Allied World Surplus Lines Insurance Company v. Goettle, Inc.

UNITED STATES DISTRICT COURT

SOUTHERN DISTRICT OF OHIO

WESTERN DIVISION

ALLIED WORLD SURPLUS LINES

INSURANCE COMPANY,

Plaintiff/Counter- Case No. 1:17-cv-670

Defendant,

JUDGE DOUGLAS R. COLE

v.

RICHARD GOETTLE, INC.,

Defendant/Counterclaimant.

OPINION AND ORDER

At its heart, every insurance dispute asks one simple question: who is left

holding the bag? Whether an insured has incurred a loss either due to an adverse

judgment or instead as a result of harms that befell his person or property, insurance

law has developed intricate rules to decide who—as between the insured or the

insurer—must bear the costs of that loss. This case presents a unique twist on this

age-old question. Defendant/Counterclaimant Richard Goettle, Inc., (Goettle)

recently settled a lawsuit brought against it by third-party claimant Joy Global

Conveyors, Inc., (JGC), in the United States District Court for the Western District

of Louisiana.1 That underlying suit was the basis for this separate coverage action in

which Plaintiff/Counter-Defendant Allied World Surplus Lines Insurance Company

(Allied World) claimed it had no duty to defend or to indemnify Goettle in the

1 The Court “may take judicial notice of proceedings in other courts of record.” Dates v. HSBC,

___ F. Supp. 3d ___, 2024 WL 860918, at *1 n.1 (S.D. Ohio 2024) (quoting Granader v. Pub.

Bank, 417 F.2d 75, 82 (6th Cir. 1969)).

Louisiana lawsuit. Goettle now contends Allied World must pay for the entire value

of the settlement in that action. According to Goettle, that is because (1) the prior

assigned judge’s summary judgment ruling in this coverage dispute, while directed

solely at the duty to defend, in fact conclusively established Allied World’s

indemnification obligations, and (2) Allied World cannot object to paying for the

settlement because it wrongfully refused to defend Goettle in the underlying suit.

As explained below, the Court concludes that Goettle’s two arguments do not

carry the day. As to the former, Goettle overstates the scope of the prior assigned

judge’s summary judgment ruling. And as to the latter, assuming without deciding

that Allied World wrongfully refused to defend Goettle, under Ohio law, an insurer’s

wrongful refusal to defend, while it may limit the insurer’s ability to rely on certain

defenses to coverage, does not expand the scope of coverage otherwise available under

an insurance contract. And because there is an open question about the extent to

which the insurance policy here requires Allied World to cover the settlement costs

of the underlying suit, the Court DENIES Goettle’s Motion to Enforce Court’s March

28, 2019,2 Order and Order for Payment of Settlement Funds (Doc. 105).

BACKGROUND

Goettle, an Ohio engineering and construction company, contracted with Allied

World, an insurance subsidiary specializing in professional liability policies for

2 The title of Goettle’s motion refers to a “March 28, 2019, Order” but no such thing exists.

The Court presumes that this is a clerical error given the substance of the motion refers to

docket entry 74—the prior-assigned judge’s May 28, 2019, Order on the parties’ cross-motions

for summary judgment. (Doc. 74). It appears that Goettle has referred to this non-existent

“March 28, 2019, Order” twice before. (Docs. 75, 79).

engineering and contracting firms, for a claims-made3 Constructors Professional

Liability and Protective Policy (the 2016–2017 Policy) covering the period between

June 28, 2016, and June 28, 2017. (Doc. 41-3; Doc. 74, #4760–62). After Goettle

submitted a renewal application on March 29, 2017, Allied World renewed the policy

(the 2017–18 Policy) with the same material provisions (with the exception of the

policy’s limits, which were increased from $5 million to $10 million) for an additional

year of coverage. (Doc. 41-7; Doc. 74, #4767–69).

Under both policies, Allied World generally agreed to cover losses arising from

negligence on Goettle’s part in rendering its engineering services, subject to

exclusions for Goettle’s services that resulted in either faulty construction or faulty

workmanship. (Doc. 41-3, #652–53, 656–57, 661–62; Doc. 41-7, #715–16, 719–20, 724–

25; Doc. 74, #4762–64). The parties expanded the scope of this coverage to include

coverage for pollution events (e.g., discharge of contaminating materials into the

environment) for both policy periods. The parties accomplished this by executing a

pollution endorsement (Endorsement 7). (Doc. 41-3, #646–51; Doc. 41-7, #709–14;

Doc. 74, #4765–67, 4780–84). The policy language also obligated Goettle, as a

condition precedent to coverage, to provide Allied World with written notice of any

claim that could result in a covered loss. The timing of the required notice differed

3 Insurance policies generally come in two forms: claims-made and occurrence-based policies.

Occurrence policies provide coverage so long as the event occurred during the policy period,

regardless whether the insured requested coverage during the period. Claims-made policies

by contrast provide coverage only for claims that are reported to the insurer during the policy

term (with the policy also usually providing a short window for late reporting after the term

otherwise expires). In this case, Allied World issued a claims-made policy that provided

coverage only for covered events that Goettle reported during the policy period or within 60

days after its expiration. (Doc. 41-3, #646, 652; Doc. 41-7, #709, 715).

depending on whether the loss fell within the ambit of Endorsement 7 or instead

under the original policy language itself.4 (Doc. 41-3, #663–64; Doc. 41-7, #726–27;

Doc. 74, #4764–65). Finally, under the policies, Allied World had a duty to defend

Goettle (up to policy limits) against “any Claim … even if the allegations of the Claim

are groundless, false or fraudulent.” (Doc. 41-3, #653).

