COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 67306 BOARD OF EDUCATION OF SOUTH EUCLID-: LYNDHURST CITY SCHOOL DISTRICT, : : Plaintiff-Appellee : : JOURNAL ENTRY vs. : and : OPINION NATIONWIDE MUTUAL INSURANCE : COMPANY, : : Defendant-Appellant : : : DATE OF ANNOUNCEMENT OF DECISION : MAY 11, 1995 CHARACTER OF PROCEEDING : Civil appeal from : Common Pleas Court : Case No. 147468 JUDGMENT : AFFIRMED IN PART, REVERSED : IN PART AND REMANDED. DATE OF JOURNALIZATION : _______________________ APPEARANCES: For plaintiff-appellee: Jill G. Okun Timothy F. Sweeney James Oliphant SQUIRE, SANDERS & DEMPSEY 4900 Society Center 127 Public Square Cleveland, Ohio 44114-1304 For defendant-appellant: Dennis M. O'Toole Daniel D. Mason David K. Smith WARHOLA, O'TOOLE, LOUGHMAN, ALDERMAN & STUMPHAUZER 502 Broadway Lorain, Ohio 44052 -3- NAHRA, J.: This appeal results from an action filed by plaintiff- appellee Board of Education of South Euclid-Lyndhurst City School District against defendant-appellant Nationwide Insurance Company for breach of contract and for breach of a duty to act in good faith. Appellee purchased an insurance liability policy from appellant which stated that appellant agreed: To pay on behalf of the insured all sums which the insured shall become legally obligated to pay for damages to which this insurance applies resulting from any claim made against the insured arising out of acts or omissions of the insured. The company shall have the right and duty to defend any suit against the insured seeking such damages even if any of the allegations of the suit are groundless, false or fraudulent and may make such investigation and such settlement of any claim or suit as it deems expedient * * * * (Emphasis added.) The definition section of the policy stated that: [t]he word "insured" means the school district named in the Declarations and includes any employee, administrator, or board member of that district while acting within the scope of his or her duty * * * * * * * (Emphasis added.) The policy also contained "Prior Acts or Omissions Coverage" which enlarged the policy period to include claims based upon incidents which occurred prior to the effective date of the policy. Thus, the insurance applied to acts or omissions of the "insured" which occurred: -4- prior to the policy period but after the applicable date shown below if claim is made or suit is brought during the policy period and providing * * * the insured at the effective date of this policy had no knowledge or could not have reasonably foreseen any circumstances which might result in the claim or suit * * * * All other provisions of this policy * * * shall be unchanged by this provision. (Emphasis added.) The applicable date shown for this extended coverage for appellee was noted as February 1, 1983. On November 26, 1985, appellee received correspondence from an attorney who advised it that he represented a student named Lynne Carter, "who fell and suffered a fracture to her left arm during cheerleading tryouts for your school system, on or about May 8, 1984." The letter requested appellee turn the matter over to its liability insurance carrier. Appellee then notified appellant of the claim. On February 19, 1986, appellant informed appellee that the "incident" did not "fall within the policy period covered," citing the language of the "Prior Acts or Omissions Coverage" portion of the policy. Thereafter, appellee requested appellant reconsider its position concerning the claim, stating that "[a]t the time coverage began the insured * * * had no knowledge of the incident on which this claim is based and was unaware of the incident until November 26, 1985 * * * *" On April 7, 1986, Lynne Carter filed suit against appellee claiming damages for the personal injury she suffered on appellee's -5- property on May 8, 1984. Thereafter, appellee retained counsel to defend itself in the action. On October 22, 1986, by and through counsel, appellee formally disputed appellant's interpretation of the "Prior Acts and Omissions Coverage" and demanded indemnification for its legal fees, costs and any loss sustained in defending the Carter action. However, appellant again declined to either defend or indemnify appellee in the Carter matter. As the case progressed, appellee continued to dispute appellant's interpretation of the policy, to apprise appellant of the case developments and to request appellant's participation in the case. Appellant made no response to this correspondence. On August 27, 1987, two days after the commencement of trial, the Carter case was settled for $20,000.00. Appellee requested