Ohio Cas. Ins. Co. v. Mansfield Plumbing Prod., L.L.C. ( 2011 )

[Cite as Ohio Cas. Ins. Co. v. Mansfield Plumbing Prod., L.L.C., 2011-Ohio-4523.]
COURT OF APPEALS
ASHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE OHIO CASUALTY INSURANCE COMPANY
Plaintiff-Appellee
-vs-
MANSFIELD PLUMBING PRODUCTS, LLC
Defendant-Appellant
JUDGES:
: Hon. W. Scott Gwin, P.J.
: Hon. Sheila G. Farmer, J.
: Hon. Julie A. Edwards, J.
:
:
: Case No. 2011-COA-009
:
:
: OPINION
CHARACTER OF PROCEEDING: Civil appeal from the Ashland County Court
of Common Pleas, Case No. 07CIV467
JUDGMENT: Affirmed
DATE OF JUDGMENT ENTRY: September 7, 2011
APPEARANCES:
For Plaintiff-Appellee For Defendant-Appellant
ROBERT W. YOUNG REGINALD S. KRAMER
3399 Pinnacle Lane COLIN G. SKINNER
Mason, OH 45040 OLDHAM KRAMER
195 South Main Street
Akron, OH 44308-1314
Gwin, P.J.
{¶1} Defendant-appellant Mansfield Plumbing Products, LLC appeals a
judgment of the Court of Common Pleas of Ashland County, Ohio, which affirmed the
decision of the magistrate to whom the matter was referred. The magistrate found
plaintiff-appellee the Ohio Casualty Insurance Company had no obligation to defend,
indemnify, or provide coverage for claims for damages arising from the failure of a
component of one of appellant’s products. Appellant assigns two errors to the trial
court:
{¶2} “I. THE TRIAL COURT ERRED IN ADOPTING THE MAGISTRATE’S
DECISION WHICH IGNORED, OR NULLIFIED, A VALID STIPULATION OF THE
PARTIES.
{¶3} “II. THE TRIAL COURT ERRED IN ADOPTING THE MAGISTRATE’S
DECISION WHEREIN THE MAGISTRATE ERRONEOUSLY CONSTRUED THE
CONTRACTUAL LOSS IN PROGRESS EXCLUSION.”
{¶4} The issue in this case is whether the “loss in progress” exclusion contained
in the parties’ contracts of insurance was properly before the magistrate, and if so,
whether it precludes appellant’s recovery.
{¶5} The matter was submitted to the magistrate on cross motions for summary
judgment. The magistrate found the relevant facts of the case are undisputed.
Appellant produces various plumbing parts and fixtures. In the spring of 2002, appellant
purchased a resin identified as Geon 210 from PolyOne Corporation, which is not a
party to the lawsuit. Appellant used the Geon 210 resin to manufacture a toilet
component known as a hush tube. Appellant installed the hush tubes made from Geon
210 in toilets which were subsequently sold to third-party consumers. In August 2002,
appellant became aware of cracks developing in some of the hush tubes produced from
Geon 210 resin. Many of appellant’s customers suffered property damage as a result of
cracked hush tubes, and numerous damage claims were submitted by the customers
between 2002 and 2005.
{¶6} In the years 2003 and 2004, appellant contracted with Federal Insurance
Company to provide primary liability insurance coverage. The primary policies had a
policy limit of $1,000,000 of coverage per occurrence. The policies also required a
$500,000 per occurrence self-insured retention, which operates like a deductible.
{¶7} Appellant also purchased excess insurance policies from appellee for the
years 2003 and 2004. The 2003 excess policy provided coverage of up to $25,000,000
per occurrence, while the 2004 excess policy provided $5,000,000 in coverage per
occurrence. The excess policies were only triggered by exhaustion of the primary
liability policies. This means before appellee’s policies would apply, appellant would be
required to pay the first $500,000 of damages arising out of each occurrence, and the
primary policy would pay the next $1,000,000 in damages.
{¶8} Ultimately, appellant paid third-party property damage claimants
$3,781,675.74 for damages caused by the failure of the hush tubes during the years
2003 and 2004. The primary insurance company recognized all the hush tube failures
in any given policy year as one occurrence, and paid appellee $1,000,000 for each of
the relevant policy years. Appellant paid its self-insured retention of $500,000 for each
policy year.
{¶9} The magistrate’s decision reviewed two specific terms in the excess policy.
The excess policy provides it will insure appellant against “bodily injury or property
damage that occurs during the policy period.” The primary policy defines the word
“occurrence” as “an accident, including continuous or repeated exposure to substantially
the same general harmful conditions.” The magistrate noted the excess policies for
2003 and 2004 are “follow form” policies, which means they adopt the terms of the
primary policies unless they specifically state otherwise.
