Sullivan v. Westfield Ins. Co.

[Cite as Sullivan v. Westfield Ins. Co., 2013-Ohio-146.]
IN THE COURT OF APPEALS
ELEVENTH APPELLATE DISTRICT
LAKE COUNTY, OHIO
TONY AND STEPHANIE SULLIVAN, : OPINION
INDIVIDUALLY AND ON BEHALF OF
ALL OTHERS SIMILARLY SITUATED, :
Plaintiffs-Appellants, :
CASE NO. 2012-L-004
- vs - :
WESTFIELD INSURANCE :
COMPANY, et al.
:
Defendants-Appellees.
Civil Appeal from the Lake County Court of Common Pleas, Case No. 11CV000397.
Judgment: Affirmed.
Patrick J. Perotti, Dworken & Bernstein Co., L.P.A., 60 South Park Place, Painesville,
OH 44077 (For Plaintiffs-Appellants).
John J. Haggerty and Thomas A. Cunniff, Fox Rothschild, LLP, 2700 Kelly Road, Suite
300, Warrington, PA 18976-2624 (For Defendants-Appellees).
MARY JANE TRAPP, J.
{¶1} Appellants, Tony and Stephanie Sullivan, appeal from two judgments of
the Lake County Court of Common Pleas. The first is an order dismissing certain
named defendants from the action, while the second is an order granting appellee,
Westfield Insurance Company’s (“Westfield”), motion for summary judgment. Through
the two orders, the trial court fully disposed of the action.
{¶2} We find that the trial court did not err in dismissing two of the named
defendants, American Select Insurance Company (“American Select”) and Ohio
Farmers Insurance Company (“Ohio Farmers”), because the Sullivans failed to state a
claim against those two entities upon which relief could be granted. We further find no
error in the trial court’s grant of summary judgment in favor of the remaining defendant,
Westfield, because the Sullivans’ claims were barred by the applicable statutes of
limitations. Therefore, the decisions of the Lake County Court of Common Pleas are
affirmed.
Substantive Facts and Procedural History
{¶3} On October 5, 1994, the Supreme Court of Ohio, in Martin v. Midwestern
Group Insurance Co., 70 Ohio St.3d 478, ruled that uninsured/underinsured (“UM/UIM”)
coverage followed the insureds under the policy and not the different vehicles in the
household, eliminating the “other-owned vehicle exception” to UM/UIM coverage. This
decision removed the necessity for insureds to pay UM/UIM premiums on each of the
vehicles on their policy, allowing them to pay for such coverage on only one vehicle, but
to have coverage for themselves and their resident family members while in any of their
owned vehicles.
{¶4} Prior to and at the time of the Martin decision, the Sullivans had an
automobile insurance policy through Westfield. Three cars were listed on the policy,
and the Sullivans paid UM/UIM premiums on all three vehicles. On December 10,
1994, the Sullivans’ insurance policy was up for renewal, however, they never
completed their premium payments, and Westfield cancelled their insurance policy for
non-payment on June 6, 1995.
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{¶5} Over fifteen years after their policy was cancelled, the Sullivans filed a
complaint against Westfield, American Select, and Ohio Farmers, asserting claims of
breach of contract, and misrepresentation and fraud. They asserted these claims on
behalf of themselves and all others similarly situated. The crux of the Sullivans’
complaint was that Westfield, American Select, and Ohio Farmers had sold them
automobile insurance, including UM/UIM coverage, and had unnecessarily and
fraudulently continued to charge them premiums for UM/UIM coverage on more than
one vehicle, despite the holding in Martin, supra.
{¶6} As to the breach of contract claim, the Sullivans alleged Westfield
provided “something other than what the parties contracted the plaintiffs would receive
for payment of premiums for ‘UM’ on vehicles beyond the first; charging a fee for a
‘benefit’ which does not exist; breaching the fiduciary duty owed by the carrier to its
customers; and breaching the contractual duty of good faith and fair dealing.”
{¶7} In regard to the misrepresentation and fraud count, the Sullivans asserted
that Westfield represented to them that “the amount they were paying for vehicles after
the first was for UM coverage for the named insured and family members, when that
was untrue; and was instead for guest coverage.” They contended that they had so
relied, to their detriment.
