FWB, LLC v. Auto-Owners (Mutual) Insurance Co.

IN THE UNITED STATES DISTRICT COURT

FOR THE NORTHERN DISTRICT OF OHIO

WESTERN DIVISION

FWB, LLC, CASE NO. 3:20 CV 70

Plaintiff,

v. JUDGE JAMES R. KNEPP II

AUTO-OWNERS (MUTUAL)

INSURANCE CO.,

MEMORANDUM OPINION AND

Defendant. ORDER

INTRODUCTION

On December 19, 2019, FWB, LLC, doing business as South End Grille (“Plaintiff”),

brought this action in the Lucas County Court of Common Pleas asserting state law claims of

breach of contract, negligence, and breach of good faith, against Auto Owners Insurance Company

(“Defendant”). (Doc. 1-1). Defendant removed the case to this Court on January 14, 2020 (Doc.

1), and Plaintiff later filed an Amended Complaint (Doc. 23). The Court has jurisdiction pursuant

to 28 U.S.C. § 1332. Currently pending before the Court is Defendant’s Motion for Summary

Judgment (Doc. 34), to which Plaintiff filed an opposition (Doc. 37), and Defendant replied (Doc.

39).

For the reasons contained herein, the Motion for Summary Judgment (Doc. 34) is

GRANTED.

BACKGROUND

Viewing the facts in the light most favorable to Plaintiff, the background of this case is as

follows:

FWB, LLC owned and operated South End Grille in Toledo, Ohio. (Doc. 32-1, Bussdieker

Deposition, 7:22-25, 8:1) (“Bussdieker Depo.”). Fred Bussdieker and Lonnie Good were FWB’s

members. (Bussdieker Depo. 17:3-11, 19-20); see also Doc. 34-2, at 5 (Intent to Purchase

Agreement). Bussdieker performed the day-to-day management of South End Grille from its

opening in 2015 through August 2017. (Doc. 37-1, at ¶¶2-3, Bussdieker Affidavit) (“Bussdieker

Aff.”). The bar thrived under his watch. Id. At all times relevant to this case, Defendant insured

the business; the premiums were paid and current. Id. at ¶¶4-5. On April 28, 2017, as part of a

policy-obligated audit by Defendant of South End Grille’s 2015-2016 revenues, Plaintiff provided

information on its revenues to Defendant through an independent insurance agent. See Doc. 37-4

(email).

Bussdieker stepped back from business operations in August 2017. (Bussdieker Aff. at ¶6).

Good ran the South End Grille unsuccessfully in September of 2017, id., and the business

ultimately closed that same month. (Bussdieker Depo. 76:20-25, 77:1). Under Good’s watch, the

business was not profitable as it was being mismanaged. Id. at 77:2-4. Following Good’s brief

tenure, on September 21, 2017, Bussdieker and Good entered into an agreement with Dohnovan

Walton and Travis Murphy to act as general managers and run the business. (Bussdieker Aff. at

¶8); see also Doc. 34-2. Under the agreement, Walton and Murphy operated the business and paid

a monthly amount to Plaintiff for the right to manage, intending to purchase the business outright.

See Doc. 34-2. On October 24, 2017, Plaintiff’s insurance agent emailed a commercial underwriter

an application for insurance coverage for South End Grille on behalf of Walton and Murphy. (Doc.

37-6) (email). In the email, the agent acknowledged Walton and Murphy did not qualify for

Defendant’s business coverage because they lacked prior restaurant ownership experience. Id. The

agent also noted Bussdieker “ha[d] sold/is selling” South End Grille to Walton and Murphy. Id.

The next day, October 25, 2017, the underwriter responded to the agent asking some follow-up

questions regarding Walton and Murphy’s plans for the business as well as past revenue amounts.

(Doc. 37-5, at 1-2). The agent responded, explaining monthly sales figures for South End Grille

were $38,200 per month. Id. at 1.

In October 2017, business revenue was poor while Walton and Murphy remained in control

of South End Grille. (Bussdieker Aff. at ¶9). Walton and Murphy also stopped making monthly

payments to Plaintiff at that time. Id.

On December 18, 2017, during a premises inspection, Bussdieker told an Ohio Department

of Liquor Control agent he leased the business to Walton weeks prior. (Doc. 34-1, at 49). Walton

signed a liquor permit correction the same day, identifying himself as the new owner. Id. at 47.

The liquor permit was placed in Safekeeping by the State of Ohio effective December 27, 2017,

the day prior to the fire. Id. at 50.

