Ohio Claims Compliance

as a bright-line bar to bad faith claims when settlement is within limits .

holding that Marginian creates a bright-line rule extinguishing third-party bad faith claims where no excess judgment exists .

16 months Untimely (Waiver) A 16-month delay in asserting policy defenses constituted a waiver .

16 Months Untimely / Prejudicial Waiver of coverage defenses

Prejudice Found Estoppel / Waiver

the Ohio Supreme Court clarified that a plaintiff must make a prima facie showing of bad faith before piercing the attorney-client privilege to access an insurer's claim file .

In EMOI Services, L.L.C. v. Owners Ins. Co. (170 Ohio St.3d 78, 2022-Ohio-4649), the Ohio Supreme Court addressed a case of first impression regarding ransomware coverage under a standard businessowners property policy .

. The Court ruled that the preferred method for computing damages to a motor vehicle is the difference between its market value immediately before the collision and immediately after the collision (i.e., immediate diminished value or gross diminution) .

the Sixth District Court of Appeals held that while a plaintiff cannot sue for a violation of OAC 3901-1-54 directly, the rules contained within the statute may be introduced as expert evidence to demonstrate the standard of care in the insurance industry .

have interpreted Boone broadly to require the disclosure of all documents that "may cast light" on whether the insurer acted in bad faith . Thus, an insurer's failure to update an insured not only opens the door to substantive tort liability but also dismantles the procedural shields protecting internal claims correspondence.

~5 weeks Timely A reasonably short period does not generate sufficient prejudice to invoke estoppel .

a federal district court in Ohio found that an ROR sent roughly five weeks after the initial loss was a "reasonably short time period" and therefore timely .

No Prejudice ROR Valid; No Waiver

In the federal context applying Ohio law, the U.S. District Court for the Southern District of Ohio in Harsh v. GEICO Gen. Ins. Co., 2018 WL 4521934, analyzed an insurer's delay in communicating settlement offers .

an insurer owes a duty to act in good faith when representing the insured against a third-party claimant .

and reaffirmed in Zoppo, punitive damages may only be recovered upon proof of "actual malice, fraud or insult" on the part of the insurer . Actual malice is defined as a state of mind characterized by hatred, ill will, a spirit of revenge, or a conscious disregard for the rights and safety of others that has a great probability of causing substantial harm .

The principles of Unklesbay were subsequently affirmed and expanded by the Fifth District Court of Appeals in Jay v. Mass. Cas. Ins. Co., 2008-Ohio-846 . In Jay, the court reiterated that the duty of good faith extends beyond scenarios involving an outright denial of payment.

: https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-ohio-6036.pdf

: https://www.akronbar.org/docDownload/2643083, https://docs.justia.com/cases/federal/district-courts/ohio/ohndce/4:2023cv02412/302656/45

No Prejudice ROR Valid; No Waiver

which required proof of actual intent by the insurer to commit a wrongful act . The Zoppo Court reinstated the "reasonable justification" standard, holding that an insurer fails to exercise good faith in processing an insured's claim if its refusal to pay is not predicated upon circumstances that furnish reasonable justification .

Rakich (2007) , Braum (2015)

an insurer fails to properly investigate when it does not intelligently assess all probabilities of the case .

Ohio courts use the "lodestar" calculation (reasonable hourly rate multiplied by the number of hours worked) to determine the proper amount for an attorney-fee award in these bad faith scenarios .

and subsequently affirmed by the Second District Court of Appeals in Braum v. Kinderdine (2015) .

. The Ninth District Court of Appeals held that an insurer need only pay for the insured's private counsel when the insurer's stance with respect to coverage renders it "impossible" for the insurer to "protect both its own interests and those of the insured" .

: https://www.supremecourt.ohio.gov/rod/docs/pdf/0/2023/2023-Ohio-3921.pdf

elaborated on the definition of good faith, stating that it requires "objective factors such as the party's full cooperation in the procedural matters of a claim, a rational evaluation of the risks and potential liabilities of a cause of action, and the lack of foot-dragging or other dilatory tactics" .

Another major cyber-fraud related coverage dispute recently decided under Ohio law is the Sixth Circuit's decision in Huntington National Bank v. AIG Specialty Insurance Co. (90 F.4th 837, 2024) .

the insurer defended the insured for nearly an entire year without reserving its rights. The court found this delay inherently prejudicial, allowing the insured's equitable estoppel claim to survive a motion to dismiss .

the Second District Court of Appeals recognized that an insurer could be held liable in tort not just for denying a claim, but for unreasonably delaying the handling, processing, and communication of the claim . The court explicitly reasoned that "the insurer's foot-dragging in the claims-handling and evaluation process could support a bad-faith cause of action" .

. The case is historically significant as it represents the highest evidentiary hurdle Ohio ever placed on policyholders, but its requirement of "intent" is no longer good law .

the rule dictates 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" .

. An insurer acts in bad faith if its refusal to pay or process a claim is not predicated upon circumstances that furnish reasonable justification .