The events prompting this coverage action and the related suit in federal court

in Louisiana arise from work Goettle performed for JGC at the Dolet Hills coal mine

near Mansfield, Louisiana. (Doc. 74, #4769). JGC contracted for Goettle to construct

a retaining wall used to support ramps dump trucks utilized for hauling lignite coal

throughout the site. Goettle began work on the project in November 2016. (Id.). Alas,

the retaining wall did not withstand the test of time. On April 18, 2017, JGC observed

4 The prior assigned judge, in her ruling on the parties’ cross motions for summary judgment,

held that Endorsement 7 expanded, but did not supplant, coverage under the Policy. (Doc.

74, #4784–85). Based on that ruling, Endorsement 7 and the original policy language were

deemed to be mutually exclusive as to the claims they each covered: claims arising from

pollution events fell under the terms of Endorsement 7, whereas claims arising from non-

pollution events fell under the original policy language. (Id.). The then-assigned judge

reached this holding, later affirmed on appeal, (Doc. 97, #5377–78), based on ambiguities that

would be created were Endorsement 7 read to supplant language in the original policy and

to apply to claims arising under both pollution and non-pollution events. (Doc. 74, #4781–84).

For example, the then-assigned judge noted that if Endorsement 7 governed non-pollution

events, mere notice to Goettle that a third-party claimant might demand payment from

Goettle for negligent engineering services would trigger Goettle’s duty to notify Allied World

of the potential claim. (Id. at #4782–83 (citing Doc. 41-7, #709, 711)). By contrast, under the

original policy language not supplanted by Endorsement 7, Goettle was also given the choice

whether to provide Allied World notice of the same potential non-pollution event immediately

or upon “the Potential Claim[’s] matur[ation] into … a demand for payment or services.” (Id.

at #4782 (citing Doc. 41-7, #727)). In other words, Goettle would face two conflicting reporting

obligations if both Endorsement 7 and the original policy language applied to the same non-

pollution event. The then-assigned judge concluded that given Ohio law resolves such

ambiguities in favor of the insured, Endorsement 7 just provided additional coverage specific

to pollution events. (Id. at #4780). And, as noted immediately above, the Sixth Circuit has

since affirmed that holding.

seepage through the slats in the retaining wall and heard loud noises emanating from

it. (Id.). JGC notified Goettle three days later via email with pictures documenting

the abnormalities. (Id. at #4769–70). From April 2017, until August 10, 2017, Goettle

and JGC communicated frequently to assess the structural integrity of the retaining

wall, to make an action plan to respond to its current state, and, eventually, to repair

it. (Id. at #4770–72). Of note, JGC sent Goettle an email on June 1, 2017, including a

geotechnical report from an outside engineering firm identifying certain “errors and

omissions” in Goettle’s design of the retaining wall. (Doc. 59-13, #4010–12). At that

time, JGC intended its email “to further discussions about repairing the wall and ‘not

to assign fault or to make a claim against any particular party.’” (Doc. 74, #4770–71

(quoting Doc. 60-1, #4054)).

Despite several months of discussions, the parties did not ultimately resolve

the structural issues with the wall. So, on August 10, 2017, JGC provided Goettle its

formal notice that JGC believed Goettle was in breach of their contract for its

“defective … design and construction” of the retaining wall and explained that it

would resort to legal action if Goettle failed to cure in a timely fashion. (Doc. 74, #4772

(quoting Doc. 43-7, #1193–94)). Shortly thereafter, on September 6, 2017, JGC sued

Goettle in the United States District Court for the Western District of Louisiana

raising claims of negligent design, negligent construction, and breach of contract (for

violating the alleged contractual duties to provide a defect-free wall in both its design

and construction as well as the duty to indemnify JGC for expenses and fees incurred

because of such defects). Complaint at 11–15, Joy Glob. Conveyors Inc. v. Richard

Goettle, Inc., No. 5:17-cv-1121 (W.D. La. Sept. 6, 2017), ECF No. 1.5

Goettle’s general counsel first learned of the incident involving the Dolet Hills

retaining wall from the August 10, 2017, letter JGC sent notifying Goettle of its belief

that the latter was in breach of their contract. (Doc. 74, #4772). Via its insurance

broker, Goettle thereafter notified Allied World of this potential claim on August 30,

2017. (Id. at #4772–73). Ultimately, on October 6, 2017, Allied World issued its

coverage determination. In that letter, it both denied any obligation to indemnify

Goettle for any aspect of the dispute between Goettle and JGC and also denied any

duty to cover the costs of Goettle’s defense of the Louisiana lawsuit. (Id. at #4773–74

(citing Doc. 47-19, #2954)).

The same day it issued its denial of coverage, Allied World brought this

declaratory judgment action. In the action, it requested a declaration that it has no

obligation to defend or to indemnify Goettle for any loss arising from the Dolet Hills

retaining wall incident. (Doc. 1, #13–17).

In its Complaint, Allied World asserted four bases for believing that the

policies it issued did not cover the Dolet Hills incident. First in Count I, it alleged

that the 2017–2018 Policy did not apply because the June 1, 2017, email from JGC to

Goettle constituted a claim against Goettle under the provisions of Endorsement 7,

5 JGC twice amended its complaint in the Louisiana action: first, to add Allied World as a

defendant under Louisiana’s direct-action statute, First Amended Complaint at 17–20, Joy

Glob. Conveyors Inc., No. 5:17-cv-1121 (W.D. La. Oct. 30, 2017), ECF No. 22; see La. Stat.

