Opinion ID: 2827105
Heading Depth: 4
Heading Rank: 1

Heading: Exclusion (h)

Text: ACE advances two arguments with respect to exclusion (h). First, it contends that the promotional gift cards are themselves contracts such that the policy excludes coverage for any cause of action arising from the cards. In support, ACE recites several online-dictionary -4- Case Nos. 14-4073/4074, ACE European Grp., Ltd. v. Abercrombie & Fitch Co., et al. definitions for “contract” and “agreement” before conclusorily asserting that the cards “fit well within the natural and commonly accepted meaning of both [words].” (ACE Br. at 41.) But, as the online definitions make clear, the word “contract” has legal import. Its meaning flows from the law of Ohio governing interpretation of this policy, not a dictionary. Under Ohio law, contracts are legally enforceable agreements consisting of—among other things—offer, acceptance, and consideration. Kostelnik v. Helper, 770 N.E.2d 58, 61 (Ohio 2002). Under this definition, we do not understand the promotional gift cards to be “contracts” within the meaning of exclusion (h). Rather, the cards are contract components; they form part of the consideration exchanged in the sales contracts entered during Abercrombie’s Christmas promotion. Abercrombie advertised—and each customer received—a promotional gift card in return for purchasing either $75- or $100-worth of goods. The class plaintiffs allege that Abercrombie breached the sales contract by failing to give them what they bargained for: an expiration-less gift card. Later in its briefing, ACE acknowledges that the cards formed part of the consideration for these sales, impliedly conceding that they do not constitute independent contracts. (ACE Br. at 42.) Thus, the fact that the class actions arise from a dispute over the cards does not trigger exclusion (h). Next, ACE argues that the exclusion applies because the class actions arise entirely out of Abercrombie’s alleged breach of these sales contracts. But Ohio precedent holds that “[o]nce an insurer must defend one claim within a complaint, it must defend the insured on all the other claims within the complaint, even if they bear no relation to the insurance-policy coverage.” City of Sharonville v. Am. Emp’rs Ins. Co., 846 N.E.2d 833, 837 (Ohio 2006). Thus, while the district court found that the breach-of-contract claims might have fallen within the exclusion, it -5- Case Nos. 14-4073/4074, ACE European Grp., Ltd. v. Abercrombie & Fitch Co., et al. nevertheless ruled that ACE must defend Abercrombie because in each action the class plaintiffs also allege consumer fraud—a claim covered by the policy. As the district court noted, the contract and consumer-fraud claims are legally distinct. In the contract claims, the class plaintiffs allege that their sales contracts with Abercrombie included an implied term that the promotional gift cards would not expire. In the consumerfraud claims, they seek to hold Abercrombie liable for alleged misrepresentations that the promotional gift cards had no expiration date. Although the two sets of claims arise out of the same nexus of operative facts, neither of the wrongful acts alleged caused the other. See Westfield Ins. Co. v. Factfinder Mktg. Research, Inc., 860 N.E.2d 145, 154 (Ohio Ct. App. 2006) (requiring a causal connection to find that one cause of action “aris[es] out of” another). In fact, certain theories of recovery are mutually exclusive. The class plaintiffs could prevail on their fraud claims by proving that Abercrombie misled them into believing the gift cards had no expiration date when they actually did. But in so doing, the plaintiffs would simultaneously disprove their contract claims, which depend on the cards having no expiration. Likewise, in seeking to prove the existence of an implied contractual term that the cards never expired, they would undermine their fraud claims, which require a misrepresentation to that effect. We therefore reject ACE’s argument that the consumer-fraud claims derive from the contract claims because the two do not rise and fall together. See Westfield, 860 N.E.2d at 154. And because each of the underlying class actions asserts a consumer-fraud claim covered by the policy, exclusion (h) does not absolve ACE of its duty to defend in any of them. See Sharonville, 846 N.E.2d at 837. -6- Case Nos. 14-4073/4074, ACE European Grp., Ltd. v. Abercrombie & Fitch Co., et al.