Fire heavily damaged the South End Grille in the early morning hours of December 28,

2017. (Bussdieker Depo. 11:1-4, 62:1-12); see also Doc. 34-6, at 1 (letter). As a result, the business

did not resume normal operations. (Bussdieker Aff. at ¶16). Further, because the fire originated in

the business office, a substantial amount of records and equipment were lost. Id. at ¶18. Plaintiff

“reconstruct[ed]” some past revenue based upon state tax reporting and information recovered

from backup software. Id.; see also Docs. 37-9, 37-10 (revenue summaries).

In January 2018, Cousino Restoration gave an estimate for repair and cleaning of South

End Grille. (Doc. 34-4). Cousino never performed any work at the restaurant. (Bussdieker Depo.

96:1-25). Once Bussdieker saw the Cousino estimate, and learned the company wanted to be paid

up front, he decided to perform the cleaning himself. Id. at 57:5-17.

Plaintiff’s liquor permit expired on June 1, 2018 and had not been renewed as of September

11, 2018. (Doc. 34-1 at 55-56). In a letter to the Ohio Department of Liquor Control dated October

24, 2018, Bussdieker stated he was actively seeking one or two buyers for the business as he

“d[idn’t] want nothing to do with” it anymore. Id. at 60.

Bussdieker executed a “Sworn Statement in Proof of Loss” to Defendant on June 11, 2018.

See Doc. 34-7. Therein, on a “Personal Property Inventory” worksheet, he listed Plaintiff’s liquor

permit, valued at $2,844, as a loss incurred during the fire. Id. at 9. He also included a $13,300.96

line item cost for Cousino Restoration. Id.

On June 21, 2018, Defendant’s claim representative Douglas Guhl sent Plaintiff a letter

detailing the covered and uncovered portions of the insurance claim. See Doc. 34-6. Defendant

ultimately paid Plaintiff a total of $33,780.76 on the claim - $14,900 for lost business income, and

$18,880.76 for property damage and cleaning. (Bussdieker Depo. 24:16-25, 25:1); see also Doc.

34-6.

STANDARD OF REVIEW

Pursuant to Federal Civil Rule 56(c), summary judgment is appropriate where there is “no

genuine issue as to any material fact” and “the moving party is entitled to judgment as a matter of

law.” When considering a motion for summary judgment, the Court must draw all inferences from

the record in the light most favorable to the nonmoving party. Matsushita Elec. Indus. Co. v. Zenith

Radio Corp., 475 U.S. 574, 587 (1986). The Court is not permitted to weigh the evidence or

determine the truth of any matter in dispute; rather, the Court determines only whether the case

contains sufficient evidence from which a jury could reasonably find for the nonmoving party.

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248-49 (1986). The moving party bears the burden

of proof. Celotex Corp. v. Catrett, 477 U.S. 317, 325 (1986). This burden “may be discharged by

‘showing’—that is, pointing out to the district court—that there is an absence of evidence to

support the nonmoving party’s case.” Id. Further, the nonmoving party has an affirmative duty to

direct the court’s attention to those specific portions of the record upon which it seeks to rely to

create a genuine issue of material fact. See FED R. CIV. P. 56(c)(3) (noting that the court “need

consider only the cited materials”).

DISCUSSION

Plaintiff asserts three causes of action against Defendant: breach of contract (Count One),

negligence (Count Two), and breach of the duty of good faith (Count Three). See Doc. 23 (First

Amended Complaint). It alleges Defendant failed to fully compensate for the damage sustained

from the December 2017 fire. Id. at 2. Specifically, Plaintiff argues Defendant failed to fully

compensate its business income losses and the full cost associated with cleaning restaurant

equipment. (Doc. 37, at 9-13). Defendant argues it is entitled to summary judgment on each of

Plaintiff’s claims. Defendant asserts Plaintiff has been fully compensated under the terms of the

insurance contract and it owes nothing more because Plaintiff voided coverage when it: 1)

materially misrepresented the value of its claims, and 2) failed to comply with the policy’s terms

and conditions. See Doc. 34. For the reasons contained herein, the Court grants summary judgment

to Defendant on each of Plaintiff’s claims and dismisses the case with prejudice.

As an initial matter, in Ohio, “an insurance policy is a contract between an insured and the

insurer.” Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 861 N.E.2d 121, 126 (Ohio 2006).

