NOT RECOMMENDED FOR PUBLICATION File Name: 24a0098n.06
No. 22-4054
UNITED STATES COURT OF APPEALS FOR THE SIXTH CIRCUIT FILED Mar 05, 2024 ) KELLY L. STEPHENS, Clerk ACE AMERICAN INSURANCE COMPANY, ) Plaintiff-Appellant, ) ) ON APPEAL FROM THE v. ) UNITED STATES DISTRICT ) COURT FOR THE SOUTHERN ZURICH AMERICAN INSURANCE COMPANY; ) DISTRICT OF OHIO DISCOVER PROPERTY & CASUALTY ) INSURANCE COMPANY, ) OPINION Defendants-Appellees. ) )
Before: GRIFFIN, BUSH, and LARSEN, Circuit Judges.
GRIFFIN, Circuit Judge.
In this insurance dispute, plaintiff ACE American Insurance Company paid nearly
$5 million in defense costs for its insured before other insurers were notified of the underlying
litigation. After defendant insurers refused to contribute for these costs, ACE filed this action for
equitable contribution. The district court granted summary judgment in favor of defendants, ruling
that, based on untimely notice alone, they did not share ACE’s obligation for the pre-tender
expenses. We vacate the district court’s judgment and remand for further proceedings consistent
with this opinion.
I.
Safelite Group, Inc., is a windshield repair company that had commercial general liability
policies through ACE, Discover Property & Casualty Insurance Company, and Zurich American
Insurance Company. In August 2015, Richard Campfield and Ultra Bond, Inc. (collectively No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
“Campfield”), sued Safelite for Lanham Act violations; in short, Campfield alleged that Safelite’s
advertising falsely led consumers into thinking windshield cracks longer than six inches cannot be
repaired, which harms the businesses of smaller companies—like Campfield’s—that perform such
repairs. That litigation remains ongoing. Campfield v. Safelite Grp., Inc., 91 F.4th 401 (6th Cir.
2024).
Safelite notified ACE of the suit in January 2016 but not defendant insurers. After Safelite
satisfied its deductible, ACE started paying for its defense in June 2017. But more than a year
later ACE inquired regarding Safelite’s other general liability insurers. Discover and Zurich
learned about the Campfield litigation ten months after that in August 2019. By that time, ACE
had paid nearly $5 million in defense costs; it then waited until October 2019 to inform Discover
and Zurich that it intended to seek equitable contribution for Safelite’s defense costs. Discover
and Zurich agreed to equally share future defense costs with ACE, but refused to reimburse ACE
for pre-tender defense costs incurred before the date they received notice of the case.
Thereafter, ACE commenced this litigation against Discover and Zurich, seeking equitable
contribution “for all past and future defense costs that ACE has paid or will pay on Safelite’s
behalf.” Discover and Zurich stipulated, for purposes of this litigation, that the Campfield
litigation triggered a duty to defend based on their contracts and that the pre-tender defense costs
“were reasonable and necessary.” The parties each moved for summary judgment. Discover and
Zurich argued that they had no duty to pay pre-tender defense costs solely because they were not
timely notified of the Campfield litigation. ACE asserted that defendants were obligated to
contribute despite the untimely notice due to a lack of prejudice. The district court granted
summary judgment in favor of Discover and Zurich, concluding that they had no duty to contribute
because of untimely notice and that a prejudice inquiry was unnecessary. ACE timely appealed.
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4 No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
II.
We review de novo the district court’s grant of summary judgment, “viewing the evidence
in the light most favorable to the nonmoving party.” Wilmington Tr. Co. v. AEP Generating Co.,
859 F.3d 365, 370 (6th Cir. 2017) (citation omitted). Summary judgment is appropriate only if
“the movant shows that there is no genuine dispute as to any material fact and the movant is entitled
to judgment as a matter of law.” Fed. R. Civ. P. 56(a). “Credibility determinations, the weighing
of the evidence, and the drawing of legitimate inferences from the facts are jury functions, not
those of [the court],” when ruling on a motion for summary judgment. Anderson v. Liberty Lobby,
Inc., 477 U.S. 242, 255 (1986).
