Legal Document: 1900 LOFTS, LLC vs. STATE FARM FIRE AND CASUALTY COMPANY

On February 15, 2023 a D1 STATE FARM FIRE AND CASUALTY COMPANY'S MOTION FOR JUDGMENT ON THE PLEADINGS. JOSEPH MONROE 0086540 DEFENDANT'S MOTION FOR JUDGMENT ON THE PLEADINGS 11/03/2023 - DENIED - MO was filed involving a dispute between 1900 Lofts, Llc, and State Farm Fire And Casualty Company, for COMMERCIAL DOCKET in the District Court of Cuyahoga County.

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Motion No. 5099311

NAILAH K. BYRD
CUYAHOGA COUNTY CLERK OF COURTS
1200 Ontario Street
Cleveland, Ohio 44113

Court of Common Pleas

MOTION FOR JUDGMENT ON THE PLEADINGS
June 23,2023 14:46

By: JOSEPH MONROE 0086540

Confirmation Nbr. 2891956

1900 LOFTS, LLC CV 23 975255

vs.
Judge: MICHAEL J. RUSSO
STATE FARM FIRE AND CASUALTY COMPANY

Pages Filed: 20

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IN THE COURT OF COMMON PLEAS
CUYAHOGA COUNTY, OHIO

1900 LOFTS, LLC ) CASE NO: CV 23 975255
)
Plaintiff, ) JUDGE MICHAEL J. RUSSO
)
v. )
)
STATE FARM FIRE AND CASUALTY ) DEFENDANT’S MOTION FOR
COMPANY ) JUDGMENT ON THE PLEADINGS
)
Defendant. )

Before the Court are two contemporaneous motions filed by Defendant State Farm Fire

and Casualty Company (“Defendant” or “State Farm”):

■ Defendant’s Motion for Judgment on the Pleadings; and

■ Defendant’s Motion for Reconsideration of Defendant’s Motion for Leave to Answer
Complaint Instanter or, Alternatively, Defendant’s Motion for Leave to Conduct
Discovery Prior to Any Damages Hearing.

It is well within the Court’s discretion to render both of these motions moot; in particular, it is

well within the Court’s discretion simply to grant Defendant’s previously filed motion:

Defendant State Farm Fire and Casualty Company’s Motion for Leave to Answer Complaint

Instanter Pursuant to Civ. R. 6(B):

Although the trial court initially entered default judgment against
appellees, the judgment was not final; consequently, the trial court was
permitted to revisit its decision. See, e.g., Crosby (trial court initially
granted default judgment, but, following a hearing, entered judgment in
favor of defendants).

5500 South Marginal Way, L.L.C. v. Parker, 8th Dist. Cuyahoga No. 109767, 2021-0hio-1410,

^21. There is no evidence whatsoever before the Court that State Farm’s approximately one-

month delay in answering the newly-filed Complaint that Plaintiff's counsel had mailed to a

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random State Farm insurance agent’s office, instead of directly to State Farm, was the result of

inexcusable neglect.

If the Court does not grant State Farm leave to answer the Complaint instanter.

Defendant in this motion for judgment on the pleadings establishes that State Farm is entitled to

judgment as a matter of law. If the Court grants State Farmjudgment on the pleadings, the Court

does not need to conduct any hearing on damages. State Farm’s motion for judgment on the

pleadings is supported by Civ. R. 8(D), 12(C), and 55(A) and the ample case law cited here. Civ.

R. 8(D) states:

Effect of Failure to Deny. Averments in a pleading to which a responsive
pleading is required, other than those as to the amount of damage, are
admitted when not denied in the responsive pleading.

Civ. R. 12(C) provides:

Motion for Judgment on the Pleadings. After the pleadings are closed
but within such time as not to delay the trial, any party may move for
judgment on the pleadings.

Civ. R. 55(A) provides:

Entry of Judgment. When a party against whom a judgment for
affirmative relief is sought has failed to plead or otherwise defend as
provided by these rules, the party entitled to a judgment by default shall
apply in writing or orally to the court thereforf.] ... If, in order to enable
the court to enter judgment or to carry it into effect, it is necessary to take
an account or to determine the amount of damages or to establish the truth
of any averment by evidence or to make an investigation of any other
matter, the court may conduct such hearings or order such references as it
deems necessary and proper and shall when applicable accord a right of
trial by jury to the parties.

Pursuant to Civ. R. 8(D), 12(C), and 55(A), State Farm, “a party against whom a

judgment for affirmative relief is sought has failed to plead or otherwise defend”, is entitled to a

judgment on the “closed” pleadings because averments of the Complaint “other than those as to

the amount of damage” present a question of law that the Court must decide-, whether “the

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claims made by Plaintiff” for the July 24, 2022 “leak and consequent property damage” (the

“Leak”) are for a “Covered Cause of Loss” under the property insurance of the State Farm

insurance policy, Exhibit A attached to the Complaint (the “Policy”). (Civ. R. 8(D), 12(C), and

55(A); and Complaint at and 12).

