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Britton v. Smythe9/21/2000
ife Ins. Co. (1983), 6 Ohio St.3d 272, 6 OBR 337, 452 N.E.2d 1315, paragraph one of the sylla- bus. Moreover, as we emphasized in Hoskins, " breach of this duty will give rise to a cause of action in tort against the insurer." Id. The tort of bad faith is not a tortuous breach of contract, for no matter how willful or malicious the breach, it is no tort to breach a contract. See Ketcham v. Miller (1922), 104 Ohio St. 372, 136 N.E. 145. Rather, the tort of bad faith arises as a consequence of a breach of a duty established by a particular contractual relationship. In the area of contracts of insurance, the legal duty of good faith imposed by law on the insurer applies with equal force to the com- pany's settlement of third-party claims against its insured as it does to those claims brought by the insured himself. Hoskins, supra, 6 Ohio St.3d at 275-276, 6 OBR at 340, 452 N.E.2d at 1319. (footnote omitted).
Even though it would be against public policy for the legal defense program to indemnify plaintiff for damages caused by her intentional conduct, Smythe, Cramer nonetheless had the duty to reserve its rights under the policy and protect its position. And when deciding to reserve its rights, it had the obligation to so in good faith, without causing undue prejudice to plaintiff's ability to make an informed decision to obtain independent counsel. The facts viewed in a light most favorable to plaintiff suggest that Smythe, Cramer had reason to know from the outset that Lamb's claims against plaintiff sounded in intentional tort. In fact, these same facts form the basis of the waiver and estoppel claims. While we express no opinion on the merits of this bad faith claim, we note the same evidence mustered in support of the waiver and estoppel issue bears on the resolution of this claim. We state only that reasonable minds could differ on the factual issue presented by the claim.
We also find the court erred by granting summary judgment on the second part of the bad faith claims Smythe, Cramer's alleged refusal to settle the Lamb litigation.
It is settled law in this state that an insurer owes a duty to exercise good faith in defending and settling claims against the insured and that a breach of that duty will give rise to a cause of action by the insured. Centennial Ins. Co. v. Liberty Mut. Ins. Co. (1980), 62 Ohio St.2d 221, 222, citing Hart v. Republic Mut. Ins. Co. (1949), 152 Ohio St. 185; Slater v. Motorists Mut. Ins. Co. (1962), 174 Ohio St. 148.
Plaintiff presented evidence to show that two months prior to trial, Smythe, Cramer had legal advice to ettle ASAP before Judy Dietz gets deposed. Settlement discussions were apparently ongoing, and the parties to the Lamb litigation were $18,000 apart, yet Smythe, Cramer wanted to squeeze another realtor to make up the difference. It took this stance, apparently, even though it knew that outside counsel had warned it not to go to trial.
Smythe, Cramer vigorously disputes plaintiff's allegations, pointing to affidavits from its counsel in the Lamb litigation that Lamb would not accept a settlement. We will discuss those affidavits in more detail in a later portion of this opinion. For present purposes the inconsistencies between counsels' affidavits and various statements quoted above are sufficiently dissimilar that reasonable minds could differ over their import. For this reason, we sustain the second assignment of error and remand for trial.
III.
The third assignment of error complains the court erred by granting summary judgment on the promissory estoppel claim against Smythe, Cramer's president. That claim alleged that plaintiff justifiably relied on the president's represent
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