Ninth District Court of Appeals Opinion Released May 6, 2013

 Baker v. Nationwide Mut. Ins. Co., 2013-Ohio-1856 is a decision reversing in part and affirming in part a decision from the Summit County Common Pleas Court. The decision, which was released on May 6, 2013, concerns a motion for summary judgment that was granted by the trial court. The main issue in the case involved the construction of an insurance policy. 

The decision sets forth the facts as follows:

"Mr. Baker owns several rental properties that he insured with Nationwide. In March 2007, the water pipes at an unoccupied multi-unit property burst, causing damage to the building. Following the incident, Mr. Baker made repairs to the water lines in the basement and to drywall on the first floor. Before finding new tenants, he decided to fix other parts of the property as well. Between March 2007 and June 2010, he repaired or replaced the front porch flooring, the roof on the back porch, ceiling tiles throughout the building, a broken toilet, drywall and carpeting. He also did some painting. He intended to replace one of the hot water tanks and complete some other repairs, but sometime between June 8 and June 15, thieves broke into the property and stripped it of its copper plumbing and fixtures. 

Mr. Baker reported the break-in to the police and filed a claim with Nationwide. Nationwide denied the claim, however, because it determined that the property had been “vacant for more than 60 consecutive days[.]” After receiving Nationwide’s decision, Mr. Baker sought a declaratory judgment that the damage is covered because, under his policy, “[b]uildings under construction or renovation are not considered vacant.” He also sued Nationwide and the adjuster who processed his claim for damages for allegedly acting in bad faith. 

The trial court dismissed Mr. Baker’s claim against the adjuster because it determined that he had failed to state a claim for relief under Civil Rule 12(B)(6). Following discovery, Nationwide and Mr. Baker filed cross-motions for summary judgment. The court granted Nationwide’s motion because it determined that Mr. Baker had not repaired the 2007 damage “as quickly as possible,” which it concluded was required under his policy and because his intermittent repairs to the other parts of the property did not constitute “construction or \renovation.” "

The Court of Appeals affirmed the decision of the trial court to dismiss the claim against the adjuster for bad faith pursuant to Civ. R. 12 (B) (6).  In affirming the dismissal the Court of Appeals noted that the obligation to act in good faith toward insureds is based on the contractual relationship between the insurance company and its policyholder. There is no such contractual relationship between an individual adjuster and a policyholder. Thus the duty arises out of the contractual relationship. Since adjusters and policyholders don't have such a relationship, there is no duty, and hence no tort. 

The Court of Appeals, however, reversed the granting of Nationwide's motion for summary judgment. In so doing the Court of Appeals noted that the language that was relied on by the trial judge was not a condition precedent to recovery but was language that limited the amount that could be recovered. In the words of the decision: "Mr. Baker’s duty to resume operations “as quickly as possible” after a loss was not a condition precedent to coverage, but a duty bearing on the amount of his recovery."