Memorandum of Opinion and Order
PATRICIA A. GAUGHAN, District Judge.
This matter is before the Court upon Plaintiff's Motion for Summary Judgment (Doc. 12) and Defendant Medmarc Casualty Insurance Company's Motion for Summary Judgment (Doc. 13). This lawsuit arises out of Medmarc's denial of insurance coverage to Plaintiff Spiros Gonakis, an attorney, for a legal malpractice claim brought against him in the Cuyahoga County Court of Common Pleas. Gonakis seeks a declaration that Medmarc has a duty to defend and indemnify him with regard to the litigation. For the reasons that follow, Medmarc's Motion for Summary Judgment is GRANTED, and Plaintiff's Motion for Summary Judgment is DENIED.
The underlying lawsuit
In December of 2011, Gonakis represented Rolvow Properties, LLC, in a real estate transaction involving Rolvow's sale of an apartment building to Classic Victor, LLC. Gonakis was retained to review the real estate purchase agreement, promissory note, and mortgage. Title to the apartment building transferred to Classic Victor on January 9, 2012, and Gonakis's representation of Rolvow ceased.
Subsequently, Classic Victor breached the parties' purchase agreement and defaulted on the promissory note and mortgage that it had executed in Rolvow's favor to secure financing for the sale. On December 21, 2015, Gonakis received a letter from attorney Stephen Thomas on behalf of Rolvow. The letter was addressed to Gonakis and five other individuals or entities: Edwin P. Pigman, Esq; Michael Burrington; Brian Stark; Bill Dragolis, and Howard Hanna Real Estate Services. The letter stated in part that Rolvow had hired Thomas to "prosecute claims for damages arising from . . . the sale" of the apartment building. It reads in full:
After receiving the letter, Gonakis searched the Cuyahoga County Common Pleas Court docket and discovered that a foreclosure action on behalf of Rolvow and against Classic Victor had been filed on September 17, 2014, by attorney Pigman. His review of the docket also revealed that on October 14, 2015, Pigman's motion for summary judgment was denied because Pigman had not filed a required preliminary judicial report/title commitment. Gonakis states that, based on his reading of the Thomas letter and the foreclosure action, he concluded the following:
Because Gonakis determined that Rolvow was not bringing any allegations of malpractice against him, he did not forward the Thomas letter to his professional liability insurance carrier at the time, Professional Solutions Insurance Company ("PSIC").
On April 4, 2016, Rolvow served Gonakis with its First Amended Complaint in the matter captioned as Rolvow Properties, LLC v. Michael Burrington, et al., Cuyahoga County Court of Common Pleas. In it, Rolvow named Gonakis as a defendant and brought one claim of legal malpractice against him. Gonakis had not been named as a defendant in the original complaint.
Gonakis's insurance policy
On January 12, 2016, Gonakis completed and signed an Application for Professional Liability Insurance with Medmarc. The application stated that "[o]nly claims that are first made against the insured and reported to the Company during the policy term are covered, subject to the policy provisions" and warned that incomplete or inaccurate information "could lead to a denial of coverage." The application also included the following questions:
Gonakis answered "no" to these questions and also stated that he had reported "all claims, potential claims and incidents." Gonakis did not disclose the Thomas letter to Medmarc at the time of his application.
The relevant provisions of Gonakis's Medmarc policy are as follows:
Gonakis filed a declaratory judgment action against Medmarc in the Cuyahoga County Court of Common Pleas on July 14, 2016, seeking a declaration that Medmarc owes a duty to defend and indemnify him in the Rolvow malpractice lawsuit and recovery of monetary damages, including punitive damages, for an alleged bad faith denial of insurance coverage. Medmarc then removed the case to this Court on the basis of diversity jurisdiction. Pending before the Court are the parties' cross-motions for summary judgment.
SUMMARY JUDGMENT STANDARD
Rule 56(a) of the Federal Rules of Civil Procedure, as amended on December 1, 2010, provides in relevant part that:
Fed .R.Civ.P. 56(a).