An insurance contract must be construed to give words their plain and ordinary meaning. State

Farm Auto. Ins. Co. v. Rose, 575 N.E.2d 459, 461 (Ohio 1991), rev’d on other grounds, 620 N.E.2d

809 (Ohio 1993). However, if the language is ambiguous, and thus susceptible to more than one

interpretation, it must be liberally construed in favor of the insured. Id.; see also Akins v. Harco

Ins. Co., 815 N.E.2d 686, 693 (Ohio Ct. App. 2004) (“[A]ny reasonable construction which results

in coverage of the insured must be adopted by the trial court.”), rev’d on other grounds, 830 N.E.2d

1161 (Ohio 2005). Importantly, “[u]nder Ohio law, the burden is on the insured to prove that he is

entitled to coverage by showing facts sufficient to establish that his loss was within the description

of the policy.” State Farm Fire & Cas. Co. v. Hiermer, 720 F. Supp. 1310, 1314 (S.D. Ohio 1988)

(citing Sterling Merch. Co. v. Hartford Ins. Co., 506 N.E.2d 1192, 1199 (Ohio Ct. App. 1986)

(“The burden, however, is not on the insurer, but on the insured to prove that he is entitled to

coverage.”)), aff’d, 884 F.2d 580 (6th Cir. 1989) (unpublished table decision).

Breach of Contract – Count One

Business Income Loss

Defendant asserts it paid Plaintiff a total of $33,780.76 to settle the insurance claim at issue.

(Doc. 34, at 19). It argues this amount covered the damage to, and cleaning of, Plaintiff’s personal

property, as well as lost business income. Id. Of this total, Defendant paid $14,900 for lost business

income.1 (Bussdieker Depo. 24:20-25, 25:1); (Doc. 34-6, at 1-2). Plaintiff argues it is owed an

1. The $14,900 represents the sum of the $4,100 payment to Plaintiff’s landlord and six months of

$1,800 loan payments from Walton and Murphy. (Doc. 34-6, at 1).

Moreover, in his affidavit, Bussdieker contends Defendant only paid him $4,100 on the lost income

claim. (Doc. 37-1, at ¶24). This contradicts Bussdieker’s earlier deposition testimony that the

payout was $14,900. (Bussdieker Depo. 24:20-25, 25:1). Defendant asserts the lost income payout

was $14,900. (Doc. 34-6, at 1-2). Plaintiff cannot create a factual dispute by testifying to one

amount, then later swearing to a different amount in an affidavit. Boykin v. Fam. Dollar Stores of

Mich., LLC, -- F.4th --, 2021 WL 2708859, at *7 (6th Cir.) (“[Defendant] invokes our ‘sham

affidavit’ rule. This rule provides that a party cannot create a genuine dispute of material fact with

an affidavit that conflicts with the party’s earlier testimony about the fact.”).

additional $33,632.02. (Doc. 37, at 5). It asserts this figure represents the proper lost income

calculation which is based upon a six-month restoration period, as agreed, and the income

considered should be six times the business’s monthly average income when Bussdieker ran it. Id.

Defendant contends it properly paid the lost income claim based upon the information provided

by Plaintiff during the claims process and any failure on Plaintiff’s part to provide proper

documentation violated the terms and conditions of the insurance contract. See Doc. 34, at 19-29.

This dispute may be resolved by looking at the unambiguous language of the parties’

insurance contract. The following language is relevant to the business income calculation:

A. COVERAGE

1. Business Income

Busines Income means the:

a. Net Income (Net Profit or Loss before income taxes) that would have

been earned or incurred; and

b. Continuing normal operating expenses incurred, including payroll.

***We will pay for the actual loss of Business Income you sustain due to the

necessary “suspension” of your “operations” during the “period of restoration”.

***

C. LOSS CONDITIONS

***

2. Duties In The Event Of Loss

a. You must see that the following are done in the event of loss: ***

(6) Send us a signed, sworn proof of loss containing the

information we request to investigate the claim. You must

do this within 60 days after our request. We will supply you

with the necessary forms.

***

3.  Loss Determination

a. The amount of Business Income loss will be determined based on:

(1) The Net Income of the business before the direct physical

loss or damage occurred;

(2) The likely Net Income of the business if no physical loss or

damage had occurred, but not including any Net Income that

would likely have been earned as a result of an increase in

the volume of business due to favorable business conditions

caused by the impact of the Covered Cause of Loss on

customers or on other businesses;

(3) The operating expenses, including payroll expenses,

necessary to resume “operations” with the same quality of

service that existed just before the direct physical loss or

damages; and

(4) Other relevant sources of information, including:

(a) Your financial records and accounting procedures;

(b) Bills, invoices and other vouchers; and

(c) Deeds, liens or contracts.

