AKC, Inc. v. United Speciality Ins. Co. , 2019 Ohio 2809 ( 2019 )

[Cite as AKC, Inc. v. United Speciality Ins. Co., 2019-Ohio-2809.]
STATE OF OHIO ) IN THE COURT OF APPEALS
)ss: NINTH JUDICIAL DISTRICT
COUNTY OF SUMMIT )
AKC, INC., dba CLEANTECH C.A. No. 29197
Appellant
v. APPEAL FROM JUDGMENT
ENTERED IN THE
UNITED SPECIALITY INSURANCE COURT OF COMMON PLEAS
COMPANY, et al. COUNTY OF SUMMIT, OHIO
CASE No. CV 2016-11-5009
Appellees
DECISION AND JOURNAL ENTRY
Dated: July 10, 2019
TEODOSIO, Presiding Judge.
{¶1} AKC, Inc., dba CleanTech, assignee of Globalcor Associates, L.L.C. (“AKC”),
appeals the order of the Summit County Court of Common Pleas granting summary judgment in
favor of United Specialty Insurance Company (“United”) and Cilantro Thai, Inc. (“Cilantro”).
We reverse and remand.
I.
{¶2} AKC is a corporation engaged in the cleaning and casualty restoration business
that was assigned a claim for damages from Globalcor Associates, LLC, dba Bank Nightclub.
The damages stemmed from an insurance claim for sanitary sewer backup and cleaning and
restoration costs at the Bank Nightclub in Akron, Ohio. In November 2016, AKC filed its
complaint alleging breach of contract against United and negligence against two restaurant
businesses: Cilantro, and USAFA, LLC, dba Bricco. AKC alleged that the two restaurants
adjoining the Bank Nightclub had been negligent in causing the sewer backup by dumping
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cooking grease into their sanitary drain lines, which connected to a common drain line used by
Globalcor.
{¶3} The complaint also alleged that Globalcor was instructed by its insurer, United, to
proceed with the immediate clean-up of the sewage in order to prevent further damage.
Subsequently, Globalcor contacted AKC to perform the clean-up and restoration, which was
completed in December 2014. After the completion of the work, United informed Globalcor that
it was denying the insurance claim because the damage was excluded by provisions of the
existing insurance policy. In March 2015, Globalcor assigned its claim for damages to AKC. In
its complaint, AKC alleged that United committed a breach of contract in denying the claim.
{¶4} All three defendants filed motions for summary judgment on the claims made
against them by AKC, with the trial court granting summary judgment in favor of all three
defendants in September 2018. AKC now appeals raising two assignments of error.
II.
{¶5} As a preliminary matter, we address two motions presently before this Court.
First is Cilantro’s motion to strike “Issue No. 6” of AKC’s reply brief. In its reply brief to this
Court, AKC raises an argument not contained within the appellant’s brief filed in this matter.
Loc.R. 7(D) provides that reply briefs shall be restricted to matters in rebuttal of the appellee’s
brief. Because “Issue No. 6” of the reply brief raises a new argument that is not restricted to a
matter of rebuttal, it is hereby stricken from the record.
{¶6} The second motion before this Court is AKC’s motion to dismiss its appeal with
prejudice as to USAFA, LLC, dba Bricco. The motion is granted and USAFA, LLC, dba Bricco
is dismissed from this appeal with prejudice.
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III.
{¶7} Appellate review of an award of summary judgment is de novo. Grafton v. Ohio
Edison Co., 77 Ohio St. 3d 102, 105 (1996). Summary judgment is appropriate under Civ.R. 56
when: (1) no genuine issue as to any material fact remains to be litigated; (2) the moving party is
entitled to judgment as a matter of law; and (3) viewing the evidence most strongly in favor of
the nonmoving party, reasonable minds can come to but one conclusion and that conclusion is
adverse to the nonmoving party. Temple v. Wean United, Inc., 50 Ohio St. 2d 317, 327 (1977),
citing Civ.R. 56(C). A court must view the facts in the light most favorable to the non-moving
party and must resolve any doubt in favor of the non-moving party. Murphy v. Reynoldsburg, 65
Ohio St. 3d 356, 358–359 (1992). A trial court does not have the liberty to choose among
reasonable inferences in the context of summary judgment, and all competing inferences and
questions of credibility must be resolved in the nonmoving party’s favor. Perez v. Scripps–
Howard Broadcasting Co., 35 Ohio St. 3d 215, 218 (1988).
{¶8} The Supreme Court of Ohio has set forth the nature of this burden-shifting
paradigm:
[A] party seeking summary judgment, on the ground that the nonmoving party
cannot prove its case, bears the initial burden of informing the trial court of the
basis for the motion, and identifying those portions of the record that demonstrate
the absence of a genuine issue of material fact on the essential element(s) of the
nonmoving party’s claims. The moving party cannot discharge its initial burden
under Civ.R. 56 simply by making a conclusory assertion that the nonmoving
party has no evidence to prove its case. Rather, the moving party must be able to
specifically point to some evidence of the type listed in Civ.R. 56(C) which
affirmatively demonstrates that the nonmoving party has no evidence to support
the nonmoving party’s claims. If the moving party fails to satisfy its initial
burden, the motion for summary judgment must be denied. However, if the
moving party has satisfied its initial burden, the nonmoving party then has a
reciprocal burden outlined in Civ.R. 56(E) to set forth specific facts showing that
there is a genuine issue for trial and, if the nonmovant does not so respond,
summary judgment, if appropriate, shall be entered against the nonmoving party.
