Ohio Insurance - Law/Policy/Advocacy

SUIT AGAINST US - LIMITATION OF ACTION CLAUSE

2011-11-11T18:25:00.001-05:00

OHIO SUPREME COURT

Dominish v. Nationwide Ins. Co., 129 Ohio St.3d 466, 2011-Ohio-4102.

"SUIT AGAINST US" --- ("US" BEING THE INSURER) ... MUST BE BROUGHT WITHIN A CERTAIN PERIOD OF TIME AFTER THE LOSS OCCURS.

LIMITATION OF ACTION CLAUSE - CONTRACTUAL LIMITATION PERIOD FOR FILING SUIT

Here is the contract clause the Ohio Supreme Court was construing:
“Suit Against Us. No action can be brought against us unless there has been full compliance with the policy provisions. Any action must be started within one year after the date of loss or damage.”

Our office is currently working on a $120,000 case involving this very issue and policy language. The Dominish decision upholds prior Ohio law on the issue and details the circumstances under which the insurer may end up waiving reliance on the "Suit Against Us" clause.

IN A NUTSHELL, The Court held that an insurer can enforce limitation-of-action clause in its insurance contract because clause is unambiguous and insurer did not admit liability or hold out a reasonable hope of adjustment.

The thrust of the analysis is on whether the insurer admitted liability or held out a reasonable hope of adjustment to the insured. If the insurer did either of those things, there maybe a waiver of the "Suit Against Us" clause and the insured could prevail despite not having filed suit within the period defined within that clause.

How Might Waiver of the "Suit Against Us" Clause Occur?

In Hounshell v. Am. States Ins. Co. (1981), 67 Ohio St.2d 427, 21 O.O.3d 267, 424 N.E.2d 311, syllabus, we stated, “An insurance company may be held to have waived a limitation of action clause in a fire insurance policy by acts or declarations which evidence a recognition of liability, or acts or declarations
which hold out a reasonable hope of adjustment and which acts or declarations occasion the delay by the insured in filing an action on the insurance contract until after the period of limitation has expired.” This holding is sufficiently clear that we have not had occasion to revisit it in the intervening 30 years.

The holding states a two-part test to determine whether an insurance company has waived a contractual limitation-of-action clause. We do not consider the test to be the exclusive way to determine whether an insurance company has waived its right to enforce a limitation-of-action clause, but it is one way.

To be deemed to have waived its right to enforce a limitation-of-action clause pursuant to our holding in Hounshell, an insurance company must have either recognized liability or held out a reasonable hope of adjustment and by doing so, induced the insured to delay filing a lawsuit until after the contractual period of limitation expired. We conclude that Nationwide did not recognize liability for the disputed portion of the damage or hold out a hope of an adjustment to include compensation for that portion of the damage.

As such, there was no waiver and the insured was barred from recovery.

Read the case here.

BODILY INJURY TO RELATIVES RESIDING IN YOUR "HOUSEHOLD"

2011-11-11T17:44:00.001-05:00

Grange v. Stubbs (10th Appellate District), App. No. 11AP-163
Coverage excluded for injuries to a relative residing in named insured's "household."

Household is not the same as residence premises. Household is the family unit... not necessarily the physical structure listed in the declarations.

We handled a case dealing with this very issue involving a young girl who was rendered a paraplegic as a result of an automobile accident. We were able to successfully brief and argue the "household" exclusion and obtain a very favorable settlement for our client.

The Ohio Supreme Court stated: We find "household" to be unambiguous in the context of the household-resident exclusions in 7(b) and (c). Given the common and ordinary meaning of the word, we reject appellants' attempt to equate "household" with "residence premises."

"Household" refers to the family unit of the insured, whereas "residence premises" refers to the physical building and location of the address listed in the declarations page. ... in explaining the difference between these two terms, 'Residence premises' refers to a type of physical structure while 'household' refers to a distinct type of living arrangement in the sense of a social unit.

Read the case here.

FIGHT OVER BASEBALL PARKING FEE RESULTING IN DEATH

2011-11-11T16:55:00.001-05:00

Ninth District Court of Appeals: Haught v. U.S.F.&G

REMEMBER THIS ONE?

BASEBALL MELEE OVER PARKING FEE ENDING IN DEATH WHEN COACH JOINED THE FRAY AND ALLEGEDLY SHOVED THE DECEDENT TO THE GROUND.

Well...... under the insurance policy that was acting in capacity as a coach resulting in insured status for the assailant.

KEY TERMS: "Acting in Capacity as Coach / Named Insured Status / Wrongful Death / Fight over Baseball Parking Fee / Commercial General Liability Policy / Coverage"

Our firm has first-hand experience dealing with assault and battery coverage issues, including wrongful death. Although this case did not deal with the "intended/expected" or "assault and battery" exclusions, it is likely that those exclusions became a part of the coverage analysis in separate related coverage arguments in Haught case. Did we mention that our founder's son just signed a National Letter of Intent to The Ohio State University baseball program? So, we know a bit about baseball too. Had to throw that in. Very proud. Here's a summary of the Haught case for you.

