Chiquita Brands Int'l, Inc. v. Nat'l Union Fire Ins. Co. of Pittsburgh PA

57 N.E.3d 97

CHIQUITA BRANDS INTERNATIONAL, INC., Plaintiff–Appellant

v.NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH PA, Defendant–Appellee.

No. C–140492.

Court of Appeals of Ohio, First District, Hamilton County.

Dec. 30, 2015.

Jones Day and Yvette McGee Brown, Taft Stettinius & Hollister, LLP and W. Stuart Dornette, and Covington & Burlington LLP, William P. Skinner and Mark Mosier, for plaintiff-appellant.

Sedgwick, LLP, Agelo L. Reppas and Traci M. Ribeiro, Reminger and Joseph W. Borchelt, for defendant-appellee.

OPINION.

SYLVIA SIEVE HENDON, Presiding Judge.

{¶ 1} Plaintiff-appellant Chiquita Brands International, Inc., (“Chiquita”) appeals the trial court's judgment holding that National Union Fire Insurance Company of Pittsburgh, PA, (“National Union”) was entitled to recoup $11,744,014.87 in defense costs that it had paid to Chiquita, plus $1,247,042.79 in prejudgment interest. We affirm.

Facts

{¶ 2} This case originates from an insurance dispute between Chiquita and National Union. National Union had insured Chiquita under a series of one-year policies from July 1992 to July 2000 (“the policies”). Numerous tort claims were filed against Chiquita essentially alleging that the plaintiffs had been injured by Chiquita's financing of terrorist groups in Colombia from 1989 through 2004. National Union did not initially defend these claims (“the underlying lawsuits”). Chiquita and National Union subsequently both moved the trial court for a declaratory judgment concerning National Union's duty to defend. On January 20, 2010, the trial court journalized an order declaring that National Union owed Chiquita a duty to defend. After the court's ruling, National Union began funding the defense. Each defense cost payment, except one, was accompanied by a letter stating, in pertinent part, that National Union was reserving a right to seek reimbursement of the payments. Because of the procedural posture of this case, a final appealable order was not entered by the trial court until December 16, 2011. National Union thereafter appealed the court's declaratory judgment order.

{¶ 3} We reversed the trial court's decision in Chiquita Brands Internatl., Inc. v. Nat. Union Fire Ins. Co. of Pittsburgh PA, 1st Dist., 2013-Ohio-759, 988 N.E.2d 897. (“Chiquita I ”). In Chiquita I , we determined that National Union did not have a duty to defend Chiquita in the underlying lawsuits because the suits did not allege conduct that constituted an “occurrence” in the “coverage territory” as defined by the policies. Chiquita I at ¶ 29. Meanwhile, National Union had made 16 defense-cost payments to Chiquita and had also made one interest payment. In Chiquita I , we remanded the cause to the trial court to determine whether National Union was entitled to recoup these payments. National Union's policies with Chiquita are silent on the issue of recoupment of costs in the event of a judicial determination that it had no duty to defend a claim.

{¶ 4} On remand, National Union moved the trial court for restitution or, in the alternative, for reimbursement of defense costs. The trial court determined that National Union was entitled to recoup the payments based on an implied-in-fact contractual right to reimbursement created by the cover letters that had accompanied National Union's payments to Chiquita. The trial court also concluded that National Union was entitled to restitution of all payments as the prevailing party on appeal.

{¶ 5} In its first assignment of error, Chiquita argues that neither of these grounds has merit and that “recent developments” require this court to hold that National Union does, indeed, have a duty to defend Chiquita in the underlying lawsuits.

I. Res Judicata

{¶ 6} Before addressing the merits of the trial court's decision, we dispose of Chiquita's argument that this court should hold that National Union has a duty to defend Chiquita in the underlying lawsuits. It is well-settled that, under the doctrine of res judicata, a valid, final judgment rendered on the merits by a court of competent jurisdiction is a complete bar to any subsequent action on the same claim between the same parties. Brooks v. Kelly, 144 Ohio St.3d 322, 2015-Ohio-2805, 43 N.E.3d 385, ¶ 7 ; Grava v. Parkman Twp., 73 Ohio St.3d 379, 653 N.E.2d 226 (1995), syllabus. We have already determined that no duty exists. We therefore will not revisit this issue.