***

4. Loss Payment

We will pay for covered loss within 30 days after we receive the sworn

proof of loss, if you have complied with all of the terms of this Coverage

Part and:

a. We have reached agreement with you on the amount of loss; or

b. An appraisal award has been made.

(Doc. 34-3, at 69, 73-74) (insurance policy). Giving these contract terms their plain and ordinary

meaning, see Rose, 575 N.E.2d at 461, the Court finds there is sufficient evidence to show

Defendant properly paid Plaintiff’s lost income claim in accordance with the contract.

In a letter from Guhl to Plaintiff dated June 21, 2018, Defendant explained how it arrived

at the $14,900 lost income figure:

We agreed that the business could have been repaired and back in operations after

6 months and that is the time frame we agreed to review for any loss of business

income [ ] you wished to present.

The documents you presented were for rent payment[s] that you claimed were

ongoing to the landlord in the amount of $4,100 and $1,800 per month for the loan

agreement entered into with your managers Dohnovan Walton and Travis Murphy.

(Doc. 34-6, at 1). As Guhl testified, Plaintiff provided no other evidence of lost income during the

claims process; Defendant paid the claim based solely upon a submitted rental agreement between

FWB and its landlord as well as Walton and Murphy’s intent to purchase agreement. See Doc. 33-

1, Guhl Deposition, 40:1-25, 41:1-15 (“Guhl Depo.”); see also Doc. 34-7 (“Sworn Statement in

Proof of Loss” submitted by Plaintiff containing the rental agreement and intent to purchase

agreement). Plaintiff argues it is owed an additional $33,632.02. (Doc. 37, at 5). It argues this

figure represents the proper income-loss calculation which is based upon a six-month restoration

period, as agreed, but that the six months of revenue considered should be six times the average

monthly amount of income the business had when Bussdieker was still in control. Id.

The conjecture that is Plaintiff’s argument falls far short of the support needed to meet its

burden to show entitlement to coverage under the insurance contract. Hiermer, 720 F. Supp. at

1314 (“Under Ohio law, the burden is on the insured to prove that he is entitled to coverage by

showing facts sufficient to establish that his loss was within the description of the policy.”). The

contract language clearly dictates four factors Defendant considers when it pays a lost income

claim: 1) net income before the loss occurred; 2) the likely net income of the business if the loss

had not occurred; 3) operating expenses just prior to the loss; and 4) other relevant documents

provided by the insured, including deeds, liens, contracts, bills, invoices, or financial records.

(Doc. 34-3, at 73-74). Moreover, the insurance contract unambiguously states that, for the claim

to be paid, Plaintiff must detail its losses in a “sworn proof of loss” and said statement must be

submitted within 60 days after Defendant requests it. Id. at 73.

Defendant has demonstrated, and Plaintiff has not contested, the only documentation

provided by Plaintiff during the claims process to support its income loss was a rental agreement

between Plaintiff and its landlord and Walton and Murphy’s intent to purchase agreement. See

Guhl Depo. 40:1-25, 41:1-15; see also Doc. 34-7 (“Sworn Statement in Proof of Loss”). Plaintiff

submitted no evidence to Defendant of net income earned prior to the fire and no evidence of its

operating expenses “just before” the fire. Id. Instead, Plaintiff now attempts to hang its hat on the

second factor – the “likely net income of the business if the loss had not occurred”. (Doc. 34-3, at

73-74). It argues the loss calculation should have been based on business’s likely income had

Bussdieker regained control. (Doc. 37, at 5). In support, Plaintiff argues the policy language directs

Defendant to pay the likely lost business income for the period of restoration and “[s]ince there is

no basis to find that [Walton and Murphy’s] payment was likely to continue, and instead there was

a strong likelihood that control was going [to] revert to Bussdie[]ker’s control of FWB

immediately following the loss, the likely lost income is what FWB would have made while under

Bussdie[]ker’s day-to-day management.” Id. As evidentiary support, Plaintiff attaches a

spreadsheet prepared by Bussdieker reflecting Plaintiff’s income from January 2016 to December

2017 (Doc. 37-9), and tax documents showing revenue for select months from 2015 through 2017

(Doc. 37-11). However, Plaintiff has provided no evidence it submitted these, nor any other

evidence, to Defendant during the claims process to support an income loss claim under the “likely

income” factor. Indeed, the “Sworn Statement in Proof of Loss” (Doc. 34-7), submitted by Plaintiff

during the claims process, does not contain these documents – only the lease and the intent to

purchase agreement.