In the Complaint, Plaintiff does not dispute the cause of the Leak set forth in the State

Farm denial letter, Exhibit B attached to the Complaint (the “State Farm Letter”); and State Farm

is entitled to judgment on the closed pleadings (the Complaint) because as a matter of law the

applicable terms of State Farm property insurance deemed admitted do not apply to the cause of

the Leak deemed admitted.

State Farm is entitled to judgment on the pleadings because the averments of the

Complaint do not establish that Plaintiff is entitled to the breach of contract and extra-contractual

and punitive damages sought in the Complaint. Accord, Graham v. Byerly, 3rd Hancock No. 5

04-09, 2004-0hio-4530 at ^18 (“[A] default judgment will be entered in favor of a party who is

entitled to the judgment. If a complaint fails to state a cause of action upon which relief can be

granted, the court is not required to enter a default judgment in favor of the plaintiff, as he would

not be entitled to such relief.”), emphasis supplied by the court; and Webster v. Perrotta, 774

A.2d 68, 77 (R.I. 2001)(“[C]onclusions of law set forth in the complaints are not deemed

established by a default judgment. ‘The defendant is not held to admit facts that are not well-

pleaded or to admit conclusions of law.’”).

Respectfully submitted,

/s/Joseph Monroe II___________________
JOSEPH MONROE, II (0086540)
Gallagher Sharp, LLP
Attorneys for Defendant State Farm Fire and
Casualty Company

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MEMORANDUM IN SUPPORT OF DEFENDANT’S MOTION
FOR JUDGMENT ON THE PLEADINGS
I. STATEMENT OF CASE

A. The Complaint

Pursuant to Civ. R. 8(D), the following averments in the Complaint — “a pleading to

which a responsive pleading is required” -- are “admitted” because they are other than “as to the

amount of damages” and have not been denied in a responsive pleading (an answer) permitted by

the Court:

1. Plaintiff, 1900 Lofts, LLC, is and was the owner of a certain premises
located at 1900 Euclid Avenue, Cleveland, Ohio 44115 (Premises).

2. At the Premises, Plaintiff operates residential apartments which house,
primarily, but not exclusively, Cleveland State University students and
their family members and [Uc].

3. Defendant, State Farm Fire and Casualty Company issued Insurance
Policy Number 95-E9-Q786-8 (Policy) to Plaintiff relative to the
Premises. Said policy was in effect at all pertinent times. A copy of said
policy is attached hereto and marked as Exhibit A.

4. On or about July 24, 2022, a tenant from the Premises made the Plaintiff
aware that there was a water leak in his/her apartment.

5. At that time, Plaintiffs representative inspected that apartment and the
Premises. During said inspection, Plaintiff learned that there was a leak
into the apartment through a 2nd floor roof. This was the first time that
Plaintiffhad any information as to such leak and consequent damage.

6. Thereafter, Plaintiff immediately (July 24, 2022) placed Defendant on
notice of the leak, and Defendant assigned Claim Number 35-37S0-93T to
the matter.

7. On August 23, 2022, Joseph Goodrum, External Claim Resource - Eberl,
from Defendant met a representative from Plaintiff at the Premises to
inspect same.

8. Defendant sent Plaintiff a certain letter, dated August 23, 2022, wherein
Defendant informed the Plaintiff that Defendant that “there were no

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damages caused by a covered loss on any roof of any building located at
1900 Euclid Ave. Cleveland, OH 44115.” (See Exhibit B.)

9. In that same letter, Defendant claimed that the leak and the consequent
damage from same was caused by poor maintenance of the roof and/or
poor installation and /or inadequate workmanship. (See Exhibit B.)

10. Additionally, in that same letter, Defendant claimed that “the building did
not sustain damage from a Covered Cause of Loss to the roof or walls, the
interior damage is not covered.” (See Exhibit B.)

11. More specifically, in that same letter, Defendant cited the Plaintiff to the
following portions of the Policy, claiming that same do not provide
coverage for Plaintiffs losses:

SECTION I-PROPERTY
When a Limit Of Insurance is shown in the Declarations for that type
of property as described under Coverage A - Buildings, Coverage B
- Business Personal Property, or both, we will pay for accidental
direct physical loss to that Covered Property at the premises described
in the Declarations caused by any loss as described under SECTION I
-- COVERED CAUSES OF LOSS.

SECTION I -- COVERED CAUSES OF LOSS
We insure for accidental direct physical loss to Covered Property
unless the loss is:
1. Excluded in SECTION I — EXCLUSIONS; or
2. Limited in the Property Subject To Limitations provision.