appellant to pay the amount. Appellant again refused. Another subsequent request from appellee for reimbursement for the settlement and legal fees and costs incurred in the suit went unanswered by appellant. On April 3, 1988, appellee filed a complaint against appellant in the Cuyahoga County Court of Common Pleas seeking damages for breach of contract and breach of a duty to act in good faith toward its insured. Appellee sought as compensatory damages $89,310.02, viz., with regard to the Carter suit $20,000.00 for the settlement, $64,450.00 for attorney fees and $4,850.02 for trial expenses. The complaint was later amended to further request as damages attorney fees expended in pursuing the instant action for breach of contract -6- and "interest on the amount of money [appellant] wrongfully refused to pay under the subject policy." Appellant answered the complaint with denials of the pertinent allegations and several affirmative defenses. Thereafter, extensive discovery took place in the action. On October 10, 1988, appellant filed a motion for summary judgment. Therein, appellant argued no genuine issues of material fact existed in the case and that the construction of the "clear and unambiguous" terms of the policy was for the court to decide as a matter of law. According to appellant, since the facts proved the injury occurred prior to the commencement of the policy period and that appellee's employee, viz., Rosemary Pasek, a teacher and Carter's cheerleading coach, was aware of its occurrence, recovery under the policy was precluded. Appellant contended that appellee should have "foreseen" Carter's injury "might result" in a claim or suit, and that appellee "concealed" the incident from appellant rather than reporting it. Appellant attached evidentiary materials to its motion. The record reflects appellee filed a response to appellant's 1 motion for summary judgment. Appellant then filed a reply. Therein, appellant stated "the parties intended the Prior Acts Endorsement to provide insurance for unknown circumstances which might result in claims or suits which are totally unforeseeable to 1 This document was not included in the record on appeal. See App.R. 9. -7- the insured." (Emphasis added.) Appellant also stated that when appellee negotiated its "new" policy with appellant, "all known prior accidents and potential claims had to be disclosed to the previous carrier, since known prior accident and potential claims were specifically excluded from coverage" under its policy. Once again, appellant argued the terms of the policy were "clear and unambiguous." Appellant attached no evidentiary materials to its reply. On April 24, 1990, the trial court issued a journal entry and opinion denying appellant's motion for summary judgment based upon the following rationale: This Court cannot, as a matter of law, find the school district should have reasonably foreseen a lawsuit with regard to Lynne's injury. The mere knowledge of an incident in which a student sustains an injury on school grounds is not sufficient to find, as a matter of law, that the school district should have reasonably foreseen a lawsuit. Thereafter, with leave of the trial court, appellee filed its amended complaint. On December 18, 1990, appellant filed a "supplemental" motion for summary judgment. Therein, it argued that appellee's action in obtaining legal counsel to both defend the Carter case and pursue the instant action had never been properly authorized, therefore, neither could appellee seek the trial court's aid in obtaining redress from appellant nor could the trial court accept jurisdiction of the matter. On January 31, 1991, appellee filed a single brief in which it both opposed appellant's motion and instituted its own "cross -8- motion" for summary judgment on the issue of liability for breach of contract. In its brief, appellee argued the following: 1) appellant could not assert the defense of illegality because it had failed to plead it and lacked standing to assert it; and 2) there were no genuine issues of material fact remaining regarding appellant's liability under the contract since the trial court's previous opinion of April 24, 1990 concerning the meaning of the terms of the "prior acts" coverage had in effect decided that claim in appellee's favor. Appellee attached a number of evidentiary materials to its brief. On February 7, 1991, the record reflects appellee refiled a previous motion for a separate hearing by the court following the jury trial on the issue of attorney fees and costs incurred in pursuing the instant action. That same day, the trial court granted the