of new and different defenses that had not been raised before. These subsequent defenses included claims that (1) Landis was not acting in the scope of his employment, and (2) Landis was not occupying a covered automobile at the time he was struck.

On July 22, 1994, the Sixth District Court of Appeals, affirming the decision of the trial court, ruled that coverage was available to the Landises. Landis v. Grange Mut. Ins. Co. (1994), 95 Ohio App.3d 422, 642 N.E.2d 679. The parties then proceeded to arbitration and, on December 5, 1995, eight years after the accident, the arbitrators awarded the Landises $1,300,000. The parties agreed that Grange was not liable for any amount of the award that exceeded its policy limits of $1,000,000. Accordingly, on December 8, 1995, Grange paid the policy limits of $1,000,000 to Fred and Ruthann Landis.

After the arbitration award was reduced to judgment, the Landises filed a motion for prejudgment interest and attorney fees. The motion was heard on February 23, 1996. The trial court did not award prejudgment interest, but awarded attorney fees in the amount of $833,333.33, the amount Fred Landis was obligated to pay pursuant to the terms of his contingent fee contract. Grange appealed the award of attorney fees, claiming that the trial court had erroneously used the amount of fees generated by the contingent fee contract as the criterion for awarding fees. Specifically, Grange contended that any fees had to be awarded pursuant to the criteria found in DR 2-106. The Landises cross-appealed, claiming that the trial court erred in denying prejudgment interest. The court of appeals reversed the trial court’s denial of prejudgment interest and also ruled that the trial court erred in awarding attorney fees by adopting the amount that the Landises paid pursuant to the terms of the contingent fee contract.

Grange then appealed to the Ohio Supreme Court, seeking a reversal of the appellate court’s decision that the Landises were entitled to prejudgment interest. The Landises cross-appealed, seeking to reverse the appellate court’s decision that the contingent fee contract could not be used as the basis for awarding attorney fees. Thereafter, the decision of the court of appeals, both with respect to prejudgment interest and attorney fees, was affirmed by the Ohio Supreme Court. Landis v. Grange Mut. Ins. Co. (1998), 82 Ohio St.3d 339, 695 N.E.2d 1140.

Subsequent to the Ohio Supreme Court’s decision, a hearing was held on May 10, 1999, for the purpose of determining prejudgment interest and attorney fees. At the conclusion of the hearing, the parties were ordered to submit briefs. Upon consideration of the evidence presented at the May 10, 1999 hearing, and upon consideration of the extensive post-hearing briefs, the court makes the following award of prejudgment interest and attorney fees.

AWARD OF PREJUDGMENT INTEREST

For purposes of the award of prejudgment interest, the parties stipulated that Grange’s denial of coverage was not a bad-faith act. The stipulation read: “Fred and Ruthann Landis have not asserted and do not assert that Grange Mutual Insurance Company’s wrongful denial of underinsured benefits rose to the level of bad faith.” The parties were in disagreement as to the implications of the stipulation, but in view of the court’s award of prejudgment interest under R.C. 1343.03(A), there is no need to address this dispute. R.C. 1343.03(A) automatically bestows a right to the statutorily stated interest as a matter of law. Testa v. Roberts (1988), 44 Ohio App.3d 161, 168, 542 N.E.2d 654, 661-662. All that this court must do is determine the starting date. The decision of the Ohio Supreme Court in Landis v. Grange Mut. Ins. Co., 82 Ohio St.3d 339, 695 N.E.2d 1140, is the law of the case and this court must therefore be guided by that decision. In that decision, the Ohio Supreme Court gave the trial court some latitude in determining the commencement date for calculating prejudgment interest. Specifically, the Ohio Supreme Court held that it is for the trial court to determine whether interest should commence “from the date coverage was demanded or denied, from the date of the accident, from the date at which arbitration of damages would have ended * * *, or some other time.” 82 Ohio St.3d at 342, 695 N.E.2d at 1142.

The court finds that it is not appropriate to use a hypothetical date based upon when Grange might have paid the award if there had been timely arbitration. The court rejects that date because arbitration is merely a process to liquidate the amount that is already due and owing. The liquidation test was rejected in Royal Elect. Const. Co. v. Ohio State Univ. (1995), 73 Ohio St.3d 110, 652 N.E.2d 687. Further, this date is rejected because the Landises requested arbitration in 1988 and Grange refused. This leads to other dates suggested in Landis, i.e., the date of the accident or the date the claim was denied. This court determines that the date of the accident is the appropriate date in this case for the following reasons.