In Haught v. U.S.F.&G., the Ninth District Court of Appeals reversed the trial court finding of no-coverage. The case hinged on the definition of "capacity" and whether the coach was still within his capacity as coach when he ran to join the melee that was occurring with a crowd over the charging of a parking fee for a baseball tournament.

The Court had this to say: Certainly, there are actions a coach could take during a tournament which would be considered acting outside his or her capacity as a coach. For example, a coach acting on his or her own personal interests would not be acting in his or her capacity as a coach, whereas a coach acting on behalf of the team’s interests would be acting within his or her capacity as a coach. Thus, we conclude the appropriate issue is whether Mr. Haught was acting on behalf of his own personal interests or on behalf of the interests of the team.

Here, given that the mêlée was occurring approximately eighty feet from where Mr. Haught was conducting a team meeting, that the argument grew heated and became violent, and that Mr. Haught’s assistant coach left the team meeting and ran towards the fight, we conclude that Mr. Haught was acting within his capacity as a coach when he ran after his assistant coach and into the crowd. Mr. Haught’s actions were not completely unconnected to his responsibilities as the coach of the team given the proximity of the fight, its escalation, and those involved in it. As such, the coach was acting within his capacity as a coach and was insured under the policy.

Read the case here.

OHIO SUPREME COURT Employment Intentional Tort - Defense

2011-07-11T14:54:00.001-04:00

Ward v. United Foundries, Inc., Slip Opinion No. 2011-Ohio-3176 (July 6, 2011)

SUMMARY:
POLICY THAT EXCLUSES ANY ACT WHICH IS "DETERMINED" TO CONSTITUTE AN EMPLOYMENT INTENTIONAL TORT DOES NOT REQUIRE THE INSURER TO DEFEND AN EMPLOYMENT INTENTIONAL TORT CASE UNTIL SUCH "DETERMINATION" IS FIRST MADE. THE INSURER CAN DENY BOTH DEFENSE AND INDEMNITY UNDER THE POLICY BEFORE ANY "DETERMINATION" OF WHETHER AN EMPLOYMENT INTENTIONAL TORT ACTUALLY OCCURRED.

CERTIFIED QUESTION:
“Whether an exclusion in a commercial general liability insurance policy and/or stop/gap endorsement form, stating the insurance does not apply to ‘bodily injury intentionally caused or aggravated by you, or bodily injury resulting from an act which is determined to have been committed by you with the belief that an injury is substantially certain to occur’ requires a final determination made by either a judge or a jury before the defense of a claim for a substantial certainty employer intentional tort can be denied.”

ANSWER TO CERTIFIED QUESTION: NO

IMPACT:
An exclusion in a commercial general liability insurance policy or stop-gap endorsement stating that the insurance does not apply to bodily injury intentionally caused or aggravated by an insured, or bodily injury resulting from an act that is determined to have been committed by an insured with the belief that an injury is substantially certain to occur does not require a final determination by either a judge or a jury before the insurer can refuse to defend a claim alleging a substantial-certainty employer intentional tort.

CLICK HERE TO READ THE CASE.

OHIO SUPREME COURT

2011-02-01T19:18:00.002-05:00

Fed. Ins. Co. v. Executive Coach Luxury Travel, Inc., Slip Opinion No. 2010-Ohio-6300.

Interpretation of "Ominbus Clause" in commercial policy of insurance.

Insurance — Insureds — Bus service contracted by college is a “hired” bus under the college’s insurance policy, and the driver employed by the bus
company is an “insured” under that same policy.

WHAT THE COURT SAID:

The omnibus clause appears straightforward; none of the words in it are unusual or uncommon, but only "auto" is defined in the policy.

All the involved parties have spent much time and effort advocating for their definition of the words "hire" and "permission."

On its face, it is clear to us that the omnibus clause applies to the case before us; Bluffton [College] hired the bus from Executive and granted permission to Niemeyer to drive the bus. Whether the insurance company intended the clause to apply is immaterial because the language of the policy supports a conclusion that Niemeyer is an insured.

We construe insurance policies liberally in favor of the insured. Blue Cross & Blue Shield Mut. of Ohio v. Hrenko (1995), 72 Ohio St.3d 120, 122, 647 N.E.2d 1358, citing Yeagar v. Pacific Mut. Life. Ins. Co. (1956), 166 Ohio St. 71, 1 O.O.2d 204, 139 N.E.2d 48, paragraph one of the syllabus.

Read the Case.

OHIO SUPREME COURT

2011-02-01T18:56:00.002-05:00

ALLSTATE INSURANCE COMPANY v. CAMPBELL
SLIP OPINION NO. 2010-OHIO-6312

INTENTIONAL ACT EXCLUSION DISCUSSED

Teens place deer decoy in roadway at night. They ensure that decoy becomes visible only 10-15 seconds before potential impact. Insurer claims that the teens' conduct intentionally caused harm to vehicle occupants; and coverage should be excluded under the "intended/expected" policy exclusion. (See original news story here.)