Property Subject To Limitations
1. We will not pay for loss to:

e. The interior of any building or structure, or the property inside
any building or structure, caused by rain, snow, sleet, ice, sand
or dust, whether driven by wind or not, unless:
(1) The building or structure first sustains damage by a
Covered Cause Of Loss to its roof, outside walls, or outside
building glass through which the rain, snow, sleet, ice, sand
or dust enters; or
(2) The loss is caused by thawing of snow, sleet or ice on the
building or structure.

SECTION I — EXCLUSIONS
* * *

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2. We do not insure under any coverage for loss whether consisting
of, or directly and immediately caused by, one or more of the
following:

1. Other Types Of Loss
(1) Wear and tear;
(2) Rust or other corrosion, decay, deterioration, hidden or
latent defect or any quality in property that causes it to
damage or destroy itself;

(4) Settling, cracking, shrinking or expansion;

But if an excluded cause of loss that is listed in Paragraphs (1)
through (7) above results in an accidental direct physical loss
by any of the “specified causes of loss” or by building glass
breakage, we will pay for the loss caused by that “specified
cause of loss” or by building glass breakage.

3. We do not insure under any coverage for any loss consisting of one
or more of the items below. Further, we do not insure for loss
described in Paragraphs 1. and 2. immediately above regardless of
whether one or more of the following: (a) directly or indirectly
cause, contribute to or aggravate the loss; or (b) occur before, at
the same time, or after the loss or any other cause of the loss:

c. Work

Faulty, inadequate or defective:

(2) Design, specifications, workmanship, repair, construction,
renovation, remodeling, grading, compaction;
(3) Materials used in repair, construction, renovation or
remodeling; or
(4) Maintenance;

of part or all of any property (including land, structures or
improvement of any kind) on or off the described premises.
But if accidental direct physical loss results from items 3.a.,
3.b., or 3.C., we will pay for that resulting loss unless the
resulting loss is itself one of the losses not insured in
SECTION I of this coverage form.

(Complaint at ^1-11; Exhibit A, the Policy, Businessowners Coverage Form, Pages 3-8; and

Exhibit B, the State Farm Letter).

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Exhibit B of the Complaint, the State Farm Letter, quotes the applicable provisions of the

Policy and states that:

[I]t was determined that water entered the building and caused interior
damages. Since the building did not sustain damage from a Covered Cause
of Loss to the roof or walls, the interior damage is not covered.

Damage resulting from these causes of loss are not covered by your
policy.

The State Farm Letter sets forth the following cause of the Leak:

The sealant around the roof appurtenances on the Townhome roof is
cracking. This is the result of wear, tear and/or deterioration that occurs
over the course of time. Additionally, water was observed pooling around
roof drains, which are located under the back decks of each unit. Debris
was surrounding the roof drains, which prevents water from effectively
draining from the roof. The inaccessibilty of these roof drains prevents
proper maintenance to ensure the roof drains work as intended. The lack
of adequate maintenance allows the rainwater to remain on the roof.

Pooling water was observed on the flat roof located on the main high-rise
building, as well. This is due to faulty installation and/or inadequate
workmanship. An adequately installed roof will allow for rainwater to
drain off the roof.

The State Farm Letter concludes that:

This denial involves the coverages of this policy only. If you have any
additional information you would like us to consider, please forward it to
us immediately.

This Company does not intend, by this letter, to waive any policy defenses
in addition to those stated above, and reserves its right to assert such
additional policy defenses at any time.

If you have any additional information regarding your claim which has not
been previously considered, or if you desire any additional explanation
regarding this matter, please contact Daren Bethel * * *.

The Complaint does not set forth any cause of loss for the Leak other than the cause of

loss set forth above in the State Farm Letter; and it is not asserted in the Complaint that State

Farm received from Plaintiff “any additional information” regarding the Leak not previously

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considered. The balance of the Complaint only addresses Plaintiffs asserted entitlement to

recover from State Farm compensatory damages in excess of $737,717.50 and punitive damages

in excess of $1,475,435.00:

12. The Policy clearly and unequivocally provides coverage for the claims
made by Plaintiff.

13. Alternatively, the applicable policy language is ambiguous, and any and
all ambiguities in the policy must be construed against the Defendant.

14. In any event, Defendant had no good faith basis for denying coverage of
the claims made by Plaintiff.

15. The refusal of the Defendant to cover Plaintiff's claims and the issuance of
the August 23, 2022 letter constitute a breach of the insurance policy.

16. Additionally, the actions of refusing to pay the claims and the issuance of
the August 23, 2022 letter were done in bad faith.

17. The actions of refusing to pay the claims and the issuance of the August
23, 2022 letter were malicious, without justification, were done with
actual malice, fraud and insult.

