The Eighth District Court of Appeals recently issued an opinion that included many legal issues typically found in the context of bad faith claims. The case involved a mold claim and, after a denial of coverage, plaintiff filed an action against their homeowner’s insurance carrier, Lightning Rod Mutual Insurance Company.

 

            The homeowners’ action asserted breach of contract and bad faith. The trial court bifurcated the bad faith claim from the contract claim and permitted the jury to determine only the contract claim. 

 

            The motion to bifurcate was filed pursuant to O.R.C. Sec. 2315.21(B)(1) which allows bifurcation of compensatory claims from punitive damage claims. However, the evidence disclosed that the homeowners had filed their complaint on April 4, 2004 and the statutory amendment upon which the motion to bifurcate was filed did not become effective until April 7, 2005. Therefore, the first issue for appellate review dealt with the question of whether or not it was appropriate to apply the statute retroactively inasmuch as it had become effective after the complaint had been filed.

 

            The court reviewed the applicable analysis and stated in paragraphs 19-21, the following:

 

            “It is well-settled law that statutes are presumed to apply prospectively unless expressly declared to be retroactive. R.C. 1.48; Van Fossen v. Babcock & Wilcox Co. (1988) 36 Ohio St.3d 100, 105, 522 N.E.2d 489. It is also settled that the General Assembly does not possess an absolute right to adopt retroactive statutes. Section 28, Article II of the Ohio Constitution prohibits the retroactive impairment of vested substantive rights. (Citation omitted.) However, the General Assembly may make retroactive any legislation that is merely remedial in nature. (Citation omitted.)

 

            As noted in Van Fossen and LaSalle, we have distilled these principles into a two-part test for evaluating whether statutes may be applied retroactively. First, the reviewing court must determine as a threshold matter whether the statute is expressly made retroactive. (Citation omitted.) The General Assembly’s failure to clearly enunciate retroactivity ends the analysis, and the relevant statute may be applied only prospectively. Id. If a statute is clearly retroactive, though, the reviewing court must then determine whether it is substantive or remedial in nature. (Citation omitted.)

 

            R.C. 2315.21(B) contains no express statement about being retroactive. The statute does not ‘clearly enunciate retroactivity;’ hence, our analysis comes to an end. R.C. 2315.21(B) may be applied only prospectively, so the court erred by granting the motion to bifurcate the bad-faith claim under that statute.”

 

            Therefore, the Court of Appeals had concluded error by the lower court in granting the motion to bifurcate based upon the Ohio Revised Code Section set forth above, but this did not end its analysis. By contrast, the court stated that the analysis is only partially complete and continued same in paragraphs 27-29 of its opinion wherein it stated the following:

 

            “Having found that the court erred by bifurcating the bad-faith claim from the contract claims, we next consider whether the error was prejudicial. Civ. R. 61 states:

 

            ‘No error in either the admissions or the exclusion of evidence and no error or defect in any ruling or order or in anything done or omitted by the court or by any of the parties is ground for granting a new trial or for setting aside a verdict or for vacating, modifying or otherwise disturbing a judgment or order, unless refusal to take such action appears to the court inconsistent with substantial justice. The court at every stage of the proceeding must disregard any error or defect in the proceeding which does not affect the substantial rights of the parties.’

 

            Generally, in order to find that substantial justice has been done to an appellant so as to prevent reversal of a judgment for errors occurring at the trial, the reviewing court must not only weigh the prejudicial effect of those errors but also determine that, if those errors had not occurred, the jury or other trier of the facts would probably have made the same decision.”

 

            As previously noted, the trial court had bifurcated the bad-faith claim. After the trial, the lower court granted summary judgment, in favor of Lightning Rod Mutual Insurance, as to the bad faith claim. Inasmuch as summary judgment was granted (as it relates to the bifurcated bad faith claim), the court found that the bifurcation was harmless error, thus not warranting the request for a new trial because the court had granted defendant’s summary judgment motion.