Ann. § 22:1269, and second, to demand the return of all monies JGC paid Goettle under their

contract, Second Amended Complaint at 26, Joy Glob. Conveyors Inc., No. 5:17-cv-1121 (W.D.

La. Nov. 13, 2019), ECF No. 77.

which meant that the claim was not made within the 2017–2018 Policy period (which

began on June 28, 2017). (Id. at #13–14). In Count II, Allied World alleged that the

2017–2018 Policy could not provide coverage because Endorsement 7 excluded

coverage for claims of which the insured had knowledge prior to the policy period and

Goettle was aware of the claim related to the Dolet Hills incident (as of the June 1,

2017, email) before the 2017–2018 Policy period. (Id. at #14–15). In Count III, Allied

World alleged that Goettle could not seek coverage under the 2017–2018 Policy

because it had not updated its March 2017 renewal application to disclose its

awareness of the Dolet Hills incident, which Allied World maintained would have

impacted its decision to renew the policy. (Id. at #15–16). And in Count IV, Allied

World alleged that Goettle could not make a claim under the 2016–17 Policy because

it did not report the Dolet Hills incident to Allied World within 60 days of the end of

the covered policy period as the policy’s reporting requirements mandated.6 (Id. at

#17). And Allied World sought a declaration from the Court affirming the validity of

each of its four theories of non-coverage. (Id. at #18). Goettle counterclaimed for

breach of contract and for a declaratory judgment, both seeking a ruling that Allied

World has a duty to defend and to indemnify Goettle in connection with the Louisiana

suit under the 2017–18 Policy. (Doc. 7, #209–10).

Following discovery, the parties both moved for summary judgment regarding

Allied World’s duties to defend and to indemnify. (Docs. 61, 62). The then-assigned

6 Goettle made expressly clear in its summary judgment briefing that it sought coverage for

the Dolet Hills incident under only the 2017–2018 Policy. (Doc. 61, #4066 n.1; see Doc. 74,

#4779). As a result, Count IV of Allied World’s Complaint is moot.

judge ultimately ruled in Goettle’s favor with respect to Allied World’s duty to defend

it in the Louisiana action. (Doc. 74, #4789). In that ruling, the judge resolved several

issues. First, she held that the Dolet Hills incident involved a non-pollution event,

such that Goettle had to comply with only the original policy language (not

Endorsement 7). (Id. at #4784–85).7 Second, she found that there was a genuine

dispute of material fact as to whether an email JGC sent on June 1, 2017, first

identifying “errors and omissions” in the construction of the retaining wall

constituted notice of a potential claim for which Goettle needed to alert Allied World

(which timing would affect whether the claim fell within the 2016–2017 Policy or the

2017–2018 Policy). (Id. at #4782 n.5). Third, she concluded that Goettle’s failure to

update its renewal application (completed before the Dolet Hills incident) to include

details of the ongoing issues related to the retaining wall did not bar it from seeking

coverage under the 2017–2018 Policy. (Id. at #4785–86).8 And finally, she held that

the August 10, 2017, demand letter from JGC “constituted at least the assertion of a

potentially covered Claim,” which thereby triggered Allied World’s duty to provide

Goettle a defense in the Louisiana action. (Id. at #4787–88).

Altogether, the summary judgment ruling effectively denied Allied World all

the relief it requested in its Complaint. See supra notes 6–8. But that did not mean

7 This holding effectively bars Allied World’s obtaining relief on Counts I and II of its

Complaint, as both counts turned on the application of Endorsement 7 to the Dolet Hills

retaining wall incident to support Allied World’s denial of coverage. (Doc. 74, #4784–85

(explaining that the arguments that serve as the basis for Counts I and II of the Complaint,

(Doc. 1, #13–15), “fail as a matter of law because Endorsement No. 7 is not applicable”)).

8 This holding implicitly bars Allied World from obtaining relief on Count III of the

Complaint. (See Doc. 1, #15–16).

the prior assigned judge granted Goettle’s counterclaim. Yes, the Court held that

Allied World owed Goettle a duty to defend—half the relief Goettle requested in its

counterclaim. But importantly (for present purposes), the judge declined to reach the

question of indemnity. Specifically, she noted that “an insurer’s duty to indemnify is

distinct from its duty to defend” and that “the Court could not determine … whether

Allied World has an ultimate duty to indemnify … as it depends on the disposition of

the underlying litigation.” (Id. at 4788 (cleaned up)). So the judge ordered Allied

World to pay the defense costs, held the indemnification issue in abeyance, and stayed

the case pending resolution of the Louisiana suit. (Id. at #4789; Doc. 91).9 Thereafter,

with the stay still in place, the matter was reassigned to the undersigned. (Doc. 99).

Then in January 2024, JGC and Goettle (without input from Allied World)

purportedly settled their dispute for $3.9 million.10 (Doc. 105, #5397). Though Allied

World had been a party to the Louisiana lawsuit, JGC and Goettle notified it of the

9 While the underlying litigation was ongoing, Goettle moved to enforce the prior judge’s

summary judgment order contending that Allied World had refused to pay certain defense

costs. (Doc. 79). Though finding that Allied World had acted reasonably in raising doubts

about the propriety of paying for the fees to which it objected, the then-assigned judge

ultimately concluded that Goettle properly requested reimbursement for those fees, granted

its motion to enforce, and ordered Allied World to pay $226,051.51. (Doc. 91, #5292). Allied

World appealed this order, which was essentially an injunctive order to pay money, (Doc. 92),

but lost on appeal, (Doc. 97). The Sixth Circuit, in ruling that Allied World owed Goettle the

$226,051.51, also analyzed and affirmed the prior-judge’s summary judgment rulings upon

which the order to pay was based. (Id. at #5377–79). In other words, the Sixth Circuit also

held that Allied World could not obtain the relief it requested in its declaratory judgment

action. The Court suspects that this affirmance prompted Allied World now to acknowledge

that the underlying Louisiana suit did incorporate some covered claims. (Doc. 108, #5565).