motion. On February 25, 1991, appellant filed a "reply" to appellee's brief in opposition to its "supplemental" motion, in which, contrary to its previous position, it argued that the trial court had jurisdiction to void appellee's contracts with its attorney in both the Carter and the instant case. Appellant offered no other arguments or evidence. Thus, it neither opposed appellee's motion for partial summary judgment nor requested reconsideration of the trial court's order of April 24, 1990. -9- On July 16, 1991, the trial court issued an order denying both appellant's "original" and "supplemental" motions for summary 2 judgment. On September 10, 1991, the trial court granted appellee's "cross-motion" for partial summary judgment, stating "that there is no genuine issue of fact and that [appellee] is entitled to judgment as a matter of law." Thereafter, a date for jury trial was set for May, 1992 on the remaining issue of damages. Both parties prepared proposed jury instructions for the trial court's consideration. Appellee also prepared interrogatories to be propounded to the jury. The record reflects the jury trial commenced on June 2, 1992. On June 5, 1992, the jury rendered a verdict for appellee in the amount of $21,268.50 for attorney fees and $1,603.87 for expenses incurred in defending the Carter case. The trial court then added the amount of $20,000.00 for the settlement of the Carter case to the award and calculated interest from November, 1987 in the amount of $62,522.21. However, on June 29, 1992, the trial court issued a "stipulated journal entry" noting that the issue of damages in regard to appellee's attorney fees and costs incurred in pursuing the instant action remained to be determined. On August 11, 1992, appellee filed an application for an order determining both that 1) the amount of its attorney fees and costs, 2 The record reflects another order denying appellant's "supplemental" motion for summary judgment was issued on September 10, 1991. -10- which were set forth as $107,142.50 and $9,246.55 respectively, were reasonable and that 2) the total of this amount of money should be included in its award of damages. The application was supported by a brief and various evidentiary materials. The record reflects appellant filed a brief in opposition to appellee's application and that, thereafter, appellee filed a 3 reply. Moreover, the trial court subsequently permitted appellant to file additional evidence in December, 1992; in January, 1993 4 appellee then filed a response to appellant's evidence. On April 12, 1994, the trial court issued a journal entry granting appellee $24,106.95 in attorney fees and $3,051.18 in trial expenses incurred in the instant case. Thereafter, appellee filed a motion for an order amending the June 5, 1992 judgment to include prejudgment interest to April 12, 1994. Appellant filed a notice of appeal in this court on May 18, 1994. Appellee then filed a notice of cross-appeal. Since the orders appealed from were not final ones, however, the appeal was stayed until the trial court ruled on appellee's motion for an extension of the prejudgment interest award. Subsequently, the trial court issued an order denying appellee's motion. Thus, this court may now address the assignments of error raised by the parties. 3 These documents were not included in the record on appeal. See App.R. 9. 4 See footnote 3. -11- I. Appellant presents four assignments of error for this court's review. The first two are related and are considered together as follows: A. FIRST ASSIGNMENT OF ERROR: THE TRIAL COURT ERRED WHEN IT GRANTED PLAINTIFF'S MOTION FOR SUMMARY JUDGMENT AND DEPRIVED NATIONWIDE OF ITS RIGHT TO HAVE A JURY DETERMINE LIABILITY. B. SECOND ASSIGNMENT OF ERROR: THE TRIAL COURT ERRED WHEN IT DENIED NATIONWIDE'S MOTION FOR SUMMARY JUDGMENT. In these assignments of error, appellant argues the trial court erred in determining in appellee's favor that there was no genuine issue of material fact concerning whether appellant had breached the insurance policy's terms when it refused to defend appellee in the Carter suit. It further contends the terms of the policy were clear in that the Carter suit did not fall within the prior acts coverage. In the alternative, appellant contends the issue of its liability for breach of contract under the facts of 5 this case was a jury question. This court disagrees. Initially, this court notes that when appellant moved for summary judgment in this case, it argued the trial court should determine there were no genuine issues of material fact concerning whether in the Carter case recovery for appellee