{¶8} Westfield, American Select, and Ohio Farmers filed a motion to dismiss
the complaint, which the trial court denied in part, granted in part, and converted in part
to a motion for summary judgment. Pursuant to Civ.R. 12(B)(6), the trial court
dismissed American Select and Ohio Farmers from the suit, finding that the Sullivans
had failed to state a claim against those entities upon which relief could be granted.
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The trial court determined that “[n]othing in the complaint indicates that the named
plaintiffs had any contractual relationship with American Select Insurance Company or
Ohio Farmers Insurance Company. The only allegation against American Select
Insurance Company and Ohio Fa[r]mers Insurance Company is that they are
subsidiaries of Westfield.”
{¶9} Westfield also sought dismissal pursuant to Civ.R. 12(B)(6), but the trial
court converted this branch of the motion into a motion for summary judgment and
permitted the parties to further brief the matter. The trial court did so because
Westfield’s 12(B)(6) motion presented material outside the complaint, and the court did
not exclude such materials. See Civ.R. 12(B).
{¶10} In its motion for summary judgment, Westfield argued, among other
things, that the Sullivans’ claims were barred by the applicable statutes of limitations.
The Sullivans countered that the statute of limitations as to the breach of contract claim
had been tolled during the pendency of Beck v. Westfield Natl Ins. Co., Cuyahoga
Common Pleas, No. CV-09-691286, 2010 Ohio Misc. LEXIS 564 (Dec. 3, 2010), and
therefore their action was brought within the 15-year statute of limitations, as extended.
They asserted that because Beck included class action allegations, it tolled the running
of the statute of limitations as to them because they were putative class members.
{¶11} As to the misrepresentation and fraud claim, the Sullivans argued that
the four-year statute of limitations had been tolled by application of the discovery rule,
because they had only recently discovered that Westfield had misrepresented the
premiums as UM/UIM coverage for the insureds and family members, and not as guest
coverage.
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{¶12} The trial court agreed that the Sullivans’ claims were barred by both the
written contract and fraud statutes of limitations. As to the breach of contract claim, the
trial court distinguished the case from Vaccariello v. Smith & Nephew Richards, Inc., 94
Ohio St.3d 380 (2002), upon which the Sullivans had relied, and stated that the
Sullivans had “made the choice to rely on the potential class action, the risk that the
case could be dismissed on merits is foreseeable, and the plaintiff, having made the
choice to rely on the class action, should not be permitted a second bite at the apple.”
The trial court pointed out that “[i]n the case before this court, the previous lawsuit, filed
in Cuyahoga County, never addressed the class action allegations, and granted the
defendant’s motion to dismiss as to the breach of contract claim, and granted the
defendant’s motion for summary judgment on the fraud and misrepresentation claim.
Thus, the action did not fail otherwise than upon the merits and R.C. 2305.10 is not
applicable and cannot toll the statute of limitations.”
{¶13} With regard to the misrepresentation and fraud claim, the trial court found
that the Sullivans had constructive knowledge of the facts giving rise to their claim, and
that constructive knowledge was sufficient to begin the running of the statute of
limitations. “That they were not aware of the legal significance of these charges (that
the additional premiums only provided UM coverage for ‘guests’ and were not
necessary to protect the insureds and their resident family members) does not act to toll
the statute of limitations. ‘Ignorance of the law does not toll the statute of limitations.’”
{¶14} Accordingly, the trial court granted Westfield’s motion for summary
judgment in its entirety, disposing of the case. The Sullivans timely appealed, and now
bring the following assignments of error:
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{¶15} “[1.] The trial court erred in granting Defendant’s motion for Summary
Judgment which dismissed Plaintiff’s breach of contract and fraud claims on statute of
limitations grounds.”
{¶16} “[2.] The trial court erred in dismissing the other Westfield coverage
entities.”
{¶17} Westfield has brought a single cross-assignment of error:
{¶18} “The trial court did not consider alternative grounds in granting
Defendant’s Motion for Summary Judgment which dismissed Plaintiffs’ breach of
contract and fraud claims on statute of limitations grounds.”
The Motion for Summary Judgment - Statute of Limitations
{¶19} In their first assignment of error, the Sullivans challenge the trial court’s
grant of summary judgment in favor of Westfield based on statute of limitations grounds.
