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- Edward J. Stoll
- Cleveland, Ohio, United States
- Currently an attorney and insurance industry professional. Mr. Stoll is a commercial lawyer, arbitrator and mediator who also serves as insurance coverage counsel and advisor to numerous businesses throughout the country. He is also a licensed insurance agent/broker.
December 28, 2007
TRIPRA Update - Terrorism Risk Insurance Program Reauthorization and Extension Act of 2007
On December 26, 2007 President Bush signed the 2007 TRIPRA Extension.
Statement by White House Deputy Press Secretary Scott Stanzel. President Bush has signed into law H.R. 2761. H.R. 2761, the "Terrorism Risk Insurance Program Reauthorization and Extension Act of 2007," which reauthorizes the Terrorism Risk Insurance Program for seven years, through December 31, 2014.
Earlier this month, Senator Dodd offered the following press release regarding the house passage of the bill: “I commend the House for their approval of this measure. It will help to protect our nation’s workers and businesses from the risk of terrorism and help to ensure that our economy is able to thrive and create jobs. This is a carefully crafted, strong and balanced bill ..." Senator Christopher J. Dodd (D-CT, Chairman, U.S. Committee on Banking, Housing & Urban Affairs)
The Big "I" had the following supportive comments on the extension of TRIPRA: "We are enormously pleased that the President has signed into law this long-term extension of the terrorism insurance program. The continuation of this program was a top priority for our members because it allows terrorism coverage to remain available and affordable and brings certainty to policyholders, insurers, and the insurance market as a whole," says Big "I" CEO Robert A. Rusbuldt. "This extension makes it possible for insurers to provide needed coverage for the business customers of independent agents and brokers and for our nation’s economic security.”
Jason Spence, Big “I” assistant vice president for federal government affairs. “It establishes a long-term extension necessary to foster certainty for policyholders while continuing to encourage increased private market capacity.”
“We thank the President, as well as both the House and Senate, for supporting this crucial program and for recognizing the need to pass an extension before the program’s expiration,” says Charles E. Symington Jr., Big "I" senior vice president for government affairs and federal relations. “We are especially grateful to Chairman Frank and Ranking Member Bachus in the House and Chairman Dodd and Ranking Member Shelby in the Senate – without their many months of hard work, this vital piece of legislation would not haven been possible."
Read the: Bill and the Changes made to 15 U.S.C. 6701. This is the final text of the bill or resolution as approved by both the Senate and House, as it is sent to the President in the case of a bill.
Read the: Big "I" Press Release.
Read the: Full Text of Sen. Dodd's Press Release
December 17, 2007
Court of Appeals - Property Damage Coverage
Water Damage Exclusion - Mudslide - Natural and Artificial Perils
Read The Case: Shanton v. United Ohio Ins. Co. (11-20-2007)
Appellees suffered property damage from a mudslide caused by a broken county-owned water line. They made a claim against their homeowner’s policy. The insurer denied coverage based upon a “water damage” exclusion. The trial court found that coverage existed.
On appeal, the court disagreed. The policy excluded damage caused by water damage. “Both parties focus their arguments on whether the policy exclusions may reasonably be construed as applying to non-natural perils as well as natural ones.” The court found that the distinction was without effect in the policy. “The exclusion at issue in this case, is broadly phrased, referring to water below the surface of the ground—without limitation—and excluding all water damage caused directly or indirectly by subsurface water. Although this exclusion refers to water that exerts pressure on or seeps or leaks through a structure, it is not limited to that type of damage. Accordingly, we conclude that damage caused by subsurface water, whether caused by natural or non-natural forces, is excluded by the insurance policy.” Reversed and remanded.
Shanton v. United Ohio Ins. Co. (9 pages) (Harsha) Appeal from the court of common pleas for Pike County.
Court of Appeals - One "Primary" Residence - Uninsured/Underinsured Motorist Coverage
UM/UIM coverage - Primarily Residing With the Policyholder
Read The Case: Wallace v. State Farm Mut. Ins. Co. (11-30-2007)
The trial court properly granted insurer’s motion for summary judgment on the issue of coverage in this UM/UIM case. Decedent spent a portion of her time in appellant’s home, but lived with her father and attended school there. She was employed in that city and her driver’s license listed her father’s address as her residence.