Plaintiff argues it provided Defendant with proof of income at different times during

Bussdieker’s tenure as manager. In support, it directs the Court to two emails (Docs. 37-4, 37-5)

which it contends demonstrate that, in November and December of 2017, it provided Defendant

“with information related to estimates of business income” as part of a scheduled policy audit.

(Doc. 37, at 4). Plaintiff also points to documentation it received from Defendant during the

original policy application process in 2015 where Defendant explained its policy premiums were

based upon “gross sales” numbers. See Doc. 37-3, at 3. There are a few problems with Plaintiff’s

evidentiary support. First, and fatal to Plaintiff’s claims, is it has not demonstrated the revenue

estimates in the emails were provided to Defendant during the claims process in a sworn statement

of loss as the insurance contract unambiguously requires. (Doc. 34-3, at 73) (policy); see also Doc.

34-7 (“Sworn Statement in Proof of Loss”). Second, the policy application does not contain any

information regarding the specifics of Plaintiff’s income – it merely notes the total exposure under

the contract (including restaurant and liquor) was $700,000 – and that figure, on which Defendant

based its premium, was “Gross Sales”. (Doc. 37-3, at 3). And again, even if this document

contained specific sales numbers, Plaintiff has not demonstrated it provided this to Defendant as

support for its income losses during the claims process as required by the insurance contract. (Doc.

34-3, at 73).

Central to Plaintiff’s business income loss claim is the assumption Bussdieker would have

regained control of South End Grille in January 2018 if the fire had not occurred. (Bussdieker Aff.

at ¶13). The uncontradicted evidence Defendant presents to the Court demonstrates otherwise.

Here, Defendant offers a letter to the Ohio Department of Liquor Control dated October 24, 2018,

where Bussdieker stated he was actively seeking “1 or 2 people” to sell the business to as he

“d[idn’t] want nothing to do with” it anymore. (Doc. 34-1, at 60). This letter was written ten

months after Bussdieker avers he “began making arrangements to take control again in January

2018.” (Bussdieker Aff. at ¶13). Plaintiff fails to present any evidence to the Court regarding

exactly what “arrangements” Bussdieker made, nor does it present evidence Bussdieker

demonstrated such to Defendant during the claims process. In fact, Plaintiff submits no evidence

anyone at Auto Owners had this information in its possession at the time Plaintiff’s claim was

investigated and paid. Moreover, assuming arguendo Bussdieker would have resumed

management of South End Grille had the fire not occurred, there is no evidence Plaintiff submitted

anything to Defendant to show the business income would have immediately reverted back to its

Bussdieker-era amounts following the tumultuous tenures of Good, Walton, and Murphy. In

essence, Plaintiff asks Defendant to pony up $33,632.02 without any evidentiary support. Plaintiff

loosely argues it submitted evidence of its income to Defendant at other times – once when

applying for the policy, and at other times during scheduled audits. Id. at 4; see also Docs. 37-4,

37-5. However, Plaintiff had a contractual duty, in the event of loss, to provide Defendant with

information related to its lost income, within 60 days after Defendant requested it – not before.

(Doc. 34-3, at 73). The evidence clearly shows Plaintiff provided nothing beyond its lease and

intent to purchase agreements. See Doc. 34-7. As the terms of the policy dictate, Defendant is only

obligated to pay supported claims. See Doc. 34-3, at 74; see also Doc. 34-7, at 1 (“I understand I

must support my claim through the submission of appropriate documentation[.]”).

For these reasons, the Court finds Plaintiff has not presented sufficient evidence to

demonstrate a genuine issue of material fact regarding whether Defendant breached its duties under

the insurance contract when calculating Plaintiff’s income loss claim.

Property Cleaning and Loss

As part of its breach of contract claim (Count One), Plaintiff also argues Defendant failed

to fully compensate for costs related to cleaning restaurant equipment. (Doc. 37, at 9) (“The

covered losses sustained by FWB that Auto Owners failed to pay involve loss of business income

and costs related to cleaning heavy equipment.”). However, this is as far as Plaintiff’s “argument”

goes. Plaintiff does not elaborate as to what, if any, cleaning Defendant refused to cover. See

generally Doc. 23 (Amended Complaint); see also Doc. 37 (Opposition to Motion for Summary

Judgment). It does not argue any additional monies are owed. Even so, Defendant argues it rightly

denies further coverage – beyond the $18,880.76 it already paid for property damage (including

cleaning) – because Plaintiff violated the policy’s concealment or fraud clause when it made

material misrepresentations during the claims process by: 1) including a cost incurred for cleaning

by Cousino Restoration for $13,330.96, which never occurred; and 2) inaccurately listing the

liquor permit as a loss incurred in the fire. (Doc. 34, at 20-23). According to Defendant, these

misrepresentations void coverage under the contract. Id.