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Dresher v. Burt, 75 Ohio St. 3d 280, 293 (1996).
ASSIGNMENT OF ERROR ONE
THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN
FAVOR OF UNITED SPECIALTY ON THE “POLLUTION EXLUSION” IN
THE SUBJECT POLICY[.]
{¶9} In its first assignment of error, AKC argues the trial court erred in granting
summary judgment in favor of United Specialty based upon the “pollution exclusion” in the
subject insurance policy, making three separate arguments that we address separately below.
{¶10} Under this assignment of error, AKC first argues the trial court erred in
interpreting the contract term “pollutant” to include raw sewage because it is not the only
interpretation that can be fairly placed on the policy language and because it is contrary to Ohio
law. The policy excludes coverage “for loss or damage caused by or resulting from * * * [the
d]ischarge, dispersal, seepage, migration, release or escape of ‘pollutants’ unless the discharge,
dispersal, seepage, migration, release or escape is itself caused by any of the ‘specified causes of
loss.’” Under the policy “pollutants” is defined as “any solid, liquid, gaseous or thermal irritant
or contaminant, including smoke, vapor, soot, fumes, acids, alkalis, chemicals and waste. Waste
includes materials to be recycled, reconditioned or reclaimed.”
{¶11} The trial court specifically found that “raw sewage” was included within the
definition of “pollutant.” The trial court also found, however, that the stated terms “discharge,
dispersal, seepage, migration, release or escape” did not encompass “back-up or overflow.” The
trial court therefore did not find that coverage was excluded as a basis of this provision, and
noted “this determination is not key to the resolution of the motion.” Because this particular
exclusionary provision was not applied by the trial court, we find AKC’s first argument to be
moot.
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{¶12} AKC next argues that the trial court erred because it mistakenly assumed that a
sanitary sewer line carrying raw sewage is the same as a storm sewer line carrying surface water
runoff. The finding in question states that the exclusion for “water” backing up or overflowing
from a sewer includes “raw sewage” that backs up or overflows from the same sewer line. AKC
has failed to show that this finding is based on the assumption that a sanitary sewer line carrying
raw sewage is the same as a storm sewer line carrying surface water runoff, and we decline to
reach such a conclusion.
{¶13} AKC’s third argument addresses the finding of the trial court that the exclusion
for water backing up or overflowing from a sewer includes raw sewage that also backs up. AKC
contends this is not the only interpretation that can be fairly placed on the policy language.
{¶14} “Where provisions of a contract of insurance are reasonably susceptible of more
than one interpretation, they will be construed strictly against the insurer and liberally in favor of
the insured.” Lane v. Grange Mut. Cos., 45 Ohio St. 3d 63, 65 (1989). “The insurer, being the
one who selects the language in the contract, must be specific in its use; an exclusion from
liability must be clear and exact in order to be given effect.” Id.
{¶15} The policy at issue provides:
B. Exclusions
1. We will not pay for loss or damage caused directly or indirectly by any
of the following. Such loss or damage is excluded regardless of any other
cause or event that contributes concurrently or in any sequence to the loss.
...
g. Water
(1) Flood, surface water, waves, tides, tidal waves,
overflow of any body of water, or their spray, all
whether driven by wind or not;
(2) Mudslide or mudflow;
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(3) Water that backs up or overflows from a sewer,
drain or sump; or
(4) Water under the ground surface pressing on, or
flowing or seeping through:
(a) Foundations, walls, floors or
paved surfaces;
(b) Basements, whether paved or
not; or
(c) Doors, windows or other
openings.
{¶16} We reviewed a similar exclusionary provision in Fairlawn Properties, Inc. v.
Liberty Mut. Ins. Co., where the policy excluded “[l]oss caused by, resulting from, contributed to
or aggravated by * * * water which backs up through sewers or drains.” Fairlawn Properties,
Inc. v. Liberty Mut. Ins. Co., 9th Dist. Summit No. 10671, 1982 WL 5163, *2 (Dec. 8, 1982).
The appellee in the case argued that the provision may have applied to water, but did not apply to
raw sewage. Id. The trial court found:
At first blush, it may seem that ‘water’ is simply another word for ‘liquid.’ This,
however, is not accurate, inasmuch as all water is liquid but not all liquids are
water. Water is a specific substance, having a definite formulation of hydrogen
and oxygen, and nothing else. In this case, the policy could have defined the
excluded damage as being that caused by liquids, or by water-borne material. The
fact is, however, that the broader terms were not used and the more narrow term
was used. This fact necessitates drawing a distinction between damage caused
solely by water and damage caused by those things that might be found in water.
An example of the former might be destruction caused by high water, or by things
floating away, or things becoming useless because of being water-logged.