Insurance policies — Inferred-intent analysis applied to intentional-act exclusions — Inferred intent is not limited to sexual molestation and homicide — Inferred intent applies only when the insured’s intentional act and the harm caused are intrinsically tied so that the act has necessarily resulted in the harm.

SYLLABUS OF THE COURT
1. As applied to an insurance policy’s intentional-act exclusion, the doctrine of inferred intent is not limited to cases of sexual molestation or homicide.

2. As applied to an insurance policy’s intentional-act exclusion, the doctrine of inferred intent applies only in cases in which the insured’s intentional act and the harm caused are intrinsically tied so that the act has necessarily resulted in the harm.

Read the Case.

OHIO SUPREME COURT

2010-05-13T20:19:00.001-04:00

RULES OF EVIDENCE PRECLUDE THE USE OF AN INSURED'S CRIMINAL "NO CONTEST" PLEA IN SUBSEQUENT DECLARATORY JUDGMENT LITIGATION

Elevators Mut. Ins. Co. v. J. Patrick O'Flaherty's, Inc., Slip Opinion No. 2010-Ohio-1043.

Syllabus of the Court:

Crim.R. 11(B)(2) and Evid.R. 410(A) prevent the use of convictions based on no contest pleas in an action for declaratory judgment for insurance coverage.

The Policy Language

In this case, the O’Flaherty’s policy provides coverage for loss or damage
from fire but expressly excludes coverage for “loss or damages caused directly or indirectly by any of the following ... Dishonest or criminal acts by you...”

In addition, the coverage part of the policy was subject to the following conditions:
“A. Concealment, Misrepresentation or Fraud[.] This Coverage Part is void in any case of fraud by you as it relates to this Coverage Part at any time. It is also void if you or any other insured, at any time, intentionally conceal or misrepresent a material fact concerning * * * [a] claim under this Coverage Part.”

Elevators Mutual denied O’Flaherty’s claim for the fire loss and seeks to use Heyman’s convictions for arson and insurance fraud as conclusive evidence to deny coverage for the loss.

We must determine whether the convictions are admissible in this action for declaratory judgment.

The "No Contest" Plea and Crim.R. 11(B) and Evid.R. 410(A)

Richard Heyman pleaded no contest to the charges of arson and insurance fraud and was convicted. Crim.R. 11(A) provides that a defendant may plead no contest in a criminal matter. “The plea of no contest is not an admission of defendant’s guilt, but is an admission of the truth of the facts alleged in the indictment, information, or complaint, and the plea or admission shall not be used against the defendant in any subsequent civil or criminal proceeding.” Crim.R.11(B)(2).

Evid.R. 410(A)(2) echoes this same principle. A plea of no contest or the equivalent plea from another jurisdiction “is not admissible in any civil or criminal proceeding against the defendant who made the plea.” Id.

Elevators Mutual challenges the application of Evid.R. 410(A),stating that the rule applies only to a plea of no contest, not the resulting conviction. The Heymans, however, argue that the prohibition against admission of a no contest plea likewise applies to the conviction that follows. The Heymans also argue that Evid.R. 803(22) acknowledges that Evid.R. 410 prohibits the admission of evidence of a final judgment entered upon a plea of no contest.

The purpose behind the inadmissibility of no contest pleas in subsequent proceedings is to encourage plea bargaining as a means of resolving criminal cases by removing any civil consequences of the plea. Mapes, 19 Ohio St.3d at 111, 19 OBR 318, 484 N.E.2d 140; Rose v. Uniroyal Goodrich Tire Co. (C.A.10, 2000), 219 F.3d 1216, 1220. The rule also protects the traditional characteristic of the no contest plea, which is to avoid the admission of guilt. Id.

The prohibition against admitting evidence of no contest pleas was intended generally to apply to a civil suit by the victim of the crime against the defendant for injuries resulting from the criminal acts underlying the plea. Allstate Ins. Co. v Simansky (Conn.Super.1998), 45 Conn.Supp. 623, 628, 738 A.2d 231.

The plain language of Evid.R. 410(A) prohibits admission of a no contest plea, and the prohibition must likewise apply to the resulting conviction. To find otherwise would thwart the underlying purpose of the rule and fail to preserve the essential nature of the no contest plea.

OHIO SUPREME COURT

2010-05-13T20:06:00.000-04:00

EMPLOYMENT INTENTIONAL TORT STATUTE CONSTITUTIONALITY - UPHELD
R.C. 2745.01 remains valid.