under the terms of 5 Appellant supports these arguments with many references to the record. However, the record on appeal does not contain many of the documents cited in appellant's brief to this court as support for its arguments. See App.R. 9. -12- the policy was precluded. Thus, appellant did not argue that the issue of whether coverage was intended in a situation such as the 6 Carter case was for a jury to decide. Moreover, following the trial court denial of its motion for summary judgment, appellant did not move for reconsideration of this decision. Civ.R. 54(B); Pitts v. Dept. of Transportation (1981), 67 Ohio St.2d 378. Furthermore, when appellee filed its motion for partial summary judgment on the issue of appellant's liability under the terms of the policy, appellant presented neither arguments nor evidence to counter appellee's motion. Notwithstanding the foregoing, a review of the trial court's decision with regard to appellee's breach of contract claim reveals it was entirely proper. Civ.R. 56(C) makes summary judgment proper when there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Norris v. Ohio Std. Oil Co. (1982), 70 Ohio St.2d 1. A motion for summary judgment forces the nonmoving party to produce evidence on any issue for which that party bears the burden of production at trial. Wing v. Anchor Media, Ltd. of Texas (1991), 59 Ohio St.3d 108. With respect to contracts of insurance, the Ohio Supreme Court has recently stated: 6 It is a fundamental rule of appellate review that arguments which were not raised in the proceedings in the trial court may not be considered on appeal. Schade v. Carnegie Body Co. (1982), 70 Ohio St.2d 207; Kalish v. TransWorld Airlines (1977), 50 Ohio St.2d 73; Karat Gold Imports v. United Parcel Service, Inc. (1989), 62 Ohio App.3d 604. -13- The interpretation of an insurance contract involves a question of law to be decided by a judge. In Erie Ins. Group v. Fisher (1984), 15 Ohio St.3d 380, 15 OBR 497, 474 N.E.2d 320, a unanimous court held: "A declaratory judgment action filed by an insurer against an insured, the purpose of which is to construe an insurance policy and determine the insurer's obligations to the insured, and is not for the purpose of determining liability in an action for the recovery of money, is properly triable to the court." Id. at syllabus. Leber v. Smith (1994), 70 Ohio St.3d 548 at 553. (Emphasis added.) It has been clearly held that if an insured's claim is "potentially or arguably" within the policy coverage, the insurer's defense of the claim is mandatory. Willoughby Hills v. Cincinnati Ins. Co. (1984), 9 Ohio St.3d 177; J.C. Penney Cas. Ins. Co. v. Professionals Ins. Co. of Ohio (1990), 67 Ohio App.3d 169. Moreover, only where the insurer does not agree to defend "groundless, false or fraudulent claims" may the insurer escape its duty to defend by demonstrating the facts alleged in the underlying action remove the insured from coverage. Preferred Risk Ins. Co. v. Gill (1987), 30 Ohio St.3d 110; J.C. Penney Cas. Ins. Co. v. Professionals Ins. Co. of Ohio, supra. Thus, in view of appellant's unrestricted obligation pursuant to the policy language, appellant could justify its refusal to defend appellee in the Carter suit only if the terms of the policy clearly precluded coverage. Willoughby Hills v. Cincinnati Ins. Co., supra; Motorists Mut. Ins. Co. v. Trainor (1973), 33 Ohio St.2d 41; Preferred Risk Ins. Co. v. Gill, supra; Allstate Ins. Co. -14- v. Vasquez (1991), 74 Ohio App.3d 564; cf., Tokles & Son, Inc. v. Midwestern Indemn. Co. (1992), 65 Ohio St.3d 621. It is well established that any ambiguity of the policy terms must be resolved in favor of the insured. Thompson v. Preferred Risk Mut. Ins. Co. (1987), 32 Ohio St.3d 340, 513 N.E.2d 733. Great Am. Ins. Co. v. Hartford Ins. Co. (1993), 85 Ohio App.3d 815, 820. Furthermore, the insurer has the burden of proof to demonstrate coverage is precluded. Tokles & Son, Inc. v. Midwestern Indemn. Co., supra; Great Am. Ins. Co. v. Hartford Ins. Co., supra. The trial court may determine whether the insured is entitled to coverage under the terms of the policy. Willoughby Hills v. Cincinnati Ins. Co., supra; Blount v. Kennard (1992), 82 Ohio App.3d 613. In making this determination, the trial court may be required to consider both objective and subjective factors. Id. If the trial court's determination is based upon competent, credible evidence, it will be upheld. Id.; cf., Great Am. Ins. Co. v. Hartford Ins. Co., supra. In this case, the trial court determined that the facts of the Carter suit were potentially or arguably within the policy's