The trial court properly concluded that decedent was not an insured under mother’s policy. “The underlying State Farm policy furnishes underinsured motorist coverage conditioned upon the injured party ‘primarily residing with the policyholder.’” The court concluded that the deceased could have only one primary residence and that was with her father. As such, she was not an insured under the policy in this case. Affirmed.
Wallace v. State Farm Mut. Ins. Co. (9 pages) (Osowik) Appeal from the court of common pleas for Fulton County.
Court of Appeals - Contractual Interpretation and Choice of Law
Out of State Accident
Choice of Law In Insurance Dispute
Read The Case: Reserve Assoc. Ltd. v. Selective Ins. Co. of South Carolina (11-30-2007)
The trial court properly granted appellee’s motion for summary judgment. This case involved insurance coverage for an accident that occurred in South Carolina. The insurance policy was purchased by appellant, an Ohio company, and covered the Ohio business and a vehicle owned in South Carolina. The accident case was litigated in South Carolina. Appellant later claimed that appellee failed to negotiate in good faith. Appellee argued that, under Ohio law, appellant had no standing because she was not insured under the policy.
Appellant argued that Ohio law did not apply. The court disagreed. Appellant purchased the Selective policy from Sky Insurance in Ohio. The policy was delivered to appellant in Ohio. Accordingly, we conclude that the place of contracting was in Ohio. The place of performance was also Ohio. “Based on the foregoing, we find that Ohio has the most significant relationship to the insurance contract and to the parties. The contract was negotiated and delivered in Ohio; the majority of the contract performance occurred in Ohio; and appellant is an Ohio company.
Accordingly, we find that Ohio law applies to appellant's claims; the trial court did not err in granting appellee's motion for summary judgment.” Affirmed.
Reserve Assoc. Ltd. v. Selective Ins. Co. of South Carolina (7 pages) (Pietrykowski) Appeal from the court of common pleas for Lucas County
Court of Appeals - Liability Insurance
Intentional Act Exclusion - Criminal Act Exclusion
Read The Case: Allstate Ins. Co. v. Dolman (11-30-2007)
Husband was previously been convicted of sexually assaulting a child in Michigan. After husband and wife moved to Ohio, he sexually assaulted another child who was in the couple’s home visiting their daughter. Wife was sued for negligence and sought defense and indemnification from her homeowner’s insurance policy. The trial court concluded that coverage was not afforded.
On appeal, the court found no error. The court first concluded that the negligent conduct attributed to wife constituted an “occurrence” under the policy. The court also found that the “joint obligation” clause created ambiguity. “The context in which the joint obligations clause appears is not conducive to a clear and unambiguous declaration that it is intended as an exclusion to coverage. Absent such clarity of purpose, we must agree with appellants that the clause is ambiguous and it must be construed in favor of coverage.”
Nonetheless, the exclusion for criminal conduct barred coverage. “By the plain language of the exclusions, if bodily injury or property damages result from the intentional or criminal acts of anyone insured under the policy, there is no coverage. Since June Doe's injury is undisputedly the result of the criminal acts of an insured, Alan Dolman, there is no coverage under this policy.” Affirmed.
Allstate Ins. Co. v. Dolman (13 pages) (Singer) Appeal from the court of common pleas for Lucas County.
Court of Appeals - Underinsured Motorist Coverage
UM/UIM – Motorcycle not covered
Read The Case: Siciliano v. Natl. Mut. Ins. Co. (11-30-2007)
Appellee purchased a motorcycle on April 10 and was killed in an accident on April 16. Appellant denied his UIM claim. The policy listed only two vehicles, neither of which was the motorcycle. The trial court concluded that there was coverage, finding that although the motorcycle was not listed as a covered vehicle under the policy, it could be considered a “newly acquired auto” under the terms of the policy.
The court disagreed with this analysis. “'Newly acquired auto' means a private passenger auto; or a pickup or van. A motorcycle is not a private passenger auto. “We find a motorcycle is a motor vehicle and an automobile is a motor vehicle, but an automobile is not a motorcycle. Because we find a motorcycle is not a ‘private passenger auto,’ the motorcycle is not a ‘newly acquired auto.’” Reversed and remanded.