 

            The opinion also reflects an interesting “twist” relating to the fact that the case was referred to a visiting judge who tried the case and who granted summary judgment in the post-trial proceeding. One of the issues raised by the homeowners, in the Court of Appeals, was that the assigned judge did not have the authority to grant summary judgment after the trial. This particular argument was rejected in a footnote, but the basis of the rejection is worthy of review and the footnote appeared in paragraph 30 of the court’s opinion:

 

            “We reject the argument made in the Mastellones’ fourth assignment of error that the judge who presided over the trial had no authority to render a posttrial summary judgment because it exceeded the scope of the judge’s assignment. The trial judge received the case by assignment because of the heavy trial schedule of the original assigned judge. See Sup. R. 17(A). While we express no opinion on whether a judge to whom a case has been transferred for trial has the authority to consider posttrial motions for summary judgment, the Mastellones did not object to the trial judge’s handling of posttrial matters and, in fact, included the judge’s name on the caption of their brief in opposition to Lightning Rod’s motion for summary judgment on the bad-faith claim. They therefore waived the right to challenge the trial judge’s authority.”

 

            The Appellate Court also reviewed the propriety of the lower court’s application of a one-year limitation of action clause to the claim for interior damage. In paragraphs 45-56 of its opinion, the court reaffirmed the viability and enforceability of a one-year limitation of action clause and stated the following:

 

            “In Sarmiento v. Grange Mut. Cas. Co., 106 Ohio St.3d 403, 2005-Ohio-5410, 835 N.E.2d 692, ¶ 11, the Supreme Court stated:

 

            ‘In Ohio, the statutory limitation period for a written contract is 15 years. R.C. 2305.06. However, the parties to a contract may validly limit the time for bringing an action on a contract to a period that is shorter than the general statute of limitations for a written contract, as long as the shorter period is a reasonable one. Miller v. Progressive, 69 Ohio St.3d 619, 624, 635 N.E.2d 317; Colvin v. Globe Am. Cas. Co. (1982) 69 Ohio St.2d 293, 295, 23 O.O.3d 281, 432 N.E.2d 167, overruled on other grounds by Miller v. Progressive. A contract provision that reduces the time provided in the statute of limitations must be in words that are clear and unambiguous to the policyholder.”

 

            The Lightning Rod policy included a one-year limitation of action clause which the Court of Appeals confirmed had been violated by the homeowners and, therefore, upheld the propriety of a directed verdict on that issue. The Eighth District case intertwines many themes that arise in the insurance defense context including prospective/retroactive application of statutes, the fact that not all error warrants a new trial in conjunction with issues unique to bad faith, inclusive of bifurcation and the interplay of a one-year limitation of action clause.

 

 

 

 

            In Hodges v. Hodges, the Sixth District Court of Appeals dealt with a situation wherein a spouse had been charged with domestic violence. When the case subsequently went to trial, the spouse was acquitted and the party who had instigated the domestic violence charges was sued for malicious prosecution. 

 

            In paragraph 38 of its opinion, the court restated the well-settled principles associated with elements of malicious prosecution and indicated the following:

 

            “In order to prevail on a malicious-prosecution claim, one must establish (1) malice in instituting a prosecution, (2) a lack of probable cause, and (3) failure of the prosecution. (Citation omitted.)”

 

            Many times, the question arises as to whether or not a malicious prosecution claim lies if the accused is acquitted in the criminal arena. Inasmuch as the answer is in the negative, this case is instructive inasmuch as the opinion is predicated upon this legal principle. The Court of Appeals followed that principle and stated in paragraph 40 of its opinion, the following:

 

            “As this court held in Vesey v. Connally (1960), 112 Ohio App.225, ‘since the guilt of the accused is not the same thing as probable cause, the fact that the accused is later acquitted and found not guilty does not negate the probable cause and is not even prima facie evidence of want of probable cause.’ This principle is precisely on point. The record establishes that probable cause existed for appellee’s arrest. Therefore, appellee cannot prevail on a claim of malicious prosecution as a matter of law.”