18. Plaintiff suffered losses in excess of $737,717.50. See Exhibit C [the
Garage Proposal],

WHEREFORE, Plaintiffs hereby demand judgment against Defendants for
compensatory damages in excess of the amount of $737,717.50, plus attorney
fees and costs of the Underlying Lawsuit, punitive damages in excess of
$1,475,435.00, together with attorney fees, expenses, interest and costs
incurred and any other relief that this court may deem proper and appropriate.

(Complaint at ^12-18, and Exhibit C thereto).

II. LAW AND ARGUMENT

A. State Farm is entitled to judgment on the pleadings because it is solely a
question of law for the Court whether the cause of the Leak was a
Covered Cause of Loss.

Whether the Policy “clearly and unequivocally provides coverage” for “the claims made

by Plaintiff’ for the Leak, or whether “the applicable policy language is ambiguous” and “must

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be construed against the Defendant” is a question of law for the Court. (Id. at **12 and 13).

“Whether a given claim is covered under the terms of an insurance policy is a question of law for

the court to decide.” Stafford v. Jewelers Mut. Ins. Co., 554 Fed. Appx. 360, 373 (6th Cir. 2014),

citing Columbia Cas. Co. v. City of St. Clairsville, Ohio, S.D. Ohio No. 05-cv-898, 2007 WL

756706 (Mar. 8, 2007); and Gomolka v. State Auto. Mut. Ins. Co., 70 Ohio St. 2d 166 (1982).

A motion for judgment on the pleadings “is granted when no material issue of fact exists

and the party making the motion is entitled to judgment as a matter of law.” See, Monticello Ins.

Co. v. Hale, 284 F.Supp.2d 898, 901 (S.D. Ohio 2003), affd, Monticello Ins. Co. v. Hale, 114

Fed. Appx. 198 (6th Cir. 2004).

In Schrock v. Feazel Roofing Co., 5th Dist. Delaware No. 02CAE10049, 2003-Ohio-

3742, *26. the plaintiffs filed a complaint against their insurer alleging that it had breached its

insurance contract with the plaintiffs and acted in bad faith by denying coverage. It had been

concluded, however, that “[t]he observed damage in the north wall of the Schrock residence was

caused by long-term water infiltration, originating along the roof edge at the top of the wall” and

that it was probable that “the damage-producing leakage was caused by installation errors made

by Feazel Roofing when the [insured] Schrock residence was reroofed in 1993.” Id. at *24. The

insurance company had denied coverage stating, in relevant part: “The Homeowner’s policy does

not cover this loss due to exclusions in the insurance policy for deterioration, wet or dry rot,

faulty and inadequate design, workmanship, repair construction, renovation or remodeling or

maintenance.” Id. at *25. The trial court concluded in Schrock that the insurer was entitled to

judgment as a matter of law; and the court of appeals affirmed. The court of appeals held that:

While the damage to [insureds’] home was caused by “faulty, inadequate
or defective” workmanship, repair, construction, renovation or remodeling
of the roof, the ensuing loss clause, by its very terms, only covers losses to
property “not excluded or excepted in this policy.” As noted by the trial

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court in its decision, “[b]ecause damage caused by rot and deterioration is
excluded under the Defendant’s policy, the Plaintiffs’ loss is not an
ensuing loss not excluded or excepted in the policy.”

Id. at *58. Further, the court held that:

Based on our conclusion that [the insureds’] claim is not covered under
their homeowner’s policy, we find that [the insurance company] had a
valid basis for denying coverage. For such reason, we find that [the
insurance company] did not act in bad faith in denying [the insureds’]
claim since [the insurance company’s] denial of coverage was not
arbitrary, unconscionable or unreasonable.

Id. at *66.

In Regents Park Corp. v. Buckeye Union Ins. Co., No. 77AP-664, 1978 WL 216663

(10th Dt. Feb. 16, 1978), the plaintiffs-insureds were owners of apartment complexes which

suffered interior water damage. They were insured by the defendant Buckeye Union, and

Buckeye Union refused to compensate them for the alleged damage. Buckeye Union denied that

the alleged water damage and resulting losses to their apartment complexes was the result of a

casualty covered by the Nationwide policy. The Nationwide policy contained the following

exclusion:

This endorsement does not insure against loss:

A. By wear and tear, deterioration, rust or corrosion, mold, wet or dry rot;
inherent or latent defect; smog; smoke, vapor or gas from agricultural
or industrial operations; mechanical breakdown, including rupture or
bursting caused by centrifugal force; settling, cracking, shrinkage,
bulging or expansion of pavements, foundations, walls, floors, roofs or
ceilings; animals, birds, vermin, termites or other insects; unless such
loss results from a peril not excluded in this policy. If loss by a peril
not excluded in this policy ensues, then this Company shall be liable
for only such ensuing loss.