10 Goettle also notes that the settlement agreement is “unexecuted,” (Doc. 105, #5397; see

Doc. 104, #5392 (referring to the agreement as in “draft” form))—a detail confirmed by review

of the unsigned document provided to the Court for in camera review in resolving Goettle’s

unopposed motion to file the draft under seal, (Doc. 110); see infra note 11. The Court is

unclear what authority would permit it to enforce an agreement lacking even the basic

requirements necessary to consummate a contract under elementary contract principles.

settlement agreement on January 22, 2024, only after they had negotiated the

compromise. See Motion to Stay at 3, Joy Glob. Conveyors Inc., No. 5:17-cv-1121 (W.D.

La. Jan. 22, 2024), ECF No. 132. And they made clear their intention to have Allied

World shoulder the entire settlement obligation (even if some of the claims would not

be covered by the policies it had issued). Id. at 3–4. As requested, the parties notified

this Court in March 2024, that JGC and Goettle had settled the underlying Louisiana

action. (3/19/24 Min. Entry). At a telephone status conference held on March 19, 2024,

the parties and the Court discussed the proper path forward. (Id.). Given Goettle’s

insistence that it could compel Allied World to pay the settlement amount (to which

Allied World did not agree), the Court ordered the parties to brief the questions

whether the settlement amount should be allocated between covered and uncovered

claims (as Allied World maintains) and, if so, whether Allied World is barred from

challenging any allocation decision that Goettle and JGC made and incorporated in

the settlement agreement. (Id.).

Thereafter, Goettle moved “to enforce” the prior judge’s summary judgment

order by having the Court enter an order compelling Allied World pay the entire

settlement agreement amount. (Doc. 105). Allied World opposed noting that no

indemnification decision had ever been made and that Ohio law does not require

insurers that fail to comply with their duty to defend to pay for claim not covered by

the policy. (Doc. 108). Goettle replied. (Doc. 109). The matter is now ripe.11

11 Goettle also moved for leave to file under seal the draft settlement agreement pursuant to

Shane Group, Inc. v. Blue Cross Blue Shield of Michigan, 825 F.3d 299, 306 (6th Cir. 2016),

and its progeny. (Doc. 110). Goettle contends that sealing is justified because the settlement

LAW AND ANALYSIS

Goettle’s motion boils down to two assertions: (1) that the then-assigned judge

already concluded that Allied World must pay for the entirety of any settlement

reached; and (2) that Ohio law bars Allied World from objecting to any obligation to

pay for uncovered claims because it wrongfully refused to defend. (Doc. 105, #5396–

98). These assertions do not withstand scrutiny under either the prior judge’s Order

or Ohio caselaw. Take each in turn.

A. Indemnification Has Not Already Been Resolved

On Goettle’s telling, the prior judge concluded that Allied World must pay for

any settlement of the Louisiana action—whether Goettle settled covered or uncovered

agreement is not a “judicial document” requiring public access and the parties’ interests in

confidentiality outweigh the public interest in access to that document. (Id. at #5586–87).

The Court concludes that Goettle has failed to meet its strong burden to overcome the right

to public access. Brown & Williamson Tobacco Corp. v. FTC, 710 F.2d 1165, 1179 (6th Cir.

1983). For starters, Goettle has offered this unexecuted settlement agreement for the Court’s

review to assist in the Court’s adjudication of its motion to enforce. (Doc. 110, #5584). That

renders it a judicial document to which the right to public access attaches, as it serves as part

of the record upon which the Court is ruling. Hearn v. Dick’s Sporting Goods, Inc., No. 1:22-

cv-329, 2023 WL 7298616, at *6 (S.D. Ohio Nov. 6, 2023); cf. Hens v. Clientlogic Operating

Corp., No. 05-cv-381S, 2010 WL 4340919, at *2 (W.D.N.Y. Nov. 2, 2010) (explaining that

settlement agreements are not judicial documents in the context of Rule 41 dismissals, where

the agreement is not docketed in order to close the case). So Goettle’s attempt to disclaim the

agreement as not a judicial document fails. Shane Grp., 825 F.3d at 305 (explaining that the

right attaches “when the parties place material in the court record”). And Goettle’s only other

basis for sealing is the parties’ agreement to keep the document confidential. But parties may

not stipulate away the public’s right to access. Hearn, 2023 WL 7298616, at *6 (citing Shane

Grp., 825 F.3d at 306); In re Smithland Towing & Constr., LLC, No. 5:18-cv-113, 2024 WL

504030, at *2 (W.D. Ky. Jan. 8, 2024) (“An agreement between the parties, or an agreement

between one party and other parties, to maintain confidentiality cannot on its own overcome

the public’s strong interest in obtaining the information contained in the court record.”

