Four Month Delay of Notification of Discrimination Charge in Policy With 60 Day Requirement Bars Coverage

The Court of Appeals for the Sixth Circuit, applying Ohio law, held that the filing of a housing discrimination charge constituted a proceeding and, therefore, triggered the notice requirement under a tenant discrimination liability insurance policy.  The Sixth Circuit found that notice four months after a charge was filed and after a formal investigation began was not timely and, therefore, coverage was not triggered.

GMS Management Company, Inc. (“GMS”) owns apartment buildings in Ohio.  On August 16, 2013, GMS received notice from the Ohio Civil Rights Commission (“OCRC”) that a housing discrimination charge had been filed against it.  According to the notice, GMS could participate in mediation and potentially resolve the charge prior to an investigation, or investigation would proceed.  GMS elected to participate in mediation and hired its own attorney who represented GMS during the unsuccessful mediation.  During the relevant time frame, Evanston Insurance Company (“Evanston”) insured GMS under a tenant discrimination liability insurance policy.  It was not until almost four months later, December 3, 2013, after the mediation failed and the OCRC began its formal investigation, that GMS reported the claim to Evanston.  Under the Evanston policy, a claim must be “promptly reported” and, as a “condition precedent to coverage,” be reported “in no event later than sixty (60) days from the date of the institution of a legal or administrative proceeding.”   Evanston denied coverage based on GMS’ failure to promptly report the claim.

GMS filed a declaratory judgment action alleging that Evanston breached the insurance contract and did so in bad faith.  According to GMS, the “complaint” is the beginning of the adjudicatory stage of the three-phase OCRC “chronological administrative regimen” which is different from the “charge” which only begins the investigatory stage of that regimen and, therefore, the 60-day reporting deadline was not triggered until a “complaint” was filed.  GMS’ argument was based on the assertion that “proceeding” does not include pre-complaint activities before an administrative agency.   Because “administrative proceeding” was not defined by the policy, the district court analyzed the usual meaning of proceeding in an administrative context.   The district court found that an administrative proceeding included “a hearing, inquiry, or investigation.”    Moreover, the district court found that the Ohio statute demonstrates that an OCRC proceeding begins with the filing of a charge, then proceeds to an investigation and, finally, the filing of a formal complaint.  Therefore, the district court held that the charge filed with the OCRC constituted a proceeding and, thus, triggered the notice requirement under the policy.  Because timely notice was not given, Evanston properly denied coverage and there was no bad faith.   In response, GMS filed a motion to amend the judgment, but the district court denied the motion finding that it raised new arguments that GMS had failed to raise at summary judgment.  GMS appealed both rulings.

The Sixth Circuit affirmed the district court on both issues, holding that there was no abuse of discretion in denying GMS’ motion to amend judgment and that the district court did not err in its conclusions with regard to the denial of coverage and bad faith.   According to the Sixth Circuit:  “The district court’s opinion carefully and correctly sets out the law governing the issues raised and clearly articulates the reasons underlying its decision.  Thus, issuance of a full written opinion by this court would serve no useful purpose.”  GMS Management Co., Inc. v. Evanston Insurance Co., No. 16-4018 (6th Cir. May 18, 2017); GMS Management, Inc. v. Evanston  Insurance Co., No. 1:14 CV 424 (N.D. Ohio June 24, 2016).