III.
At issue in this case is whether under these circumstances ACE is entitled—under Ohio
law—to recover its pre-tender defense costs through equitable contribution from defendants.1 To
prevail, ACE must show that it shared a defense obligation with Discover and Zurich despite the
untimely notice they received of the Campfield litigation. Pointing to Ohio’s “all-sums” approach,
ACE argues that it acted exactly as instructed by the Ohio Supreme Court when an insured
identifies a single “targeted insurer” to handle its defense. In contrast, Discover and Zurich argue
that the untimely notice alone—regardless of prejudice—negates their obligation. To answer these
questions, we first address equitable contribution in general, then whether the all-sums approach
applies, and finally whether prejudice is necessary for Discover and Zurich to share a defense
obligation with ACE.
1 It is undisputed that Ohio law controls this case. See Erie R. Co. v. Tompkins, 304 U.S. 64, 78 (1938). -3- No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
A.
Equitable contribution “is an equitable doctrine that rests upon the broad principle of
justice, that where one has discharged a debt or obligation which others were equally bound with
him to discharge, and thus removed a common burden, the others who have received a benefit
ought in conscience to refund to him a ratable portion.” Resco Holdings, L.L.C. v. AIU Ins. Co.,
112 N.E.3d 503, 508 (Ohio Ct. App. 2018) (internal quotation marks omitted). In other words, a
plaintiff seeking equitable contribution must show: (1) the existence of a shared obligation; (2) the
payment of the obligation by the plaintiff; and (3) the defendant’s failure to pay its proportionate
share. See McDougall v. Cent. Nat’l Bank, 104 N.E.2d 441, 445 (Ohio 1952). Ohio courts “apply
the doctrine of contribution liberally since it is based on broad principles of equity.” Resco
Holdings, 112 N.E.3d at 508. “Virtually all cases involving equitable contribution among insurers
concern a single insurer that paid a claim and sought contribution from one or more nonpaying
insurers.” Id. at 512. The party seeking equitable contribution has the burden to prove that it is
appropriate by a preponderance of the evidence. 18 Am. Jur. 2d Contribution § 99.
ACE paid all pre-tender defense costs, and the parties do not dispute that if Discover and
Zurich are deemed responsible for any of those costs, then they received a benefit from ACE doing
so. They similarly do not dispute that Discover and Zurich received untimely notice of the
Campfield litigation. So the question before us is whether Discover and Zurich shared a common
obligation with ACE. Answering that question requires us to examine Ohio insurance law.
In Ohio, insurance contracts are interpreted under general contract law, so we interpret
their words based on their plain and ordinary meaning and, if they are clear and unambiguous,
their interpretation is a question of law. Krewina v. United Specialty Ins. Co., 221 N.E.3d 819,
822–23 (Ohio 2023). When an insurance contract includes a notice provision, notice must be
-4- No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
timely given to trigger the duty to defend. See, e.g., Goodyear Tire & Rubber Co. v. Aetna Cas.
& Sur. Co., 769 N.E.2d 835, 842 (Ohio 2002); Red Head Brass, Inc. v. Buckeye Union Ins. Co.,
735 N.E.2d 48, 57–59 (Ohio Ct. App. 1999); see also Am. Emps. Ins. Co. v. Metro Reg’l Transit
Auth., 12 F.3d 591, 592–93 (6th Cir. 1993) (applying Ohio law). If notice is not timely, then the
insured has the burden to show that there was no prejudice to the insurer; but if the insurer was
prejudiced by the untimely notice, then “coverage must be forfeited.” Ferrando v. Auto-Owners
Mut. Ins. Co., 781 N.E.2d 927, 946–47 (Ohio 2002); see also Clark v. Chubb Grp. of Ins. Cos.,
337 F.3d 687, 692 n.2 (6th Cir. 2003) (discussing Ferrando). The Ohio Supreme Court explained:
If the insurer did receive notice within a reasonable time, the notice inquiry is at an end, the notice provision was not breached, and [insurance] coverage is not precluded. If the insurer did not receive reasonable notice, the next step is to inquire whether the insurer was prejudiced. Unreasonable notice gives rise to a presumption of prejudice to the insurer, which the insured bears the burden of presenting evidence to rebut.
