Case Title: Cincinnati Ins. Co. v. Anders

Citation: 2003-Ohio-3048

Docket Number: 20020248 and 20021030

State: ohio

Court: Ohio Supreme Court

Date: 2003-06-25T00:00:00Z

Document:
[Cite as Cincinnati Ins. Co. v. Anders, 99 Ohio St.3d 156, 2003-Ohio-3048.] 
 
 
CINCINNATI INSURANCE COMPANY, APPELLEE, v. ANDERS ET AL.; HASTINGS ET 
AL., APPELLANTS. 
GUIDEONE MUTUAL INSURANCE COMPANY, APPELLEE, v. RENO ET AL., 
APPELLANTS, ET AL. 
[Cite as Cincinnati Ins. Co. v. Anders, 99 Ohio St.3d 156, 2003-Ohio-3048.] 
Insurance — Duty of insurer to defend — Insurance policies insuring against 
liability for property damage arising from accidents do not provide 
coverage to homeowners who are sued for their negligent failure to 
disclose to purchasers damage to the property that occurred during the 
sellers’ occupancy. 
(Nos. 2002-0248 and 2002-1030 — Submitted February 11, 2003 — Decided 
June 25, 2003.) 
CERTIFIED by the Court of Appeals for Greene County, Nos. 2001-CA-42, 2001-
Ohio-1920, and 2001-CA-68, 2002-Ohio-2057. 
__________________ 
SYLLABUS OF THE COURT 
Insurance policies insuring against liability for property damage arising from 
accidents do not provide coverage to homeowners who are sued for their 
negligent failure to disclose to purchasers damage to the property that 
occurred during the sellers’ occupancy. 
__________________ 
 
