Court Opinion

ID: 6778035
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:52:26.509935+00
Date Added: 2024-06-11T16:02:49.832513
License: Public Domain

Cook, J.,
dissenting in part. Because the Wagners failed to prove their bad faith claim at trial, I respectfully dissent.
In Zoppo v. Homestead Ins. Co. (1994), 71 Ohio St.3d 552, 644 N.E.2d 397, paragraph one of the syllabus, the court set out the following test for determining whether an insurer breaches its duty to process claims in good faith: “An insurer fails to exercise good faith in the processing of a claim of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification therefor. (Hart v. Republic Mut. Ins. Co. [1949], 152 Ohio St. 185, 39 O.O. 465, 87 N.E.2d 347, and Staff Builders, Inc. v. Armstrong [1988], 37 Ohio St.3d 298, 525 N.E.2d 783, approved and followed; Slater v. Motorists Mut. Ins. Co. [1962], 174 Ohio St. 148, 21 O.O.2d 420, 187 N.E.2d 45, paragraph two of the syllabus, overruled; Motorists Mut. Ins. Co. v. Said [1992], 63 Ohio St.3d 690, 590 N.E.2d 1228, overruled to the extent inconsistent herewith.)”
To demonstrate that the Wagners presented sufficient evidence to create a jury question on their bad faith claim, today’s majority cites evidence (1) that Mr. Wagner was cooperative and candid during the investigation of the claim, (2) that he was never officially questioned or charged with arson, and (3) that there was expert testimony from which a jury could conclude that the fire could have been accidentally caused. Additionally, the majority says that the bad faith claim could have been supported by Midwestern’s delay in refusing the Wagners’ claim. None of the facts discussed by the majority, however, tends to prove the unreasonableness of Midwestern’s stated justifications for denying the Wagners’ claim as required by Zoppo. Instead, they tend to prove only a breach of the insurance contract.
Midwestern justified its refusal of the Wagners’ claims on two grounds: (1) that it suspected Mr. Wagner of intentionally setting the fire, and (2) that, after the fire, Mr. Wagner seriously misrepresented his financial status to Midwestern. The “Special Businessowners Policy” between Midwestern and the Wagners excludes coverage for losses caused by fraudulent or dishonest acts committed by Mr. Wagner. It also would allow Midwestern to void the entire policy if Mr. Wagner, or someone on his behalf, made misrepresentations with an intent to deceive Midwestern.
Bad faith is not shown by a mere breach of a contractual duty. Helmick v. Republic-Franklin Ins. Co. (1988), 39 Ohio St.3d 71, 529 N.E.2d 464, paragraph two of the syllabus. Although Zoppo made it clear that actual intent is not a necessary element of a bad faith claim, it cannot be read to dispense with the insured’s duty to prove that the insurer committed some act above breaching the insurance contract.
*296In Zoppo, the court pinned its approval of a bad faith award on the insurance company’s failure to adequately investigate a bar owner’s claim for fire damage. As in the present case, the insurance company in Zoppo denied its insured’s claim because of its belief that the insured deliberately set fire to his business premises. That, however, is where the similarities between Zoppo and the case now under consideration end. At trial, the Zoppo plaintiff produced evidence that the insurance company failed to seriously explore leads that others had set the fire. Those leads included the following: (1) that Zoppo had ousted several men from his bar, who then threatened to burn the bar down, (2) that three weeks before the fire in question, there had been an attempt to set the bar on fire, (3) that two men whom Zoppo had ousted from his bar publicly bragged that they were responsible for the attempted fire, and (4) that one of those men also told a group of bar patrons that he had set the actual fire. The Zoppo plaintiffs additionally produced evidence that, despite these leads, and despite the fact that there appeared to be a break-in and robbery connected with the fire, the insurance company failed to locate key suspects, verify alibis (including Zoppo’s), follow up with witnesses, or ask anything but cursory questions of suspects other than Zoppo. Finally, the Zoppo court noted that part of the insurer’s denial of the claim was based on its belief that Zoppo had a motive to destroy the bar— financial gain. Zoppo purchased the bar six months before the fire for $10,000 and insured it for $50,000. Other information, either possessed by or readily discoverable to the insurer, however, undermined the reasonableness of the insurer’s belief. The insurer’s own initial underwriting report stated the building’s market value as $95,798. Additionally, Zoppo had no debts and had actually made improvements to the bar before the fire. Id., 71 Ohio St.3d at 555-556, 644 N.E.2d at 400.
In contrast to Zoppo, when the evidence is construed most favorably to the plaintiffs’ in this case, there still is nothing to justify a finding of bad faith. Instead, the Wagners’ evidence provides only a foundation for the fact-finder to reject the insurer’s defenses to the breach of contract claim.
At trial, Midwestern provided evidence that at the time it rejected the claim it was in possession of information tending to demonstrate that the fire at the Wagners’ store had been set deliberately, and that Mr. Wagner possessed both the means and a motive to set the fire. Two separate reports — one by an independent consulting firm and another by the Fostoria Fire Department— stated that the fire had been incendiary in nature. There were no signs of a forced entry into the store. And, by his own account, Mr. Wagner locked the store up only minutes before the fire alarm sounded.
Furthermore, Mr. Wagner had serious financial difficulties. He had filed for bankruptcy, failed to pay payroll taxes for the previous year, and owed over *297$100,000 in federal income taxes. Moreover, sales had been declining steadily at the Wagners’ store over the last five years and, over the last two to three years, the Wagners had unsuccessfully attempted to sell their business.
Finally, Mr. Wagner twice misrepresented to a Midwestern investigator that he was current on his bills and denied that he was involved in a civil action despite his pending bankruptcy petition.
Faced with the reasons stated by Midwestern for denying coverage, the Wagners failed to present sufficient evidence to raise a jury question that Midwestern’s actions were unreasonable and therefore gave rise to a bad faith claim. The Wagners’ expert opined that the fire was caused accidentally and that the source of ignition was an electrical spark that reacted with bug spray vapors to cause an explosion. He also testified, however, that his theory of causation involved a rare phenomenon that is not generally known in fire department circles. The Wagners’ expert also criticized the investigative techniques and thoroughness of the Fostoria Fire Department and the insurance company’s independent investigator, but these criticisms fall far short of establishing bad faith on the part of the insurance company itself. Compare Zoppo.
Finally, Midwestern’s delay in denying the Wagners’ claims after Mr. Wagner filed a sworn proof of loss does not, in itself, provide a basis for a bad faith award. While the delay arguably ran afoul of the contract terms, it did not render Midwestern’s denial of the Wagners’ claims unreasonable — which is the ultimate focus of the Zoppo bad faith inquiry.
Accordingly, I believe that the trial court erred in failing to direct a verdict in favor of Midwestern on the Wagners’ bad faith claims. The Wagners should not be permitted to recover bad faith damages and thus are not entitled to punitive damages or attorney fees. See Helmick v. Republic-Franklin Ins. Co., 39 Ohio St.3d at 75, 529 N.E.2d at 468. And, as an additional consequence, prejudgment interest should be calculated on only the $197,701.98 breach of contract award. More important, however, I fear that today’s application of Zoppo will further blur the distinction between the proof required to create a jury question on a breach of contract committed by an insurer and a cause of action in tort for bad faith.
Moyer, C.J., and Lundberg Stratton, J., concur in the foregoing opinion.