But see dissent of Delaney – “Construing this ambiguity strictly against the Appellant, wrongful death claims are not excluded from coverage by the ‘other owned auto’ exclusion. I further find that a review of the above case law also shows that the wrongful death claims are made by another insured under the decedent’s policy. I would find that under the Appellant’s policy terms of who is an insured, the next-of-kin of the decedent are also considered insureds under the policy under B.3, which states, ‘3. Any person for damages that person is entitled to recover because of ‘bodily injury’ to which this coverage applies sustained by a person described in B.1. or 2. above.”
Siciliano v. Natl. Mut. Ins. Co. (14 pages) (Farmer) Appeal from the court of common pleas for Fairfield County.
Court of Appeals - Commercial Property Insurance Coverage
Meaning of the term "collapse"
Read The Case: Zanesville L.L.C. v. Motorists Mut. Ins. Co. (11-30-2007)
Appellee owned commercial property that was covered by appellant. The coverage included coverage for collapse of the building. Collapse did not include settling, cracking, shrinkage, bulging, or expansion. The wall of the building was discovered to be bowing and had pulled away from the structure 3 to 4 inches. The insurer denied coverage.
The trial court properly concluded that coverage was owed in this case. Appellant argued that the trial court improperly concluded that the had been a collapse. The Supreme Court has held that “collapse” means an actual falling down, falling together, or caving into an unorganized mass. “In the case sub judice, there was evidence before the trial court that part of the City Grille Building had collapsed. Bricks from the building were on the ground in front of the building. Pieces were crumbling off of the building and concrete, mortar and parts of a brick were on the sidewalk underneath the wall.” Affirmed.
Zanesville L.L.C. v. Motorists Mut. Ins. Co. (12 pages) (Edwards) Appeal from the court of common pleas for Muskingum County.
November 29, 2007
Directors & Officers ( D&O) Renewal Checklist
As the end of the year 2007 approaches, many individuals and businesses are working through their insurance renewals. I've come to learn that substantially more policies carry a January 1 renewal date than any other date.
So, I'll attempt over the next month to relay some valuable checklists that can be used during the renewal process.
The first will be for those corporate directors and officers and their D&O Insurance Policy Renewal. Customarily, I walk through each item with my clients and get them ready for (or attend with them) the meeting with their broker. Some of the pieces and parts of D&O policies can be fairly technical.
CHECKLIST FOR D&O
1. Review coverage limits and other liability extensions such as EPLI
2. Review all exclusionary language
3. Ensure that defense provision includes frivolous claims (private/not-for-profit)
4. Determine if subsidiaries and past subsidiaries are covered and what
constitutes a subsidiary
5. Determine if coverage includes joint ventures and general/limited partnerships
6. Determine if policy includes spousal (or “domestic partner”) liability coverage
7. Determine if policy contains a severability/imputation clause (for Exclusions and/or Application)
8. Determine if policy covers criminal, administrative, investigatory or regulatory proceedings
9. Review for any exclusion for bodily injury and property damage
10. Are EEOC charges or complaints, written demands, and verbal or written accusations of wrongdoing covered
11. Are ERISA and plan management excluded
12. Is there an insured v. insured exclusion
13. Determine if the policy excludes allegations of dishonesty or criminal acts or is “adjudication” or written admission required to deny coverage
14. Determine if the coverage applies to the audit committee
15. How are the limits of coverage applied in the event of rescission due to wrongful acts of certain directors and officers
16. How will the policy protect the director and officers individually in the event of bankruptcy
October 25, 2007
TRIPRA Terrorism Risk Insurance Program Reauthorization Act
* Note: See my post of 12-28-07 for update on TRIPRA.
The Senate Banking Committee passed the Terrorism Risk Insurance Program Reauthorization Act (TRIPRA) of 2007. The TRIPRA bill would extend the current federal terrorism insurance backstop, which is set to expire at the end of this year, for an additional seven years. In addition, it would modify the definition of terrorism to include domestic acts of terror and would require ongoing reports to Congress from the President's Working Group on inclusion of coverage for group life and nuclear, biological, chemical and radiological (NBCR) events.
“With the terrorism backstop set to expire, this significant step toward extending it on a long-term basis comes at a critical time,” says Charles Symington Jr., Big “I” senior vice president for government affairs and federal relations. “We applaud the committee for taking action and hope this crucial legislation will gain full Senate approval as soon as possible.”“Getting this important legislation passed before the end of the year is a priority for our members and we are grateful to the committee for advancing it a step closer,” says Jason Spence, Big “I” assistant vice president for federal government affairs.