(cleaned up)). And the Court has reviewed the agreement and sees nothing in it that fits the

bill of grounds justifying sealing, such as confidential communications, privileged materials,

trade secrets, or the like. Hearn, 2023 WL 7298616, at *6. So the agreement must be filed on

the public docket. The Court accordingly DENIES Defendant/Counterclaimant Richard

Goettle, Inc.’s Renewed Motion for Leave of Court to File Document Under Seal (Doc. 110).

claims and whether Allied World consented to the agreement or not. But that

description of the prior judge’s ruling is simply wrong. The then-assigned judge

expressly stated that “the Court cannot determine at this time whether Allied World

has an ultimate duty to indemnify.” (Doc. 74, #4788). If this Court never previously

determined whether Allied World had a duty to indemnify, it necessarily has made

no finding that Allied World must “reimburse [Goettle] for a loss suffered because of

[the settlement of the Louisiana suit].” Indemnify, Black’s Law Dictionary (12th ed.

2024). And Goettle cannot concoct an implicit ruling to that effect merely because the

summary judgment ruling included case citations that set forth general principles of

Ohio insurance law. (Doc. 105, #5395–97, 5409; Doc. 109, #5578–80). The previous

opinion could not have been more clear that it was not deciding “whether Allied World

has an ultimate duty to indemnify.” (Doc. 74, #4788; see Doc. 78, #4877). In other

words, the May 28, 2019, Order does not hold that Allied World must pay for a

settlement to which it never consented. Thus, there is nothing for Goettle to “enforce”

in that regard.

Possibly (although the motion and reply do not truly present this argument),

Goettle is inartfully arguing that (1) the prior assigned judge’s legal holdings in

connection with resolving the duty-to-defend question also foreclosed all four grounds

Allied World raised in its Complaint as a basis for denying indemnification, see supra

notes 6–8, and (2) Allied World cannot now raise other grounds for denying

indemnification, such that (3) the prior opinion implicitly ruled that Allied World

must provide coverage. If that is the argument (again, the Court is skeptical in light

of the briefing), Goettle would have slightly more support for its claim that its motion

now merely seeks to “enforce” the prior judge’s ruling in its favor. But any such

argument nonetheless cannot be squared with either the prior judge’s ruling or the

procedural posture of this case. First and foremost, that Allied World’s previously

proffered grounds for seeking a declaratory judgment fail does not necessarily mean

that it has a duty to indemnify no matter what. To the contrary, there may be other

bases for a lack of coverage besides those first-order arguments Allied World had

raised (for example, it may now argue that the coverage provisions do not apply to

the underlying suit in the first instance). (See Doc. 47-19, #2942–54 (Allied World’s

raising several additional defenses to coverage in its denial letter); Doc. 61, #4102–

03 (Goettle’s acknowledging that Allied World had asserted other defenses in its

denial letter)). And Goettle points to no case law holding that an insurer must present

every possible ground for non-coverage if it brings a declaratory judgment action to

that effect, on pain of otherwise losing the right to rely on that ground to defeat the

insured’s demand for coverage in the same action.12 Or stated differently, Goettle still

retains its burden of proof on its counterclaim, which requests a judgment compelling

Allied World to indemnify it for the costs associated with the underlying Louisiana

12 The issue, of course, would be in a different posture vis-à-vis what coverage defenses Allied

World could raise were indemnity litigated after judgment had been rendered in the insurer’s

separate declaratory judgment action—res judicata would apply to that case. But seeing as

no judgment has been rendered in this single action, the prior judge rightly rejected Goettle’s

attempt to rely on res judicata to bar Allied World from raising defenses to indemnity other

than those for which it sought a declaratory judgment, (Doc. 61, #4102–03; see Doc. 75,

#4797–801 & Doc. 77, #4845–46 (reraising the failed arguments that res judicata applies in

this single action)), as lacking in merit. (Doc. 74, #4789 n.7). And as to Goettle’s attempts to

achieve the same result via the doctrines of waiver and estoppel, (Doc. 75, #4792–93; Doc. 77,

#4845–49), those arguments do not fare much better, as explained below, see infra note 14.

suit. Ramsey v. Allstate Ins. Co., 416 F. App’x 516, 520 (6th Cir. 2011). And it cannot

satisfy that burden simply by noting that Allied World’s attempt to seek a declaratory

judgment—focused only on certain coverage defenses—failed as a matter of law.

This point is underscored by the prior judge’s emphatic holding (in response to

Goettle’s motion to clarify, (Doc. 75), that attempted to bar Allied World from

defending against the counterclaim using defenses not identified in its Complaint)

that “it could not resolve whether Allied World will have [a] duty to indemnify

Goettle” and that “it would be speculative and premature to decide” whether Allied

World could raise those additional defenses in response to Goettle’s counterclaim.

(Doc. 78, #4875, 4877). Simply, the prior assigned judge made clear—more than

once—that she made no determination as to indemnification. As a result, Goettle

cannot be heard to “enforce” any such non-existent determination now.

B. Sanderson v. Ohio Edison Co. and Allocation

Goettle’s second argument seeks to sidestep this issue by contending that,

under Ohio law, Allied World’s alleged wrongful refusal to defend Goettle in the

Louisiana litigation means that Allied World cannot object to paying for both the

covered and uncovered claims that Goettle settled in the underlying suit. (Doc. 105,

#5406; Doc. 109, #5579–80). Allied World disagrees with both the underlying

assumption and the proposed result. It states that (1) it never wrongfully refused to

defend, and (2) the caselaw on which Goettle relies does not stand for the broad

proposition that Goettle asserts. (Doc. 108, #5560–62). The Court concludes, however,

that it need not address whether Allied World wrongfully refused to defend,13 as, even

assuming it did so, Goettle’s preferred outcome does not attain.