They argue that the trial court erred in not tolling the 15-year statute of limitations
applicable to the breach of contract claim on account of Beck, supra, and not applying
the discovery rule in determining when the 4-year statute of limitations began running
on the misrepresentation and fraud claim. We find that the trial court properly declined
to find that either statute of limitations was tolled, and thus we affirm the grant of
summary judgment to Westfield on statute of limitations grounds.
Standard of Review
{¶20} We review de novo a trial court’s order granting summary judgment.
Hapgood v. Conrad, 11th Dist. No. 2000-T-0058, 2002-Ohio-3363, ¶13, citing Cole v.
Am. Industries and Resources Corp., 128 Ohio App.3d 546 (7th Dist.1998). “A
reviewing court will apply the same standard a trial court is required to apply, which is to
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determine whether any genuine issues of material fact exist and whether the moving
party is entitled to judgment as a matter of law.” Id., citing Parenti v. Goodyear Tire &
Rubber Co., 66 Ohio App.3d 826 (9th Dist.1990).
{¶21} “Since summary judgment denies the party his or her ‘day in court’ it is not
to be viewed lightly as docket control or as a ‘little trial’. The jurisprudence of summary
judgment standards has placed burdens on both the moving and the nonmoving party.
In Dresher v. Burt [75 Ohio St.3d 280 (1996)], the Supreme Court of Ohio held that the
moving party seeking summary judgment bears the initial burden of informing the trial
court of the basis for the motion and identifying those portions of the record before the
trial court that demonstrate the absence of a genuine issue of fact on a material element
of the nonmoving party’s claim. The evidence must be in the record or the motion
cannot succeed. 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 but must be able to specifically point to some evidence of the type listed
in Civ.R. 56(C) that 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. If the moving party
has satisfied its initial burden, the nonmoving party has a reciprocal burden outlined in
the last sentence of Civ.R. 56(E) to set forth specific facts showing there is a genuine
issue for trial. If the nonmoving party fails to do so, summary judgment, if appropriate
shall be entered against the nonmoving party based on the principles that have been
firmly established in Ohio for quite some time in Mitseff v. Wheeler (1988), 38 Ohio
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St.3d 112, 526 N.E.2d 798.” Welch v. Ziccarelli, 11th Dist. No. 2006-L-229, 2007-Ohio-
4374, ¶40.
Beck Did Not Toll the Breach of Contract Statute of Limitations
{¶22} Pursuant to R.C. 2305.06, a plaintiff must bring an action for breach of
contract within 15 years of the date that the cause of action accrued. The Sullivans do
not dispute they brought their claim for breach of contract later than 15 years after the
cause of action had accrued (June 6, 1995), but argue that the statute of limitations had
been tolled during the pendency of the Beck case in the Cuyahoga County Court of
Common Pleas. They suggest that the tolling of the statute thus brought their filing date
of February 11, 2011 within the 15 years limitations period.
{¶23} The Sullivans rely on Vaccariello, supra, asserting that because the Beck
case included class action allegations, the statute of limitations was tolled because they
were putative class members in the Beck action. The Vaccariello court held specifically
that “the filing of a class action, whether in Ohio or the federal court system, tolls the
statute of limitations as to all asserted members of the class who would have been
parties had the suit been permitted to continue as a class action.” Vaccariello at 382-
383.
{¶24} A review of the Cuyahoga County Common Pleas Court’s decision in Beck
reveals that the action did not terminate because of a failure to secure class
certification, as in Vaccariello. Instead, the Beck court disposed of the action squarely
on the merits of the case. The plaintiffs in Beck brought identical claims against
Westfield as the Sullivans attempted to bring here, including class action allegations.
The trial court never addressed the class action allegations in Beck; instead, the trial
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court granted Westfield’s motion to dismiss the breach of contract claim and its motion
for summary judgment on the fraud and misrepresentation claim. Both motions and
judgment entries addressed the merits of the case; thus, the Beck case did not fail
“otherwise than upon the merits.”
{¶25} In Vaccariello, the plaintiff was able to successfully invoke the saving
statute, R.C. 2305.19 (which adds one year to the applicable limitations period for an
action that was commenced but “fails otherwise than upon the merits”), because the
federal court denied class certification. Thus the first action “failed otherwise than upon
the merits.” As the tolling of time in Vaccariello was based on the saving statute, it was
essential that the first action filed by the Becks “failed otherwise than upon the merits” in
order for the Sullivans to benefit from Vaccariello. It is critical to note that had the
federal case in Vaccariello failed on the merits, the outcome of that case would have
been different, because the saving statute would then have been unavailable to toll the
time.