Rule 56(e) provides in relevant part that "[i]f a party fails to properly support an assertion of fact or fails to properly address another party's assertion of fact as required by Rule 56(c), the court may. . . consider the fact undisputed for purposes of the motion. . . [and] grant summary judgment if the motion and supporting materials—including the facts considered undisputed-show that the movant is entitled to it." Fed.R.Civ.P. 56(e).
Although Congress amended the summary judgment rule, the "standard for granting summary judgment remain unchanged" and the amendment "will not affect continuing development of the decisional law construing and applying" the standard. See, Fed.R.Civ.P. 56, Committee Notes at 31.
Accordingly, summary judgment is appropriate when no genuine issues of material fact exist and the moving party is entitled to judgment as a matter of law. Celotex Corp. v. Catrett, 477 U.S. 317, 322-23 (1986) (citing Fed. R. Civ. P. 56(c)); see also LaPointe v. UAW, Local 600, 8 F.3d 376, 378 (6th Cir. 1993). The burden of showing the absence of any such genuine issues of material facts rests with the moving party:
Celotex, 477 U.S. at 323 (citing Fed. R. Civ. P. 56(c)). A fact is "material only if its resolution will affect the outcome of the lawsuit." Anderson v. Liberty Lobby, 477 U.S. 242, 248 (1986).
Once the moving party has satisfied its burden of proof, the burden then shifts to the nonmoving party. The court must afford all reasonable inferences and construe the evidence in the light most favorable to the nonmoving party. Cox v. Kentucky Dep't. of Transp., 53 F.3d 146, 150 (6th Cir. 1995) (citation omitted); see also United States v. Hodges X-Ray, Inc., 759 F.2d 557, 562 (6th Cir. 1985). However, the nonmoving party may not simply rely on its pleading, but must "produce evidence that results in a conflict of material fact to be solved by a jury." Cox, 53 F.3d at 150.
Summary judgment should be granted if a party who bears the burden of proof at trial does not establish an essential element of his case. Tolton v. American Biodyne, Inc., 48 F.3d 937, 941 (6th Cir. 1995) (citing Celotex, 477 U.S. at 322). Accordingly, "the mere existence of a scintilla of evidence in support of plaintiff's position will be insufficient; there must be evidence on which the jury could reasonably find for the plaintiff." Copeland v. Machulis, 57 F.3d 476, 479 (6th Cir. 1995) (quoting Anderson, 477 U.S. at 52 (1986)). Moreover, if the evidence is "merely colorable" and not "significantly probative," the court may decide the legal issue and grant summary judgment. Anderson, 477 U.S. at 249-50 (citation omitted).
A court sitting in diversity applies the law of the forum state. Schwartz Manes Ruby and Slovin, L.P.A. v. Monitor, 483 Fed. Appx. 241, 244 (6th Cir. 2012). The parties agree that Ohio law governs the Medmarc policy.
The Medmarc policy is a "claims-made" policy, meaning that it only protects the insured for claims made and reported within the policy period. Mueller v. Taylor Rental Ctr., 106 Ohio App.3d 806, 810 (Ohio App. 1995). Unlike an occurrence policy, a claims-made policy is designed to limit liability to a fixed period of time. Id. Medmarc argues that it has no duty to defend Gonakis against the Rolvow malpractice lawsuit because the policy only covers a claim if it is first made during the policy period and "no insured knew or should have known of facts that reasonably could have been expected to result in a claim prior to the [policy's] effective date." (Policy, § 2.1); (see also id. § 2.2(b)). Medmarc asserts that Gonakis could have reasonably expected the Rolvow lawsuit once he received the Thomas letter. It also argues that the claim is excluded under Section 4.1 because the policy excludes any claim "that occurred prior to the continuous coverage effective date, if on that date, the Insured knew or believed, or had reason to know or believe, that the circumstance, act, error, or omission might reasonably be expected to result in a claim . . . against the Insured."
Both parties agree that the relevant policy language is whether Gonakis was aware of facts or should have known of facts that "reasonably could have been expected to result in a claim."