Id. at *4-5. Also, the policy did not insure against loss to:

M. The interior of buildings, caused by rain, snow, sand or dust, whether
driven by wind or not, unless: (1) the building(s) shall first sustain an
actual damage to roof or walls by the direct action of wind or hail and

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then this Company shall be liable for loss to the interior of the
building(s) as may be caused by rain, snow, sand or dust entering the
building(s) through openings in the roof or walls made by direct action
of wind or hail; or (2) such loss results from fire, lightning, aircraft,
vehicles, explosion, riot or civil commotion, vandalism or malicious
mischief, to the extent that such perils are insured against in this
policy.

Id. at *4-5. The court of appeals recognized that:

The issue is whether the water damage to the interior of the building from
the leaky roof is excluded from coverage. While recognizing that
exclusions are to be interpreted strictly against the insurer, we find that the
damage for which suit was brought is excluded. The rain or snow which
seeped into the building through the leaky roof occurred as a result of the
combination of wear and tear or deterioration of the roof, to which no
actual damage had occurred by the direct action of wind or hail. Both
exclusions “A” and “M” appear to apply to the loss herein, and certainly
the combination of these exclusions preclude any recovery for [the
insureds’] loss. [The insureds’] argument that the water damage exclusion
in paragraph “M” does not apply because the loss was caused by water,
rather than rain or snow, is rejected. Had it not been for rain or snow,
which are forms of water, the water would not have entered the building
through the leaky roof. Strained or unreasonable constructions of an
insurance contract are not proper. See Morfoot v. Stake (1963), 174 Ohio
St. 506. [The insureds’] suggested interpretation is in that category.

Id. at *6-7.

In Karoue v. Commercial Union Assur. Cos., 5th Dist. Stark No. CA-4709, 1978 WL

217472, *1 (Feb. 15, 1978), the defendant-insurer denied that the damage to the plaintiff

insured’s garage was covered. The defendant denied coverage stating that the damage to the

garage was caused by and resulted from earth movement, wear and tear, settling, cracking,

shrinkage, bulging and expansion of the foundation and walls of the said garage, all of which

were expressly excluded by the insurance policy issued to the plaintiff. The court of appeals

renderedjudgment in favor of the defendant-insurer stating that:

The defendant denied that the garage was damaged by windstorm and or
lightning, but rather claimed that the damage to the garage was caused by
and resulted from earth movement and was due to wear and tear, settling,

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cracking, shrinkage, bulging and expansion of the foundation and walls of
the said garage, all of which was expressly excluded by the insurance
policy issued to the plaintiff.

At the trial the plaintiff abandoned any claim that the damage to the cast
and north walls of the garage were caused by lightning. Thus the
plaintiff’s claim rests entirely on the proposition that the damage to the
walls was caused by a windstorm. Viewing the testimony offered by the
plaintiff and Tom Price, President of the Towne Construction Company, in
a light most favorable to the judgment, we find no evidence to support the
claim that the damage to the walls was caused by a windstorm.

State Farm’s denial of coverage is also analogous to the denial of coverage the court of

appeals affirmed in Boughan v. Nationwide Prop. & Cas. Co., 2005-Ohio-244 (3rd Dt.).

Sometime in the spring of 1997, the plaintiffs-insureds in that case (the Boughans) noticed that

the brickwork of their home was flaking. The flaking was apparently caused by water getting

into the bricks and freezing. The Boughans notified their insurer (Nationwide) of the damage to

the brickwork and were told by Nationwide representatives that the damage was not covered. An

inspection of the home was completed and a letter dated July 16, 1998 formally denied the

Boughans’ claim. The Boughans filed suit. The trial court found that the damage to the home

was specifically excluded by the policy, and granted Nationwide summary judgment. The court

of appeals affirmed the trial court’s decision. The court of appeals found “that the plain language

of the policy excludes coverage for the damage to the Boughans’ home”; and, “Accordingly,

Nationwide was under no contractual obligation to repair the home”; that “[t]he Boughans have

not presented a set of facts that would entitle them to recovery against Nationwide.” Id. al *18.

Accord, Edmond v. Hartford Ins. Co., D. Conn. 3:98 No. CV 1653(CFD), 2008 WL 616092, *5

(Mar. 3, 2008)(“[T]he evidence in the record concerning the cause of the damage to Edmond’s

home shows that it resulted from faulty original construction. Since the clear terms of the

policy’s exclusion preclude coverage for such damage, there is no material question of fact as to

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whether Hartford is obligated to compensate Edmond for it. Accordingly, summary judgment for

Hartford on this claim is proper.”); and Rhoden v. State Farm Fire and Cas. Co., 32 F.Supp.2d

907 (S.D Miss. 1998)(Homowners insurer was granted summary judgment because damages to

insureds’ home were excluded by earth movement, settling/cracking, and construction defects

exclusions.).