{¶26} In contrast, the Beck case, where the Sullivans could potentially be class
members (and indeed sought to be added), failed upon the merits. Therefore, the
saving statute was not available to the Sullivans, and Vaccariello is distinguishable.
{¶27} The Sullivans’ statutory time expired in June 2010; Beck was pending at
that time. In June 2010, the Sullivans essentially had to make a decision whether to file
their own class action in Lake County before the statutory time expired, or gamble and
wait for the outcome of the Beck case, in which the trial court could do a number of
things: decide the merits; decide otherwise than on the merits; certify the class and
proceed to merits; or, deny the class and proceed to merits. Under Vaccariello, the time
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could only be tolled if the Cuyahoga county case “failed otherwise than upon the
merits,” such as when the trial court denied certification. Then the time for Sullivan’s
claim would be tolled up to that point.
{¶28} The Sullivans had two choices in June 2010. The first was to hold off filing
their own claim – the benefit would be saving any time and expense in filing, while the
risk would be that Beck may be decided upon the merits, rendering the saving statute
inapplicable. The second was to file their own claim to protect the statute in the event
Beck failed “upon the merits.”
{¶29} The Sullivans chose the former, taking the risk that the case could be
decided on the merits and not in their favor. As Judge Lucci remarked, the Sullivans
should not be allowed a second bite at the apple after making their choice.
{¶30} Therefore, we find the court below correctly determined that the statute
of limitations was not tolled during the pendency of Beck, and that the Sullivans failed to
bring their action within the 15 year limitations period
The Discovery Rule Does Not Delay the Running of the Fraud Statute of
Limitations
{¶31} Pursuant to R.C. 2305.09, a plaintiff must bring a claim for fraud and
misrepresentation within four years of discovering the fraud. The Sullivans argue that
the fraud action was tolled by the “discovery rule,” because they claim they only recently
discovered that Westfield misrepresented that the UM/UIM premiums on the additional
vehicles provided UM/UIM coverage, when Westfield really only provided guest
coverage.
{¶32} “The discovery rule set forth in R.C. 2305.09(D) is applicable to claims
sounding in fraud. Investors REIT One v. Jacobs (1989), 46 Ohio St.3d 176, 182, 546
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N.E.2d 206. ‘The discovery rule operates to extend the time in which a party may file a
complaint. Generally, the discovery rule states that the statute of limitations does not
begin to run until the plaintiff discovered, or through the exercise of reasonable
diligence, should have discovered, the complained of injury.’ Smith v. Rudler, 1993
Ohio App. LEXIS 3967, *3-4 (Aug. 13, 1993), Ashtabula App. No. 92-A-1753,
unreported, citing Investors REIT One, supra, at 179. Thus, ‘[a] cause of action for
fraud or conversion accrues either when the fraud is discovered, or in the exercise of
reasonable diligence, the fraud should have been discovered.’ Stokes v. Berick, 1999
Ohio App. LEXIS 6264, *14 (Dec. 23, 1999), Lake App. No. 98-L-094, unreported, citing
Investors REIT One, supra, paragraph 2b of the syllabus.” Thut v. Thut, 11th Dist. No.
2000-G-2281, 2001 Ohio App. LEXIS 1748, *8-9 (April 13, 2001). See also Ciganek v.
Kaley, 11th Dist. No. 2004-P-0001, 2004-Ohio-6029, ¶23. The applicable statute of
limitations is triggered by the “constructive knowledge of facts, rather than actual
knowledge of their legal significance * * *.” (Emphasis sic.) Flowers v. Walker, 63 Ohio
St.3d 546, 549 (1927).
{¶33} The trial court was correct not to apply the discovery rule to the Sullivans’
fraud claim, because the Sullivans had knowledge of all the relevant facts back in 1994.
From our review of the record, we find the Sullivans failed to meet their reciprocal
burden of demonstrating that there remains a genuine issue of material fact for trial.