coverage, thus, appellant had a duty to defend appellee in the action. Appellant's complete refusal to do so therefore constituted a breach of its contract with appellee. A review of the record supports the trial court's conclusion. -15- The policy clearly stated appellant had agreed to defend appellee "regardless of the true facts." Preferred Risk Ins. Co. v. Gill. Moreover, although in its motion for summary judgment appellant set forth arguments concerning what the parties intended to cover in the policy language, it provided no evidence to support its arguments as required by Civ.R. 56(C). Cf., Allstate Ins. Co. v. Vasquez, supra. Therefore, the trial court could conclude the facts of the Carter suit brought it "arguably" within coverage. Since coverage under the policy was not clearly excluded, appellant's defense of appellee in that case was mandatory. Willoughby Hills v. Cincinnati Ins. Co., supra; J.C. Penney Cas. Ins. Co. v. Professionals Ins. Co. of Ohio, supra; Blount v. Kennard, supra; cf., Preferred Risk Ins. Co. v. Gill, supra; Allstate Ins. Co. v. Vasquez, supra. The evidence before the trial court thus demonstrated there was no genuine issue of material fact regarding appellee's breach of contract claim since appellant clearly breached its contract when it refused to defend appellee in the Carter suit. Willoughby Hills v. Cincinnati Ins. Co., supra; Great Am. Ins. Co. v. Hartford Ins. Co., supra. Thus, the trial court correctly denied appellant's motion for summary judgment and properly granted summary judgment in appellee's favor on its claim. Wing v. Anchor Media, Ltd. of Texas, supra. For the foregoing reasons, appellant's first two assignments of error lack merit and are accordingly overruled. -16- II. Appellant's third assignment of error states: THE TRIAL COURT ERRED WHEN IT RULED THAT SOUTH EUCLID IS ENTITLED TO ATTORNEY FEES AND EXPENSES. Appellant argues appellee was not entitled to any recovery of its attorney fees and expenses incurred in pursuing the instant action. To support its argument, appellant urges this court to reject the clear mandate set forth by the Ohio Supreme Court in Allen v. Standard Oil Co. (1982), 2 Ohio St.3d 122, in favor of certain opinions from other Ohio appellate districts. This court, however, is bound to follow the decisions of the supreme court, therefore, it declines to accept appellant's urging. In Allen v. Standard Oil Co., supra, at syllabus 2, the rule was clearly stated thusly: 2. When an indemnitor wrongfully refuses to defend an action against an indemnitee, the indemnitor is liable for the costs, including attorney fees and expenses, incurred by the indemnitee in defending the initial action and in vindicating its right to indemnity in a[n] * * * action brought against the indemnitor. (Emphasis added.) The court went on to explain the legal principle involved, viz., the insurer "failed in its duty to defend and this failure should not require [the insured] to incur expenses that it cannot recover." Id., at 125. See, also, Motorists Mut. Ins. Co. v. Trainor, supra; Willoughby Hills v. Cincinnati Ins. Co., supra; Blount v. Kennard, supra; cf. Allstate Ins. Co. v. Vasquez, supra. -17- The trial court was therefore correct in permitting appellee to recover attorney fees and costs incurred in pursuing the instant action. Accordingly, appellant's third assignment of error is also overruled. III. Appellant's fourth and final assignment of error states: THE TRIAL COURT ERRED WHEN IT AWARDED PLAINTIFF PREJUDGMENT INTEREST. Appellant argues appellee was not entitled to prejudgment interest in this case because appellee's damages for appellant's breach of the insurance policy were "unliquidated." It must first be noted that at the trial on the issue of damages, appellant objected to giving the jury an instruction regarding an award of interest but did not specify a reason. Civ.R.51(A) requires not only an objection to the giving of a certain jury instruction but also a statement of the specific grounds for objection. R.H. Mary & Co. v. Otis Elevator Co. (1990), 51 Ohio St.3d 108; Hardiman v. Zep Mfg. Co. (1984), 14 Ohio App.3d 222. Secondly, this court finds an award of prejudgment interest in this case and was proper on the authority of R.C. 1343.03(A) and Willoughby Hills v. Cincinnati Ins. Co., supra. Appellee's insurance policy with appellant was an "instrument in writing" and the amounts due and owing for expenses rendered in defending the Carter case were capable of "reasonably certain calculations." -18- Moreover, in its complaint, appellee specifically requested interest as an element of its compensatory