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Intergroup International Ltd. v. Cincinnati Insurance Companies

Court of Appeals of Ohio, Eighth District, Cuyahoga

November 22, 2017


         Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-15-848369

          ATTORNEY FOR APPELLANT David J. Horvath.

          ATTORNEY FOR APPELLEE Patrick S. Corrigan.

          BEFORE: Boyle, J., E.A. Gallagher, P.J., and McCormack, J.


          MARY J. BOYLE, JUDGE.

         {¶1} Plaintiff-appellant, Intergroup International Ltd. ("Intergroup"), timely appeals from an order of the trial court that denied its motion for summary judgment and granted summary judgment in favor of defendant-appellee Cincinnati Insurance Companies ("Cincinnati") on Intergroup's complaint and Cincinnati's counterclaims for declaratory judgment. After careful review of the record, we find that summary judgment in favor of Cincinnati on Intergroup's claims related to the 2014 insurance claim was proper, but further find that summary judgment was improper on its 2015 claims and Cincinnati's counterclaims. Accordingly, we affirm in part and reverse in part.

         I. Facts Underlying the Parties' Claims

         {¶2} This case arises from an insurance claim dispute between Intergroup and Cincinnati and pertains specifically to Cincinnati's denial of insurance coverage on two incidents of property damage to the roof structure of Intergroup's warehouse facility located at 14500 Darley Avenue, Cleveland, Ohio (the "Darley building" or the "property"). The relevant facts are taken from the evidentiary documents and transcripts of depositions filed with the parties' motions for summary judgment.

         A. Purchase, Repairs, and Initial Inspection

         {¶3} Intergroup purchased the Darley building in 2011. In conjunction with the purchase, Intergroup hired Kane Construction to inspect the roof, its supporting members, and to make any and all necessary repairs. Mike Kane, the owner of Kane Construction, repaired leaks to the roof, and "re-engineered" and replaced a roof truss that was "sagging." Kane further reported that a few of the trusses appeared to have "slight discoloration" from leaks throughout the years because the building was nearly 100 years old. Otherwise, Kane did not "see the need to replace any of the trusses because of any noticeable deterioration" other than the truss that he "re-engineered" and replaced.

         {¶4} Subsequently, Intergroup contracted with Cincinnati to provide commercial insurance coverage on the property. In April 2012, as part of the insurance underwriting process, Cincinnati sent loss control field director, Leo Kline, to the Darley building to inspect the premises and note the physical conditions of the property. In his report, Kline noted that the roof had been repaired in 2011-2012, with "only minor repairs needed" and that the roof was in satisfactory condition at the time of the inspection. Kline did not make any recommendations for repairs to the property at that time.

         B. The June 2, 2014 Event and Claim Denial

         {¶5} Over two years later, on the morning of June 2, 2014, Intergroup employees arrived to the Darley building to discover that a truss holding up the roof had undergone movement and was sagging in place. Intergroup immediately attempted to stabilize the sagging truss by engineering a metal support beam to hold it up. Subsequently, Intergroup contacted Cincinnati to report the failed truss and file a claim for insurance coverage.

         {¶6} In response to the claim, Cincinnati sent a claims representative, Lee Hatch, to inspect the affected area of the property and take pictures. When Hatch viewed the failed truss from the ground, he saw peeling paint and discolored and splintered wood. This led him to believe that there could be an issue with the wood that caused the trusses to move. Hatch reported his observations to his field claims manager, Jeff Shive, and further recommended that Cincinnati employ an expert to view the damaged truss and give an opinion on the cause of damage. Cincinnati contacted Rudick Forensic Engineering to investigate. Rudick dispatched engineer Eric Hauser, a senior forensic engineer, to the site.

         {¶7} Hauser inspected the damaged property on June 11, 2014, and issued his findings in an inspection report. In his report, Hauser stated that two trusses had experienced "differential movement, " and Intergroup had installed a steel post "below the south-most of the two compromised trusses." He noted that workers informed him of a storm that occurred the night before and said that when they arrived in the morning they saw the sagging trusses and water leaking down through the roof directly above the damaged areas.

         {¶8} When describing the roofs surface upon inspection, Hauser reported the presence of "a large area of ponded water" on the roof directly above the damaged trusses. Specifically, he noted that "[t]he severity of staining of the membrane surfaces both below and adjacent to the accumulated water indicated this condition had been present over an extended period of time prior to the reported discovery of leaks during the previous week." He also noted that there were numerous and apparently old cracks in the roof membrane that might have allowed water to seep into the interior of the building and damage the structures.

         {¶9} Hauser reported that a close range inspection of the failed trusses revealed that the presence of varying degrees of rot and decay within the "truss chords" caused the movement of the trusses and that "[m]inimal resistance was afforded during insertion of the point of a scratch awl into the interior of the more severely deteriorated sections." Lastly, he noted that "[i]t was readily apparent that exposure to moisture over an extended period of time had eventually compromised the integrity of the support structure such that it was unable to support normal roof loadings."

         {¶10} On June 27, 2014, Cincinnati denied Intergroup's claim for insurance coverage. In a letter written by Hatch to Neil Gloger, Intergroup's chief executive officer, Hatch explained that the claim was denied because:

Mr. Hauser's conclusion is that the damage to the roof truss was not storm related but due to varying degrees of rot and decay within portions of the top chords, diagonals, and vertical truss members. This occurrence is unfortunately not a direct physical loss to your property and after a review of your policy it does not appear that we will be able to provide coverage for your loss.

         {¶11} Hatch further included in the letter the section of the policy that he felt was relevant to the denial of the claim which was:

We will pay for direct physical "loss" to Covered Property at the "premises" caused by or resulting from any Cause of Loss.
1. Covered Property
Covered Property, as used in this Coverage Part, means the following types of property for which a Limit of Insurance is shown in the Declarations:
a. Building
Building, means the building or structure described in the Declarations, including:
(1)Completed additions;
(2)Fixtures, including outdoor fixtures;
(3)Permanently installed [items]:
(5) If not covered by other insurance:
(a) Additions under construction, alterations and repairs to a covered building;
(b)Materials, equipment, supplies and temporary structures, on or within 1, 000 feet of the "premises, " used for making additions, alterations or repairs to a covered building.
b. Exclusions
We will not pay for "loss" caused directly or indirectly by any of the following, unless otherwise provided. Such "loss" is excluded regardless of any other cause or event that contributes concurrently or in any sequence to the "loss."
(d) Miscellaneous Causes 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[.]

         {¶12} Gloger challenged the denial of the claim on the grounds that the insurance policy had a rider on page 19 that covered a "collapse" where rot and decay was hidden from view and was not reasonably discoverable. According to Gloger, no one at the facility had noticed the presence of rot or decay until the truss failed and exposed splintered wood.

         {¶13} Cincinnati reviewed the rider to the policy and in a letter written by Hatch to Gloger dated September 14, 2014, Cincinnati once again denied ...

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