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.

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.

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."

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.