Taken from Big "I" News & Views, October 18, 2007
October 4, 2007
Will The New Employment Intentional Tort Statute Survive Constitutional Scrutiny?
*SEE BLOG POST of 3/24/2008 for recent Appellate Case (Kaminski); and BLOG POST of 9/25/07 for recent Trial Court Case (Berry), both dealing with the Constitutionality of the Current Statute and coming to opposite conclusions.
The History - In a Nutshell:
R.C. 4121.80.
The Ohio legislature has been attempting to codify Ohio's Employment Intentional Tort ("EIT") claim since 1986. The first statutory enactment was contained in R.C. 4121.80. That statute was a response to the judicially created cause of action for EIT, which was deemed by the General Assembly to be too liberal. Under R.C. 4121.80, the Ohio legislature (1) expanded the defenses available to employers; (2) eliminated a trial by jury; (3) established an intentional tort fund for employers to contribute to from which payment to injured employees would exclusively be made; (4) offset damages by workers' compensation benefits; (5) set damage limitations; (6) heightened the standard for proving an intentional tort by defining "substantial certainty" as "deliberate intent"; and (7) made all of these changes applicable to pending and future claims.
Clearly, the General Assembly's intent in codifying the EIT in Ohio was to attempt to balance the competing interests between employers and employees. The state run workers' compensation system was established to tip the scales in favor of employees through a system of compensation regardless of fault on the part of employers. The employers contribute financially to that system and the intent of protecting employees from workplace injuries is served. The General Assembly recognized that the common law EIT was further tipping the scales in favor of employees and in the interests of balancing the competing interests of employers and employees, was attempting to codify (not eliminate) the types of claims that rise to the level of intentional and, thereby, outside of the workers' compensation system.
Brady v. Safety-Kleen (1991), 576 N.E.2d 722.
In Brady , The Ohio Supreme Court held that section 4121.80 was unconstitutional in toto. The statute exceeded the legislative authority granted to the Ohio legislature under both sections 34 and 35 of the Ohio Constitution. It violated section 34 by eliminating the prior common law right of action and not furthering the comfort, health, or general welfare of employees within the meaning of that section. It violated section 35 because the statute was required to address a cause of action occurring within the scope of employment, and an EIT may arise out of the employment relationship, but according to Brady does not occur within the scope of employment.
R.C. 2745.01 and R.C. 2305.112 (Eff. 11-1-1995).
The General Assembly again attempted statutory reform of the EIT effective November 1, 1995, with the enactment of two new statutes (2745.01 and 2305.112). R.C. 2745 created a statutory cause of action for EIT. The limitations imposed within that statute included (1) elimination of the "substantially certain" level of intent; (2) requirement of "clear and convincing evidence"; and (3) threatening sanctions for improperly presented EIT claims. R.C. 2305.112 reduced the statute of limitations for an EIT from two years to one year.
Johnson v. BP Chemicals, Inc. (1999), 85 Ohio St.3d 298.
In Johnson, The Ohio Supreme Court struck down R.C. 2745.01. The Court held that the statute imposed excessive standards of deliberate and intentional acts, with heightened burden of proof and that the imposition of such a statute was not within the General Assembly's power as it did not further the comfort, health, safety, and general welfare of all employees. In its opinion, the Court noted that the minimal level of proof under the statute would require that the employee essentially commit a criminal assault in order for the EIT to be actionable. This made the proof so unreasonable and excessive that the "chance of recover is virtually zero." This was felt to be an insurmountable obstacle for an injured employee and not one that was authorized to be imposed under the General Assembly's powers.
R.C. 2745.01 (Eff. 4-7-2005).
The General Assembly has now repealed former sections 2745.01 and 2305.112, and enacted new R.C. 2745.01. This newly enacted 2745.01 differs from the prior version in that it does not: (1) require a heightened standard of proof; and (2) attempt to impose any threat of sanctions in improper EIT claim filings. Although the new statute does attempt to increase the level of intent that is required under the common law EIT cause of action, it does create certain rebuttable presumptions and allow for certain inferences of intent when dealing with "substantial certainty" claims. For instance, in the manufacturing arena the statute permits a rebuttable presumption that an injury was "substantially certain" to occur if there is a deliberate removal of a safety guard or a deliberate misrepresentation of a toxic or hazardous substance. However, outside of those two areas of exemption, an employee must establish that the employer deliberately intended to cause the employee's injury, disease, condition or death. It is questionable whether this new statute will be forgiving enough to pass constitutional muster.