Gonakis argues that the phrase "reasonably could have expected to result in a claim"-which the policy does not define-is ambiguous and must be construed against Medmarc. The Southern District of Ohio has interpreted this same language and determined that it is ambiguous because it is susceptible of two meanings: it could require reporting whenever there is any possibility of or potential for a claim, or it could require reporting only when a claim is reasonably probable. Professionals Direct Ins. Co. v. Wiles, Boyle, Burkholder & Bringardner Co., 2009 WL 4281263, at *11-13 (S.D. Ohio Nov. 24, 2009). Having found that the language was ambiguous, the court construed it against the insurer and interpreted it to mean that the insured was only required to report claims that were "reasonably probable, reasonably likely to happen, or reasonably certain." Id. at * 13. Using this construction, the court found that there was a question of fact as to whether the insured, a law firm faced with a malpractice claim, had met the reporting requirement by waiting to give notice of the claim until after the Ohio Supreme Court ruled against its client in the underlying litigation. In denying summary judgment to the insurer, the court noted that the underlying litigation was still pending during the applicable time period, there was a reasonable probability that it would resolve favorably for the firm's client, and the firm's client had not indicated in any way that it believed that the firm had committed legal malpractice or that it was considering bringing such a claim. Id.
Here, even if the Court liberally construes the undefined language at issue ("reasonably could have been expected to result in a claim") in favor of Gonakis, a reasonable insured would have expected a malpractice claim by Rolvow after receiving the Thomas letter. After receiving the letter on December 21, 2015, Gonakis was aware that Rolvow was represented by new counsel, Stephen Thomas, and that Rolvow had retained Thomas to prosecute claims for damages arising from the addressees' separate involvements in the sale of Rolvow's apartment building "
Gonakis's interpretation of the Thomas letter-that it does not apply to him, that all addressees except for him would be the subject of a lawsuit by Rolvow, and that Thomas was conducting an investigation and wanted Gonakis to preserve his file because Thomas might contact him as part of the investigation-is simply not supported by the language of the letter. The letter was addressed to all recipients collectively, made no exceptions for Gonakis, and clearly stated in the first paragraph that Rolvow had hired Thomas to prosecute claims against the recipients. ("Gentlemen: The undersigned has been retained by Brian McMillin in his capacity as Managing Member of Rolvow Properties, LLC, to prosecute claims for damages arising from your separate involvements (as applicable). . . .")
Gonakis notes that Rolvow had not contacted him in the four years following the real estate transaction, that Rolvow had never complained about Gonakis's representation, that the statute of limitations on a malpractice claim is one year, that the foreclosure proceedings still had a reasonable possibility of resolving in Rolvow's favor at the time of the Thomas letter, and that the final paragraph of the letter states that Thomas was simply "investigating allegations." In addition, he believes that he had ably represented Rolvow. These facts would weigh strongly in favor of Gonakis had the letter not explicitly stated that Rolvow had hired Thomas to prosecute claims arising, in part, from the real estate transaction for which Gonakis had represented Rolvow or directed all recipients to refer the letter to their respective professional liability insurance carriers. But in light of these statements, the only objectively reasonable conclusion that an attorney could have come to was that Rolvow was reasonably likely to file a lawsuit against Gonakis. Moreover, Gonakis's subjective belief that a malpractice claim would be meritless is beside the point because the objective prong of the relevant policy provisions does not address the insured's subjective belief as to the merits of a possible claim or whether he had committed a wrongful act.
The Thomas letter, which Gonakis received several weeks prior to the effective date of the Medmarc policy, gave Gonakis a basis to reasonably expect that Rolvow would file a claim against him. Therefore, the Medmarc policy does not apply to the claim and Medmarc owes no duty to defend or indemnify Gonakis for the claim.
For the foregoing reasons, Medmarc's Motion for Summary Judgment (Doc. 13) is GRANTED, and Plaintiff's Motion for Summary Judgment (Doc. 12) is DENIED.
IT IS SO ORDERED.