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Devito v. Grange Mutual Casualty Co.

Court of Appeals of Ohio, Eighth District

August 8, 2013

KATHLEEN R. DEVITO PLAINTIFF-APPELLEE
v.
GRANGE MUTUAL CASUALTY CO., ET AL. DEFENDANTS-APPELLANTS

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-790538

ATTORNEYS FOR APPELLANTS Brian Borla Frank G. Mazgaj Hanna, Campbell & Powell, L.L.P. 3737 Embassy Pkwy., Suite 100 Akron, OH 44333

ATTORNEY FOR APPELLEE Christopher M. DeVito Morganstern, MacAdams & DeVito Co., L.P.A. 623 West St. Clair Avenue Cleveland, OH 44113

BEFORE: S. Gallagher, J., Jones, P.J., and McCormack, J.

JOURNAL ENTRY AND OPINION

SEAN C. GALLAGHER, JUDGE

{¶1} Appellants, Grange Mutual Casualty Company ("Grange") and Zito Insurance Agency, Inc. ("Zito"), appeal the decision of the Cuyahoga County Court of Common Pleas that denied in part their motion to stay the bad-faith claim. For the reasons stated herein, we reverse the decision of the trial court insofar as it denied a stay of discovery on the bad-faith claim.

{¶2} On August 31, 2012, appellee Kathleen R. DeVito filed a complaint against Grange and Zito. DeVito alleged that Grange and Zito breached their contract of homeowners residential insurance with DeVito when they denied coverage for her claim for rafter and roof damage to her home. DeVito further alleged that Grange and Zito breached their covenant of good faith and their fiduciary duty to DeVito by denying her claim.

{¶3} Following initial proceedings, Grange and Zito filed a motion to bifurcate the bad-faith claim from the contract claim and motion to stay the bad-faith claim. The trial court granted the motion in part and denied the motion in part and ordered that "trial of the bad faith claim shall commence, if necessary, immediately upon the conclusion of the trial of the breach of contract claim. Discovery shall proceed on all issues."

{¶4} Grange and Zito have appealed the trial court's ruling. Their sole assignment of error provides as follows:

The trial court erred in allowing discovery to proceed on all issues, and not staying discovery of the bad faith claim until after resolution of the underlying breach of contract claim.

{¶5} Initially, we must recognize that the issue in this matter is not whether DeVito can obtain discovery from the insurance claim file on her bad-faith claim. Grange and Zito concede that discovery of attorney-client and/or work-product documents created prior to the denial of coverage that are related to the bad-faith claim are discoverable.

{¶6} Indeed, in Boone v. Vanliner Ins. Co., 91 Ohio St.3d 209, 744 N.E.2d 154 (2001), the Ohio Supreme Court recognized an exception to the attorney-client privilege with regard to communications showing an insurance company's lack of good faith in denying coverage. The court held as follows:

[I]n an action alleging bad faith denial of insurance coverage, the insured is entitled to discover claims file materials containing attorney-client communications related to the issue of coverage that were created prior to the denial of coverage. * * * Of course if the trial court finds that the release of this information will inhibit the insurer's ability to defend on the underlying claim, it may issue a ...

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