The Future - What Does It Hold?
The Future:
The General Assembly is charged with enacting laws in furtherance of the "comfort, health, safety and general welfare of all employees." In creating a monopolistic workers' compensation system, they have done that and tipped the scales in favor of employees in order to allow compensation. It would appear that the General Assembly also has the authority to enact a statute that deals with tort claims between those same parties (employers/employees)in order to balance those same and competing interests.
It is noted that previously, in Brady, The Ohio Supreme Court held that the General Assembly may not impose upon the common law EIT as such claims did not occur within the scope of employment. However, recently in Penn Traffic Co. v. AIU, (2003) 99 Ohio St.3d 227, the Ohio Supreme Court held that an EIT does, in fact, arise out of employment and occur during the course of employment. If this is true, then Brady may no longer be an obstacle for the Court in upholding R.C. 2745.01. For in Penn Traffic, the Court has acknowledged the General Assembly's right to legislate the EIT as they have those rights within the employment context.
Finally, if the less stringent standards contained in the new statute do not create an "insurmoutable obstacle to victims" of employment intentional torts, then there would appear to be a sufficient basis to find that the new R.C. 2745.01 is, indeed, constitutional.
Assault & Battery - Duty To Defend
Second District Court of Appeals Holds That Stop-Gap Endorsement Contained In Commercial General Liability Policy Provides Coverage For "Substantially Certain" Claims Including Assault and Battery
Read the Case: GNFH, Inc. v. West American Insurance Co. (2007), 172 Ohio App.3d 127
In the Trial Court: The trial granted summary judgment against the insured on the issue of whether appellee, an insurance company, had a duty to defend appellants with regard to an intentional tort claim. The trial court found that the acts alleged in the complaint were sexual harassment and sexual battery torts. The Trial Court classified the claims as “direct intent” torts, which are precluded by public policy in Ohio from being covered by insurance.
In the Court of Appeals: The appellate court held that a duty to defend did exist for the claims of assault and battery under two of the three policies discussed. The Second District Court of Appeals reasoned as follows:
Under the most recent public policy pronouncement of the Ohio Supreme Court, intentional acts that result in injury are not necessarily “direct intent” torts, and insurance in such cases is not against public policy. Some allegations in the underlying complaint involved negligent conduct, which would not require direct intent to harm. Moreover, the conduct that might be classified as criminal in nature, like assault, is not a direct or specific intent crime. Specific or direct intent is also not required to establish sexual imposition. For example, R.C. 2907.06(A)(1) prohibits sexual contact where the offender knows the contact is offensive to the other person or is reckless in that regard. Therefore, coverage was not automatically precluded on the basis of public policy.
Whether coverage exists depends on the language used in the policies. The appellate court held that allegations in the complaint raise a duty to defend under two of the three insurance policies under review. One “Stop-Gap” liability endorsement specifically provides coverage for bodily injury claims which are substantially certain to occur, but are not directly intended. While a second “Stop-Gap” liability endorsement excludes coverage for bodily injury that is “expected or intended” by the insured. However, the court opined that excluding coverage for a “substantial certainty” tort would render the endorsement illusory, since the only coverage offered under the endorsement is for employer torts that are not covered by Workers’ Compensation.
After finding a duty to defend the insured for the assault and battery alleged, the case was reversed and remanded for further proceedings.
Read the Case: GNFH, Inc. v. West American Insurance Co. (2007), 172 Ohio App.3d 127
In the Trial Court: The trial granted summary judgment against the insured on the issue of whether appellee, an insurance company, had a duty to defend appellants with regard to an intentional tort claim. The trial court found that the acts alleged in the complaint were sexual harassment and sexual battery torts. The Trial Court classified the claims as “direct intent” torts, which are precluded by public policy in Ohio from being covered by insurance.