For starters, as the prior assigned judge explained (twice over), in Ohio, “[a]n

insurer’s duty to indemnify is distinct from its duty to defend,” and “estoppel cannot

be invoked to create coverage under an insurance policy where coverage otherwise

does not exist.” (Doc. 74, #4788–89 (emphasis added) (cleaned up); Doc. 78, #4877).

Both rules reveal that the scope of Allied World’s coverage liability remains an open,

contestable question. See supra Part A. Namely, an insurer’s actions with respect to

its duty to defend do not on their own implicate its independent obligation to

indemnify an insured. Rather, the scope of the duty to indemnify is dictated by the

policy language, and as noted immediately above, an insured cannot use estoppel to

expand the scope of a policy’s stated coverage. Hybud Equip. Corp. v. Sphere Drake

Ins., 597 N.E.2d 1096, 1103–04 (Ohio 1992). As applied here, those principles suggest

that Goettle cannot foist liability for uncovered claims on Allied World (i.e., expand

coverage) by claiming (1) the latter flouted its duty to defend Goettle in the

underlying Louisiana suit, and (2) that this failure bars (i.e., estops) Allied World

from challenging its coverage obligations now.14

13 The Court does note, however, that under Ohio law, an insurer’s bringing a declaratory

judgment action to define its defense obligations generally does not constitute a wrongful

refusal to defend. Allstate Ins. Co. v. Vasquez, 599 N.E.2d 756, 758 (1991). And furthermore,

the prior assigned judge did note that although she needed to order Allied World to pay

certain defense costs to which it objected, “it was reasonable under the procedural

circumstances [] for Allied World to question whether the fees sought were incurred by

Goettle in its defense against [JGC’s] claims.” (Doc. 91, #5292).

14 The Court acknowledges that there are exceptions to this rule. See Turner Liquidating Co.

v. St. Paul Surplus Lines Ins., 638 N.E.2d 174, 179 (Ohio Ct. App. 1994). But to invoke them,

What of Goettle’s suggestion that caselaw supports its position? Goettle points

to Sanderson v. Ohio Edison Co., 635 N.E.2d 19 (Ohio 1994), as holding that insureds

may compel insurers to pay for an entire settlement (encompassing covered and

uncovered claims) when the insurer wrongfully refuses to defend the insured. (Doc.

105, #5402–04). That characterization overstates Sanderson. In fact, a close reading

Goettle would need to proffer evidence either that Allied World led it to believe Allied World

would not contest the scope of its coverage liability (a detrimental reliance theory) or that

Allied World acted inconsistently with its right to raise such a challenge, thereby impliedly

waiving its ability to do so. Id. This is a tall ask. Andreae v. Cap. One, No. 1:22-cv-618, 2024

WL 1579914, at *6 (S.D. Ohio Apr. 11, 2024) (explaining that waiver through inconsistent

acts must be shown via evidence “clearly and unmistakably” revealing the rightsholder’s

voluntary relinquishment of a known right); accord Hill v. Xerox Bus. Servs., LLC, 59 F.4th

457, 471–79 (9th Cir. 2023) (detailing all the record evidence before determining that the

defendant clearly and unmistakably impliedly waived its arbitration right). And it is one

Goettle will be unable to meet, especially because any failure by Allied World to assert certain

defenses combined with the mere passage of time does not amount to a waiver—only, at best,

a forfeiture, Hebrard v. Nofziger, 90 F.4th 1000, 1006 (9th Cir. 2024). Besides, Allied World

forecasted from the start that it does not believe it owes Goettle any money under the policy,

as it brought this suit to lend judicial credence to its denial letter. (Doc. 1; Doc. 47-19, #2942–

54). So Goettle cannot reasonably claim that it believed Allied World would not challenge the

scope of its indemnification obligations once the Louisiana suit ran its course. The coverage

liability contest is still fair game.

To be sure, Goettle could be arguing that Allied World’s wrongful denial of its duty to defend

“waived” its right to challenge its duty to indemnify. The Court addresses that next in its

analysis of Sanderson v. Ohio Edison Co. 635 N.E.2d 19 (Ohio 1994). As explained in more

detail, while Ohio law would permit Goettle to hold Allied World to the settlement (and its

admissions in such an agreement)—assuming Allied World wrongfully refused to defend—

Goettle still cannot expand the scope of its coverage due to it under its policy. In other words,

the wrongful refusal to defend does bar Allied World from arguing that the insured should

have avoided (or decreased the costs of) liability for covered claims in the underlying suit.

That is because the refusal to defend constitutes actions inconsistent with directing how the

insured should have handled the underlying suit. But not being able to object to the costs of

an underlying liability to the extent that it is properly covered by the policy does not mean

the policy’s coverage obligations can be expanded to sweep in what otherwise are non-covered

claims. Simply, courts may require insurers to bear the costs of wrongfully refusing to defend

but may not use that wrongful refusal to rewrite the insurance contract.

For these reasons, Goettle cannot seek refuge under either the detrimental reliance or waiver

exceptions to the rule that an insured cannot utilize (via estoppel) Allied World’s litigation

behavior to expand the scope of its coverage liability under a policy.

of that case suggests it stands for the opposite of what Goettle intimates. All agree

Sanderson holds that an insured need not obtain the insurer’s consent to settle when

the latter wrongfully refused to defend the lawsuit. (Doc. 105, #5402–03; Doc. 108,

#5559). The Sanderson court explained that, in such a context, “the insurer

voluntarily foregoes the right to control the litigation.” 635 N.E.2d at 23. So the

insurer cannot complain that it did not agree to settle the underlying matter (even if

such consent is a condition precedent to indemnification under the policy) because

“[n]either the insured nor the injured party is required to perform conditions in a

policy made vain and useless by reason of the insurer’s prior breach.” Id. at 23–24.