Kaminski v. Metal & Wire Prods. Co.,Slip Opinion No. 2010-Ohio-1027

Torts — Employer intentional torts — R.C. 2745.01 — R.C. 2745.01 does not violate Section 34 or 35, Article II, Ohio Constitution.
_________________
SYLLABUS OF THE COURT

R.C. 2745.01 does not violate Section 34 or 35, Article II of the Ohio
Constitution. (Johnson v. BP Chems., Inc. (1999), 85 Ohio St.3d 298, 707
N.E.2d 1107, limited.)

What The Court Held:

As we anticipated in our post of October, 4, 2007, the Ohio Supreme Court has determined that the current employment intentional tort statute is constitutional. In the case of Kaminski v. Metal & Wire Products, the contitutionality of the statute was found on the following basis:

[W]e hold that R.C. 2745.01 violates neither the plain language nor the plain meaning of Sections 34 or 35, Article II of the Ohio Constitution.

We find the construction of Sections 34 and 35 set forth in Johnson v. BP Chems., Inc. (1999),85 Ohio St.3d 298, 707 N.E.2d 1107, to be inconsistent with other decisions of this court, including decisions subsequent to Johnson.

Moreover, the provisions of the statute we review herein are significantly different from those of the statute reviewed in Johnson. Therefore while we do not specifically overrule the decision in that case, we limit its reach to apply only to the statutory provisions that were then at issue.

Because the judgment of the court of appeals in the case sub judice was based on Johnson’s flawed interpretations of Sections 34 and 35, we must reverse.

In Stetter, ___ Ohio St.3d ___, 2010-Ohio-1029, ___ N.E.2d ____, also decided this day, we uphold the constitutionality of R.C. 2745.01 in the face of challenges on other grounds. The net result of these two decisions is to confirm the constitutional validity of R.C. 2745.01.

Ohio Supreme Court - Insurance for Multiple Stabbing:

2009-10-05T11:54:00.003-04:00

A policy that excludes coverage for injuries that arise out of the intentional or criminal acts of "any" insured, does NOT exclude coverage for claims of negligent entrustment or supervision brought against "any" other insured.

SAFECO INSURANCE COMPANY OF AMERICA, APPELLANT, v. WHITE ET AL.; FEDERAL INSURANCE COMPANY ET AL. Ohio Supreme Court, Decided August 4, 2009.

SUMMARY:
The Ohio Supreme Court has now held that when one insured commits an intentional act (in this case the multiple stabbing of a young girl), the homeowner insurance policy must still provide coverage for any claims that other insureds were negligent in supervising or entrusting the insured perpetrator. This is despite any exclusion that precludes coverage for bodily injury that arises out of the conduct of "any insured."

Specifically, the Court held:

1. When a liability insurance policy defines an "occurrence" as an "accident," a negligent act committed by an insured that is predicated on the commission of an intentional tort by another person, e.g., negligent hiring or negligent supervision, qualifies as an "occurrence."

2. Insurance-policy exclusions that preclude coverage for injuries expected or intended by an insured, or injuries arising out of or caused by an insured's intentional or illegal acts, do not preclude coverage for the negligent actions of other insureds under the same policy that are predicated on the commission of those intentional or illegal acts, e.g., negligent hiring or negligent supervision.

UNSOLICITED FAXES - INCLUDING TREBLE DAMAGES

2009-10-05T11:47:00.003-04:00

COVERED UNDER "ADVERTISING INJURY" PROVISIONS OF COMMERCIAL INSURANCE POLICY

Motorist Mutual Insurance Company v. Dandy-Jim, Inc. et al., (May 14, 2009), 8th District Court of Appeals.

In Motorist Mutual, the insured allegedly sent numerous unsolicited facsimilies in violation of the TCPA. The insured submitted the claims to it's insurer, Motorist Mutual and demanded coverage under the "advertising injury" provisions of the policy. The Court of Appeals agreed and found coverage despite Motorist Mutual's arguments that: (i) certain exclusions applied; (ii) there was no triggering event under the coverage; and (iii) the nature of the claims were not within the ambit of the definition of "advertising injury."

The most interesting part of the decision in Motorist Mutual was that the treble damages authorized by the TCPA, and sought by the claimants, were not punitive in nature and were also covered under the policy. The Court reasoned that the claimants were not seeking punitive damages. Rather, they are "seeking damages under the TCPA. The amounts of such damages are specified by the statute. The TCPA provides for the higher of actual damages, or damages of $500 per violation. 47 U.S.C. §227(b)(3)(B). The award may be increased to "not more than 3 times the amount available under subparagraph (B)" if the violation was committed "willfully or knowingly." 47 U.S.C. §227(b)(3)."