Concealment or fraud clauses are fully enforceable under Ohio law. Taylor v. State Farm

Fire & Cas. Co., 2012 WL 1643877, at *3 (N.D. Ohio) (citing Smith v. Allstate Indem. Co., 304

F. App’x 430, 431-32 (6th Cir. 2008)). To void an insurance contract due to concealment or fraud,

the insured must make a material misrepresentation. McCurdy v. Hanover Fire & Cas. Ins. Co.,

2013 WL 4050909, at *3 (N.D. Ohio). “A misrepresentation will be considered material if a

reasonable insurance company, in determining its course of action, would attach importance to the

fact misrepresented.” Latimore v. State Farm Fire & Cas., Co., 2012 WL 3061263, at *4 (N.D.

Ohio). An insurer may void a contract if it finds the insured made a material misrepresentation

during the insurer’s investigation into his or her claim. McCurdy, 2013 WL 4050909, at *3.

Misrepresenting the value of property lost in a fire bears materially on the amount the insurer is

obligated to pay the insured under the policy. Taylor, 2012 WL 1643788, at *3; see also Latimore,

2012 WL 3061263, at *7 (“Misrepresentations regarding an insured’s financial condition or items

lost in a fire constitute material misrepresentations.”); Parker v. State Farm Fire & Cas. Co., 1988

WL 1058394, at *4 (N.D. Ohio) (“Statements of an insured misrepresenting the extent of loss . . .

are clearly material since they affect the extent of the insurer’s obligation to pay for a claimed

loss.”).

Relevant here is the concealment or fraud clause in the parties’ contract:

A. CONCEALMENT, MISREPRESENTATION OR FRAUD

This Coverage Part is void in any case of fraud by you as it relates to this Coverage

Part at any time. It is also void if you or any other insured, at any time, intentionally

conceal or misrepresent a material fact concerning:

1. This Coverage Part;

2. The Covered Property;

3. Your interest in the Covered Property; or

4. A claim under this Coverage Part.

(Doc. 34-3, at 90).

Here, Defendant asserts it paid Plaintiff $33,780.76 to settle the insurance claim at issue.

(Doc. 34, at 19); (Bussdieker Depo. 24:16-25). It argues this amount covered the damage to, and

cleaning of, Plaintiff’s personal property, as well as lost business income. (Doc. 34, at 19). Of the

total, Defendant paid $18,880.76 for property damage. (Bussdieker Depo. 29:4-7); (Doc. 34, at

26). Defendant argues it owes no further monies to Plaintiff because Plaintiff made material

misrepresentations during the claims process when it included: 1) a cost incurred for cleaning by

Cousino Restoration for $13,330.96, which never occurred, and 2) inaccurately listed the liquor

permit as a loss incurred during the fire. (Doc. 34, at 20-23).

Regarding the Cousino Restoration item, Defendant offers Bussdieker’s “Sworn Statement

in Proof of Loss” which includes a line item cost for “Cousino Restoration” in the amount of

$13,330.96. (Doc. 34-7, at 9). It also includes $3,550.00 for cleaning performed by Bussdieker

himself. Id. However, as Bussdieker testified, Cousino Restoration never performed cleaning work

at the restaurant. (Bussdieker Depo. 96:1-25). Once Bussdieker saw Cousino’s full estimate (which

he attached to his loss statement at Doc. 34-7, at 19-21), and learned the company required up-

front payment, he decided to clean himself. Id. at 57:5-17. Further, as Defendant notes, Plaintiff

included a $2,844.00 claim for a lost liquor permit in its “Sworn Statement in Proof of Loss”. (Doc.

34-7, at 9). Plaintiff admits it never lost its liquor permit in the fire; it was placed in Safekeeping

with the Ohio Department of Liquor Control on December 27, 2017. (Bussdieker Depo. 77:11-19,

78:5-17); see also Doc. 34-1, at 51 (Safekeeping confirmation letter). Defendant argues including

such in a sworn loss statement, along with the Cousino Restoration item, amounts to a violation of

the concealment or fraud clause in the parties’ insurance contract. The Court agrees.

