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Mafcote, Inc. v. Genatt Associates

February 14, 2007


The opinion of the court was delivered by: District Judge Susan J. Dlott


This matter is before the Court on Defendant's Motion for Summary Judgment (doc. 53). The Court heard oral argument on this motion on January 18, 2007. For the reasons that follow, the Court GRANTS Defendant's motion.


Plaintiff Mafcote, Inc. brings this suit against its insurance broker, Defendant Genatt Associates, Inc., for failure to procure insurance coverage and misrepresentation of the coverage obtained. The lawsuit arises from the ashes of the earlier insurance coverage suit between Mafcote and the insurer, Third-Party Defendant Continental Casualty Ins. Co. ("CCIC"), Mafcote, Inc. v. Continental Casualty Ins. Co., No. C-01-02-411 (S.D. Ohio) ("the earlier CCIC coverage case"). In that lawsuit, the Honorable Judge Sandra Beckwith held that CCIC was not liable under the boiler and machinery insurance policy purchased by Mafcote to cover an "extra expense" incurred by one Mafcote affiliate, Royal Consumer Products, LLC ("RCP"), to purchase replacement paper after a boiler breakdown at a different Mafcote affiliate, Miami Wabash Paper, LLC ("Miami Wabash"). Miami Wabash regularly manufactured and sold paper and paperboard in a raw material state to RCP, who then turned the raw material into finished paper product. Judge Beckwith held that CCIC was not liable for extra expense incurred by RCP because RCP did not suffer an accident at its location, or alternatively because the affiliate that suffered the boiler loss, Miami Wabash, did not incur the extra expense.*fn1 (Mafcote, Inc. v. Continental Cas. Ins. Co., No. 1:02-CV-411, slip op. at 11 (S.D. Ohio Mar. 25, 2004).

Mafcote is a multinational corporation with multiple subsidiaries. Mafcote's president, Steven Schulman, has been responsible for procuring insurance for Mafcote since the 1960s or 1970s and he has used six different insurance brokers during that time.

Genatt admits that it is an expert in insurance coverage matters. Genatt makes recommendations to its clients about boiler coverage issues. Mafcote had used Genatt as a broker to purchase various insurance policies since 1989 or 1990. (Rynston Dep. at 24.) Genatt was familiar with the business structure of Mafcote, including the relationship of Mafcote's affiliates to one another. Genatt knew Mafcote's insurance needs, including the fact that all Mafcote affiliates needed to be covered under the boiler insurance policy. Terrence Reiff, Genatt's expert witness, testified in his deposition that the relationship between Mafcote and Genatt suggested reliance. He stated that Mafcote had some reliance, but not total reliance, upon Genatt regarding the insurance coverages to obtain. He stated that Mafcote would expect Genatt to have expertise on coverage issues. (Reiff Dep. at 23-24, 37.)

Genatt assisted Mafcote in purchasing a boiler policy from CCIC for the period of 2000 to 2001, a policy which Mafcote then renewed with Genatt's assistance for the 2001 to 2002 period. Genatt represented to Mafcote that its affiliates were insured under the Mafcote CCIC policy. When Genatt presented the CCIC policy to Mafcote, Genatt stated that the boiler insurance coverage was "as broad or broader" than the boiler insurance coverage provided by Mafcote's previous insurer. (Doc. 56 ex. 11, jt. ex. 40.) Genatt admits that it had a duty to act in Mafcote's best interests. Genatt had no authority to purchase insurance without Mafcote's express approval of the policy.

Miami Wabash suffered a boiler loss on July 16, 2001. The Mafcote affiliate mistakenly first reported the boiler loss to the wrong insurance company on July 27, 2001.*fn2 Miami Wabash was unable to produce paper for RCP for at least 29 days between July 16, 2001 and August 14, 2001. Mafcote decided between July 16-18, 2001 that RCP would purchase replacement paper from a third party at a higher rate. Mafcote did not inform Genatt or CCIC of the decision to have RCP purchase the replacement paper before the purchases were made.

On August 14, 2001, Mafcote informed Genatt about the boiler loss. Genatt immediately reported the Miami Wabash boiler loss to CCIC. Miami Wabash installed a temporary boiler and it became operational on August 15, 2001. Mafcote has admitted that it took only 24 to 48 hours to obtain and install the substitute boiler.

