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Can punitive damages be awarded in a breach of contract?

Gavel and scales punitive damages

Last week, the Supreme Court of Ohio issued a ruling in an insurance case that called into question whether punitive damages can be awarded in a breach of contract claim.

The case, which involves an insurance agent and Nationwide Insurance, had the potential to change the landscape of not only the insurance industry, but businesses at large in Ohio.

In a 6-1 decision, the Court reversed a judgment of the Seventh District Court of Appeals, clarifying that punitive damages are not recoverable in a breach-of-contract lawsuit. The exception to this rule is if the breach involves a tort, among other clarifications the decision provides to Ohio contract law:

  • When a breach of contract involves conduct that also constitutes a tort, punitive damages may be awarded only for the tort, not for the breach, and any punitive damages awarded are subject to the statutory limitations on punitive damages imposed in R.C. 2315.21.
     

  • A party to a contract does not breach the implied duty of good faith and fair dealing by seeking to enforce the agreement as written or by acting in accordance with its express terms, nor can there be a breach of the implied duty unless a specific obligation imposed by the contract is not met.
     

  • An unconditional release of liability becomes effective upon execution and delivery and bars any claims encompassed within it, unless it was procured by fraud, duress, or other wrongful conduct.
     

  • A party seeking to avoid a release of liability on the basis that it was procured under duress is required to prove duress by clear and convincing evidence.
     

  • The prevention of performance doctrine, which states that a party who prevents another from performing a contractual obligation may not rely on that failure of performance to assert a claim for breach of contract, is not a defense to a release of liability and therefore cannot be asserted as a defense to a release.
     

  • A fraud claim cannot be predicated on predictions or projections relating to future performance or on misrepresentations made to third parties.

This is just one of many cases that showcase the important role of the Supreme Court of Ohio. With two of the seven justices up for election this November, you’ll want to pay close attention to this race. Learn why Supreme Court of Ohio races really do matter.

Read more about this ruling in Court News Ohio.
 

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Supreme Court of Ohio case could have major impact on insurance agency negligence claims

Lady Justice holding scales in front of legal books

When should the statute of limitations begin on an insurance agency negligence claim?

That’s the question the Supreme Court of Ohio will answer in London Insurance vs. LGR Realty – a case that could have a major impact on the entire insurance industry.

LGR Realty filed a complaint against Frank & London Insurance Agency, an independent agency in Columbus, alleging that they received an unsatisfactory insurance policy.

This allegation arose after a third party filed a claim against LGR Realty and the commercial policy carrier, Continental Casualty Company, refused to defend and indemnify.

Frank & London Insurance argues that the statute of limitations clock began running when the policy was issued. However, LGR Realty argues that it was a “delayed-damages” situation and the statute of limitations clock began when Continental Casualty Company refused to defend or indemnify on the third-party claim.

The trial court ruled in favor of Frank & London Insurance Agency, citing that the case was time-barred. LGR Realty appealed this decision, and the 10th District Court of Appeals overturned the trial court ruling.

Recent Supreme Court of Ohio professional negligence cases have nearly rescinded the court’s decision in Kunz v. Buckeye Union Insurance Co., which approved the delayed-damages rule regarding statute of limitations. However, this decision has not been expressly overruled.

The Supreme Court of Ohio will soon determine whether the delayed-damages rule in Kunz v. Buckeye Union Insurance Co. will remain valid.

LGR Realty’s argument rests on the logic that it is unrealistic to expect a policyholder to know the extent of their coverage until harm is suffered. Therefore, the Court should rule that the statute of limitations began when Continental refused to indemnify LGR when they were sued by a third party.

However, Frank & London Insurance argues that since a cause of action in a professional negligence claim begins when the wrongful act is committed, the statute of limitations in this specific case began when LGR Realty purchased their policy.

Additionally, Frank & London Insurance argues that since the Kunz v. Buckeye Union Insurance Co. case, there have been other professional negligence claims where the court held that the statute of limitations begins when the act is committed, not when the discovery of the tort occurs.

A decision by the Supreme Court of Ohio is expected to be issued soon. Stay tuned for more updates!

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