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The Scott Fetzer Co. v. Zurich American Insurance Co.

United States District Court, N.D. Ohio, Eastern Division

December 18, 2017




         This matter comes before the Court upon the Report and Recommendation of Magistrate Judge Thomas M. Parker. The Report and Recommendation (ECF # 51) recommends that the Motion of Defendant Zurich American Insurance Company (“Zurich”) for Summary Judgment (ECF #16, #17)) be granted on all claims and that the Motion of Plaintiff, The Scott Fetzer Company (“Scott Fetzer” or “Fetzer”), for Partial Summary Judgment on its First Claim for Declaratory Judgment and Breach of Contract (ECF #18, #19) be denied. Further, Magistrate Judge Parker recommends that if the Court adopts the recommendations above, Plaintiff's Motion to Lift Stay of Bad Faith Claim (ECF #32) should necessarily be denied. Scott Fetzer has filed an Objection to the Report and Recommendation and Zurich has filed a Response to Fetzer's Objection. For the reasons set forth below, the Report and Recommendation is of Magistrate Judge Thomas is adopted.

         Procedural and Factual Background

         Scott Fetzer filed this action against its insurer Zurich in the Court of Common Pleas for Cuyahoga County asserting claims for Declaratory Judgment and Breach of Contract (Count 1) and bad faith (Count 2). Zurich removed the action to this Court pursuant to 28 U.S.C. § 1441 and § 1332 because complete diversity exists between the parties.

         Scott Fetzer is an insured under two policies providing general liability insurance issued by Zurich. The first was policy no. GLO8979229-09 for the period of January 1, 2012 to January 1, 2013. The second was policy no. GLO8979229-10 for the period of January 1, 2013 to January 1, 2014. All material terms of the Policies are identical.

         In 2015, three women, Kristl Thompson, Ashley Raby, and Corbie Leslie, filed suit in Missouri state court alleging that they had been sexually harassed and assaulted by a co-worker, John Fields, while selling Kirby vacuums door to door for Fetzer.[1] The plaintiffs asserted three claims against the Scott Fetzer defendants. The first claim for fraudulent misrepresentation asserted that Scott Fetzer was vicariously liable for Field's false promises in inducing the Plaintiffs to work with him. The second claim, for fraudulent concealment, asserted theories of direct and vicarious liability. The direct liability allegations stated that the Fetzer Defendants failed to inform the Plaintiffs of Mr. Field's criminal history, his sexually deviant propensities, his sexually deviant activities with other Kirby employees, and that he was forbidden from selling vacuums door-to-door without supervision because he was a sex offender. The third claim, negligence, asserted that Scott Fetzer negligently hired, retained and supervised Mr. Field. Each Plaintiff asserted that the injuries alleged in the complaint were the direct and proximate result of the Scott Fetzer Defendants. Zurich accepted coverage under the policies for the Missouri case which was captioned Kristl Thompson, et al., v. The Scott Fetzer Company d/b/a The Kirby Company, et al., Case No. 1316 CV26862 in the Circuit Court of Jackson County, Missouri at Independence. Ultimately, Scott Fetzer and Zurich settled the claims asserted in the Missouri lawsuit. Other than the settlement amounts to be paid, the three settlement agreements, filed under seal, were basically the same. One settlement amount reached with one of the Missouri Plaintiffs reached or exceeded the deductible amount set forth in the policies and Zurich paid a portion of that settlement. Zurich did not reimburse Scott Fetzer for the amounts paid in settlement to the other two Missouri Plaintiffs because it applied new deductibles, treating each Plaintiff's claim as a separate “occurrence.”

         Thereafter, Scott Fetzer filed the instant action. Scott Fetzer claims that Zurich breached the Policies by applying three deductibles instead of one deductible to the settlements reached with the Missouri Plaintiffs. As a result of this alleged breach, Fetzer asserts that it has been damaged in the sum of two of the settlements, plus interest. Fetzer's second claim is for bad faith. The bad faith claim was bifurcated and discovery on that claim was stayed pending resolution of the first claim. Both Zurich and Scott Fetzer moved for summary judgment-Zurich seeking summary judgment on both claims and Fetzer seeking summary judgment on Count 1. The summary judgment motions were referred to Magistrate Judge Parker for a Report and Recommendation.

         Standard of Review for a Magistrate Judge's Report and Recommendation

         The applicable district court standard of review for a magistrate's report and recommendation depends upon whether objections were made to that report. When objections are made to a report and recommendation of a magistrate judge, the district court reviews the case de novo. FED. R. CIV. P. 72(b) provides this standard of review. It states, in pertinent part, the following:

The district judge to whom the case is assigned shall make a de novo determination upon the record, or after additional evidence, of any portion of the magistrate judge's disposition to which specific written objection has been made in accordance with this rule. The district judge may accept, reject, or modify the recommended decision, receive further evidence, or recommit the matter to the magistrate judge with instructions.

         Accordingly, this Court will review the Report and Recommendation, to which timely objections have been filed, de novo. See Dacas Nursing Support Sys., Inc. v. NLRB, 7 F.3d 511 (6th Cir. 1993).


         The parties agreed that this case presents a single issue-how many occurrences, and therefor how many deductibles, were involved in the Missouri lawsuit and the three settlements. Scott Fetzer argued that the Missouri lawsuit and settlements involved one occurrence-the purported negligence of Scott Fetzer in connection with the hiring, retention, and supervision of Mr. Fields. Thus, Fetzer was only required to pay one deductible. Zurich contends that the Missouri lawsuit involved three occurrences because the claims involved different persons, locations, situations and policy years. As such, Zurich contends that Fetzer was required to pay three deductibles.

         The Policies at issue define the term “occurrence” to mean “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” The ...

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