Ferrando, 781 N.E.2d at 947; see also Clark, 337 F.3d at 692–93. In essence, violating a notice
provision breaches the contract. Ferrando, 781 N.E.2d at 947. But that breach is material and
allows the insurer to deny coverage only if the untimely notice prejudiced the insurer—and the
insured must overcome a presumption of prejudice. See id.
“[T]he prejudice inquiry is a factual one.” Walls v. Amerisure Mut. Ins. Co., 343 F.3d 881,
887 (6th Cir. 2003) (applying Ohio law). For example, prejudice may be shown by witnesses,
documents, or other evidence no longer being available, Ormet Primary Aluminum Corp. v. Emps.
Ins. of Wausau, 725 N.E.2d 646, 656 (Ohio 2000), or from the insurer’s inability to participate in
negotiations to reduce costs, Canton Drop Forge, Inc. v. Travelers Cas. & Sur. Co., 2021
WL 5895789, at *2 (6th Cir. Dec. 14, 2021). Similarly, “[p]rejudice has been described as
seriously impairing the insurer’s ability to investigate a claim.” McCruter v. Travelers Home &
Marine Ins. Co., 168 N.E.3d 1, 16 (Ohio Ct. App. 2021) (internal quotation marks omitted).
-5- No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
B.
ACE first argues that it is entitled to equitable contribution because it acted exactly as a
“targeted insurer” should under Ohio’s “all-sums” approach by defending Safelite on its own and
only later seeking equitable contribution from Discover and Zurich. If the all-sums approach
applies, ACE can then use it to show that Discover and Zurich were not prejudiced by receiving
untimely notice of the Campfield litigation. The district court was not persuaded and concluded
instead that Ohio’s general prejudice rules applied to this dispute. We agree.
Under Ohio law, “[t]he all-sums approach allows the insured to seek full coverage for its
claims from any single policy, up to that policy’s coverage limits, out of the group of policies that
has been triggered.” Resco Holdings, 112 N.E.3d at 508 (internal quotation marks omitted). “The
insured selects one insurer (the ‘targeted insurer’) from which it may obtain a defense and
indemnification up to the insurer’s policy limits. The targeted insurer then has the right to seek
contribution from the other insurers (the ‘nontargeted insurers’).” Id. Untimely notice is “the
natural result of [the] all-sums approach, which was designed to streamline the recovery process
for the insured by permitting the insured to choose one primary targeted insurer with which to deal
during the litigation.” Pa. Gen. Ins. Co. v. Park-Ohio Indus., 930 N.E.2d 800, 808 (Ohio 2010).
Indeed, the all-sums approach “presupposes that some insurers might not receive an opportunity
to sit at the negotiation table and that those insurers must wait for a resolution in the underlying
case.” Id. So untimely notice based on “adherence to the all-sums approach does not in and of
itself result in prejudice to the nontargeted insurers.” Id.
But the all-sums approach is limited to cases involving “progressive” injuries such as
“continuous . . . environmental pollution,” Goodyear Tire & Rubber Co., 769 N.E.2d at 841, or
asbestos-related injuries that manifest over time, Park-Ohio, 930 N.E.2d at 803; see also Lubrizol
-6- No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
Advanced Materials, Inc. v. Nat’l Union Fire Ins. Co. of Pittsburgh, 160 N.E.3d 701, 705 (Ohio
2020) (discussing Goodyear and Park-Ohio). Ohio courts do not use the all-sums approach if “the
time of damage is known or knowable.” Lubrizol, 160 N.E.3d at 705–06. For example, the Ohio
Supreme Court declined to apply the all-sums approach in Lubrizol because the damages—caused
by resin used in plumbing—occurred at a discernible time. Id.
