Title: Lightning Rod Mut. Ins. Co. v. Southworth

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Lightning Rod Mut. Ins. Co. v. Southworth, Slip Opinion No. 2017-Ohio-7438.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in an 
advance sheet of the Ohio Official Reports.  Readers are requested to 
promptly notify the Reporter of Decisions, Supreme Court of Ohio, 65 
South Front Street, Columbus, Ohio 43215, of any typographical or other 
formal errors in the opinion, in order that corrections may be made before 
the opinion is published. 
 
 
SLIP OPINION NO. 2017-OHIO-7438 
LIGHTNING ROD MUTUAL INSURANCE COMPANY, APPELLEE, v. SOUTHWORTH, 
D.B.A. BOB’S HOME SERVICE, L.L.C., ET AL.; CMH HOMES, INC., D.B.A. LUV 
HOMES, APPELLANT. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Lightning Rod Mut. Ins. Co. v. Southworth, Slip Opinion No. 
2017-Ohio-7438.] 
Appeal dismissed as having been improvidently accepted. 
(No. 2016-1116―Submitted June 20, 2017―Decided September 5, 2017.) 
APPEAL from the Court of Appeals for Scioto County, No. 15CA3704,  
2016-Ohio-3473. 
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{¶ 1} This cause is dismissed as having been improvidently accepted. 
O’CONNOR, C.J., and KENNEDY, O’NEILL, FISCHER, and DEWINE, JJ., 
concur. 
O’DONNELL, J., dissents, with an opinion joined by FRENCH, J. 
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SUPREME COURT OF OHIO 
 
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O’DONNELL, J., dissenting. 
{¶ 2} I respectfully dissent from the majority’s decision to resolve this 
appeal by declaring that it was improvidently accepted. 
{¶ 3} CMH Homes, Inc., d.b.a. Luv Homes, presented the following 
proposition of law, which in my view, raises an important issue that should be 
decided on the merits: 
 
A general liability insurance policy that applies to “property 
damage” that occurs during the policy period is “triggered” by 
damage during the policy period regardless of whether that damage 
is the continuation or resumption of damage that first appeared 
before the policy period as long as that damage was not known to 
the insured or those persons specifically listed in the policy prior to 
the inception of the policy. 
 
Facts and Procedural History 
{¶ 4} In November 2007, Jonathan and Heather Beattie purchased a new 
manufactured home from CMH that was produced by Skyline Corporation and 
installed by Bob’s Home Service, L.L.C. (“Bob’s”).  Almost immediately, the 
Beatties noticed problems with the home, including cracks in the drywall and the 
ceiling at the marriage line where the two halves of the home were joined together.  
Beginning in January 2008, CMH and Skyline made attempts to repair the 
problems, but they persisted, and in June 2012, the Beatties filed suit against 
Skyline, CMH, and Vanderbilt Mortgage and Finance, Inc., seeking monetary 
damages and declaratory and injunctive relief in connection with the sale and 
installation of the home. 
{¶ 5} CMH filed a third-party complaint against Bob’s alleging that it had 
breached a contract with CMH by failing to install the home in a manner that met 
January Term, 2017 
 
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manufacturer specifications and that it had a duty to indemnify CMH with respect 
to losses incurred due to the actions of Bob’s or its employees.  Robert Southworth, 
a member of Bob’s, requested that Lightning Rod Mutual Insurance Co. provide 
Bob’s with a defense in the litigation pursuant to a commercial general liability 
insurance policy Lightning Rod had issued for the period November 26, 2008, to 
November 26, 2009, which it renewed annually through November 26, 2012.  
Lightning Rod assigned counsel to defend Bob’s subject to a reservation of rights 
and filed suit against Southworth, Bob’s, and CMH seeking a declaratory judgment 
that it was not obligated to defend or indemnify Bob’s for claims related to the 
Beatties’ home. 
{¶ 6} Lightning Rod moved for summary judgment in the declaratory 
judgment action, and CMH filed a cross motion for summary judgment.  The trial 
court granted Lightning Rod a summary judgment, concluding that Bob’s was not 
entitled to coverage pursuant to the policy because Southworth was the only named 
insured, the policy excluded coverage for Bob’s or Southworth doing business as a 
limited liability company, “the occurrences happened prior to the * * * policy 
period,” and “defects were discovered within 12 months of the work and were 
known to Robert Southworth before the issuance” of the policy. 
{¶ 7} In affirming, the Fourth District Court of Appeals stated that “at the 
heart of * * * this appeal is the issue of whether property damage that first occurs 
prior to the policy period, and continues or reoccurs into the policy period, is 
sufficient to trigger coverage.”  2016-Ohio-3473, 55 N.E.3d 1174, ¶ 25.  The 
appellate court held that the policy was unambiguous and coverage did not exist in 
those circumstances, so Lightning Rod had no duty to defend or indemnify 
Southworth or Bob’s and the remaining issues raised by CMH, such as its claims 
that no evidence supported a finding that Southworth knew of the problems at the 
Beatties’ home before purchasing the policy and that the trial court erred by not 
reforming the policy to include Bob’s as a named insured, were moot. 
SUPREME COURT OF OHIO 
 