And it necessarily follows that, if the insurer cannot object to the way the insured

handled the underlying litigation, the insurer also cannot object the costs of the

litigation to the extent the policy provides coverage. Id. at 24. Simply put, an insurer

that refused to defend may not profit from its breach of the contract and decrease its

liability under contract by suggesting that had the insured done a better job of

defending the underlying claim the resulting liability would have been smaller or

non-existent. For this reason, an insured’s admissions in the underlying litigation

(including concessions of liability) will be held against an insurer that wrongfully

refused to defend. Id. at 23–24.

But forfeiting the right to control the underlying litigation and the resulting

value of the settlement is not the logical equivalent of admitting one’s indemnity

obligations under the policy. Suffolk Tankers, Ltd. v. Evanston Ins. Co., No. 1:00-cv-

3062, 2005 WL 2401897, at *1 & n.12 (N.D. Ohio Sept. 28, 2005) (“Ohio law is

clear[:] … an insurer’s rejection of a demand for defense will permit an insured to

proceed to settle a claim on its own and, if coverage is established, to bind the insurer

to that result.” (emphasis added)). As a result, the two cannot be conflated as Goettle

does in its briefing. (See Doc. 109, #5578 (stating correctly that an insured may settle

without consent of the insurer who wrongfully refused to defend but then concluding,

without explanation, that rule statement requires finding that “the insurer must

indemnify the insured for the full amount of the settlement”)).

Sanderson itself lays that distinction bare. After concluding the insurer was

estopped from using its lack of consent to avoid liability for the settlement (and noting

the settlement was not otherwise proven to be fraudulent or collusive), the Sanderson

court expressly addressed the merits of the insurer’s arguments that the policy (either

by its coverage or exclusion provisions) did not cover the settlement. 635 N.E.2d at

24–26, 24 n.1. Namely, the court considered whether the underlying accident had not

“arise[n] out of the [insured’s] use of the particular insured vehicle and therefore

[wa]s not covered by the insurance policy.” Id. at 24–25. After finding that that

coverage provisions applied, the Sanderson court then turned to the insurer’s other

argument that coverage did not extend to the accident because the vehicle (which had

not been owned by the insured) “was not furnished for [his] regular use,” which was

required for coverage to extend to an accident involving an automobile the insured

did not own. Id. at 25–26. If Goettle were right that an insurer’s refusal to defend

conclusively determined the insurer’s obligation to pay for any settlement the insured

struck (even absent fraud or collusion), why would the Sanderson court reach the

merits of the insurer’s argument that the accident was not covered? It would make

little sense to assess the scope of the insurer’s indemnity obligation if coverage

liability were “conclusively” established by its refusal to defend. Goettle never

addresses this portion of Sanderson—what would be a glaring inconsistency under

Goettle’s (misreading) of its holding. Nor can it. Sanderson simply does not support

its position.15 See Buckeye Ranch, Inc. v. Northfield Ins. Co., 839 N.E.2d 94, 111–12

(Franklin Cnty. Ct. Com. Pl. 2005) (recognizing under Sanderson that the insurer

could not object to the reasonableness or the cost of settlement but explaining that

“[t]here remain open questions as to whether the settle[d]” claims were covered by

the policy); accord Suffolk Tankers, Ltd., 2005 WL 2401897, at *1 & n.12 (reading

Sanderson merely to bar insurers from contesting the decision to settle but stating

that the settlement may not be held against the insurer unless and until the insured

establishes coverage).

Put simply, Sanderson established a modest rule: an insurer cannot defeat an

insured’s claim under the policy on the grounds that the insured struck a settlement

with the third-party claimant without the insurer’s consent or that the settlement

value was too costly or unreasonable. The insurer’s refusal to defend estops it from

asserting those specific defenses which are inconsistent with its declining to take

15 In fact, Goettle appears to acknowledge that Sanderson did not reach as far as it otherwise

contends. Goettle states that Sanderson held that “when an insurer unjustifiably breaches

the duty to defend, … such insured is at liberty to make a reasonable settlement without

prejudice to the insured’s right under the insurance agreement.” (Doc. 105, #5402–03

(emphasis added)). Correct. Goettle may still recover under the insurance agreement even

though it did not obtain Allied World’s consent to settle Louisiana suit. But if the insurance

agreement still applies, it necessarily follows that Goettle has no right to recover for claims

the insurance agreement does not cover.

control over the underlying litigation. But Sanderson still adhered to the baseline

requirement that an insured demonstrate coverage under the policy. Or, stated

differently, it did not alter the rule that an insured may not expand coverage via

estoppel. Hybud Equip. Corp., 597 N.E.2d at 1103–04; see Owens Corning v. Nat’l

Union Fire Ins. of Pittsburgh, PA, 257 F.3d 484, 493 (6th Cir. 2001) (explaining that

under Ohio law, an insurer may be liable for “coverage of [a] settlement except to the

extent that the uninsured claims have actually increased the insurer’s liability”

(emphasis added)). Accordingly, Goettle has no leg to stand on in seeking to have the

Court leave the full bill with Allied World based solely on the claim that Allied World

wrongfully refused to defend it (assuming such wrongful refusal occurred).16 Ohio law

does not permit such an outcome—coverage under the policy is still a prerequisite to

recovery even for settlements executed by an insured handling his own defense in the

underlying litigation.

