Court Opinion

ID: 6764727
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:35:25.793349+00
Date Added: 2024-06-11T16:02:40.582192
License: Public Domain

Douglas, J.,
dissenting. While the judgment of the majority appears to affirm the judgment of the court of appeals, this really is more fiction than fact. Therefore, I must vigorously dissent.
Part II of the opinion of the court of appeals is a well-reasoned discussion of the primary issue in this case. Today’s majority opinion is so far afield from what the court of appeals held, and what this case is all about, that it is my guess that the court of appeals’ judges, Judges Pryatel, McManamon and Parrino, and also the parties herein, will not recognize that we are discussing their case.
This case is not about punitive damages. This case is not about intentional torts. This case is not about “no lawful basis” or “the intentional refusal to satisfy a claim.” This case is about the question of what is a proper jury instruction in an action by an insured alleging bad faith on the part of an insurer in failing to settle a claim within the terms of a policy of insurance. This case is also about a cross-appeal presenting the issues of what evidence *701is admissible by an insured to support an allegation of bad faith against an insurer; whether litigation expenses of an insured, to effect recovery of a claim under the insured’s own policy, are recoverable as damages in the bad faith claim; and whether the duty of good faith owed by an insurer to its insured continues until the claim is resolved or terminates when litigation between the insurer and the insured commences.
I
The Appeal
Appellant-insurer’s sole proposition of law on appeal to this court is: “In order to demonstrate bad faith on the part of an insurer, an insured must show that the insurer acted with a dishonest purpose, moral obliquity, conscious wrongdoing, or a breach of a known duty through some ulterior motive. (Slater v. Motorists Mutual Ins. Co. [1962], 174 Ohio St. 148 [21 O.O.2d 420, 187 N.E.2d 45], approved and followed).” This appeal arises because the court of appeals reversed a jury verdict rendered in favor of appellant on the bad faith claim of appellee. The basis of the reversal was that the trial court improperly, in part, instructed the jury on the standard to be used in determining alleged insurer bad faith.
The trial judge instructed the jury that “I will now define for you bad faith. A lack of good faith is the equivalent of bad faith. Bad faith embraces more than bad judgment or negligence. Bad faith imparts a dishonest purpose, moral obliquity, conscious wrongdoing or a breach of a known duty through some ulterior motive.” (Emphasis added.) This definition is found in Slater v. Motorists Mut. Ins. Co. (1962), 174 Ohio St. 148, 21 O.O.2d 420, 187 N.E.2d 45, a four-to-three decision of this court, with a visiting judge from the second appellate district in the majority.
Subsequently, we decided Staff Builders, Inc. v. Armstrong (1988), 37 Ohio St.3d 298, 525 N.E.2d 783. In Staff Builders, we said: “Accordingly, it is our further determination that 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." (Emphasis added.) Id. at 303, 525 N.E.2d at 788. In addition, we said that “ * * * [a]s mentioned previously, an award of compensatory damages against an insurance company for bad faith is predicated upon its refusal to pay the claim where such refusal is not founded upon circumstances that furnish reasonable justification therefor.” (Emphasis added.) Id. at 304, 525 N.E.2d at 790.
In further discussing the trial court’s charge in Staff Builders, Justice Sweeney ably pointed out the different standards applicable to bad faith and *702malice: “ * * * In explaining the standard of conduct evidencing bad faith on the part of appellant, the trial court in its jury instruction remarked: ‘[Bad faith] imports a dishonest purpose, moral obliquity, conscious wrongdoing, breach of a known duty through some ulterior motive or ill will partaking of the nature of fraud. It also embraces actual intent to mislead or deceive another.’ ” (Emphasis sic.) Id. at 305, 525 N.E.2d at 790. Justice Sweeney went on to say that “[t]his standard, however, is more akin to that necessary to prove malice than bad faith. * * * ” Id.
As the court of appeals recognized in its well-reasoned opinion, the standards set forth in Slater and Staff Builders, to support a claim of insurer bad faith, are incompatible. Further, over forty years ago this court set the standard in Hart v. Republic Mut. Ins. Co. (1949), 152 Ohio St. 185, 188, 39 O.O. 465, 466, 87 N.E.2d 347, 349, when we said, “ * * * [t]he conduct of the insurer must be based on circumstances that furnish reasonable justification therefor. * * * ” Finally, the subject of “what is bad faith” and the various standards used by the several states for determining alleged bad faith claims were discussed in Murray & Delli Bovi, Prosecuting Bad Faith Claims, Prosecuting and Defending Insurance Claims (Cushman, Roznowski & Simpson Ed. 1989) 439, at Section 17.8. Attorneys Dennis Murray, Sr. and Kirk Delli Bovi point out, at 445-446, that the range of the spectrum of standards is the simple negligence standard on the one end and the moral obliquity standard on the other end. Obviously, the middle, fairer and more acceptable standard is the one we adopted in Staff Builders —the “reasonable justification” standard.
Accordingly, the syllabus law in this case should be:
“An insurance company fails to exercise good faith in the processing of a claim of its insured when its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification for such refusal. (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.)” Conversely, the majority says that in order to demonstrate the tort of bad faith, an insurer must “ * * * intentionally refuse to satisfy the insured’s claim. * * * ” (Emphasis added.) This has never been the law in Ohio and we should not now let such a standard creep into our jurisprudence.
II
The Cross-Appeal
The majority summarily dispatches appellee’s cross-appeal by dismissing it as improvidently allowed. Given the extensive discussion in the majority *703opinion of non-issues, this indeed seems curious. I would not treat the cross-appeal in the manner dictated by the majority.
A