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Positions of the Parties 
{¶ 8} CMH maintains that the appellate court improperly rewrote the policy 
to apply only to property damage that first occurs during the policy period even 
though the policy explicitly contemplates coverage for damage that is already in 
progress when the policy takes effect so long as the insured or a designated 
employee did not know about the damage before the policy period began.  CMH 
asserts that even if the policy were ambiguous on this point, the ambiguity must be 
resolved in favor of the insured and consistent with Ohio caselaw that CMH claims 
recognizes “continuing * * * property damage can ‘trigger’ multiple policy 
periods.” 
{¶ 9} Lightning Rod maintains that the court should dismiss this appeal as 
having been improvidently accepted because the policy only covers property 
damage that first occurs during the policy period, not the continuation or recurrence 
of damage during the policy period that was discovered or manifest before the 
policy was issued, and CMH misinterprets caselaw on the theory of “continuous 
trigger.”  Lightning Rod also asserts that coverage is barred in this case for reasons 
not addressed by the appellate court, including that Bob’s faulty workmanship does 
not qualify as an occurrence pursuant to the policy. 
Law and Analysis 
{¶ 10} In Transtar Elec., Inc. v. A.E.M. Elec. Servs. Corp., 140 Ohio St.3d 
193, 2014-Ohio-3095, 16 N.E.3d 645, this court stated: 
 
 
Our review of cases involving a grant of summary judgment 
is de novo.  Summary judgment may be granted only when (1) there 
is no genuine issue of material fact, (2) the moving party is entitled 
to judgment as a matter of law, and (3) upon viewing the evidence 
in favor of the nonmoving party, reasonable minds can come to but 
January Term, 2017 
 
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one conclusion, and that conclusion is adverse to the nonmoving 
party. 
 
(Citations omitted.)  Id. at ¶ 8. 
{¶ 11} This matter involves the interpretation of an insurance policy, which 
“ ‘is a contract whose interpretation is a matter of law.’ ”  Laboy v. Grange Indemn. 
Ins. Co., 144 Ohio St.3d 234, 2015-Ohio-3308, 41 N.E.3d 1224, ¶ 8, quoting 
Sharonville v. Am. Emps. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 
N.E.2d 833, ¶ 6.  This court has explained: 
 
The fundamental goal when interpreting an insurance policy is to 
ascertain the intent of the parties from a reading of the policy in its 
entirety and to settle upon a reasonable interpretation of any 
disputed terms in a manner designed to give the contract its intended 
effect.  * * * Words and phrases must be given their plain and 
ordinary meaning “unless manifest absurdity results, or unless some 
other meaning is clearly evidenced from the face or overall contents 
of the instrument.”  Alexander v. Buckeye Pipe Line Co., 53 Ohio 
St.2d 241, 374 N.E.2d 146 (1978), paragraph two of the syllabus. 
 
Laboy at ¶ 8. 
{¶ 12} “Where the terms are clear and unambiguous, a court need not go 
beyond the plain language of the agreement to determine the rights and obligations 
of the parties.”  In re All Kelley & Ferraro Asbestos Cases, 104 Ohio St.3d 605, 
2004-Ohio-7104, 821 N.E.2d 159, ¶ 29.  If a provision is ambiguous, i.e., it is 
reasonably susceptible of more than one meaning, courts will construe it against the 
insurance company.  Dominish v. Nationwide Ins. Co., 129 Ohio St.3d 466, 2011-
Ohio-4102, 953 N.E.2d 820, ¶ 7. 
SUPREME COURT OF OHIO 
 
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{¶ 13} The Commercial General Liability Coverage Form in the policy 
states: 
 
1. 
Insuring Agreement 
a. 
We will pay those sums that the insured becomes legally 
obligated to pay as damages because of * * * “property 
damage” to which this insurance applies.  We will have the 
right and duty to defend the insured against any “suit” 
seeking those damages.  * * * 
b. 
This insurance applies to * * * “property damage” only if: 
(1) 
The * * * “property damage” is caused by an 
“occurrence” that takes place in the “coverage 
territory”; 
(2) 
The * * * “property damage” occurs during the 
policy period; and 
(3) 
Prior to the policy period, no insured * * * and no 
“employee” authorized by you to give or receive 
notice of an “occurrence” or claim, knew that the * * 
* “property damage” had occurred, in whole or in 
part.  If such a listed insured or authorized 
“employee” knew, prior to the policy period, that the 
* * * “property damage” occurred, then any 
continuation, change or resumption of such * * * 
“property damage” during or after the policy period 
will be deemed to have been known prior to the 
policy period. 
 