For that reason, it is no surprise that Ohio law permits allocation (i.e., the

apportioning of the costs of an insured’s obligation to a third-party claimant between

those claims covered by the policy and those that are not) before compelling an

insurer to pay for a settlement. Buckeye Ranch, Inc., 839 N.E.2d at 111–12

(concluding, after finding the insurer “forfeited the right to control the [insured’s]

16 Admittedly, Goettle does cite a single case that adopts the position it now pushes. (Doc.

105, #5405 (citing Stoller v. Fid. & Guar. Ins. Underwriters, Inc., No. WD-87-64, 1988 WL

81809, at *6 (Ohio Ct. App. Aug. 5, 1988)). But Stoller cannot carry the day. The appeals

court’s holding there predates and, most importantly, conflicts with the Ohio Supreme

Court’s decision in Sanderson. And, in any event, it is unpublished and therefore has no

precedential value under Ohio law. Watson v. Neff, 2009-Ohio-2062, ¶ 16 & n.2 (4th Dist.)

(explaining that under the former Ohio Sup. Ct. R. Rep. Op. 2(G), unpublished decisions prior

to May 1, 2002, are not controlling authority in Ohio).

defense,” that “[t]here remain open questions … whether the settlement … related

predominantly to [non-covered claims] … or instead … decisions … of a professional

nature [such that they were covered by the professional liability policy] and, if so

whether [an] exclusion provision … operate[d] to deny reimbursement for some or all

of the settlement” (emphasis added)); accord Clifford v. Church Mut. Ins., 655 F.

App’x 293, 300 (6th Cir. 2016) (citing World Harvest Church v. Grange Mut. Cas. Co.,

2013-Ohio-5707, ¶ 29 (10th Dist.), rev’d on other grounds, 68 N.E.3d 738 (Ohio 2016)),

for the proposition that under Ohio law “allocation [applies] … when there are both

‘covered and non-covered claims’”); Owens Corning, 257 F.3d at 493 (concluding that

Ohio insurance law would permit allocation of settlement costs between insured and

uninsured claims).17 The parties may therefore proceed to litigate over how to

17 Goettle objects that Clifford, World Harvest, and Owens Corning do not establish a rule

that allocation is permitted under Ohio law. It contends that Clifford and World Harvest are

inapt because both involved general jury verdicts and neither implicated an insurer that

failed to defend the insured. (Doc. 109, #5571–73). But as explained, Ohio law does not compel

an insurer that refused to defend to pay for uncovered claims. And that Clifford and World

Harvest allow allocation of general verdicts regarding both covered and uncovered claims

reveals that Ohio law uses allocation as the means to implement the rule that estoppel does

not expand the scope of an insurer’s liability under the policy. So Goettle’s objections to those

cases lack merit. Goettle also contends that Owens Corning cannot support allocation because

the case applied Delaware law and upheld a decision not to allocate settlement costs. (Doc.

109, #5573–74). First, Owens Corning expressly applied Ohio insurance law to whether

allocation of settlement costs was permissible—it applied Delaware law only to whether the

corporation properly indemnified its directors. 257 F.3d at 488 (“Ohio law governs the

[insurance] contract, although we look to the corporate law of Delaware for the standards

governing [corporate] indemnification.”). And while the Owens Corning court found allocation

unwarranted, it reached that conclusion after agreeing with the district court that the

summary judgment record contained no evidence that any portion of the settlement costs

stemmed from the uncovered claims. Id. at 493 & n.4. In other words, Owens Corning

supports the principle that allocation of settlements between covered and uncovered claims

is proper under Ohio insurance law and that the insured must show (using evidence in the

summary judgment record) “there is no genuine issue of material fact concerning whether

allocation is warranted.” Id. at 493. So Goettle’s objections to Owens Corning are baseless.

apportion the costs of the settlement between covered and uncovered claims (as Allied

World now maintains, (Doc. 108, #5565); see supra note 9), which will thereby

establish how much Allied World must pay for the settlement.

To be certain, no such ruling on allocation is proper at this moment. The

movant, Goettle, has made no effort to present evidence in its motion. And that means

it has not met its burden of proving the absence of a genuine issue of material fact as

to what settled claims are covered and how much of the settlement value can be

attributed to those covered claims (if less-than-all of the settlement is covered by the

policy). Owens Corning, 257 F.3d at 493. This evidentiary gap in the record poses an

obstacle to Goettle’s meriting the relief it requests.

CONCLUSION

In short, Allied World will be obligated to pay some amount of the settlement,

as it readily admits. (Doc. 108, #5565). But it still may challenge whether it is

obligated to pay the full amount, or whether a portion of that amount should be

allocated to uncovered claims. As Goettle has provided no evidentiary basis either to

ascertain what claims are covered or to allocate the settlement value accordingly, the

Court cannot entertain its request for relief at this time. For this reason and those

explored above, the Court DENIES Defendant/Counterclaimant Richard Goettle,

Inc.’s Motion to Enforce Court’s March 28, 2019, Order and Order for Payment of

Settlement Funds (Doc. 105).

In addition, as explained above, see supra note 11, the Court finds that the

settlement agreement does not merit sealing under the standards outlined in Shane

Group. So the Court DENIES Defendant/Counterclaimant Richard Goettle, Inc.’s

Renewed Motion for Leave of Court to File Document Under Seal (Doc. 110).

Accordingly, Goettle shall file the settlement agreement on/the public docket.

SO ORDERED.

August 19, 2024

DATE DOUGLAS R. COLE

UNITED STATES DISTRICT JUDGE

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