Under a plain reading, the abovementioned concealment or fraud clause states a

misrepresentation of a material fact concerning a claim under the policy amounts to fraud. (Doc.

34-3, at 90). As explained, these clauses are fully enforceable under Ohio law, Taylor, 2012 WL

1643877, at *3, and any misrepresentation of loss incurred during a fire is a material

misrepresentation, Parker, 1988 WL 1058394, at *4. Here, there is no dispute Plaintiff included

both items, as losses, within its “Sworn Statement in Proof of Loss”. (Doc. 34-7, at 9) (emphasis

added). By signing this loss form, Bussdieker, as Plaintiff’s representative, swore the cleaning item

and lost liquor permit were losses incurred in the fire. See Doc. 34-7, at 1.

Plaintiff counters the concealment or fraud clause was not violated because, as Defendant

acknowledged in Guhl’s letter, Defendant did not pay for these alleged losses. (Doc. 37, at 14);

see also Doc. 34-6, at 4 (letter from Defendant which explains “You added onto the Personal

property form, a cost for the liquor permit and the cost for what Cousino construction would have

charged you for the work you performed on cleaning your items. These charges are not being

considered as they were not incurred in this loss.”). Whether Defendant paid the losses or not is

immaterial. All the concealment or fraud clause requires to void coverage is that Plaintiff

misrepresent a material fact, i.e., the cleaning and liquor permit losses, to Defendant during the

claims process. (Doc. 34-3, at 90). As Defendant has shown, Plaintiff did just that. Plaintiff does

not counter this allegation.2

For these reasons, the Court finds Plaintiff has also not presented sufficient evidence to

create a genuine issue of material fact about whether Defendant breached its contractual duties

2. Because the Court finds Defendant entitled to summary judgment for the reasons stated above,

it need not reach Defendant’s alternative argument that Plaintiff also voided coverage by failing

to supply complete information regarding damaged property.

when processing Plaintiff’s claims regarding property cleaning and business income loss. Thus,

Defendant is entitled to summary judgment as to Count One.

Bad Faith – Count Three

Defendant next argues Plaintiff’s bad faith claim (Count Three) fails as a matter of law

because Plaintiff breached the terms and conditions of the insurance contract. (Doc. 34, at 26-27).

Plaintiff argues a bad faith claim may still survive where an insurer lacks “reasonable justification”

when it fails to investigate or pay a claim. (Doc. 37, at 6). Further, Plaintiff asks this Court to stay

a decision on the bad faith claim pending further discovery. Specifically, Plaintiff contends

Defendant has yet to provide a copy of its “claims manual” which may yield information as to

whether Defendant adjusted the claim without “reasonable justification.” Id. at 36-37.

“Under Ohio law, an insurer owes a duty of good faith to it its insured in the processing,

payment, satisfaction, and settlement of the insured’s claims.” Marsteller v. Sec. of Am. Life Ins.

Co., 2002 WL 31086111, at *4 (N.D. Ohio). “The appropriate test to determine whether an

insurance company breached this duty and denied an insurance benefit in bad faith is the

‘reasonable justification’ standard.” Id. (quoting Friendly Farms v. Reliance Ins. Co., 79 F.3d 541,

545-46 (6th Cir. 1996)); see also Zoppo v. Homestead Ins. Co., 644 N.E.2d 397, 399-400 (Ohio

1994) (“[O]ver the past forty-five years this court has consistently applied the “reasonable

justification” standard to bad faith cases.”). “The crucial inquiry is whether ‘the decision to deny

benefits was arbitrary or capricious, and there existed a reasonable justification for the denial,’ not

whether the insurance company’s decision to deny benefits was correct.” Rauh Rubber, Inc. v.

Berkshire Life Ins. Co., 202 F.3d 269, 269 (6th Cir. 1999) (unpublished table decision) (quoting

Thomas v. Allstate Ins. Co., 974 F.3d 706, 711 (6th Cir. 1992)). Thus, “[t]o withstand a motion for

summary judgment in a bad faith claim, an insured must oppose such a motion with evidence

which tends to show that the insurer had no reasonable justification for refusing the claim.”

Marsteller, 2002 WL 31086111, at *5.