First, the court must look to the language of the contract. The only operative language that the court finds in the Grange UIM contract states:

“The company will pay all sums which the Insured or his legal representative shall be legally entitled to recover as damages from the owner or operator of an uninsured highway vehicle because of bodily injury sustained by the Insured, caused by accident and arising out of the ownership, maintenance or use of such uninsured highway vehicle; provided, for the purposes of this coverage, determination as to whether the Insured or such representative is legally entitled to recover such damages, and if so the amount thereof, shall be made by agreement between the Insured or such representative and the company or, if they fail to agree, by arbitration.” (Emphasis added.)

Where there is no question as to the liability of the underinsured motorist, as was the case herein, the contractual obligation to pay is fixed as of the date of the accident. The amount may not be determinable on that date, but the obligation to pay is fixed. The contract provides that UIM benefits are conditioned only on the liability of the uninsured motorist. Determination of the amount owed is simply liquidation. Contractual benefits are due and payable even if they are not liquidated. Royal Electric, supra.

Second, using the claim date is not practical in this case because the facts permit the inference that Grange would have denied coverage even if the claim had been placed on the date of the accident.

Third, the guiding principle in the Supreme Court decision in Landis is that the aggrieved party should be made whole, ie., the objective to be achieved is to award interest in an amount that will leave the Landises in the position that they would have enjoyed had Grange admitted coverage and paid the $1,000,000 policy limits in 1988. In the totality of the circumstances herein, this make-whole doctrine suggests that interest commence from the date of the accident.

Fourth, the facts in this case also suggest that had Grange not denied coverage and had investigated the claim, it would have readily discovered that the tortfeasor was clearly liable and that Fred Landis had been severely injured. Accordingly, the court finds that for the purpose of calculating prejudgment interest, the commencement date will be June 5, 1988. The amount of prejudgment interest therefore that is due and owing for the period between June 5, 1988 and December 8,1995 is $752,602.24.

The court is mindful of the recently published decision of the Sixth District Court of Appeals in Cotner v. United States Fid. & Guar. Co. (1998), 126 Ohio App.Bd 664, 711 N.E.2d 248. Although a recent publication, that case is over a year old and was decided (March 20, 1998) over three months before the Supreme Court’s decision (July 15, 1998) in this case. As a consequence, its applicability is limited. The court of appeals in Cotner held that the date that coverage becomes due and owing for purposes of prejudgment interest, pursuant to R.C. 1343.03(A), is the date “when it is determined by a court, arbitrator, or by the agreement of the parties that such a loss is covered.” 126 Ohio App.3d at 674, 711 N.E.2d at 255, citing Myers v. Cent. Ins. Co. (1997), 119 Ohio App.3d 277, 286, 695 N.E.2d 49, 54-55. This date was rejected by the Ohio Supreme Court. In Landis, the Ohio Supreme court held: “A determination that the benefits became due and payable upon the entry of the arbitrator’s award would, in this case, work an injustice by rewarding Grange for improperly denying benefits.” Landis, 82 Ohio St.3d at 341-342, 695 N.E.2d at 1142. Since the Ohio Supreme Court has rejected the result in Cotner, this court is compelled to do so also.

When prejudgment interest is owed, the prejudgment interest is part of the underlying debt, and like all components of the debt, it merges into one judgment entry. Prejudgment interest is owed in this case as of December 8, 1995.

When interest is in fact a part of the debt owed, awarding interest upon the interest that is part of the underlying debt is not compound interest. It is therefore appropriate. Nakoff v. Fairview Gen. Hosp. (1997), 118 Ohio App.3d 786, 788, 694 N.E.2d 107, 108. The Ohio Supreme Court has explicitly determined that the aggrieved parties (the Landises) must be awarded interest if they are to be made whole. In Royal Electric, supra, the Ohio Supreme Court stated:
“[W]e are more persuaded by those states that have moved away from the medieval notion that interest is evil. See, e.g., State v. Phillips (Alaska 1970), 470 P.2d 266, 274 (‘At the moment the cause of action accrued, the injured party was entitled to be left whole and became immediately entitled to be made whole. * * * All damages then, whether liquidated or unliquidated, pecuniary or nonpecuniary should carry interest from the time the cause of action accrues * * (Emphasis added.) 73 Ohio St.3d at 117, 652 N.E.2d at 692.
“[PJrejudgment interest does not punish the party responsible for the underlying damages * * *, but, rather, it acts as compensation and serves ultimately to make the aggrieved party whole. * * * [T]o make the aggrieved party whole, the party should he compensated for the lapse of time between accrual of the claim and judgment.” (Emphasis added.) Id.

