A federal district court in Ohio has ruled that an insured that notified its insurer of a formal complaint filed against it by a state civil rights commission but not of the earlier initiation of the commission action had not provided timely notice.
The Case
On June 13, 2013, Thomas Fasanaro submitted a rental application for an apartment at Deer Creek Apartments, an apartment complex in Ohio managed by GMS Management, Inc. In response to an inquiry regarding his employment, Mr. Fasanaro indicated on the application, “disabled.”
By written notification dated June 24, 2013, GMS advised Mr. Fasanaro that his application had been denied based on the fact that his income did not meet the criteria and that a credit report had revealed delinquent past or present credit obligations with others.
Mr. Fasanaro filed an Ohio Housing Discrimination Charge with the Ohio Civil Rights Commission (“OCRC”) asserting that GMS had refused to rent to him because of his handicap.
An “official notification” was issued by the OCRC dated August 13, 2013 that advised GMS that it had “been named as a Respondent” in the case Thomas Fasanaro v. Deer Creek Run Apartments, AKR H3 (37051) 08122013. The OCRC notification stated:
The housing discrimination charge was officially filed with the Department of Housing and Urban Development and the [OCRC], pursuant to the Fair Housing Act and Section 4112 of the Ohio Revised Code.
It further stated:
There are two options for processing the above referenced charge. You may elect either Option A- Alternative Dispute Resolution, or Option B-Investigation.
The notification explained both options. In part, the notification stated that:
ADR is a mediation program implemented by the OCRC aimed at helping parties resolve their disputes without a full investigation by the OCRC or costly and time-consuming litigation.
After explaining the mediation process, the notification stated:
Should an agreement not be reached the case will be forwarded for a full investigation.
GMS received the notification on August 16, 2013.
GMS did not notify Evanston Insurance Company, which had issued it a tenant discrimination liability insurance policy, of the OCRC charge at that point. GMS elected to participate in alternative dispute resolution and it retained an attorney who represented GMS during an unsuccessful mediation of the OCRC charge.
The matter then proceeded to investigation. By notification dated November 19, 2013, the OCRC advised GMS that “the investigation of the above-referenced matter has not been completed within 100 days from the filing of the charge.” The OCRC further advised:
At this time, the projected date for completion of the investigation of this case will be June 28, 2014. This date, however, is subject to change because we cannot always predict what additional information or further action may be necessary to ensure that a comprehensive and impartial investigation has been conducted.
On December 3, 2013, GMS sent a letter to Lyons Insurance Group, an insurance agency, “to formally submit a claim” pursuant to the policy. The letter referenced the OCRC charge and stated that GMS was named as a respondent by Mr. Fasanaro on August 13, 2013. The letter further stated:
The respondents elected an alternative dispute resolution and a telephone hearing was conducted on September 9, 2013. The respondents were represented by [an attorney]. Respondents never received a formal notice from the OCRC's mediator theat [sic] the mediation had failed.
The respondents received no further notice regarding this matter until [the attorney] received a telephone message on November 20, 2013….
Additionally, the letter stated that GMS had received a subpoena from the OCRC on December 2, 2013 for documents and a deposition. The letter concluded:
Please advise me immediately who will be representing the respondents in this matter and what steps are being taken to quash or limit the subpoena.
On December 17, 2013, Evanston, through its claims examiner, Emily Shaw, denied coverage of the claim and stated it would not defend or indemnify GMS. The letter stated that:
[A] condition precedent to coverage under the Policy is that the Insured comply with Section VII, para. 1. entitled Notice of Claim. It appears that the Complaint was received by the Insured on August 15, 2013. Accordingly, the Institution of the Claim occurred on August 15, 2013. We draw your attention to the specific language of Section VII Claims, para. 1. (the Policy's Notice provision), which states that:
Each Insured shall use all reasonable means to assure that each Claim is promptly reported to the Company AND IN NO EVENT LATER THAN SIXTY (60) DAYS FROM THE DATE OF THE INSTITUTION OF ANY LEGAL OR ADMINISTRATIVE PROCEEDING. REPORTING THE CLAIM WITHIN THE SIXTY (60) DAYS FROM THE INSTITUTION OF ANY LEGAL OR ADMINISTRATIVE PROCEEDING IS A CONDITION PRECEDENT TO COVERAGE UNDER THIS POLICY.
The Claim was first reported to the Company on December 3, 2013, more than 60 days after August 15, 2013 – the Institution of the Claim. Because the Claim was not reported to the Company within sixty (60) days of Institution of the Claim, a condition precedent to coverage is not satisfied, and coverage is denied.
On December 20, 2013, GMS, through its attorney, contested the denial of coverage based on late notice of the claim. The letter stated that the notice had been timely because the policy required that notice of the claim be given within 60 days of “institution of any legal or administrative proceeding” and there had been no “proceeding” because that word did not encompass an “investigation” and the matter had not gone past an “investigation.”
GMS subsequently sued Evanston, and the parties moved for summary judgment.
The Evanston Policy
The policy provided:
III. DEFINITIONSThe District Court's Decision***
2. “Authority” means the United States Department of Housing and Urban Development or any similar federal, state or local agency charged with the administration of fair housing laws.
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4. “Claim” shall mean a written demand for money or services by a Tenant as a result of Wrongful Discrimination by the Insured, including the Institution in a court of general jurisdiction of any lawsuit against the Insured by a Tenant alleging discrimination against the Tenant on the basis of race, religion, age, sex, sexual preference, national origin, familial status or disability. Claim shall also include the Institution of a charge against the Insured with any Authority by a Tenant or an administrative action initiated by an Authority including any investigations, conciliation meetings or hearings on behalf of a Tenant.
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9. “Institution” means, when referring to the commencement of any lawsuit, the time legal process is served on the Insured. With respect to administrative proceedings, the term means the time written notice is received by the Insured.
VII. CLAIMS
1. Notice of Claim. Each Insured shall use all reasonable means to assure that each Claim is promptly reported to the Company AND IN NO EVENT LATER THAN SIXTY (60) DAYS FROM THE DATE OF THE INSTITUTION OF ANY LEGAL OR ADMINISTRATIVE PROCEEDING. REPORTING THE CLAIM WITHIN THE SIXTY (60) DAYS FROM THE INSTITUTION OF ANY LEGAL OR ADMINISTRATIVE PROCEEDING IS A CONDITION PRECEDENT TO COVERAGE UNDER THIS POLICY.
The district court granted Evanston's motion for summary judgment.
In its decision, the district court rejected GMS's argument that it was “only with the filing of a formal complaint by the OCRC” that the “proceeding” stage began. Rather, it found, the OCRC proceeding began “with the filing of a charge.” In the district court's view, to say that none of the activities occurring before the filing of a formal complaint constituted “proceedings” would “be nonsensical.”
The district court found that the policy showed the parties' intent to have a “proceeding” encompass the submission of the OCRC charge, its mediation, and investigation. Therefore, the submission of the Fasanaro charge to the OCRC and its mediation and investigation constituted a proceeding, and Evanston had properly denied coverage on the basis of late notice, the district court concluded.
Steven A. Meyerowitz
Steven A. Meyerowitz, a Harvard Law School graduate, is the founder and president of Meyerowitz Communications Inc., a law firm marketing communications consulting company. He may be contacted at [email protected].