MOYER, C.J. 
I. Facts 
A. Cincinnati Insurance Company v. Anders 
SUPREME COURT OF OHIO 
2 
{¶1} 
Appellants, Roger and Jenny Hastings, appeal from the judgment 
of the Greene County Court of Appeals affirming the trial court’s declaratory 
judgment in favor of appellee, Cincinnati Insurance Company (“CIC”). 
{¶2} 
This case is related to a complaint filed by Jeffrey and Julie Anders 
against the Hastingses, alleging that the Hastingses failed to disclose structural, 
electrical, mechanical, and plumbing defects in the home they sold to the 
Anderses.  The only damage the Anderses put at issue in the appeal was allegedly 
caused by installation of fiberglass insulation with the vapor barrier on the wrong 
side, leading to the eventual deterioration of the floor joists. 
{¶3} 
The Hastingses requested that their insurer, CIC, provide them 
with legal representation pursuant to their homeowner’s insurance policy and its 
umbrella endorsement.  After considering the complaint against the Hastingses, 
CIC refused to provide a defense against any of the Anderses’ nine claims.  
Thereafter, the trial court granted the Hastingses’ motion for summary judgment 
with respect to all of the Anderses’ claims except those for breach of contract and 
unjust enrichment. 
{¶4} 
CIC then filed a complaint in the Common Pleas Court of Greene 
County for declaratory judgment against both the Hastingses and the Anderses, 
seeking a determination that it was not required under the homeowner’s policy 
with its umbrella endorsement to defend the Hastingses against the claims of the 
Anderses.  The Hastingses filed a counterclaim for a declaration that they had a 
right to a defense on the claim of negligent misrepresentation in the underlying 
action as well as a claim for bad faith.  The trial court declared that neither the 
basic homeowner’s policy nor its liability umbrella endorsement required CIC to 
provide a defense against any of the claims asserted by the Anderses against the 
Hastingses. 
{¶5} 
The Court of Appeals for Greene County affirmed, holding that 
“the Anders’ [sic] claims against the Hastings [sic] were not arguably or 
January Term, 2003 
3 
potentially within the scope of the policy, and CIC did not have a duty to defend.”  
Thereafter, the court of appeals recognized that this holding was in conflict with 
Spalding v. Aetna Cas. & Sur. Co. (Oct. 11, 1994), Stark App. No. CA 9429, 
1994 WL 590438.  Accordingly, on March 20, 2002, we determined that a 
conflict existed and ordered the parties to brief the following issue: 
{¶6} 
“Whether insurance policies covering personal injuries arising out 
of property damage provide coverage to homeowners who are sued for their 
negligent failure to disclose to purchasers damage to the property that occurred 
during the sellers’ occupancy.” 
{¶7} 
This cause is now before this court upon our determination that a 
conflict exists. 
B. GuideOne Mutual Insurance Company v. Reno 
{¶8} 
Appellants, Lee and Melanie Reno, appeal from the judgment of 
the Greene County Court of Appeals affirming a declaratory judgment by the 
Common Pleas Court of Greene County in favor of appellee, GuideOne Mutual 
Insurance Company (“GuideOne”). 
{¶9} 
In 1998, Jeffrey Cooper purchased a home from the Renos, which 
he later alleged had extensive structural damage caused by termite infestation.  
Cooper 
sued 
the 
Renos, 
asserting 
claims 
of 
intentional 
fraudulent 
misrepresentation and concealment, negligent or reckless misrepresentation, and 
civil conspiracy to conceal. 
{¶10} The Renos owned a homeowner’s insurance policy issued by 
GuideOne.  Counsel for the Renos sent GuideOne a letter asking GuideOne to 
provide a legal defense for the Renos against Cooper’s claims.  GuideOne began 
investigating the matter and soon informed the Renos that it had retained counsel 
to represent them in the Cooper case.  Within three weeks, however, GuideOne 
also sent a “reservation of rights” letter to the Renos, emphasizing that it was not 
waiving its right to deny coverage and concluding on available information that 
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despite its previous correspondence, it had no duty to defend the Renos against 
Cooper’s claims. 
{¶11} GuideOne filed a complaint for a declaratory judgment that its 
policy issued to the Renos created no legal duty to defend against the Cooper 
claims.  The declaratory judgment action was consolidated with Cooper’s 
underlying action against the Renos, and the trial court granted GuideOne’s 
motion for summary judgment in the declaratory judgment action. 
{¶12} The Renos appealed, and the Greene County Court of Appeals 
affirmed, stating that “the claims for which GuideOne’s policy provides coverage 
must arise out of a negligent act or omission of the Renos that causes the property 
damage alleged, and that’s not what Cooper alleged in his lawsuit against the 
Renos.” 
{¶13} The Greene County Court of Appeals certified the same issue that 
it had certified in Cincinnati Ins. Co. v. Anders, and we accepted jurisdiction and 
consolidated the cases for disposition. 
II. Analysis 
{¶14} The certified question is, “Whether insurance policies covering 
personal injuries arising out of property damage provide coverage to homeowners 
who are sued for their negligent failure to disclose to purchasers damage to the 
property that occurred during the sellers’ occupancy.”  We answer this question in 
the negative. 
{¶15} The insurance policies at bar provided that if suit were brought 