II. Restitution is the Appropriate Remedy

{¶ 7} Chiquita next argues that the trial court erred by holding that National Union was entitled to recoup defense costs on the ground that an implied-in-fact contract was created through the letters that had accompanied National Union's defense-cost payments. To establish the existence of an implied-in-fact contract, “the proponent must prove that an agreement, based on a meeting of the minds of the parties and on mutual assent, existed, to which the parties intended to be bound.” Lucas v. Costantini, 13 Ohio App.3d 367, 368, 469 N.E.2d 927 (12th Dist.1983), citing Columbus, Hocking Valley & Toledo Ry. Co. v. Gaffney, 65 Ohio St. 104, 61 N.E. 152 (1901) ; see Stepp v. Freeman, 119 Ohio App.3d 68, 694 N.E.2d 510 (2d Dist.1997). Based on the record before us, we cannot conclude that Chiquita ever agreed that National Union should be entitled to recoupment of defense costs in the event that a court determined that National Union had no duty to defend. Chiquita has consistently maintained that National Union had a duty to defend the underlying lawsuits. Its acceptance of defense-cost payments was clearly premised on its position that the payments were due under the terms of the policies, and not on an “acceptance” of the terms contained in National Union's accompanying letters. But we affirm the trial court's judgment because we find that, under the particular facts of this case, National Union is entitled to restitution.

{¶ 8} Chiquita correctly points out that the policies were silent as to reimbursement of defense costs upon a judicial determination that there was no duty to defend. But we believe National Union is entitled to recover under a restitution theory. Restitution is appropriate where one party to a contract demands from the other a performance that is not in fact due by the terms of that contract under circumstances where it is reasonable to accede to that demand, and where the party on whom the demand is made renders such performance under a reservation of rights, thereby preserving a claim in restitution to recover the value of the benefit conferred in excess of the recipient's contractual entitlement, 1 Restatement of the Law 3d, Restitution and Unjust Enrichment, Section 35 (2011). Restitution under these circumstances does not require that the contract be set aside; rather, it is a means to enforce adherence to a contract through ordering repayment of a sum to which the recipient was never entitled under the contract's terms. Id. at comment a, citing Palmer, Law of Restitution, Section 14.1 (1978); see Motorists Mut. Ins. Co. v. Trainor, 33 Ohio St.2d 41, 45, 294 N.E.2d 874 (1973) (holding that an insurer may defend an action pursuant to a unilateral reservation of rights concerning any potential policy defenses provided it gives notice to the insured).

A. The Duty to Defend

{¶ 9} The question we must first address is whether “performance”—in this case payment of defense costs—was ever due under the policies.

{¶ 10} An insurance policy is a contract, and the rights and responsibilities of the parties are set forth in the policies. Nationwide Mut. Ins. Co. v. Marsh, 15 Ohio St.3d 107, 109, 472 N.E.2d 1061 (1984). Interpretation of an insurance policy presents a question of law that we review de novo. State Farm Fire and Cas. Co. v. Condon, 163 Ohio App.3d 584, 2005-Ohio-5208, 839 N.E.2d 464, ¶ 18 (1st Dist.).

{¶ 11} Chiquita contends that National Union had a contractual duty to defend the underlying lawsuits that was extinguished only after this court's decision in Chiquita I . We are unpersuaded by this argument. All of National Union's policies with Chiquita included language that it had a “right and duty to defend” claims against Chiquita. Where an insurance policy includes a duty to defend, the insurer is obligated to defend any claim that even potentially or arguably falls within the scope of coverage. Willoughby Hills v. Cincinnati Ins. Co., 9 Ohio St.3d 177, 459 N.E.2d 555 (1984), syllabus. Where a claim potentially or arguably falls within the scope of coverage, the duty to defend is not determined by the action's ultimate outcome or the insurer's ultimate liability. Trainor at paragraph two of the syllabus. Thus, an insurer may have a duty to defend even if the insurer is not ultimately liable on the underlying claim. See W. Lyman Case & Co. v. Natl. City Corp., 76 Ohio St.3d 345, 347, 667 N.E.2d 978 (1996) ; Socony–Vacuum Oil Co. v. Continental Cas. Co.,

144 Ohio St. 382, 59 N.E.2d 199 (1945), paragraph one of the syllabus. The “right and duty” to defend benefits both the insurer and the insured. The insured receives a defense. The insurer has control over the defense and is in a position to mitigate its potential losses. And by defending even arguably covered claims, an insurer may avoid a subsequent claim of bad faith.

{¶ 12} This broad duty to defend is not unlimited, however. “It is axiomatic that an insurance company is under no obligation to its insured, or to others harmed by the actions of an insured, unless the conduct alleged of the insured falls within the coverage of the policy.” Gearing v. Nationwide Ins. Co., 76 Ohio St.3d 34, 35, 665 N.E.2d 1115 (1996). Consequently, where the conduct alleged in a claim is indisputably not covered by a policy, there is no duty to defend. See Allstate Ins. Co. v. Campbell, 128 Ohio St.3d 186, 2010-Ohio-6312, 942 N.E.2d 1090 ; Wedge Prod. Inc. v. Hartford Equity Sales Co., 31 Ohio St.3d 65, 509 N.E.2d 74 (1987). Defense of an indisputably uncovered claim goes beyond what the...