This case does not involve a progressive injury. The alleged injuries in the Campfield
litigation are specific and identifiable statements made by Safelite over many years that were
allegedly false and misleading. So the underlying injuries here are much like those in Lubrizol:
distinct and identifiable events that occurred at a known or knowable time. And they are unlike
the injuries caused by continuous exposure in Goodyear and Park-Ohio that festered over time
and resulted in disease and pollution. Consequently, the all-sums approach does not apply here.
ACE pushes back on this conclusion, arguing that Lubrizol’s limitation of the all-sums
approach to progressive-injury cases does not control because it addressed indemnification, not
defense costs. True, Lubrizol specifically answered a certified question about indemnification.
And the duty to defend is “broader than the duty to indemnify.” Red Head Brass, Inc., 735 N.E.2d
at 54. But ACE has presented no authority establishing that defense and indemnification costs
should be allocated differently. Nor do Goodyear, Park-Ohio, or Lubrizol suggest that any such
scheme would be appropriate. See also Resco Holdings, 112 N.E.3d at 508–09 (discussing the all-
sums approach). Consequently, the difference between defense and indemnity costs here makes
no difference.
-7- No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
C.
ACE alternatively contends that even if it is wrong about the all-sums approach’s
application, the district court nevertheless erred in declining to conduct the Ferrando prejudice
analysis. We agree.
1.
As discussed, Ohio law generally requires prejudice for untimely notice to materially
breach an insurance policy and allow an insurer to deny coverage. Ferrando, 781 N.E.2d at 947.
The district court concluded that this case presented an exception to that general rule based on the
unpublished Ohio Court of Appeals decision in Dover Lake Park, Inc. v. Scottsdale Ins. Co.,
No. 21324, 2003 WL 21458956 (Ohio Ct. App. June 25, 2003). Dover Lake reasoned that the
prejudice inquiry mandated by Ferrando was based on “policy reasons” that “include[d] the
adhesive nature of insurance contracts, the public policy of compensating tort victims, and the
inequity of the insurer receiving a windfall due to a technicality.” Id. at *3. Because the Dover
Lake court concluded that none of these policy reasons favored the insured, it held that there was
no need to conduct the Ferrando prejudice analysis. Id. at *3–4.
While we can look to unpublished lower-court decisions when making an Erie guess, our
task when confronted with the absence of state supreme court caselaw is to “ascertain from all
available data . . . what the state’s highest court would decide if faced with the issue.” Ziegler v.
IBP Hog Mkt., Inc., 249 F.3d 509, 517 (6th Cir. 2001). Because Dover Lake is contrary to
Ferrando, we conclude the Ohio Supreme Court would not adopt its reasoning.
Start with the “policy reasons” discussed in Dover Lake. Ferrando did not base its holding
on those policy reasons alone. Instead, those were some of the many reasons it chose to adopt the
notice-prejudice rule. Ferrando, 781 N.E.2d at 934–36, 942–45, 947. Moreover, nothing in
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Ferrando suggests that its notice-prejudice rule should apply only when the specific facts of a case
support the policy reasons for doing so. Rather, Ferrando’s broad holding established a general
rule that an insurer is “released from the obligation to provide [insurance] coverage when the
insurer is prejudiced by the lack of reasonable notice.” Id. at 930. Sidestepping the prejudice
inquiry, as Dover Lake did, conflicts with that holding.
Furthermore, no other court has adopted this over-twenty-year-old case’s reasoning.
Cf Olbrys v. Peterson Boat Works, Inc., 81 F.3d 161, at *4–5 (6th Cir. 1996) (unpublished table
decision) (declining to follow an outlier unpublished court of appeals decision). And we are
unaware of any other Ohio case similarly declining to apply Ferrando’s mandated prejudice
inquiry. Rather, Dover Lake aside, Ohio courts universally conduct the prejudice inquiry set forth
in Ferrando. See, e.g., Thomas v. Nationwide Mut. Ins. Co., 895 N.E.2d 217, 229 (Ohio Ct. App.
2008). And this makes sense, because Ferrando set forth the general rule for insurance contracts
concerning prejudice. In short, the weight of relevant data shows that Ferrando’s rule is universal.