"Motorists offered no evidence that Congress intended TCPA damages to be punitive in nature. To the contrary, the purpose of the statutory damage provision of the TCPA is to "liquidate uncertain actual damages and to encourage victims to bring suit to redress violations." In addition, damages under the TCPA are "set to be fair." Hence, the TCPA is a remedial law. "

"The public policy prohibiting the protection of insurance for punitive damages stems from the underlying assumptions that an individual should not be able to escape punishment for his or her intentionally malicious acts and that the deterrent effect of punitive damages would be diminished if tortfeasors can be indemnified against them. ... However, no showing of intentional malice is required to obtain treble damages under the TCPA if the fax advertisements were sent "willfully." "[T]o establish a willful violation of the TCPA for an award of treble damages, a plaintiff must prove that the defendant consciously and deliberately committed or omitted an act that violated the statute, irrespective of any intent to violate the law." Thus, a willful or knowing violation of the TCPA is different from an intentionally malicious act that could give rise to punitive damages."

"As the treble damage provision of the TCPA is not punitive in nature, we find no public policy prohibiting insurance coverage for treble damages under the TCPA."

NEW EMPLOYMENT INTENTIONAL TORT STATUTE

2009-10-05T11:43:00.003-04:00

CONSTITUTIONALITY IN QUESTION

Ohio's new employment intentional tort statute (R.C. 2745.01) is under attack and losing in the Ohio Courts of Appeal. Most recently in Barry v A.E. Steel Erectors, Inc. and previously in Kaminski v. Metal & Wire Products,(March 18, 2008), Columbiana County App. No. 07-CO-15. Both of these Ohio Courts of Appeal decisions have found the new employment intentional tort unconstitutional.

The rationale employed by the Appellate Courts is that due to the excessive standard of requiring proof that the employer intended to cause injury, "it is clearly not 'a law that furthers the "*** comfort, health, safety and general welfare of all employee[e]s."' Johnson, 85 Ohio St. 3d at 308, quoting Brady, 61 Ohio St.3d at 633, quoting Section 34, Article II of the Ohio Constitution.

Additionally, "because R.C. 2745.01 is an attempt by the General Assembly to govern intentional torts that occur within the employment relationship, R.C. 2745.01 'cannot logically withstand constitutional scrutiny, inasmuch as it attempts to regulate an area that is beyond the reach of constitutional empowerment.'" Id., quoting Brady, 61 Ohio St.3d at 634.

Our postings have been anticipating this struggle since the enactment of the new statute.

8TH DISTRICT (CUYAHOGA COUNTY) SELECTED INSURANCE CASES FROM 2008

2009-01-03T09:18:00.003-05:00

2008 YEAR IN REVIEW - CUYAHOGA COUNTY APPELLATE COURT

*Please click on the case name for a link to view the full text of the following opinions from the Eighth District Court of Appeals:

NATIONWIDE MUTUAL INSURANCE COMPANY V. PRAGOTRADE, INC.

Product Liability
Commercial Policy of Insurance
Products & Completed Operations Hazard Endorsement

An endorsement that excludes coverage, which is listed on Declarations Page but not included with Policy creates issues of fact for jury as to the nature and extent of coverage under the purported endorsement.

DAILY V. AMERICAN FAMILY INSURANCE COMPANY

Uninsured Motorist Coverage
Definition of "Relative"
Definition of "Insured"
Exclusion of other persons that own a motor vehicle - Valid

When "insured" under automobile policy is defined to include resident relatives, but excludes any person who owns a motor vehicle, such terms validly exclude a resident relative that owns his/her own motor vehicle.

STIGGERS V. ERIE INSURANCE COMPANY

Commercial Insurance Coverage
Timely Notice Provisions
Purely Economic Loss
Your Work Exclusion
Your Product Exclusion
Ongoing Operations Exclusion

MASTELLONE V. LIGHTNING ROD MUTUAL INSURANCE COMPANY

BAD FAITH
Insurer's Bad Faith
Bifurcation - Basis/Foundation for allowing bifurcation of bad faith claim
R.C. 2315.21(B) - Is prospective Only and is not to be applied retroactively as a basis for bifurcation of bad faith claims against insurer.
Summary Judgment Standard on Bad Faith Claim

COVERAGE
Mold Damage
Proof that mold does not cause "physical damage" to the structure or integrity of the exterior of a building or premises. Aestetic damage only.
No coverage.

WHITE V. ALLSTATE INSURANCE COMPANY

BAD FAITH
Issues of fact exist as to Allstate's committing bad faith and breach of policy of insurance.

COVERAGE
Homeowner policy.
Fire Loss.

OHIO SUPREME COURT - SELECTED INSURANCE CASES FROM 2008

2009-01-03T08:01:00.007-05:00

2008 YEAR IN REVIEW - INSURANCE CASES

* Please click on the case name in order to link to the full opinion of the Court.

LAGER V. GONZALEZ

Uninsured Motorist Coverage

There is no recognizable difference between the terms "for bodily injury" and "because of bodily injury" in a policy of uninsured motorist coverage. Under the well-settled principles of contract construction in Ohio, these phrases do not create any ambiguity upon which a reasonable interpretation would allow coverage.

The Court of Appeals decision is REVERSED.