The court of appeals in Boughan, supra at ^19, held, “Based on the foregoing analysis,

Nationwide had a reasonable justification for denying the claim: the claimed damage was not

covered under the policy”; and, “Therefore, Nationwide did not breach its duty of good faith in

handling the Boughans’ claim.” Id.. Accord, Schrock, supra at *66.

In Broad v. North Pointe Ins. Co., No. 5:11CV2422, 2014 WL 1097925, *10 (N.D. Ohio

Mar. 19, 2014), the court recognized that:

“[A]n insurer fails to exercise good faith in the processing of a claim of its
insured where its refusal to pay the claim is not predicated upon
circumstances that furnish reasonable justification therefor.” Zoppo, 71
Ohio St. 3d at 554. “Where a policy does not cover a claim, it cannot be
bad faith to refuse to cover it.” Latimore, 2012 U.S. Dist. LEXIS 104129,
2012 WL 3061263, at *8 (citing Pasco v. State Auto. Mut. Ins. Co., 1999
Ohio App. LEXIS 6492, 1999 WL 1221633, at *5-*6 (Ohio Ct. App.
1999)).

In Joseph v. State Farm Fire and Cas. Co., No. 2:ll-cv-794, 2013 WL 663623, *14 (S.D.

Ohio Feb. 22, 2013), the court held, “When the denial of benefits was legally correct under the

terms of the applicable insurance policy, it cannot be found that the insurer’s denial of benefits

was arbitrary or capricious, or that a reasonablejustification for the denial did not exist.”

State Farm is entitled to judgment as a matter of law as to Plaintiff’s extra-contractual

and punitive damages claims whether or not the Court agrees that State Farm is entitled to

judgment as a matter of law as to Plaintiff's breach of contract claim. In Blevins v. Allstate Prop.

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& Cas. Ins. Co., No. l:13-cv-00440, 2015 WL 631059 (S.D. Ohio Feb. 12, 2015), the court

recognized:

Whether the coverage decision (i.e., the breach of contract claim) by
Allstate was correct is not now before this Court. Rather, at bar is whether
any genuine issues of material fact preclude a ruling on whether, as a
matter of law, the claim was “fairly debatable”. None do.

Id. at *5 (Emphasis supplied by court). Citing Corbo Properties Ltd. v. Seneca Ins. Co., Inc., 771

F. Supp. 2d 877, 884 (N.D. Ohio 2011), the court noted, “A plaintiff cannot ‘save’ a bad faith

claim by arguing the merits of its breach of contract claim.” Id..

Further, Plaintiff must prove “malice, fraud or insult on the part of the insurer” to recover

punitive damages and attorney fees; and attorney fees may only “be awarded as an element of

compensatory damages where thejury finds that punitive damages are warranted.” See, Zoppo v.

Homestead Ins. Co., 71 Ohio St. 3d 552, 557, 1994-Ohio-461, citing Staff Builders, Inc. v.

Armstrong, 37 Ohio St.3d 298 (1988), paragraph two of syllabus; and Zoppo, supra at 578, citing

Columbus Finance, Inc. v. Howard, 42 Ohio St.2d 178, 183 (1975). “Actual malice” is defined

as “(1) that state of mind under which a person’s conduct is characterized by hatred, ill will or a

spirit of revenge, or (2) a conscious disregard for the rights and safety of other persons that has a

great probability of causing substantial harm.” Id. at 558, quoting Preston v. Marty, 32 Ohio

St.3d 334, syllabus. The Complaint before this Court sets forth no factual allegations that there

was malice, fraud or insult on the part of State Farm. Because no facts are alleged that State

Farm acted fraudulently or with malice in denying any coverage for the Leak, Plaintiff cannot

recover punitive damages or its attorney fees.

Whether or not the Court grants State Farm a judgment on the pleadings that it does not

owe Plaintiff any payment under the Policy, State Farm is entitled at a minimum to a judgment

on the pleadings as to Plaintiff's extra-contractual and punitive damages claims because the State

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Farm Letter establishes that State Farm had reasonable justification (a good faith basis) to deny

Plaintiff any payment under the Policy.

B. State Farm is entitled to judgment on the pleadings because the entry of
default does not preclude a judgment as a matter of law that damages
sought in the Complaint cannot be recovered.

The Court’s entry of default does not preclude a judgment on the pleadings that the

damages sought in the Complaint cannot be recovered.