against an insured for damages to a third party arising from an “occurrence,” the 
insurer would provide the policy holder with a legal defense. 
{¶16} The certified question requires us to determine the scope of the 
coverage provided by the insurance policies and whether the claims against the 
insureds are included in the coverage.  We have previously analyzed similar 
insurance policies to determine an insurer’s duty to defend. 
January Term, 2003 
5 
{¶17} In Motorists Mut. Ins. Co. v. Trainor (1973), 33 Ohio St.2d 41, 62 
O.O.2d 402, 294 N.E.2d 874, this court held that under a liability insurance policy 
the scope of the allegations in the complaint against the insured determines 
whether an insurance company has a duty to defend the insured.  We held that 
“where the complaint brings the action within the coverage of the policy the 
insurer is required to make defense, regardless of the ultimate outcome of the 
action or its liability to the insured.”  Id. at paragraph two of the syllabus. 
{¶18} We expanded on Motorists in Willoughby Hills v. Cincinnati Ins. 
Co. (1984), 9 Ohio St.3d 177, 9 OBR 463, 459 N.E.2d 555, stating that “the duty 
to defend need not arise solely from the allegations in the complaint but may arise 
at a point subsequent to the filing of the complaint.”  Id. at 179, 9 OBR 463, 459 
N.E.2d 555.  Where the allegations state a claim that falls either potentially or 
arguably within the liability insurance coverage, the insurer must defend the 
insured in the action.  Id. at 180, 9 OBR 463, 459 N.E.2d 555. 
{¶19} The Willoughby Hills policy stated that the insurance company 
would indemnify the insured against liability for damage caused by an 
“occurrence” and would defend against any action against the insured seeking 
damages resulting from an occurrence “ ‘even if any of the allegations of the suit 
are groundless, false or fraudulent.’ ”  Willoughby Hills, 9 Ohio St.3d at 177, 9 
OBR 463, 459 N.E.2d 555, quoting the insurance policy. 
{¶20} In Preferred Risk Ins. Co. v. Gill (1987), 30 Ohio St.3d 108, 30 
OBR 424, 507 N.E.2d 1118, the court distinguished Willoughby Hills.  In 
Preferred Risk, the insurance company sought a declaratory judgment that it had 
no duty to defend an insured against a tort claim framed in terms of negligence 
brought by the parents of a child murdered by the insured.  The insurance 
company denied coverage, as the policy in question expressly excluded coverage 
for any intentional act, and intent was an element of the crime of which the 
insured had been convicted. 
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{¶21} We held that allegations in the complaint did not justify the 
application of the Willoughby Hills rule by stating, “[W]here the conduct which 
prompted the underlying * * * suit is so indisputably outside coverage, we discern 
no basis for requiring the insurance company to defend or indemnify its insured 
simply because the underlying complaint alleges conduct within coverage.”  
Preferred Risk, 30 Ohio St.3d at 113, 30 OBR 424, 507 N.E.2d 1118.  In 
distinguishing Preferred Risk from Willoughby Hills, we also observed that unlike 
the policy in Willoughby Hills, the Preferred Risk policy did not contain language 
promising to defend the insured against groundless, false, or fraudulent claims.  
Id. at 114, 30 OBR 424, 507 N.E.2d 1118. 
A. Cincinnati Insurance Company v. Anders 
{¶22} The liability section of the CIC homeowner’s policy issued to the 
Hastingses reads as follows: 
{¶23} “If a claim is made or a suit is brought against any insured for 
damages because of bodily injury, personal injury, or property damage arising out 
of an occurrence to which this coverage applies, we will: 
{¶24} “a. pay up to our limit of liability for the damages arising out of 
bodily injury, personal injury, or property damage for which the insured is legally 
liable; and 
{¶25} “b. provide a defense at our expense by counsel of our choice, even 
if the suit is groundless, false, or fraudulent.” 
{¶26} The underlying claim still at issue is that the Hastingses should 
have known of the damage to the joists before the sale of the home and 
negligently failed to disclose this information. 
{¶27} Only property damage is at issue here, not bodily injury or 
personal injury.  The policy defines “property damage” as “physical injury to or 
destruction of tangible property, including loss of use of this property.”  CIC must 
January Term, 2003 
7 
defend the Hastingses if the Hastingses are sued for property damage arising out 
of an occurrence. 
{¶28} The Hastingses argue that the insurance policy language is clear on 
its face and so comprehensive that the underlying claims are clearly within the 
scope of coverage.  We are not persuaded. 
{¶29} The policy defines “occurrence” as  
{¶30} “an accident, including exposure to conditions, which results, 
during the policy period, in: 
{¶31} “a. bodily injury, 
{¶32} “b. property damage, 
{¶33} “c. personal injury.” 
{¶34} Common words in a contract will be given their ordinary meaning 
unless manifest absurdity results or unless some other meaning is clear from the 
face or overall contents of the agreement.  Alexander v. Buckeye Pipe Line Co. 
(1978), 53 Ohio St.2d 241, 7 O.O.3d 403, 374 N.E.2d 146, paragraph two of the 
syllabus; Shifrin v. Forest City Ent., Inc. (1992), 64 Ohio St.3d 635, 638, 597 
N.E.2d 499. 
{¶35} For liability coverage to exist, the property damage must “aris[e] 
out of an occurrence,” that is, an accident resulting in property damage. The 