(Boldface sic.) 
January Term, 2017 
 
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{¶ 14} Regarding the requirement that the property damage occur during 
the policy period, the policy defines “property damage” to include “[p]hysical 
injury to tangible property”; however, the policy does not define “occurs.”  There 
are several dictionary definitions of the term “occur,” including “to present itself: 
come to pass: take place: HAPPEN” and “to be present or met with: EXIST.”  
(Capitalization sic.)  Webster’s Third New International Dictionary 1561 (2002).  
Thus, there are at least two possible explanations of property damage occurring 
during the policy period: physical injury to tangible property either happens during 
the policy period or exists during the policy period. 
{¶ 15} If both of these interpretations were reasonable, then the court would 
have to construe the policy against the insurance company by using the more 
expansive interpretation requiring only that physical injury to tangible property 
exists during the policy period.  See Cadet Mfg. Co. v. Am. Ins. Co., W.D.Wash. 
No. C04-5411 FDB, 2006 WL 2105065, *4 (July 26, 2006) (concluding that the 
term “occurs” in an insurance policy was “fairly susceptible to different, reasonable 
interpretations,” noting “[t]he average person purchasing insurance would construe 
the policy language to provide indemnity for property damage that exists during the 
policy period,” and resolving the ambiguity in the policy by interpreting the term 
“occurs” in favor of the insured). 
{¶ 16} However, to give effect to Section 1(b)(3) of the policy, the only 
reasonable interpretation of the term “occurs” in this matter is “exists.”  That 
section excludes coverage if the insured or an authorized employee knew of the 
property damage in whole or in part prior to the policy period and provides that if 
the insured or an authorized employee knew damage occurred prior to the policy 
period, “then any continuation, change or resumption of such * * * ‘property 
damage’ during * * * the policy period will be deemed to have been known prior 
to the policy period.”  (Emphasis added.)  If the policy did not cover a continuation, 
change, or resumption of preexisting property damage because the damage did not 
SUPREME COURT OF OHIO 
 
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happen during the policy period, a separate exclusion for such damage based on the 
knowledge of the insured or an authorized employee would be unnecessary.  
However, if the policy covers such damage because it exists during the policy 
period, the exclusion in Section 1(b)(3) would have effect, and “ ‘[i]n construing a 
written instrument, effect should be given to all of its words, if this can be done by 
any reasonable interpretation.’ ”  Hybud Equip. Corp. v. Sphere Drake Ins. Co., 
Ltd., 64 Ohio St.3d 657, 666, 597 N.E.2d 1096 (1992), quoting Wadsworth Coal 
Co. v. Silver Creek Mining & Ry. Co., 40 Ohio St. 559 (1884), paragraph one of the 
syllabus. 
{¶ 17} Accordingly, in my view, the policy provides coverage for property 
damage that exists during the policy period, including the continuation, change, or 
resumption during the policy period of damage that began before the policy period 
so long as the insured or an authorized employee had no knowledge of the damage 
before the policy period.  Thus, the appellate court erred in affirming summary 
judgment in favor of Lightning Rod on the basis that the policy does not cover a 
continuation or resumption of property damage under any circumstances.  
However, because the appellate court did not resolve other issues raised by CMH, 
the matter should be further considered by that court. 
Conclusion 
{¶ 18} For the foregoing reasons, I dissent from the majority’s decision to 
dismiss this appeal as having been improvidently accepted.  I would reverse the 
judgment of the court of appeals and remand the cause to that court to consider the 
other issues it declared moot. 
FRENCH, J., concurs in the foregoing opinion. 
_________________ 
 
Weston Hurd, L.L.P., Ronald A. Rispo, and Robert E. Goff Jr.; and David 
L. Jarrett, for appellee. 
January Term, 2017 
 
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Brouse McDowell, L.P.A., Caroline L. Marks, Clair E. Dickinson, Amanda 
M. Leffler, Lucas M. Blower, and Paul A. Rose, for appellant. 
Vorys, Sater, Seymour & Pease, L.L.P., Natalia Steele, and Thomas E. 
Szykowny, urging affirmance for amicus curiae Ohio Insurance Institute. 
Bruns, Connell, Vollmar & Armstrong, L.L.C., and T. Andrew Vollmar, 
urging affirmance for amicus curiae Ohio Association of Civil Trial Attorneys. 
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