In the Court of Appeals: The appellate court held that a duty to defend did exist for the claims of assault and battery under two of the three policies discussed. The Second District Court of Appeals reasoned as follows:
Under the most recent public policy pronouncement of the Ohio Supreme Court, intentional acts that result in injury are not necessarily “direct intent” torts, and insurance in such cases is not against public policy. Some allegations in the underlying complaint involved negligent conduct, which would not require direct intent to harm. Moreover, the conduct that might be classified as criminal in nature, like assault, is not a direct or specific intent crime. Specific or direct intent is also not required to establish sexual imposition. For example, R.C. 2907.06(A)(1) prohibits sexual contact where the offender knows the contact is offensive to the other person or is reckless in that regard. Therefore, coverage was not automatically precluded on the basis of public policy.
Whether coverage exists depends on the language used in the policies. The appellate court held that allegations in the complaint raise a duty to defend under two of the three insurance policies under review. One “Stop-Gap” liability endorsement specifically provides coverage for bodily injury claims which are substantially certain to occur, but are not directly intended. While a second “Stop-Gap” liability endorsement excludes coverage for bodily injury that is “expected or intended” by the insured. However, the court opined that excluding coverage for a “substantial certainty” tort would render the endorsement illusory, since the only coverage offered under the endorsement is for employer torts that are not covered by Workers’ Compensation.
After finding a duty to defend the insured for the assault and battery alleged, the case was reversed and remanded for further proceedings.
September 28, 2007
OHIO SUPREME COURT (Sept. 27, 2007): Ohio Govt. Risk Mgt. Plan v. Harrison, ____ Ohio St.3d ____, 2007-Ohio-4948
READ THE CASE: Ohio Govt. Risk Mgt. Plan v. Harrison
Decided: September 27, 2007
INSURANCE - DUTY TO DEFEND - EQUAL PROTECTION - HOSTILE WORK ENVIRONMENT - RIGHT TO PRIVACY CLAIMS - SEX DISCRIMINATION - ALLEGATIONS POTENTIALLY OR ARGUABLY WITHIN INSURANCE COVERAGE - COVERED
Federal action alleging individual claims, as well as claims in official capacity against Chief of Police for (1) denial of equal protection by creating a hostile work environment; (2) violation of right to privacy; (3) R.C. 4112.02 sex discrimination; (4) common law invasion of privacy; (5) common law intentional infliction of emotional distress. ("The Federal Case")
The Chief's and the Police Department's insurer was Government Risk Management Plan ("The Plan"). A Declaratory Judgment action ensued to determine the rights, if any, of the Chief to insurance coverage under The Plan for The Federal Case.
The Ohio Supreme Court held that: "The issuer of a law-enforcement liability insurance policy has a duty to defend its insured against an action ... [containing] allegations ... that could arguably be considered covered by the policy." Further, The Plan agreed to defend against any such claims, regardless of whether they were groundless, false or fraudulent. Finally, the Court recognized that The Plan covered the Chief as an "insured" as long as he was "acting on behalf of or in the interests of" the Police Department. The use of the word "or" was disjunctive allowing coverage if the Chief was acting on behalf of the City, even if such actions were not in the interests of the City.
The Ohio Supreme Court held inter alia that since the allegations against the Chief were potentially within his official capacity or committed under color of state law, The Plan was obligated to provide a defense against the Federal Case.
OHIO SUPREME COURT (Sept. 27, 2007): Cincinnati Ins. Co. v. CPS Holdings, Inc., ___ Ohio St.3d ___, 2007-Ohio-4917
READ THE CASE: Cincinnati Ins. Co. v. CPS Holdings, Inc.
Ohio Supreme Court
Decided: September 27, 2007
UMBRELLA POLICY - DUTY TO DEFEND - OCCURRENCE - UNDERLYING INSURANCE
What constitutes "Underlying Insurance"
for Purposes of Determining an Insurer's Duty to Defend?
In CPS Holdings, the Ohio Supreme Court addressed the insurer's duty to defend CPS, a third-party administrator of a program to secure natural gas, against claims of negligence, professional negligence, breach of implied warranty, breach of contract, breach of express warranty, conversion, unjust enrichment, recovery of public funds under R.C. 117.28 and piercing of the corporate veil. No "property damage" or "bodily injury" was alleged.