The accrual of the Landises’ claim to prejudgment interest in the amount of $752,602.24 was fixed on December 8, 1995. More than three and one half years has elapsed. Without an award of interest on this $752,602.24, the Landises would be receiving an amount less than the amount awarded. In that approximate three-and-one-half-year period, Grange enjoyed the income therefrom, and, conversely, the Landises were deprived of the income therefrom. If they are to be made whole, interest must be awarded for the lapse of time between December 8, 1995 and the payment of the $752,602.24; otherwise, the Landises will not have been made whole. In Landis, the Ohio Supreme Court stated:

“ ‘[Prejudgment] interest is allowed, not only on account of the loss which a creditor may be supposed to have sustained by being deprived of the use of his money, but on account of the gain being made from its use by the debtor.’ ” Landis, 82 Ohio St.3d at 342, 695 N.E.2d at 1142, quoting Hogg v. Zanesville Canal & Mfg. Co., 5 Ohio 410, 424 (1832).

Accordingly, the court awards interest for the period of December 8, 1995 to July 22, 1999, the present date, in the amount of $272,173.42. Interest is also awarded at $206.19 for each day’s delay in payment thereafter.

AWARD OF ATTORNEY FEES

In Landis, the Ohio Supreme Court stated that the lower court abused its discretion only in awarding attorney fees pursuant to a contingency contract not bargained for by Grange. Landis, 82 Ohio St.3d at 343, 695 N.E.2d at 1143. The court then provided the appropriate method for calculating attorney fees. Landis, 82 Ohio St.3d at 343, 695 N.E.2d at 1143. That method requires that the hours spent by counsel be reasonably determined, that an hourly fee be set, and that the court thereby reach a conclusion as to a reasonable amount of attorney fees. The method used for determining the reasonableness of attorney fees to be awarded is incorporated in DR 2-106(B). Those criteria are:

1. The time and labor involved in maintaining the litigation.
2. The novelty and difficulty of the legal questions involved.
3. The professional skill required to perform the necessary legal services.
4. The attorney’s inability to accept other cases.
5. The fees customarily charged.
6. The amount involved and the results obtained.
7. The nature and length of the attorney-client relationship.
8. The experience, reputation, and ability of the attorney.
9. Whether the fee is fixed or contingent.
The court will now consider each of these criteria.

1. The time and labor involved in maintaining the litigation

Grange disputes the hours submitted by plaintiffs because cross-examination of the Landises’ attorney revealed that he did not religiously keep the type of records typically kept by defense counsel and other attorneys who work on an hourly basis. The Landises’ attorney admitted that his method of timekeeping did not involve “time tickets.” However, he testified to the fact that copious records were maintained. These records included correspondence, appointment calendars, briefs, drafts of briefs, pleadings, drafts of pleadings, etc. Seven banker boxes were presented to the court to substantiate the maintenance of contemporaneous records of the work performed. Counsel for the Landises further testified that, based upon these extensive contemporaneous records, he was able to conservatively set forth the amount of hours assigned to each of the tasks that he performed in his eleven years of representing the Landises. Employing these extensive contemporaneous records and employing his own method of timekeeping, the Landises’ attorney testified that he spent at least 1,695 hours over the eleven years of representation. He further testified that he employed at least two additional methods to cross-check the calculation of time expended. Given the amount of record-keeping testified to by plaintiffs’ counsel, this court is reluctant to create a retroactive requirement for time tickets when the hours are adequately documented without time tickets. The Landises also presented an expert witness, namely, Eric Zagrans of Elyria, Ohio. Attorney Zagrans reviewed the documents contained in the seven banker boxes of records maintained by the Landises’ attorney. He also interviewed the Landises and their attorney. Based on his review of those documents and the interviews, he concluded that 1,695 hours represented a reasonable expenditure of time. The court finds that 1,695 hours were in fact spent by the Landises’ attorney and that those hours were a reasonable expenditure of time.

2.The novelty and difficulty of the legal questions involved

The novelty and difficulty of the legal questions are not disputable. In view of the multiple appeals, including the appeal by Grange to the Ohio Supreme Court, it can hardly be disputed that the issues involved were both novel and difficult. This case resulted in two published opinions, i.e., the Supreme Court’s opinion concerning interest and attorney fees, Landis v. Grange Mut Ins. Co., 82 Ohio St.3d at 339, 695 N.E.2d at 1140-1141, and the court of appeals’ opinion concerning the coverage issue, Landis v. Grange Mut. Ins. Co., 95 Ohio App.3d 422, 642 N.E.2d 679. The novelty and difficulty of the issue are further demonstrated by the amount of attention the Supreme Court’s opinion received in the legal community. Prejudgment Interest Owed to ‘Underinsured, ’ Ohio Lawyers Weekly, July 28, 1998, at 1. Attorney Ed Clark of the Ohio Academy of Trial Lawyers testified that the Supreme Court decision levels the playing field between the insurance industry and its customers in situations where coverage is wrongfully denied. This court agrees. The novelty and difficulty of the issues were also confirmed by attorney Zagrans.