Litigation Expenses

This case involves a policyholder sued by his insurance carrier. The case commenced when the carrier offered appellee $5,000 to settle his underinsured claim. After this offer was refused, the appellee demanded arbitration. When the arbitrators unanimously awarded appellee-insured over $118,000, the carrier wanted a jury trial.7 Subsequently, the jury rendered its verdict for appellee in the amount of $480,000 and the carrier finally paid appellee the $100,000 policy limit.8 This was in January of 1989 — for an accident that occurred in January of 1982.
Meanwhile, appellee has been through negotiations, arbitration, two trials, two trips to the court of appeals and two trips to this court. Now, if what the majority opinion holds is what I think it does — appellee will go through yet another trial on the bad faith claim and will not be entitled to claim any litigation expenses even if a jury finds the carrier engaged in bad faith. It might be logically asked, what other compensatory damages might there be in a bad faith claim? From the evidence submitted, there are obviously some— home foreclosure, no money for son’s college tuition, no medical or fire insurance and so forth.
At the trial on the bad faith claim, appellee sought litigation expenses connected only with the litigation of the injury claim. He did not seek expenses involved in the bad faith claim. The expenses sought consisted generally of deposition costs and expert witness fees. The litigation expenses were sought as part of the compensatory damages in the bad faith case. Apparently no attorney fees were sought.
*704While it is true, as set forth in Ohio Edison Co. v. Franklin Paper Co. (1985), 18 Ohio St.3d 15, 16, 18 OBR 13, 479 N.E.2d 843, 844, that “[generally, an unsuccessful litigant is not liable for the litigation expenses, including attorney fees, of its adversary in the absence of a statute providing for their allowance * * *,” that rule does not, necessarily, also pertain to cases where an insurer is found to have acted in bad faith. The law in Ohio on this question is sparse. For this reason, if no other, this court should address and decide the question.
Nonetheless, we do have the reported case of Spadafore v. Blue Shield (1985), 21 Ohio App.3d 201, 21 OBR 215, 486 N.E.2d 1201, in which then-judge and now Chief Justice Moyer participated and concurred. In sustaining the appellant’s fourth and fifth assignments of error relating to compensatory damages, the court said that “[t]he course of conduct sufficiently established the breach of the insurer’s duty of good faith so as to submit that issue to the jury. Damages flowing from the conduct and other damages caused by the breach of contract also should have been submitted. * * * An obvious loss to Spadafore [appellant] was the cost of the lawsuit to enable recovery of his claim. * * * ” (Emphasis added.) Id. at 204, 21 OBR at 217-218, 486 N.E.2d at 1204.
This is the same claim being made herein in appellee’s cross-appeal. The issue is important. It has been properly raised. The trial court and the court of appeals have ruled that such litigation expenses may not be considered by the jury. We should decide the question.
B

What Evidence is Admissible?

This case, in appellee’s cross-appeal, raises two issues under this heading. First, may documents showing how the carrier handled the claim be admitted in evidence even if those documents contain information of the carrier, its attorneys and its claims personnel regarding evaluation of the claim and possible offers of settlement? Secondly, does the common-law duty of good faith terminate when an insured files a lawsuit against the insurer sounding in bad faith?
Appellee submitted five exhibits9 which involved the conduct of the carrier in evaluating appellee’s claim. The trial court excluded these documents from evidence on the basis of Evid.R. 403 and 408. The trial court also ruled that *705any evidence coming into existence after the bad faith lawsuit was filed could not be admitted on the issue of bad faith.
In Spadafore, supra, the court also said that “ * * * evidence of the breach of the insurer’s duty to exercise good faith occurring after the time of filing suit is relevant so long as the evidence related to the bad faith or handling or refusal to pay the claim. * * * ” (Emphasis added.) Id. at 204, 21 OBR at 217, 486 N.E.2d at 1204. Appellee claims, and at least some of the documents so indicate, that the evidence was related to the handling of the original injury claim and has nothing to do with the specific bad faith litigation but, in any event, the insurer’s duty of good faith continues even after a bad faith lawsuit is filed. Appellee also contends, and I think properly so, that Evid.R. 408 does not preclude the introduction of settlement negotiations if offered not to prove liability for the original loss but to prove failure to process the claim fairly and in good faith.
Once again, these are important issues. The trial court and the court of appeals have decided the questions. They are matters of first impression for us. They are properly before us. We should decide them for the guidance of the bench and bar.
Accordingly, because the majority does not decide- the primary issue presented to us by the parties and, in addition, ignores the important issues raised in the cross-appeal, I must dissent even though I agree that appellee is entitled to a new trial on his bad faith claim.
Sweeney and Resnick, JJ., concur in the foregoing dissenting opinion.

. As part of his response to the carrier’s complaint seeking a jury trial, appellee filed a motion to dismiss on the basis that the award of the arbitrators was final. The trial judge, Judge Feighan, in October 1986, ruled that the carrier did not have the right to appeal the arbitrators’ award. The carrier appealed and the court of appeals, on the basis of language in the policy, reversed the judgment of the trial court and ruled that the carrier was entitled to a trial by jury on appellee’s underinsured motorists claim. It now appears that the trial judge was correct. See Schaefer v. Allstate Ins. Co. (1992), 63 Ohio St.3d 708, 590 N.E.2d 1242.

. Apparently the carrier paid the full $100,000 policy limit, notwithstanding the $25,000 paid by the tortfeasor’s insurance company, on the authority of James v. Michigan Mut. Ins. Co. (1985), 18 Ohio St.3d 386, 18 OBR 440, 481 N.E.2d 272, and Gomolka v. State Auto. Mut. Ins. Co. (1984), 15 Ohio St.3d 27, 15 OBR 67, 472 N.E.2d 700. See appellee’s exhibits 82A and B and 83.

. Given the content of these documents, it is no wonder the carrier is fighting so vigorously to keep them from a jury.