Cincinnati had issued a primary and an umbrella policy to CPS. Cincinnati filed a Declaratory Judgment action to determine coverage under both of those policies. CPS eventually gave up on claims under the Cincinnati primary policy, but continued to argue that the umbrella provided coverage. Their theory was that the Cincinnati umbrella provided excess coverage over any underlying insurance, which was defined as "insurance available to the insured under all other insurance polices applicable to the 'occurrence.'" CPS argued that a primary errors and omissions policy issued through Gulf Ins. Co. satisfied the definition of "underlying insurance" requiring Cincinnati's umbrella policy to respond.
The Ohio Supreme Court noted that the Cincinnati umbrella policy was excess over any "underlying insurance" that was applicable to the "occurrence." According to the Court, the term "occurrence" was a defined term within the umbrella policy and that the definition of "occurrence" required that there be either "property damage" or "bodily injury" that was covered under the "underlying insurance."
The Court held inter alia that: "The purpose for including the term "occurrence" within the definition of "underlying insurance" is to limit the umbrella policy's coverage to claims arising from accidents that resulted in bodily injury or property damage." Therefore, the Gulf Ins. Co. errors and omissions policy was not "underlying insurance" as it did not provide coverage for "property damage" or "bodily injury" claims. As such, the Cincinnati umbrella did not need to respond over the Gulf policy and did not provide any excess coverage for the claims against CPS.
September 27, 2007
Commercial Insurance Rates - Steady for August 2007
Not quite a freeze..... But, U.S. commercial property/casualty insurance rates held steady in August with just a few changes, according to MarketScout.
Commercial property and workers’ compensation accounts experienced rate increases of 1 percent. General liability, auto, professional liability, D&O and EPLI, however, had slight rate decreases. Rates by industry class were within a 3 percent range, with all industries averaging rate decreases from 12 percent to 15 percent compared with August 2006.
September 26, 2007
CGL - Business Sued for Liability Arising out of Premises Owned Personally by Shareholder
The Big "I" Virtual University "Ask an Expert" recently responded to the following inquiry: "The named insured is a corporation. The sole stockholder personally owns a piece of land on which the corporation parks its vehicles. A pedestrian tripped on the premises and is suing the insured corporation. The location of this land was not specifically scheduled as a location on the policy. The insurer of seven years is denying the claim on the basis of misrepresentation, that the insured didn't declare the location. Is this correct?"
Although the corporate liability for injuries occurring on a personally owned premises is a separate question, the concern here was whether the insurer was obligated to defend and indeminfy the corporate insured against the claim. In response, the Big "I" noted that:
"Application information typically consists of representations, not warranties. The insured is covered for BI [Bodily Injury] and PD [Property Damage] anywhere in the 'coverage territory.' Unless the claim rep can cite an exclusion that removes this broad coverage grant, it's covered. The condition cited doesn't do anything unless the insured is being accused of fraud, misrepresentation or concealment."
"Generally speaking, premises are an underwriting and rating issue, not a coverage issue absent a designated premises exclusionary endorsement such as the CG 21 44. The 'coverage territory' is all that matters. Have the adjuster point to a specific policy provision that removes coverage."
Although the corporate liability for injuries occurring on a personally owned premises is a separate question, the concern here was whether the insurer was obligated to defend and indeminfy the corporate insured against the claim. In response, the Big "I" noted that:
"Application information typically consists of representations, not warranties. The insured is covered for BI [Bodily Injury] and PD [Property Damage] anywhere in the 'coverage territory.' Unless the claim rep can cite an exclusion that removes this broad coverage grant, it's covered. The condition cited doesn't do anything unless the insured is being accused of fraud, misrepresentation or concealment."
"Generally speaking, premises are an underwriting and rating issue, not a coverage issue absent a designated premises exclusionary endorsement such as the CG 21 44. The 'coverage territory' is all that matters. Have the adjuster point to a specific policy provision that removes coverage."
September 25, 2007
Cuyahoga County Common Pleas Court finds New Intentional Tort Statute Constitutional
Timothy Barry v. A.E. Steel Erectors, Inc.
Cuyahoga County Court of Common Pleas
Case No. 587362
(2007)
In an opinion rendered by the Honorable Judge Eileen T. Gallagher, the new employment intentional tort statute (R.C. 2745.01) was ruled constitutional. In granting summary judgment in favor of the employer and against the injured employee, the Court stated that: "A properly enacted statute is presumed constitutional." The Court found that" R.C. 2745.01 was duly enacted and in effect at the time of Plaintiff's injury, and is the applicable law to determine whether Plaintiff has a meritorious claim for an intentional tort."
