Roberts v. United States Fidelity & Guaranty Co.

665 N.E.2d 664, 75 Ohio St. 3d 630

• Court: Ohio Supreme Court
• Decided: June 26, 1996
• Docket: No. 94-2511
• Status: Published

Opinions

Francis E. Sweeney, Sr., J.

This court must determine whether the trial court properly made the following findings: (1) that USF&G did not act in bad faith in breaching the duty to defend Wikel; (2) that USF&G was entitled to a setoff; and (3) that Wikel was entitled to only $1.5 million in damages for USF&G’s breach of its duty to defend. For the following reasons, we'uphold the trial court’s determination that USF&G did not act in bad faith and, thus, we reverse that portion of the court of appeals’ judgment remanding this issue to the trial court for reconsideration. We reverse the court of appeals’ allowance of a setoff of damages. Finally, we affirm the court of appeals’ determination that Wikel is entitled to only $1.5 million in damages. Accordingly, we affirm the judgment of the court of appeals in part and reverse it in part.

Appellant, Wikel’s trustee in bankruptcy, argues that we should remand this cause to the trial court for application of this court’s holding in Zoppo v. Homestead Ins. Co. (1994), 71 Ohio St.3d 552, 644 N.E.2d 397, paragraph one of the syllabus. While Zoppo involved an insurer’s bad faith failure to process a claim, appellant argues that it should be extended to apply to eases involving bad faith failure to defend. In Zoppo, we held, at paragraph one of the syllabus, that “[a]n insurer fails to exercise good faith in the processing of a claim of its insured where its refusal to pay the claim is not predicated upon circumstances that furnish reasonable justification therefor.” In Zoppo we abandoned the intent requirement of Motorists Mut. Ins. Co. v. Said (1992), 63 Ohio St.3d 690, 590 N.E.2d 1228. We decline to extend Zoppo to this particular case of bad faith failure to defend, as Zoppo was decided after the trial court’s and court of appeals’ decisions in this case. This case has been litigated for over ten years and should come to final resolution before this court.¹

The trial court found that USF&G did not act in bad faith, applying the intent requirement of Said, supra. In support of this finding, the trial court cited the definition of “bad faith” set forth in Said, which included the requirement that in order to demonstrate bad faith, “wrongful intent” must be proven. The court noted that “[i]t is not enough that the insurance company exercised poor judgment or even that it acted recklessly.” While the trial court’s entry erroneously included language setting forth the standard for an award of punitive damages in bad faith claims, we find that the inclusion of this language was harmless here, as the entry indicates that this was merely an additional reason for finding no bad faith. Thus, regardless of the inclusion of this erroneous language, we believe that the trial court found no bad faith under the properly cited definition articulated in Said, supra. In fact, the trial court concluded that it found no bad faith “under the standards articulated by the Ohio Supreme Court.” Accordingly, we find it unnecessary to remand this matter to the trial court for reconsideration of this finding.

We must next address whether USF&G was entitled to a setoff in the amount of $1 million by virtue of Wikel’s settlement in that amount with Wikel’s own counsel. A setoff was improper here, as Wikel’s professional negligence claim against its own counsel was separate and distinct from Wikel’s breach of contract claim against USF&G. The attorney-client relationship between Wikel and its separate counsel arose out of a particular contract. The insured-insurer relationship between Wikel and USF&G arose out of a completely separate and distinct contract. The insurer, USF&G, and Wikel’s separate counsel had no relationship with each other and no determination was ever made that Wikel’s separate counsel in the Miller action bore any responsibility for the damages which the trial court awarded against USF&G in the instant case. Accordingly, we reverse the court of appeals’ finding that the trial court properly allowed the setoff.

Appellant next argues that the trial court erred in awarding only $1.5 million in damages (the Miller judgment), as it demonstrated that the Miller judgment was the reason it had to eventually seek bankruptcy protection, which led to the demise of the business and an $8,206,099 economic loss to the company. We will not disturb a decision of the trial court as to a determination of damages absent an abuse of discretion. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219, 5 OBR 481, 482, 450 N.E.2d 1140, 1142. While the trial court did not state its reason for allowing $1.5 million as compensatory damages, we agree with the court of appeals that the trial court must have found that these additional debts (or losses) were remote, speculative, and not supported by the evidence. The appellate court found that Wikel was entitled to recover only those damages which could reasonably be considered as arising naturally from USF&G’s breach of the duty to defend. The appellate court then affirmed the trial court’s damages, concluding that “the trial court’s finding that the actual damages sustained by Wikel as a direct result of USF&G’s contractual breach of its duty to defend Wikel was $1.5 million is supported by the evidence.” We agree with both lower courts that the alleged $8.2 million loss could not have been seen to arise from the $1.5 million judgment against Wikel.² Accordingly, we affirm the court of appeals’ finding that the trial court’s determination of damages was not against the manifest weight of the evidence.

Judgment affirmed in part and reversed in part.

Moyer, C.J., Douglas and Grady, JJ., concur.

1 . While we decline to extend Zoppo to this particular case of bad faith failure to defend, we leave it open as to whether Zoppo may be applied to future eases.

2 . Wikel’s amended complaint prayed for $7 million in damages and, thus, the most it would have been entitled to is that amount of damages.