ANGEL V. REED

Two Year Limitation on Filing Claim for Uninsured Motorist
VALID

The 2 year notification of claim provision in uninsured motorist coverage of automobile policy is valid and enforceable. The time period begins to run at the time of the accident. Although, the Court leaves open the ability to present factors that relate to when the insured knew or should have known that an uninsured motorist situation was present.

However, if the insured can merely contact tortfeasor's identified insurer (contained in accident report) to ascertain if coverage exists and/or the limits of that coverage, then the time period under the 2 year limitation period begins to run immediately.

ADVENT, EXR. V. ALLSTATE INSURANCE COMPANY

S.B. 97 Amendements to R.C. 3937.18 and R.C. 3937.31.

Certified Question: Can the S.B. No. 97 Amendments to R.C. 3937.18 be incorporated into an insurance policy during a two-year guarantee period that commenced subsequent to the S.B. 267 Amendments to R.C. 3937.18 and R.C. 3937.31, but prior to the S.B. No. 97 Amendments?

Answer to Certified Question: "YES."

UNITED STATE SUPREME COURT

2008-07-15T10:34:00.006-04:00

ERISA - ADMINISTTRATOR - CONFLICT OF INTEREST - DISCRETIONARY BENEFIT DETERMINATIONS

READ THE CASE: Metropolitan Life Ins. Co. v. Glenn (2008), 544 U.S. ____.

On June 19, 2008, the United State Supreme Court issued its opinion AFFIRMING the 6th Circuit decision rendered in Metro. Life Ins. Co. v. Glenn.

HOLDING OF THE COURT:

1. Firestone Tire & Rubber Co. v. Bruch, 489 U. S. 101, sets out
four principles as to the appropriate standard of judicial review under
§1132(a)(1)(B):
(1) A court should be “guided by principles of trust
law,” analogizing a plan administrator to a trustee and considering a
benefit determination a fiduciary act, id., at 111–113;
(2) trust law principles require de novo review unless a benefits plan provides otherwise, id., at 115;
(3) where the plan so provides, by granting “the administrator or fiduciary discretionary authority to determine eligibility,” “a deferential standard of review [is] appropriate,” id., at 111,115; and
(4) if the administrator or fiduciary having discretion “is operating under a conflict of interest, that conflict must be weighed as a ‘facto[r] in determining whether there is an abuse of discretion,’ ” id.,
at 115. Pp. 3–5.

2. A plan administrator’s dual role of both evaluating and paying
benefits claims creates the kind of conflict of interest referred to in
Firestone. That conclusion is clear where it is the employer itself that
both funds the plan and evaluates the claim, but a conflict also exists
where, as here, the plan administrator is an insurance company. For
one thing, the employer’s own conflict may extend to its selection of
an insurance company to administer its plan. For another, ERISA
imposes higher-than-marketplace quality standards on insurers, requiring
a plan administrator to “discharge [its] duties” in respect to
discretionary claims processing “solely in the interests of the [plan’s]
participants and beneficiaries,” 29 U. S. C. §1104(a)(1); underscoring
the particular importance of accurate claims processing by insisting
that administrators “provide a ‘full and fair review’ of claim denials,”
Firestone, supra, at 113; and supplementing marketplace and regulatory
controls with judicial review of individual claim denials, see
§1132(a)(1)(B). Finally, a legal rule that treats insurers and employers
alike in respect to the existence of a conflict can nonetheless take
account of different circumstances by treating the circumstances as
diminishing the conflict’s significance or severity in individual cases.

3. The significance of the conflict of interest factor will depend upon
the circumstances of the particular case. Firestone’s “weighed as a
‘factor’ ” language, 489 U. S., at 115, does not imply a change in the
standard of review, say, from deferential to de novo. Nor should this
Court overturn Firestone by adopting a rule that could bring about
near universal de novo review of most ERISA plan claims denials.
And it is not necessary or desirable for courts to create special burden-
of-proof rules, or other special procedural or evidentiary rules, focused
narrowly upon the evaluator/payor conflict. Firestone means
what the word “factor” implies, namely, that judges reviewing a benefit
denial’s lawfulness may take account of several different considerations,
conflict of interest being one. This kind of review is no
stranger to the judicial system. Both trust law and administrative
law ask judges to determine lawfulness by taking account of several
different, often case-specific, factors, reaching a result by weighing all
together. Any one factor will act as a tiebreaker when the others are closely balanced. Here, the Sixth Circuit gave the conflict some
weight, but focused more heavily on other factors: that MetLife had
encouraged Glenn to argue to the Social Security Administration that
she could do no work, received the bulk of the benefits of her success
in doing so (being entitled to receive an offset from her retroactive
Social Security award), and then ignored the agency’s finding in concluding
that she could do sedentary work; and that MetLife had emphasized
one medical report favoring denial of benefits, had deemphasized
other reports suggesting a contrary conclusion, and had
failed to provide its independent vocational and medical experts with
all of the relevant evidence. These serious concerns, taken together
with some degree of conflicting interests on MetLife’s part, led the
court to set aside MetLife’s discretionary decision. There is nothing
improper in the way this review was conducted. Finally, the Firestone
standard’s elucidation does not consist of detailed instructions,
because there “are no talismanic words that can avoid the process of
judgment.” Universal Camera Corp. v. NLRB, 340 U. S. 474, 489.
Pp. 8–13. 461 F. 3d 660.