{¶10} The second policy term in dispute is the “loss in progress” exclusion. The
excess policy excludes “bodily injury or property damage that is a *** continuation or
resumption of any bodily injury or property damage known *** prior to the beginning of
the policy period, to have occurred.” Appellee successfully argued to the magistrate
and the court that appellant knew its toilets malfunctioned in 2002, prior to its purchase
of the excess policy. Appellee argued because appellant knew of the damage, even if
the damage fell within the policy period, it was excluded.
I.
{¶11} Appellant’s first assignment of error urges the trial court erred in adopting
the magistrate’s decision because the magistrate considered a policy exclusion that was
beyond the scope of the issues and the stipulation presented.
{¶12} The joint stipulation filed by the parties on May 6, 2010 provides that if the
court finds there was one occurrence under the primary liability insurance contracts,
then appellant “*** sustained a net loss, in excess of itself-insured retentions and
primary insurance, of $781,675.74, for which it is entitled to recovery, together with
interest on said amount *** subject to the court’s ruling on the legal issues described
and set forth in paragraph four below”. In the alternative, if the court found each third
party damage claim was a separate occurrence, then appellee’s policies would not
apply. The stipulation provided the parties reserved all rights to appeal the rulings of
the court, and the right to supplement the record on the remaining legal issues.
{¶13} It is appellant’s position that because the stipulation does not expressly
refer to the loss in progress provision, the magistrate should not have considered it
Appellant also argues, appellee had waived any argument regarding the exclusion by
omitting it from the stipulation.
{¶14} Appellee asserts the joint stipulation does not provide that the loss in
progress exclusion is inapplicable to the case. Appellee also argues the stipulated
provision reserving the right to supplement the record on the legal issues means it has
not waived its arguments regarding the applicability of the loss in progress coverage
exclusion. In fact, appellee argues appellant specifically admitted the loss in progress
issue is potentially determinative of the case, and never moved to strike any of the
arguments appellee raised regarding the loss in progress exclusion.
{¶15} The magistrate found it is irrelevant whether there was a single occurrence
or multiple occurrences in this case, because the plain language of the parties’
contracts excluded any disputed damages from coverage. The magistrate found the
loss in progress provision excludes property damage that is a continuation or
resumption of any bodily injury or property damage known by appellant before the
beginning of the policy period. Stated simply, the magistrate found because appellant
knew about the defective resin in 2002, the policies issued in 2003 and 2004 do not
cover any damages caused by the defective resin.
{¶16} We find the court did not err in construing the loss in progress provision,
and we agree the loss in progress provision excludes damages occurring prior to the
beginning of the policy period, of which appellant knew prior to purchasing the policy.
{¶17} The first assignment of error is overruled.
II.
{¶18} In its second assignment of error, appellant argues if the loss in progress
exclusion was properly before the court, then the court misconstrued the provision, and
it does not bar appellant’s recovery.
{¶19} Appellant asserts even if the occurrence that caused the damages took
place in 2002, the damage did not immediately manifest itself until later. Appellant
asserts the excess coverage applies to damages that occurred during the policy
periods, and it had no way of knowing when any future property damage claims might
arise or how extensive they would be. Appellant urges the policies were in effect when
the property damage actually developed.
{¶20} As the magistrate properly found, even if we were to find each damage
claim is a separate occurrence, the damages all arose from use of the defective resin,
and appellant knew prior to purchasing the policies that the hush tubes were failing and
causing damage to third parties. We agree with the court the failing of the hush tubes is
a continuation of property damage and is excluded by the loss in progress provision.
{¶21} The second assignment of error is overruled.
{¶22} For the foregoing reasons, the judgment of the Court of Common Pleas, of
Ashland County, Ohio, is affirmed.
By Gwin, P.J.,
Farmer, J., and
Edwards, J., concur
_________________________________
HON. W. SCOTT GWIN
_________________________________
HON. SHEILA G. FARMER
_________________________________
HON. JULIE A. EDWARDS
WSG:clw 0809IN THE COURT OF APPEALS FOR ASHLAND COUNTY, OHIO
FIFTH APPELLATE DISTRICT
THE OHIO CASUALTY INSURANCE
COMPANY
:
:
Plaintiff-Appellee :
:
:
-vs- : JUDGMENT ENTRY
:
MANSFIELD PLUMBING
PRODUCTS, LLC
:
:
:
Defendant-Appellant : CASE NO. 2010-CAF-03-0024
For the reasons stated in our accompanying Memorandum-Opinion, the
judgment of the Court of Common Pleas, of Ashland County, Ohio, is affirmed. Costs to
appellant.
_________________________________
HON. W. SCOTT GWIN
_________________________________
HON. SHEILA G. FARMER
_________________________________
HON. JULIE A. EDWARDS