property damage in this case was alleged to have been caused by the faulty 
installation of insulation.  The occurrence for purposes of the policy was not the 
nondisclosure of the damage. 
{¶36} The alleged negligent nondisclosure of the structural damage was 
not an accident that resulted in property damage but, rather, an accident that 
allegedly caused economic damages.  The actual accident was the faulty 
installation of the insulation, leading to the structural deterioration of the house.  
The underlying claims of the Anderses against the Hastingses pertain to the 
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nondisclosure of the damage, not the damage itself.  Therefore, the underlying 
claims are outside the scope of the CIC policy. 
{¶37} Having determined that CIC had no duty to defend the Hastingses 
under their basic homeowner’s policy, we next determine whether it had a duty to 
defend under the umbrella liability endorsement. 
{¶38} The Hastingses’ umbrella endorsement was also issued by CIC and 
contains liability coverage similar to that provided in the homeowner’s policy.  
The umbrella endorsement states that CIC will provide a defense against liability 
for property damage caused by an occurrence.  “Occurrence” is defined as “an 
accident, happening, event or series of related events that unexpectedly or 
unintentionally causes Personal Injury or Property Damage during the 
endorsement period.” 
{¶39} The same analysis we applied to the homeowner’s policy is 
applicable to the umbrella endorsement.  The underlying claims do not meet the 
requirement of arising out of or being caused by an occurrence.  CIC has no duty 
to defend the Hastingses under the endorsement. 
B. GuideOne Mutual Insurance Company v. Reno 
{¶40} The liability portion of the Renos’ homeowner’s insurance policy 
reads as follows: 
{¶41} “If a claim is made or a suit is brought against an ‘insured’ for 
damages because of ‘bodily injury’ or ‘property damage’ caused by an 
‘occurrence’ to which this coverage applies, we will: 
{¶42} “1. Pay up to our limit for the damages for which the ‘insured’ is 
legally liable.  * * * 
{¶43} “2. Provide a defense at our expense by counsel of our choice, 
even if the suit is groundless, false or fraudulent.” 
January Term, 2003 
9 
{¶44} The policy defines “occurrence” as “an accident, including 
continuous or repeated exposure to substantially the same general harmful 
conditions, which results, during the policy period, in: 
{¶45} “a. ‘Bodily injury’; or 
{¶46} “b. ‘Property damage.’ ” 
{¶47} The Renos’ liability policy, issued by GuideOne, is similar to the 
Hastingses’ CIC policy.  All of the policies require that the damage must arise out 
of or be caused by an occurrence.  In the Renos’ case, the property damage was 
allegedly caused by termite infestation. 
{¶48} As with the Hastingses’ policies, we must determine whether 
Cooper’s underlying claims fall within the scope of the Renos’ policy coverage.  
These claims are for intentional fraudulent misrepresentation and concealment, 
negligent or reckless misrepresentation and concealment, and civil conspiracy to 
defraud.  These claims all relate to the allegation that the Renos knew or should 
have known of the defective conditions prior to the sale of the home and that they 
are liable for having failed to disclose those facts. 
{¶49} The Renos argue that these underlying claims qualify as an 
occurrence.  We conclude that the alleged nondisclosure did not cause the damage 
and is therefore not within the coverage of the policy.  As we have previously 
determined, the nondisclosure of the infestation is not the occurrence; the 
infestation is the occurrence.  GuideOne has no duty to defend the Renos against 
Cooper’s claims. 
{¶50} The Renos also argue that the policy provision stating that 
GuideOne would provide a defense even if the suit is “groundless, false, or 
fraudulent” brings Cooper’s underlying claims within the coverage of the 
insurance policy.  Again we disagree. 
{¶51} Since our holding in Preferred Risk, it is still the law that if the 
conduct alleged in a complaint is indisputably outside the scope of coverage, there 
SUPREME COURT OF OHIO 
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is no duty to defend.  The fact that the Renos’ policy contains more inclusive 
language than what was present in the Preferred Risk policy does not change our 
preceding analysis regarding how to determine whether the underlying claims are 
covered by the Renos’ policy.  If the insurance company is to be required to 
provide a defense for its policy holder, the underlying claims must at least 
arguably fall within the coverage of the policy. 
{¶52} For the foregoing reasons, the judgments of the court of appeals 
are affirmed. 
Judgments affirmed. 
 
RESNICK, F.E. SWEENEY, PFEIFER, MCMONAGLE, LUNDBERG STRATTON 
and O’CONNOR, JJ., concur. 
 
TIMOTHY E. MCMONAGLE, J., of the Eighth Appellate District, sitting for 
COOK, J. 
__________________ 
 
Mary S. Peterson, for appellee Cincinnati Insurance Company. 
 
Boyk & Crossmock, L.L.C., Steven L. Crossmock and John B. Huber, for 
appellants Roger and Jenny Hastings. 
 
Davis & Young, L.P.A., and David J. Fagnilli, urging affirmance for 
amicus curiae Complex Insurance Claims Litigation Association. 
 
John E. Breidenbach and Steven E. Bacon, for appellee GuideOne 
Insurance Company. 
 
Haffey & Segreti and A. Mark Segreti Jr., for appellants Lee and Melanie 
Reno. 
__________________