Also on August 15, 2001, Genatt representative Ed DiGioia provided Mafcote in writing with the name of the CCIC claims adjuster who would handle the claim. DiGioia also stated in the writing that "purchasing stock from others to maintain production" should fall within the "extra expense" provision of the CCIC policy. Finally, DiGioia stated "all of these comments need to be confirmed by the [CCIC] adjustor assigned to the case." (Doc. 53 ex. H, jt. ex. 18.)

After this date, Mafcote communicated with both Genatt and CCIC about its boiler loss. Genatt also contacted CCIC on Mafcote's behalf. Genatt commented, gave advice to, and assisted Mafcote with its boiler loss claims. The CCIC adjustor who handled the Mafcote claim testified that Genatt advocated on Mafcote's behalf.

Mafcote requested that Genatt review its claim to CCIC to make sure it was correct. The evidence suggests that Genatt represented to Mafcote throughout the claims process that the CCIC policy provided coverage for RCP's purchases. Genatt, however, disputes that Mafcote could have relied upon its advice or representations. It points out that Mafcote made the decision to have RCP, not Miami Wabash, purchase the replacement paper almost one month before Mafcote notified Genatt of the boiler loss. Further, Mafcote first made a provisional written claim to CCIC to recover "third party purchases which would have been obtained from [Miami Wabash] had the accident not occurred" on October 10, 2001. (Doc. 53 ex. I, jt. ex. 6.) However, Genatt did not learn that the RCP affiliate, as opposed to Miami Wabash, incurred the extra expense for replacement paper until October 15, 2001. (Doc. 53 ex. J, jt. ex. 8.) By October 15, 2001, RCP had made its replacement paper purchases.

The parties agree that the CCIC insurance policy procured by Genatt would have provided coverage for Miami Wabash to purchase substitute paper from third parties. CCIC also admits that the policy would have provided coverage for Miami Wabash to purchase replacement paper if Mafcote had provided CCIC timely notice. During the claim adjustment period, CCIC denied the RCP extra expenses claim for the paper purchase on the basis of late notice. During the coverage litigation, however, CCIC raised a different defense to coverage--only Miami Wabash could submit a claim for extra expenses because only it suffered the boiler loss.

Mafcote hired four different law firms to litigate the earlier CCIC coverage case. Genatt asserted that CCIC was unreasonable in its handling of Mafcote's claim.

Following the conclusion of the earlier CCIC coverage suit, Mafcote filed the instant suit against Genatt on December 29, 2004. Genatt now moves for summary judgment. The parties have stipulated that Mafcote will dismiss Counts Seven and Eight of its Complaint so this Order does not address those claims. Mafcote otherwise opposes Genatt's motion. Both parties agree that Ohio law governs this dispute.


Federal Rule of Civil Procedure 56 governs motions for summary judgment. Summary judgment is appropriate if no genuine issue of material fact exists and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56(c). On a motion for summary judgment, the moving party has the burden of showing that no genuine issues of material fact are in dispute, and the evidence, together with all inferences that can permissibly be drawn therefrom, must be read in the light most favorable to the party opposing the motion. Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 585-87 (1986).

The moving party may support a motion for summary judgment with affidavits or other proof or by exposing the lack of evidence on an issue for which the nonmoving party will bear the burden of proof at trial. Celotex Corp. v. Catrett, 477 U.S. 317, 324 (1986). In responding to a summary judgment motion, the nonmoving party may not rest upon the pleadings but must go beyond the pleadings and "present affirmative evidence in order to defeat a properly supported motion for summary judgment." Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 257 (1986). The nonmoving party "must set forth specific facts showing there is a genuine issue for trial."

Fed. R. Civ. Pro. 56(e). The Court's task is not "to weigh the evidence and determine the truth of the matter but to determine whether there is a genuine issue for trial." Liberty Lobby, 477 U.S. at 249. A genuine issue for trial exists when there is sufficient "evidence on which the jury could reasonably find for the plaintiff." Id. at 252.


A. Breach of Contract

No written contract existed between Mafcote and Genatt. In the Complaint, Mafcote alleges that it retained Genatt as its insurance broker to provide for its business insurance needs. Specifically, Mafcote alleges that it engaged Genatt to procure business insurance to cover losses in the event of damage to or the loss of use of a boiler at any Mafcote or affiliate location. Genatt received compensation in the form of a commission. Upon Genatt's recommendation, Mafcote ...

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