Here, Defendant did not refuse or deny Plaintiff’s insurance claim – it paid the claim. The

only debate is to whether Plaintiff was entitled to more money for lost business income and

property cleaning. As discussed supra, it was not. Defendant is entitled to summary judgment on

a claim that Plaintiff is owed additional compensation because it failed to comply with the terms

and conditions of the policy by providing the proper documentation to Defendant to support

income loss greater than $14,900; Plaintiff also violated the concealment or fraud clause when it

materially misrepresented items lost during the fire. Defendant rightly paid $14,900 on the income

loss claim because this is the only figure which had evidence to support it. Marsteller, 2002 WL

31086111, at *4. There is no need to wait for a claims manual, as Plaintiff suggests. Plaintiff either

submitted documentation to Defendant to support its income loss as required by the policy, or it

didn’t; it either materially misrepresented its losses, or it didn’t. Here, as discussed supra, Plaintiff

was properly compensated under the terms of the policy based upon the evidence it submitted to

Defendant during the claims process. Plaintiff presents no evidence Defendant acted in bad faith

in refusing to pay more. Marsteller, 2002 WL 31086111, at *5.

For these reasons, Defendant is entitled to summary judgment as to Count Three.

Negligence – Count Two

Finally, in Count Two, Plaintiff alleges Defendant owed a duty of good faith and breached

that duty by negligently failing to investigate the insurance claim, informing Plaintiff it would not

pay the policy limits, and failing to train and supervise its employees. (Doc. 23, at 3). Defendant

does not independently address the negligence claim in its Motion for Summary Judgment, but

encompasses such in the argument that it did not act in bad faith in handling the claim. See Doc.

34, at 26-27.

A breach of the duty of good faith, as pleaded here in Count Three, is distinguishable from

negligence, as pleaded in Count Two. “A lack of good faith is the equivalent of bad faith, and bad

faith, although not susceptible of concrete definition, embraces more than bad judgment or

negligence. It 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.” Wasserman v. Buckeye Union Cas. Co., 290

N.E.2d 837, 840 (Ohio 1972). Negligence is a separate, less serious tort, one where a tortfeasor’s

action falls below a reasonable standard of care. See Gedeon v. E. Ohio Gas Co., 190 N.E. 924,

925 (Ohio 1934) (“Negligence is the failure to exercise that degree of care which an ordinarily

careful and prudent person would exercise under the same or similar circumstances.”) (internal

quotation and citation omitted). “Ohio maintains the traditional elements for negligence: duty,

breach, causation, and harm.” Ross v. PennyMac Loan Servs. LLC, 761 F. App’x 491, 498 (6th

Cir. 2019).

Upon review of the negligence claim in the Amended Complaint (Doc. 23, at 3), it is clear

Plaintiff does not allege Defendant owed it a duty independent of any already encompassed by the

insurance contract. Plaintiff asks for economic damages in return for Defendant’s negligence. Id.

at 3, 5. Problematic for Plaintiff is that this scenario is specifically barred by the economic loss

doctrine which, in essence, “holds that absent tangible physical harm to persons or tangible things

there is generally no duty to exercise reasonable care to avoid economic losses to others. These

losses may be recovered in contract only.” Long v. Time Ins. Co., 572 F. Supp. 2d 907, 911 (S.D.

Ohio) (internal quotation and citation omitted); see also id. (“Ohio law precludes the recovery of

economic damages ‘where recovery of such damages is not based upon a tort duty independent of

contractually created duties.’” (quoting Pavlovich v. Nat’l City Bank, 435 F.3d 560, 569 (6th Cir.

2006)). In short, the existence of the insurance contract prevents Plaintiff from recovering

economic damages on a negligence theory.

Moreover, as discussed fully herein, Defendant did not act in bad faith in settling Plaintiff’s

insurance claim because it was reasonably justified in settling for the amount paid. The reasonable

justification stems from Defendant’s thorough investigation into the claim. The investigation

revealed Plaintiff made material misrepresentations during the claims process regarding losses

incurred during the fire. Moreover, Plaintiff failed to provide documentation to support its business

income losses. Because these failures are Plaintiff’s alone, it cannot reasonably be said Defendant

acted negligently by breaching its duty to handle Plaintiff’s claim carefully and prudently. As

discussed, supra, Defendant investigated and paid Plaintiff’s claim based upon the information

Plaintiff provided during the claim’s process in accordance with the unambiguous terms of the

insurance contract.

Because Plaintiff cannot show Defendant breached a duty, independent of one already

contemplated by the insurance contract, Count Two fails as a matter of law and Defendant is

entitled to summary judgment.

CONCLUSION

For the foregoing reasons, good cause appearing, it is

ORDERED that Defendant’s Motion for Summary Judgment (Doc. 34), be and the same

hereby is, GRANTED.

s/ James R. Knepp II

UNITED STATES DISTRICT JUDGE