Examples of the latter might be stains or foul odors.
***
It seems clear that the material which caused the damage in this case was not
water, but whatever was in whatever liquid it was that came out of the sanitary
sewer. Further buttressing this construction would be the observation that the
choice of words by the insurance company was consistent with the well-known
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exemption in nearly all property insurance policies of damages caused by floods.
This sort of damage is what was trying to be exempted, and this is why the word
‘water’ was used. The damage in this case was simply not the kind of flood
damage so contemplated.
Id.
{¶17} We agreed with the trial court’s finding that the exclusion was ambiguous,
stating:
The broad provisions of coverage are to insure the property of the insured.
Exclusions in the policy should be definite and detailed and not lend themselves
to other subjective determinations. As the trial court pointed out, questions arise
as to whether the exclusion deals with water which backs up through storm
sewers which ordinarily carry runoff and drainage water alone. If the exclusion
was to have encompassed raw sewage backing up from sanitary sewers it could
have specifically so stated.
We recognize appellant’s argument that raw sewage also contains water.
However, the facts herein lead us to the conclusion that in order to apply the
exclusion questions are presented, and for that reason we find the trial court’s
judgment, as to exclusion (D) being ambiguous, is supported by the record.
Id. at *3.
{¶18} In reviewing the policy issued by United, we note that the section setting forth the
exclusion is specifically listed under the category of “water.” Three of the four subsections
mention only water, with the second subsection specifying “[m]udslide or mudflow.” Had the
insurer wished to exclude “sewage” from coverage, it could have easily and succinctly done so
with the mere addition of the very word, as other insurance policies have done. See Hartman v.
Erie Ins. Co., 6th Dist. Wood No. WD-16-022, 2017-Ohio-668, ¶ 34 (concerning a policy stating
a “water damage” exclusion for “water or sewage which backs up through sewers or drains or
water which enters into and overflows from within a sump pump, sump pump well or any other
system designed to remove subsurface water which is drained from the foundation”) (Emphasis
added.).
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{¶19} The rationale we set forth in Fairlawn Properties is equally applicable to this
matter. We conclude the provision of the insurance contract was reasonably susceptible of more
than one interpretation, and therefore should be construed strictly against the insurer and liberally
in favor of the insured. See Lane at 65.
{¶20} AKC’s first assignment of error is sustained.
ASSIGNMENT OF ERROR TWO
THE TRIAL COURT ERRED IN GRANTING SUMMARY JUDGMENT IN
FAVOR OF * * * CILANTRO * * * [.]
{¶21} In its second assignment of error, AKC argues the trial court erred in granting
summary judgment in favor of Cilantro. As in the first assignment of error, AKC raises three
separate arguments under this assignment of error.
{¶22} AKC first argues that it presented evidence that both parties to the assignment of
claims by Globalcor to AKC intended that negligence claims against any tortfeasors subject to
subrogation to the insurance claim were to be included in the assignment. In its second
argument, AKC contends that because Globalcor assigned AKC its negligence claims for
physical damage, the economic loss doctrine does not apply. Finally, AKC argues that the
affidavit of Delmas Roy of the Akron Department of Public Service established that “grease
traps are installed in commercial kitchens to prevent sanitary sewer blockage, and that failure to
clean those grease traps can lead to the sewer back-up that Globalcor experienced.” AKC
contends this evidence satisfies the “duty” element of its negligence claim.
{¶23} Although the trial court found that AKC did not receive an assignment from
Globalcor to pursue a negligence claim against Cilantro, it further found that even if the
negligence claim had been otherwise viable, AKC failed to produce any evidence to establish
that Cilantro owed AKC or Globalcore a duty, that it breached that duty, or that its damages were
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proximately caused by the breach of duty. The trial court specifically stated that it granted
summary judgment in favor of Cilantro on that basis. None of the arguments set forth by AKC
in its assignment of error address the failure to produce evidence of a breach of duty or of
proximate cause. This failure renders the arguments set forth by AKC moot, as those arguments
alone could not sustain the assignment of error.
{¶24} AKC’s second assignment of error is overruled.
IV.
{¶25} Cilantro’s motion to strike “Issue No. 6” of AKC’s reply brief is granted. AKC’s
motion to dismiss its appeal with prejudice as to USAFA, LLC, dba Bricco is granted. AKC’s
first assignment of error is sustained. AKC’s second assignment of error is overruled. The
judgment of the Summit County Court of Common Pleas is reversed and remanded for further
proceedings consistent with this opinion.
Judgment reversed
and remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(C). The Clerk of the Court of Appeals is
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instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30.
Costs taxed to Appellees.
THOMAS A. TEODOSIO
FOR THE COURT
HENSAL, J.
CONCURS.
CARR, J.
CONCURS IN JUDGMENT ONLY.
APPEARANCES:
JOHN CURTIS ALBERTI, Attorney at Law, for Appellant.
JEFFREY S. MAYNARD, Attorney at Law, for Appellee.
ERIC J. WILLIAMS, Attorney at Law, for Appellee.
JOHN L. ANTEL, Attorney at Law, for Appellee.