On April 9, 2023, just twelve (12) days after State Farm’s actual receipt of the Complaint,

Plaintiff filed its Application for Default. Under “Remedies Requested”, the Application for

Default stated that:

■ “this Court should grant default judgment to 1900 Lofts on its claim for breach of
contract and bad faith”;

■ “[tjhere is coverage — as a matter of law — under the State Farm Policy issued to
1900 Lofts”; and

■ “[tjhis Court should schedule a hearing as to the compensatory damages owed 1900
Lofts by State Farm, punitive damages, and legal fees.”

No case law, though, was cited in the Application for Default in support of Plaintiff's assertion

that “[tjhere is coverage — as a matter of law — under the State Farm Policy issued to 1900

Lofts.” No case law can be offered by Plaintiff that it is entitled to judgment on the Complaint

based upon the applicable terms of the insurance policy deemed admitted pursuant to Civ. R.

8(D).

In Bettis v. Natl. Union Fire Ins. Co. of Pittsburgh, PA, 5th Dist. Stark No.

2003CA00251, 2004-0hio-2172, an insured filed a coverage action against the defendant

insurance company (National Union) seeking benefits under the uninsured motorist provisions of

the defendant’s policies. A motion for default judgment was filed upon the National Union’s

Electronically Filed 06/23/2023 14:46 / MOTION / CV 23 975255/ Confirmation Nbr. 2891956 / CLMHB
failure to answer the complaint; and National Union filed in response a notice of appearance, a

motion seeking additional time, and a motion for leave to file its answer instanter.

The trial court denied National Union’s motion for leave to file an answer, and granted

the plaintiff’s motion for default. The trial court found National Union did not demonstrate

excusable neglect in failing to plead or otherwise defend. The allegations contained in the

complaint, though, were insufficient to support a finding of coverage. The court of appeals

held that the plaintiff’s coverage action could not be resolved via a motion for default. The court

of appeals reversed the trial court default judgment and remanded the case back to the trial court

for an interpretation of the contract. Id. at *30. The court of appeals held that trial court had to

interpret and resolve the rights contained in the policy. Id. at *20.

In Graham v. Byerly, 3rd Hancock No. 5-04-09, 2004-0hio-4530 at ^18, the court of

appeals held:

[A] default judgment will be entered in favor of a party who is entitled to
the judgment. If a complaint fails to state a cause of action upon which
relief can be granted, the court is not required to enter a default judgment
in favor of the plaintiff, as he would not be entitled to such relief. Such is
the situation in this case. * * * [The plaintiff] Graham failed to state a
claim upon which relief can be granted and he is not entitled to judgment
in his favor.

(Emphasis supplied by the court).

In Baker v. Lifeline Field Marketing, LLC, 6th Dist. Lucas No. L-15-1224, 2017-Ohio-

5675, the plaintiff moved for default judgment and for summary judgment. The trial court

recognized that while the defendant had defaulted, effectively admitting the allegations in the

complaint, the plaintiff still had to establish damages, and still had to “plead facts sufficient to

support his claims.” Id. at ^12. The court found that the complaint pled facts sufficient to support

the plaintiff’s breach of contract claim, but not facts sufficient to support the plaintiff’s

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defamation claim. See also, Board of Trumbull Township Trustees v. Rickard, 11th Dist.

Ashtabula Nos. 2016-A-0044, 2016-A-0045, 2017-Ohio-8143 at ^31 (“Relying on Civ.R. 55(A),

the trial court found ‘that in order to prove contractual damages, the contract must be proven.

What damages are recoverable can only be determined by the terms of the contract.’”); Stuber v.

Baker, 3rd Dist. Allen No. 1-04-70, 2005-0hio-3230 (The trial court granted a default against the

defendant, but thereafter ruled that there was no proof of damages and dismissed the case.); Mt.

Pleasant Volunteer Fire Dept. v. Stuart, 7th Dist. Jefferson, No. 01 JE 11, 2002-Ohio-5227 at

*40 (“In conclusion, the trial court did not abuse its discretion when it denied [the defendant]

leave to plead, nor when it refused to continue the damages hearing. However, the damage award

was against the manifest weight of the evidence.”); and Furniture Sales Specialists, Inc. v.

Thomas, 82 Ohio App.3d 759, 763 (5th Dist. 1993)(“While appellee is correct that it may be

entitled to damages for wrongful detention of its goods, our review of the pleadings leads us to

conclude that appellee failed to plead facts sufficient to demonstrate that appellant should be

jointly liable with Jerry Thomas. * * * The pleadings and attachments to them do not

demonstrate that appellant is liable on the contract for the price agreed upon by appellee and

Jerry Thomas.”); and Schafrik v. Hartford Fire Ins. Co., 11th Dist. Geauga No. 955, 1981 WL

4268 (Oct. 13, 1981)(The court of appeals affirmed the trial court’s judgment that coverage was

not owed, although the plaintiff-insured sought a default judgment that the defendant-insurance

company.).