3.The professional skill required to perform the necessary legal services

The representation of the Landises in this matter involved two appearances in the court of appeals and an appearance in the Ohio Supreme Court. Further, attorney Zagrans testified that, given the nature of the case and the “take no prisoners” attitude shown by Grange, professional skill of a very high level was required to represent the Landises properly according to the Canons of Ethics. This testimony was undisputed.

4.The attorney’s inability to accept other cases

The Landises’ attorney testified that his practice is limited in part by the complicated nature of the cases he undertakes and that he was precluded from accepting other employment by undertaking the Landises’ case. This testimony was also undisputed.

5.The fees customarily charged

Grange stipulated that a one-third contingent fee was normal, ordinary, and customary. While the court is restrained from adopting the contingent fee contract as the exclusive criterion for calculating the amount of fees that should be awarded, it is worth noting that, notwithstanding the aforesaid stipulation, the court is awarding fees that are significantly less than the amount of attorney fees that the Landises are in fact going to have to pay. Further, attorney Zagrans testified that a reasonable hourly rate for an attorney of James Murray’s experience and credentials was $350 to $400. Nonetheless, the court finds that the reasonable hourly rate is $250.

6.The amount involved and the results obtained

With respect to the underlying coverage, a greater result could not have been obtained. Notwithstanding Grange’s protracted efforts to deny coverage, Grange was ultimately required to pay the policy limits of $1,000,000. Further, the litigation that ensued following the determination of coverage will result in the Landises receiving over $1,456,000 in addition to the $1,000,000 policy limits. This is a very large amount of money. The result is extraordinary.

7.The nature and length of the attorney client relationship

The Ohio Supreme Court described this case as “a lengthy and tortuous journey through the judicial system.” 82 Ohio St.3d at 341, 695 N.E.2d at 1142. With respect to the length of the relationship, eleven years is exceedingly lengthy for a relationship involving litigation.

8.The experience, reputation, and ability of the attorney

The testimony revealed the fact that the Landises’ attorney is one of a few dozen Ohio attorneys who are board-certified as civil trial advocates by the National Board of Trial Advocacy and that he has published extensively both in print and electronic media, has made numerous appearances before the Ohio Supreme Court, is on the Board of Trustees of the Ohio Trial Lawyers Association, is a sustaining member of the American Trial Lawyers Association, has the highest rating afforded by Martindale & Hubbell, and has handled complex litigation including class actions in which various courts have appointed him as lead counsel. At the conclusion of the testimony regarding James Murray’s credentials, Grange’s attorney stipulated that the Landises’ attorney was qualified to handle complex litigation.

9.Whether the fee is fixed or contingent

The fees were contingent. Further, Grange stipulated that “the contingent fee contract represents a fee arrangement that is a normal, ordinary, and customary contractual agreement.” The Supreme Court’s decision prohibits adopting the contingent fee contract as the criterion for awarding fees. Accordingly, that criterion is rejected. The court declines to add any enhancement to the hourly rate of $250. Accordingly, attorney fees in the amount of $423,750 (1,695 hours reasonably spent times $250) are awarded. In making this award, the court recognizes that this does not represent an award of fees to the attorney. This award is a reimbursement to the Landises for attorney fees that they must pay.

It is ordered, adjudged, and decreed as follows:

1. Defendant Grange is ordered to pay interest on the UIM payment at the statutory rate from June 5, 1988 until December 8, 1995 in the amount of $752,602.24. This amount merges with the judgment of December 8, 1995.
2. Defendant Grange is ordered to pay interest on the $752,602.24 from December 9, 1995 until that amount is actually paid. Interest from December 9, 1995 until July 22, 1999 is awarded in the amount of $272,173.42. If payment is delayed beyond July 22, 1999, interest will be assessed at $206.19 per day.
3. Defendant Grange is ordered to pay attorney fees in the amount of $423,750.00.
4. Pursuant to this court’s order of May 24, 1996, defendant Grange has been ordered to pay expenses of litigation in the amount of $8,349.02. Additional expenses of litigation incurred since the court’s order of May 24, 1996 must also be paid. Those additional expenses are $2,519.63.

Judgment accordingly.

Joseph E. Cirigliano, J., of the Court of Common Pleas of Lorain County, sitting by assignment.