Affirmed.

(Bold emphasis added by blog administrator)

CHANGES IN THE LAW REGARDING: Stranger-Originated Life Insurance (STOLI) Transactions In The Ohio Life Insurance Market

2008-07-11T17:38:00.009-04:00

On June 11, 2008, Governor Strickland signed HB 404,which protects Ohio seniors by limiting Stranger-Originated Life Insurance (STOLI) transactions in the Ohio life insurance market. The new law takes effect on September 11, 2008.

WHAT IS STOLI?

"STOLI involves investment firms inducing certain wealthy
seniors to obtain life insurance. These come-ons often include
promises of “free life insurance” and other incentives—
sometimes including payments in the six figures. The
investment firms fully finance the transaction and continue
paying premiums throughout the life of the contract. Two
years into the contract, the investment firms—speculators—
purchase the policy and stand to profit from the death
benefits from policies on lives of strangers."
Stoli Alert, March 2007.

The important implications of this new law are summarized as follows:

ACT SUMMARY

· Requires viatical settlement providers, as a condition of licensure, to provide information concerning their use of life expectancy information and to meet financial responsibility requirements for licensure.

· Requires a business that is licensed as a viatical settlement broker to maintain at least one individual who individually is licensed as a viatical settlement broker.

· Requires individuals who are licensed as viatical settlement brokers to complete continuing education requirements.

· Exempts certain attorneys, certified public accountants, financial planners, and insurance agents from viatical settlement provider or broker licensure requirements.

· Allows a viatical settlement provider or viatical settlement broker to assign, transfer, or pledge a viaticated policy to a viatical settlement purchaser or a qualified institutional buyer.

· Allows the Superintendent of Insurance to refuse to issue, suspend, revoke, or refuse to renew a license because the licensee was the subject of administrative action by the Department of Commerce, Division of Securities.

· Revises the definition of "viatical settlement contract" and identifies ten specific situations or arrangements that are not viatical settlement contracts.

· Requires viatical settlement providers or viatical settlement brokers to disclose additional information to a viator.

· Requires the Superintendent to disapprove a contract or disclosure form if it does not meet the specified requirements for disclosures.

· Requires all premium finance companies to disclose premium finance agreements relating to life insurance policies to the insurer.

· Under specified situations, prohibits a viator from entering into a viatical settlement contract within five years, rather than two years, of the date of issuance of the insurance policy.

· Specifies that a viator is prohibited from entering into a viatical settlement contract prior to the application for or issuance of the policy and from promoting a policy for the purpose of selling the policy.

· Redefines the possible situations (exceptions) under which a viator could enter into a viatical settlement contract within the required waiting period after the issuance of the insurance policy.

· Allows the Superintendent to develop or approve a form requesting verification of coverage of a viator by an insurer and requires insurers to accept an original or facsimile or electronic copy of that form.

· Allows a viatical settlement broker, in addition to a viatical settlement provider, to request verification of coverage from an insurer and allows an insurer to indicate in its response to such a request that it intends to investigate possible fraud.

· Redefines the escrow agent's role in the process of viaticating a policy.

· Prohibits, in advertisements, the use of certain words indicating that a life insurance policy is "free" unless true.

· Adds additional fraudulent viatical settlement acts including actions regarding stranger-originated life insurance (STOLI) and defines STOLI.

· Requires life insurance companies to adopt procedures to detect and prevent stranger-originated life insurance.

· Specifies that a prevailing party in a civil action is not entitled to attorney's fees if the prevailing party provided information of the party's own fraudulent viatical settlement acts.

· Requires antifraud initiatives to include a description of the procedures used to review the accuracy of life expectancies.

· Relieves an insurer that issued a policy being viaticated from liability for any act or omission of a viatical settlement broker or viatical settlement provider unless the insurer receives compensation for the placement of a viatical settlement contract.

· Requires the Superintendent to consider certain factors in determining the nature, scope, and frequency of examinations of licensees.

· Removes the authority of the Superintendent to conduct a market examination of an insurer.

· Requires the Superintendent to cooperate with an official from another state for the examination of a foreign or alien licensee as far as is practical.

· Revises the requirements for annual reports by viatical settlement providers.

· Requires the Superintendent to keep confidential and not a matter of public record all individual transaction data regarding the business of viatical settlements and data that could compromise the privacy of personal, financial, and health information of the viator or insured.

· Allows persons with knowledge of an insured's identity to disclose that identity if the disclosure is required to purchase financial guarantee insurance.

· Makes certain other conforming changes.

