COLUMBUS, Ohio (Legal Newsline) – The Ohio Supreme Court has ruled that punitive damages are not recoverable in a breach of contract action in which the alleged violation stems from conduct that also constitutes a wrongful act.
Christine Lucarell sued Nationwide Mutual over allegations of breach of contract, invasion of privacy, fraudulent misrepresentation and retaliation, ultimately leading the defendant to appeal a judgment of the 7th District Court of Appeals, which had affirmed a jury verdict in favor of the plaintiff that also reversed a verdict reached by the trial court in favor of Nationwide on her claim for fraud.
At the heart of Lucarell’s action is her contention that the company had “fraudulently and in bad faith induced her to open a new insurance agency when it intended to terminate her after she generated a profitable book of business.”
According to the opinion, Lucarell opened her office in 2006 and operated it for almost three years. Her case has attracted much attention across the industry and is viewed by some as a referendum on how insurance companies are allowed to structure agreements with independent agencies.
Initially, the jury returned verdicts in favor of Lucarell topping $42 million in damages. The Supreme Court of Ohio later applied statutory caps to the award, leaving the total judgment entered against Nationwide at $14 million.
After both parties appealed, the appellate court affirmed the breach of contract judgment, affirmed the invasion of privacy judgment in part, reversed the retaliation and constructive discharge judgments, and reinstated and remanded the fraud claim for a new trial.
The appeals court also found that punitive damages were applicable for breach of contract, provided Lucarell proved her fraud claim and that the jury could have found that Nationwide prevented her from performing obligations of releases the enter into agreement over. The court also dismissed Nationwide’s assignments of error challenge regarding the level of evidence the court used to arrive at its decision.
In rendering its verdict, the Ohio Supreme Court outlined “even if the conduct constituting a breach of contract is also a tort, punitive damages may be awarded only for the tort and are subject to the statutory limitations provided in R.C. 24 2315.21. Thus, punitive damages are not recoverable on a claim for breach of contract, including a claim for breach of the implied duty of good faith and fair dealing.”
The high court added the doctrine of prevention of performance is separate from and not a defense to a release of liability.
“A claimant asserting duress is required to prove duress by clear and convincing evidence,” the ruling added. “Although the prevention of performance doctrine precludes a party who prevents another from performing its contractual obligations from relying on that failure of performance to assert a claim for breach of contract, it has nothing to do with a release of liability, which requires no further performance by the releasor to be effective.”
The case has now been sent back to the 7th District Court of Appeals for further consideration