Ohio Supreme Court Found Proposed Title Reinsurance Agreement Unenforceable

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Olympic Holding Company L.L.C. v. ACE Limited et al

(May 7, 2009 Supreme Court of Ohio)

In a 4-2 decision, the Supreme Court of Ohio reversed the Ohio Court of Appeals, 10th Circuit, and found that a joint venture agreement between a title reinsurer and several title agencies does not comply with the Ohio Statute of Frauds and, as a result, imposed no fiduciary duties upon the parties.

This lawsuit was commenced shortly after the reinsurer failed to execute a proposed reinsurance/joint venture agreement regarding the creation of a system of title insurance and reinsurance for residential and commercial real estate.  The plaintiff alleged a breach of the agreement, the reinsurer's breach of its fiduciary duty, promissory estoppel, negligent misrepresentation, tortious interference with a contractual relationship and tortious interference with a business relationship. 

Shortly after the lawsuit was filed, the reinsurer moved for summary judgment claiming that the proposed agreement violated Ohio's Statute of Frauds.  The plaintiff argued that promissory estoppel removed this agreement from the statute of frauds.  The trial court agreed with the reinsurer's argument stating that promissory estoppel was inapplicable and could not be used to bar the reinsurer's affirmative defense.

On appeal, the Ohio Court of Appeals, 10th District, reversed the trial court's decision claiming that the reinsurer never intended to execute the agreement and therefore should be estopped from using the statute of frauds defense.

The Supreme Court of Ohio in its decision reversed the 10th District Court of Appeals by stating that the statute of frauds is applicable because the agreement could not be performed within the year.  "In the instant case, the parties envisioned that the proposed joint venture agreement would last five years.  Therefore, the proposed joint agreement in the instant case comes within the statute of frauds."

Justice Terrance O'Donnell along with Justice Paul E. Pfeifer dissented by stating that the majority should have joined "the majority position among jurisdictions that have considered this issue" and rule that promissory estoppel is an adequate exception to the statutes of fraud.  The dissent went on to state that this decision fundamentally modified the scope of the promissory estoppel exception to the statute of frauds in Ohio. 

by Thomas F. Segalla and Jeffrey L. Kingsley

Download the Olympic v. ACE Limited Decision