February 29, 2012
Storm Damage and Insurance

by Justice Paul E. Pfeifer

On July 28, 2006, a storm caused a tree to fall and damage a house owned by a man named Dennis J. Dominish. In the wake of the storm, Dennis submitted a claim to his insurance company – Nationwide Insurance Company.

Nationwide investigated the scene, assessed the damage, and twice issued a check to Dennis in the amount of $6,741.96. Both times that Dennis received a check, he wrote the word “void” on it and returned it to Nationwide, deeming the amount insufficient to cover the damage to his home.

Two years later, on July 25, 2008, Dennis filed suit against Nationwide. In response, the insurance company argued that the lawsuit was barred by a clause in the insurance contract that states:

Suits Against Us. No action can be brought against us unless there has been full compliance with the policy provisions. Any action must be started within one year after the date of loss or damage.”

The trial court agreed with Nationwide and granted the company’s motion for summary judgment – meaning that the judge decided the case without a trial. Dennis appealed, and the court of appeals reversed the trial court’s ruling.

The court of appeals concluded that the policy language was ambiguous, and that in any event, Nationwide, by its actions, had waived its right to enforce the one-year limitation clause.

After that ruling, Dennis’s case came before us – the Supreme Court of Ohio – for a final review. Unfortunately, Dennis passed away in December 2010, but his appeal proceeded nonetheless.

The first issue was whether the policy language was ambiguous. Our court has long adhered to the principle that ambiguous language in an insurance contract is construed against the insurance company.

In isolation, any word or phrase in the policy language that Dennis contested may be ambiguous. But when considered as a whole, the provision is unambiguous. The fact that the word “start” is not commonly used to indicate the commencement of a lawsuit does not mean that it refers to something else when it’s used in a provision entitled “Suit Against Us.”

Similarly, though the word “action” can refer to many things, there’s no reason to think it refers to anything other than a lawsuit when used as part of a two-sentence provision that is entitled “Suit Against Us.”

The fact that the two sentences could have been written more clearly – and they could have – doesn’t mean that they’re ambiguous. The policy states in language clear enough to be plainly understood that any lawsuit by a policyholder against Nationwide must be commenced within one year. We therefore concluded that the policy language was not ambiguous.

The next issue was whether Nationwide had waived its right to enforce the one-year waiver clause. In a case from 1981, our court stated that when an insurance company – by its actions – recognizes liability, and that recognition causes the policyholder to delay filing a lawsuit, the company has waived its right to enforce a limitation clause.

That case established a two-part test to determine whether an insurance company has waived a contractual limitation-of-action clause. First, the company must have either recognized liability or held out a reasonable hope of adjustment, and second, by doing so, induced the policyholder to delay filing a lawsuit until after the period of limitation expired.

In this case, we concluded that Nationwide did not recognize liability for the disputed portion of the damage or hold out hope of an adjustment to include compensation for that portion of the damage.

Nationwide clearly stated that it was not liable beyond the amount of the check that it twice sent to Dennis. In a letter dated September 6, 2006, Nationwide stated, “You will receive…a partial denial letter indicating the roof damage is NOT part of the covered loss, nor is any damage to personal property, nor…for any mold related issues.  All of these issues are discussed in the partial denial letter.”

In the partial-denial letter – bearing the same date – Nationwide wrote, “The purpose of this letter is to advise you that Nationwide Mutual Fire Insurance Company has decided, based upon the investigation into the circumstances surrounding a claim made by you, that there is no coverage for certain aspects of your storm related claim under the Nationwide Homeowner policy.

“In particular, there is no coverage available for your roof or any damage to contents of your home or any resultant mold formed a s result of your loss. There is coverage available for the resultant interior damage to your home. I will contact you to make final arrangements and payment regarding the interior damage.”

The letter contained the following caption in capital letters: PARTIAL DENIAL OF COVERAGE. Enclosed with the letter was the check on which Dennis wrote “void” and returned to Nationwide.

The letter finished by pointing out that “any suit you wish to file against Nationwide as a result of this claim must be done so within one year.” Following that sentence was the paragraph with the heading “Suit Against Us.”

So, Nationwide admitted partial liability, offered a check to cover that liability, and denied further liability. The company made payment and did not engage in further negotiations after issuing the partial denial of benefits.

After viewing the record in a light most favorable to Dennis – which is what we must do when reviewing a case that was decided on summary judgment – we concluded that Nationwide offered to pay for the part of the claim it deemed itself liable for, that it denied all other claims, that it had a limitation-of-action clause in its policy, that it informed Dennis of the clause, that it asserted the clause at every possible instance, and that Dennis was not induced to forbear filing suit by anything that Nationwide did.

We therefore concluded – by a seven-to-zero vote – that Nationwide did not waive its right to enforce the limitation-of-action clause, and thus reversed the judgment of the court of appeals and reinstated the trial court’s grant of summary judgment.

EDITOR'S NOTE: The case referred to is Dominish v. Nationwide Ins. Co., 129 Ohio St.3d 466, 2011-Ohio-1431. Case No. 2010-1431. Decided August 23, 2011. Majority opinion written by Justice Paul E. Pfeifer.