For these reasons, the district court erred in declining to conduct the prejudice inquiry mandated
by Ferrando.
2.
Discover additionally seeks to avoid the prejudice analysis because the notice provisions
in its contracts required notice within thirty days rather than “a reasonable time.” According to
Discover, that makes its contracts similar to “claims made” contracts.
Notice is a particularly important matter in claims-made policies. Claims made policies, unlike occurrence policies, are designed to limit liability to a fixed period of time. An occurrence policy provides coverage for acts done during the policy period regardless of when the claim is brought. In contrast, a claims made policy provides coverage for claims brought against the insured only during the life of the policy. So the very essence of a claims-made policy requires the claim to be first made during the policy period.
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Wright State Physicians, Inc. v. Drs. Co., 78 N.E.3d 284, 289 (Ohio Ct. App. 2016) (internal
quotation marks, citations, and brackets omitted). See also United States v. A.C. Strip, 868 F.2d
181, 187 (6th Cir. 1989) (“Claims made policies, unlike occurrence policies, are designed to limit
liability to a fixed period of time. To allow coverage beyond that period would be to grant the
insured more coverage than he bargained for and paid for, and to require the insurer to provide
coverage for risks not assumed.”). The distinction between the two types of contracts is important
because Ferrando’s notice-prejudice rule does not apply to claims-made policies. See ISCO
Indus., Inc. v. Great Am. Ins. Co., 148 N.E.3d 1279, 1281–82, 1286–88 (Ohio Ct. App. 2019).
Even though Discover’s policies required it to receive notice of a claim within thirty days,
they nevertheless covered any “offense . . . committed . . . during the policy period.” That
coverage makes them occurrence policies, not claims-made ones. Indeed, Discover argues that its
specific-notice provision makes its policies merely similar to a claims-made policy; Discover does
not argue that its policies actually were claims-made policies. While Discover’s specific-notice
provision does make its policies similar to a claims-made policy, they are similar, not the same.
As explained above, what sets apart a claims-made policy is the requirement that a claim be made
during the policy period. Such a policy provides certainty to insurers regarding when their liability
ends. In contrast, Discover had no such certainty with its occurrence policies because its policies
had no similar specified date by which Discover did not have to provide insurance benefits to
Safelite.
Nevertheless, Discover asks us to treat specific-notice provisions in occurrence policies
differently from those that use amorphous terms like “prompt notice.” But doing so would conflict
with Ferrando. True, Ferrando specifically dealt with prompt-notice provisions. Yet its reasoning
applies equally to specific-notice provisions in occurrence policies. Whether notice was timely
-10- No. 22-4054, Ace Am. Ins. Co. v. Zurich Am. Ins. Co., et al.
simply started the analysis in Ferrando. And Ferrando held that untimely notice—without
more—does not materially breach an insurance contract. The major difference between a specific-
notice provision and an unspecified one is how easy it is to determine whether the notice was
untimely. After passing that threshold, however, the analysis for an occurrence policy should be
the same as outlined in Ferrando. Thus, the notice provisions in Discover and Zurich’s policies
should be treated the same from a prejudice perspective.
D.
In summary, to receive equitable contribution, ACE must show that it shared a defense
obligation with Discover and Zurich. Because the all-sums approach does not apply here, ACE
cannot rely on its special notice rules to establish a shared defense obligation. And that shared
obligation exists only if Discover and Zurich were prejudiced by the untimely notice they received
of the Campfield litigation. But the district court did not conduct the fact-intensive prejudice
analysis, so we remand for it to do so in the first instance. See Walls, 343 F.3d at 887. After all,
we are “a court of review, not first view.” Taylor v. City of Saginaw, 11 F.4th 483, 489 (6th Cir.
2021) (citation omitted). Similarly, we leave for the district court to consider in the first instance
on remand the question of whether the voluntary-payment provisions of Discover and Zurich’s
insurance policies mean they do not share a defense obligation with ACE.
IV.
For the reasons stated, we vacate the district court’s judgment in favor of Discover and
Zurich and remand for further proceedings consistent with this opinion.
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