Opinion ID: 2827105
Heading Depth: 3
Heading Rank: 2

Heading: The Extent of ACE’s Duty

Text: In the alternative, ACE argues that its duty to defend in the Illinois class action (the “Boundas Action”) has already terminated. On May 2, 2011, the trial court in that case dismissed the plaintiffs’ consumer-fraud claim under Rule 12(b)(6), leaving only their excluded contract claim. ACE contends that its duty to defend ended with the dismissal of the covered -8- Case Nos. 14-4073/4074, ACE European Grp., Ltd. v. Abercrombie & Fitch Co., et al. claim. The district court rejected this argument, holding that ACE’s duty continues at least until the trial court in the Boundas Action issues a final, appealable judgment on the covered claim. The district court relied primarily on our decision in City of Sandusky v. Coregis Ins. Co., 192 F. App’x 355 (6th Cir. 2006). In that case, an insurer promised to “defend [the City of Sandusky] or be associated with a defense” against discrimination claims by the City’s employees. Id. at 357. In accord with the policy, the insurer hired counsel to defend the City against a class of plaintiffs seeking both damages—claims that the policy obliged the insurer to defend—and equitable relief—claims that the policy excluded. When the district court granted a motion for summary judgment on the damages claims, the insurer withdrew its attorneys, and the City sued for continued coverage. Id. at 357–58. On appeal, we first looked to the contract to determine when the insurer’s duty to defend terminated. But finding this language ambiguous, we applied Ohio law and held that silence or ambiguity regarding the termination of the duty to defend results in the duty continuing until the trial court issues a final judgment on all covered claims. Id. at 361–62. Following Sandusky, the district court first examined the policy language. Finding it ambiguous, the court construed that ambiguity against ACE and ruled that its duty to defend in the Boundas Action continues until final judgment on the consumer-fraud claim. In their appellate briefs, neither party attempts to show that the policy language unambiguously resolves the matter at Sandusky’s first step. Instead, they set about attacking and defending the interpretation of Ohio law that underpins Sandusky’s second step. We hew to the interpretation of Ohio law articulated in Sandusky. Where the contract is ambiguous, the insurer has a duty to defend “until no remaining claims against an insured are covered by the subject policy.” Sandusky, 192 F. App’x at 361; see also Sharonville, 846 N.E.2d -9- Case Nos. 14-4073/4074, ACE European Grp., Ltd. v. Abercrombie & Fitch Co., et al. at 837 (discussing the breadth of an insurer’s duty to defend); Lane, 543 N.E.2d at 490 (holding that courts construe ambiguous language in favor of the insured); Wedge Prods., Inc. v. Hartford Equity Sales Co., 509 N.E.2d 74, 76 (Ohio 1987) (explaining that the duty to defend terminates when “no possibility of coverage under the policy” exists). That requires, at the very least, a final, appealable judgment on all covered claims. Sandusky, 192 F. App’x at 362. Despite the potential for a windfall to insureds, “Ohio law is clear that an insurer must precisely define the scope of its defense if it expects to defend [the withdrawal of counsel] on the ground that its duty was extinguished.” Id. ACE grumbles that Sandusky espouses a “minority” position among American jurisdictions, but that is irrelevant. This court must ascertain how the Ohio Supreme Court would rule, regardless of whether the outcome constitutes a majority or minority position. See Kingsley Assocs., Inc. v. Moll PlastiCrafters, Inc., 65 F.3d 498, 507 (6th Cir. 1995). ACE never compares the state law underpinning these extra-jurisdictional cases to the law of Ohio nor otherwise explains how those decisions should guide our interpretation of Ohio law.3 Moreover, the district court’s admirable survey of these cases reveals that the holdings are more nuanced and the weight of authority more balanced than ACE suggests. ACE does cite one authoritative case, but it is inapposite. See City of Willoughby Hills v. Cincinnati Ins. Co., 459 N.E.2d 555 (Ohio 1984). In Willoughby Hills, the Ohio Supreme Court quoted a Seventh Circuit opinion stating that an insurer’s “defense obligations will continue until such time as the claim against the insured is confined to a recovery that the policy does not 3 As an afterthought, ACE invites us to certify to the Ohio Supreme Court the question of whether ambiguous policy language requires the insurer to defend the insured until final judgment of the covered claims. We decline. The Sixth Circuit disfavors certification in cases such as this. See Berrington v. Wal-Mart Stores, Inc., 696 F.3d 604, 610–11 (6th Cir. 2012) (citation omitted) (declining to certify a question where the proponent never raised the issue in the district court and where state law provided “a reasonably clear and principled course”). - 10 - Case Nos. 14-4073/4074, ACE European Grp., Ltd. v. Abercrombie & Fitch Co., et al. cover.” Id. at 558 (quoting Solo Cup Co. v. Fed. Ins. Co., 619 F.2d 1178 (7th Cir. 1980)) (internal quotation marks omitted). But ACE reads this quote out of context. Willoughby Hills confronted whether the duty to defend may attach later in proceedings, after the insured recognizes that a once-ambiguous complaint asserts a covered claim. Id. at 557–58. The Seventh Circuit answered this question in the affirmative then stated the converse: that any duty to defend an ambiguous complaint terminates once it becomes clear that the complaint asserts no covered claims. Id. This dictum does not affect the outcome of this case because the complaint in the Boundas Action unambiguously asserts a consumer-fraud claim covered by the policy. ACE must defend Abercrombie in the Boundas Action.