There have been many successful challenges to the numerous attempts by the Ohio Legislature to codify employment intentional torts in Ohio. The recent statute enacted on April 7, 2005 is subject to challenges as well. It is anticipated that the Barry decision will be appealed and that the constitutionality of R.C. 2745.01 will be addressed further at that time.
Ohio Employment Intentional Tort Statute
EMPLOYMENT INTENTIONAL TORT
CLAIMS AGAINST YOUR COMPANY
IS YOUR BUSINESS COVERED?
HAS THE OHIO LEGISLATURE MADE IT EASIER OR MORE DIFFICULT FOR AN EMPLOYEE TO SUE HIS/HER EMPLOYER FOR AN EMPLOYMENT INTENTIONAL TORT?
Through House Bill 498 ("H.B. 498"), The Ohio General Assembly has again revised the Employment Intentional Tort law in Ohio. The new statute took effect on April 7, 2005 and replaces the prior Ohio Revised Code § 2745.01. The General Assembly also repealed former Ohio Revised Code § 2305.112.
As most readers know, Ohio has a state run workers compensation system. Despite that, the law in Ohio over the years has still permitted an additional and separate claim over and above workers compensation to be made against employers for injuries occurring during the course of employment. This is the Employment Intentional Tort claim. Although these claims occur during employment, an Employment Intentional Tort is not compensable through the Ohio Workers Compensation program and must be protected against through private insurance.
Under the new law, an Ohio employee may still make a claim for an Employment Intentional Tort, in addition to any recovery under Ohio's Workers Compensation system.
Also as with the prior law, an employee in an Employment Intentional Tort case must establish that his/her employer either (1) intended to injure the employee; or (2) acted with the belief that injury to the employee was substantially certain to occur.
However, under the new law the definition of "substantially certain" has been narrowed to include only when an "employer acts with deliberate intent to cause an employee to suffer an injury, a disease, a condition or death." This is a new and higher standard of culpability against employers than existed under the prior law.
Therefore, it would seem, at first blush, that it will be much more difficult for an employee to prove an intentional tort then it was under the prior law. Unfortunately, this is not necessarily true because of other provisions in the new statute. The new statute states that any injury to an employee that results from the "deliberate removal by an employer of an equipment safety guard or deliberate misrepresentation of a toxic or hazardous substance" will create a rebuttable presumption against the employer that the employer intended that injury.
So, under the new law there appears to only be a need for the intentional act of removing a safety device or a deliberate statement that misrepresents the true state of toxic or hazardous substances. If the removal of that guard or the failure to provide accurate information on those toxic or hazardous substances would have prevented the injury, then liability would appear to arise. There is no need for intent, recklessness or even negligence as to the specific injury or the specific employee. Rather, all that is needed is the deliberate removal or deliberate misrepresentation in order for there to arise a presumption that the employer intended the injury.
This appears to be much easier standard for the employee than under prior law. For instance, if an employee is injured on a machine and a guard that had been removed would have prevented that injury, then there is a presumption under the new law that the employer intended to cause that injury and is liable. The new statute makes no mention of possible defenses to that presumption, such as if: (1) the employee knew of the danger; (2) the employee had other safety means available and failed to use them; (3) the employee was performing a task that had not actually been directed by the employer or part of that employee's understood duties; and (4) the employer had no prior instances of injury on that same or similar piece of machinery. Certainly, each of those factors and how the statute works to apply to them will need to be addressed through the courts before there can be any certainty about the outcome.
What is certain, is that insurance coverage for Employment Intentional Torts is even more important to businesses now than it was under prior law. When reviewing business coverage we recommend personal and in depth discussion with an insurance agent or insurance counsel. In specifically addressing coverage for Employment Intentional Torts, be sure to look for language that provides both indemnification and defense coverage for claims that are "substantially certain" to occur. Policy language that provides defense and indemnity for "employment intentional torts as defined under current law" may also be an acceptable provision. However, even when this acceptable language is present, there must be careful consideration of all "exclusions" in the policy as it is common for the coverage to be taken away through "exclusions" even through it may first designated as a covered claim.
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