damages. As the Ohio Supreme Court has recently approvingly declared, if reparation is delayed by a "wrong-doer," the injured party cannot be made fully whole unless the damages awarded include compensation in the way of interest for withholding such reparation. Moskovitz v. Mt. Sinai Med. Ctr. (1994), 69 Ohio St.3d 638 at 656. See, also, DeSantis v. Smedley (1986), 34 Ohio App.3d 218. Therefore, the trial court did not err in awarding appellee prejudgment interest in this case. Accordingly, appellant's fourth assignment of error is also overruled. IV. Appellee raises two assignments of error in its cross-appeal to this court. Its first follows: THE TRIAL COURT ERRED IN AWARDING AN INSUFFICIENT AMOUNT IN ATTORNEYS' FEES AND COSTS TO PLAINTIFF WITHOUT PROVIDING A BASIS FOR SUCH AWARD. Appellee points to the difference between the amount of attorney fees and costs, respectively, requested in its August 11, 1992 motion, viz., $107,142.50 and $9,246.55, and the trial court's actual award of only $24,106.95 and $3,051.18, to argue the trial court's failure to provide any findings with regard to these awards was improper. Appellee cites a federal court decision, Northcross v. Board of Educ. of Memphis City Schools (6th Cir., 1979), 611 F.2d 624 in support of its argument. This court remains unpersuaded for two reasons. -19- First, where there is evidence in the record to justify it, the amount of an award of attorney fees is a matter within the trial court's discretion. See, e.g., Digital & Analog Design Corp. v. North Supply Co. (1992), 63 Ohio St.3d 657, Vinci v. Ceraolo (1992), 79 Ohio App.3d 640. Secondly, the record reflects many documents regarding this issue were filed in the trial court, however, neither party has fulfilled its duty to ensure these documents were included in the record on appeal. App.R. 9. Under these circumstances, this court cannot properly evaluate the assignment of error and must affirm the trial court's decision. Volodkevich v. Volodkevich (1989), 48 Ohio App.3d 313. For the foregoing reasons, appellee's first cross-assignment of error is overruled. V. Appellee's second cross-assignment of error states: THE TRIAL COURT ERRED IN DENYING PLAINTIFF'S MOTION TO AMEND JUDGMENT TO EXTEND INTEREST ON THE JUDGMENT UNTIL APRIL 1994. Appellee argues the trial court's denial of its motion to extend the award of prejudgment interest from the date of the jury's verdict to the date of the final resolution of the issue of attorney fees and costs was improper. This court agrees on the authority of Moskovitz v. Mt. Sinai Med. Ctr., supra, at 656, citing with approval Lawrence Railroad Co. v. Cobb (1878), 35 Ohio St. 94. -20- In this case, the jury returned a verdict for appellee wherein it determined that a portion of appellee's damages should include prejudgment interest. The trial court agreed with the jury's verdict and entered judgment thereon. A few weeks later, the trial court acknowledged that an issue in the case, viz., appellee's attorney fees and costs incurred in pursuing the instant action, still remained to be determined. This issue, however, was not resolved by the trial court until April 12, 1994. It is therefore unfair to deny appellee the compensation it should have earned during this interval of time. This court therefore agrees with appellee's assessment that unless interest is awarded up until the time that all the issues in the case were decided, appellee will not be in the same position as it was prior to appellant's breach of the insurance contract. Willoughby Hills v. Cincinnati Ins. Co., supra; see, also, Phoenix Phase I Associates v. Ginsberg (1985), 23 Ohio App. 1. Therefore, the trial court erred in denying appellee's motion to amend the award of prejudgment interest. Accordingly, appellee's second cross-assignment of error is sustained. The judgment of the trial court is affirmed in part and reversed in part. Prejudgment interest on the amount of the damages awarded to appellee is to be calculated from November, 1987 to April 12, 1994. This case is therefore remanded to the trial court for a determination of the total amount of damages to which appellee is entitled pursuant to this opinion. Judgment accordingly. -21- This cause is affirmed in part, reversed in part and remanded for proceedings consistent with this opinion. Costs assessed against defendant-appellant. It is ordered that a special mandate be sent to said court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. BLACKMON, P.J., and MATIA, DAVID T., J., CONCUR. JOSEPH J. NAHRA JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journalization, at which time .