Other courts are in accord with the above Ohio court decisions. See, e.g., Webster v.

Perrotta, 774 A.2d 68, 77 (R.I. 2001)(“[C]onclusions of law set forth in the complaints are not

deemed established by a default judgment. ‘The defendant is not held to admit facts that are not

well-pleaded or to admit conclusions of law.’”); Trustees of the 1199 SEIU Health Care

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Employees Pension Fund v. Traymore Chemists, Inc., E.D.N.Y. No. 13 CV 4070(MKB), 2014

WL 4207589 at *2 (June 25, 2014)(“[P]laintiffs are not entitled to a default judgment as a matter

of right, simply because the defendant is in default.”); Brack v. Jamison, D. Colo. No. 05-cv-

02658-WYD-CBS, 2007 WL 2914152 at *3 (Oct. 4, 2007)(“Although Defendants ... have failed

to contest [plaintiff’s] claim for damages, the court must still determine that there is a basis for

the damages sought. [Plaintiff’s] conclusory affidavit fails to establish a basis for the damages he

seeks.”); Joe Hand Promotions, Inc. v. Canela, E.D.N.Y. No. 03 CV 0200(ARR), 2005 WL

4677826 at *2 (July 9, 2005)(“The burden is on the plaintiff to establish his entitlement to

recovery.”); and Cablevision of Southern Connecticut, Limited Partnership v. Smith, 141

F.Supp.2d 277, 281 (D.Conn.2001)(“[A] party is not entitled to a default judgment as of right;

rather the entry of a default judgment is entrusted to the ‘sound judicial discretion’ of the

court.”).

Here State Farm is entitled to ajudgment on the closed pleadings based simply on (1) the

averments of the Complaint as to the Policy and Leak deemed admitted, and (2) the holdings in

the cases cited as to the pertinent policy language and cause of the Leak. The property insurance

of the Policy is clear and unambiguous and does not provide coverage for the Leak. The

averments of the Complaint deemed admitted, including the alleged applicable language of the

Policy, establish that the Policy clearly and unequivocally does not provide coverage for the

Leak; the applicable language of the Policy is not ambiguous; and, therefore, State Farm’s

refusal to cover the Leak and issuance of the State Farm Letter did not constitute a breach of the

insurance policy. The averments of the Complaint deemed admitted and applicable language of

the Policy cited in the State Farm Letter establish as a matter of law that a good faith basis

existed to deny any coverage of the Leak; State Farm’s refusal to pay for the Leak and issuance

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of the State Farm Letter were not done in bad faith; and State Farm’s refusal to pay for the Leak

and issuance of the State Farm Letter were not malicious, without justification, or done with

actual malice, fraud and insult. The Leak did not cause Plaintiff to suffer losses in excess of

$737,717.50 to a “Garage” or attorney fees and costs of an “Underlying Lawsuit”. See Exhibit C.

III. CONCLUSION

For any or all of the above reasons, State Farm is entitled to judgment on the pleadings

pursuant to Civ. R. 12(C).

Respectfully submitted,

/s/Joseph Monroe II______________
JOSEPH MONROE II (0086540)
GARY L. NICHOLSON (0005268)
Gallagher Sharp, LLP
1215 Superior Avenue, 7th Floor
Cleveland, OH 44114
35 North Fourth Street, Suite 200
Columbus, Ohio 43215
Tel: (216) 241-5310 / Fax: (216) 241-1608
Tel: (614) 340-2300 / Fax: (614) 340-2301
imonroe@gallaghersharp .com
gnicholson@gallaghersharp.com
Attorneys for Defendant State Farm Fire
and Casualty Company

Electronically Filed 06/23/2023 14:46 / MOTION / CV 23 975255/ Confirmation Nbr. 2891956 / CLMHB
CERTIFICATE OF SERVICE

I hereby certify that on June 23, 2023, the foregoing was filed electronically. Notice of

this filing will be sent by operation of the Court’s electronic filing system to all parties indicated

on the electronic filing receipt. All other parties will be served by electronic and/or regular U.S.

Mail. Parties may access this filing through the Court’s system.

/s/Joseph Monroe II____________________
JOSEPH MONROE, II (0086540)
Gallagher Sharp, LLP
Attorneys for Defendant State Farm Fire and
Casualty Company

Electronically Filed 06/23/2023 14:46 / MOTION / CV 23 9752539 Confirmation Nbr. 2891956 / CLMHB

Case Info

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MICHAEL J RUSSO Track Judge’s New Case

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Document Filed Date

June 23, 2023

Case Filing Date

February 15, 2023

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Document for 1900 LOFTS, LLC vs. STATE FARM FIRE AND CASUALTY COMPANY

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