Simply put, the Sullivans did not demonstrate why, in the exercise of due diligence from
the release of the Martin decision in 1994, they could not have discovered the alleged
fraud.
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{¶34} The UM/UIM premiums applied to each of their three vehicles are obvious
from their declaration sheet, thus they are presumed to know the contents of their policy
and that they were being assessed these charges. See Michigan Auto Ins. Co. v. Van
Buskirk, 115 Ohio St. 598, 606 (1927). Furthermore, Mr. Sullivan, in his affidavit,
confirmed that he had in fact reviewed the declaration page and was aware they were
being charged multiple UM/UIM premiums. While the Sullivans were not aware of the
legal significance of these multiple premiums, nor the fact that it was legally
unnecessary to pay a separate premium for each automobile to provide UM/UIM
coverage to them and their resident family members, that lack of understanding of the
legal significance does not act to toll the running of the statute. “Ignorance of the law
does not toll the statute of limitations.” Lynch v. Dial Finance Co. of Ohio, Inc., 101
Ohio App.3d 742, 748 (8th Dist.1995).
{¶35} Furthermore, “all persons are ‘conclusively presumed to know the law.’” In
re Estate of Holycross, 112 Ohio St.3d 203, 2007-Ohio-1, ¶27, quoting State v. Pinkney,
36 Ohio St.3d 190, 198 (1988). The Sullivans, therefore, are presumed to have known
that, in a post-Martin world, UM/UIM coverage followed the insureds and not the
vehicles, requiring only one premium to cover their household. While the Sullivans may
not have known what sort of coverage the additional UM/UIM premiums provided them,
if anything, they were on notice back in 1994 to inquire if concerned. Therefore, the
discovery rule does not apply, as the Sullivans were fully in possession of all the facts
necessary to bring their claim. The fact they were not told until 16 years later, by their
attorney, that they might have a claim “cannot be used to circumvent the statute of
limitations or limitations would become meaningless.” Lynch at 748.
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{¶36} The trial court was correct in its determination that no genuine issue of
material fact existed and in its grant of summary judgment in favor of Westfield. Under
no set of facts could the Sullivans continue their action against Westfield, because, as a
matter of law, they were time barred from so doing. The first assignment of error is
without merit.
The Motion to Dismiss American Select and Ohio Farmers
{¶37} In their second assignment of error, the Sullivans argue that the trial court
erred when it dismissed American Select and Ohio Farmers from the action. Because
we have determined that summary judgment was appropriate on statute of limitations
grounds, this assignment of error is moot. Even if it was determined that American
Select and Ohio Farmers were improperly dismissed from the action, the trial court’s
grant of summary judgment in favor of the defendants and this court’s affirmance of that
decision above would render any reversal of their dismissals meaningless. The
Sullivans, whether upon the motion to dismiss, or the subsequent motion for summary
judgment, would ultimately have been precluded from pursuing their claims against
American Select and Ohio Farmers, just as they were against Westfield. The claims
against American Select and Ohio Farmers were identical to those against Westfield,
and accrued on the same date, thus they too would have been time barred and resolved
through a grant of summary judgment to the defendants. Therefore, the second
assignment of error is without merit.
Westfield’s Cross-Assignment of Error
{¶38} Westfield, in an effort to protect its position and prevent the reversal of the
trial court’s decision, brought a single cross-assignment of error. However, we need not
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address the cross-assignment of error, as we decline to reverse the trial court’s grant of
summary judgment.
{¶39} Pursuant to R.C. 2505.22, “assignments of error may be filed by an
appellee who does not appeal, which assignments shall be passed upon by a reviewing
court before the final order, judgment, or decree is reversed in whole or in part.” These
cross-assignments of error, however, may only be considered by a reviewing court
when necessary to prevent the reversal of the judgment under review. Parton v.
Weilnau, 169 Ohio St. 145, 158 (1959). “There is nothing in the statute to indicate that
such assignments of error shall necessarily be passed upon where, as here, the
judgment of the [court] is being affirmed.” Id.{¶40} Because we affirm the decision of the trial court, we decline to further
consider Westfield’s cross-assignment of error. The Sullivans’ assignments of error are
without merit and the judgment of the Lake County Court of Common Pleas is affirmed.
TIMOTHY P. CANNON, P.J.,
CYNTHIA WESTCOTT RICE, J.,
concur.
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