READ THE ACT: HB 404

READ THE OHIO DEPARTMENT OF INSURANCE PRESS RELEASE: Law Amendments Contain Strong Consumer Protection Elements

REVIEW STOLI LEGISLATION AND NEWS THROUGHOUT THE COUNTRY: National Association of Insurance and Financial Advisors - Stoli Alert

SUPREME COURT OF THE UNITED STATES OF AMERICA Reviews 6th Circuit Decision

2008-05-07T13:01:00.013-04:00

ERISA - ADMINISTRATOR - CONFLICT OF INTEREST - DISCRETIONARY BENEFIT DETERMINATIONS

*NOTE:
SINCE THIS POST, THE SUPREME COURT HAS ISSUED ITS OPINION AFFIRMING THE 6TH CIRCUIT DECISION.
SEE UPDATED POST OF JULY 15, 2008 AND THE RECENT SUPREME COURT DECISION IN:
Metropolitan Life Ins. Co. v. Glenn, (2008) 554 U.S. ____.

The U.S. Supreme Court heard oral arguments on Wednesday, April 23rd, 2008 in the appeal of the Ohio case from the 6th Circuit: Metropolitan Life Ins. Co. v. Glenn, (6th Cir., Ohio 2006), Case No. 05-3918

The two questions to be addressed by the Supreme Court are stated as follows:

"If an administrator that both determines and pays claims under an ERISA plan is deemed to be operating under a conflict of interest, how should that conflict be taken into account on judicial review of a discretionary benefit determination?"

"Whether the Sixth Circuit erred in holding, in conflict with two other Circuits, that the fact that a claim administrator of an ERISA plan also funds the plan benefits, without more, constitutes a "conflict of interest" which must be weighed in a judicial review of the administrator's benefit determination under Firestone Tire & Rubber v. Bruch, 489 U.S. 101 (1989)?"

THE SIXTH CIRCUIT RULING:

The 6th Circuit ruled that the ERISA plan administrator had a conflict of interest, that when coupled with the other factors taken into account resulted in the determination that the denial of the petitioner's claim rose to a level of "arbitrary and capricious."

The 6th Circuit reviewed the administrator's decision under the highly deferential standard (i.e. arbitrary and capricious). They determined that the plan administrator’s determination to deny benefits to Glenn could not be sustained.

[The] obligation under ERISA to review the administrative record in order to determine whether the plan administrator acted arbitrarily and capriciously in making ERISA benefits determinations . . . inherently includes some review of the quality and quantity of the medical evidence and the opinions on both sides of the issues. Otherwise, courts would be rendered to nothing more than rubber stamps for any plan administrator’s decision as long as the plan [administrator] was able to find a single piece of evidence – no matter how obscure or untrustworthy – to support a denial of a claim for ERISA benefits.

The Court concluded that MetLife’s decision to deny long-term benefits in this case was not the product of a principled and deliberative reasoning process. MetLife acted under a conflict of interest and also in unacknowledged conflict with the determination of disability by the Social Security Administration. In denying benefits, it offered no explanation for crediting a brief form filled out by Dr. Patel while overlooking his detailed reports. This inappropriately selective consideration of Glenn’s medical record was compounded by the fact that the occupational skills analyst and the independent medical consultant were apparently not provided with full information from Dr. Patel on which to base their conclusions. Moreover, there was no adequate basis for the plan administrator’s decision not to factor in one of the major considerations in Glenn’s pathology, that of the role that stress played in aggravating her condition and, in the language of the MetLife policy, in preventing her return to “gainful work or service for which [she is] reasonably qualified taking into consideration [her] training, education, experience, and past earning.” Taken together, these factors reflect a decision by MetLife that can only be described as arbitrary and capricious.

THE UNITED STATES SUPREME COURT WILL DECIDE:

On April 23rd, the U.S. Supreme Court heard oral arguments, where it appeared as though the Court was first and foremost concerned with what weight was to be given the fact that an administrator (and fiduciary) has a clear conflict of interest. When reviewing an administrator's decision to deny benefits, the conflict of interest of that administrator is a factor to be considered. However, how much weight? and under what circumstances? were the Supreme Court's foundational concerns. For, how could they move on to addressing the specific factors of the case at hand until they knew what weight they were to give the conflict, and under what circumstances that conflict become a relevant factor. Does a conflict merely tip the scales when all other factors supporting the declination of benefits are equal? And, does a conflict always presuppose that the denial was based upon that conflict?

We will continue to follow this important case and supplement once the Opinion of the Court has been rendered.

READ THE UNITED STATES SUPREME COURT ORAL ARGUMENTS HERE.

READ THE 6TH CIRCUIT UNDERLYING DECISION HERE.

READ THE UNITED STATES SUPREME COURT ISSUES TO BE DECIDED HERE.

COURT OF APPEALS - 7th District ( Employment Intentional Tort Statute )

2008-03-24T23:19:00.011-04:00

Ohio Employment Intentional Tort Statute - Held Unconstitutional

*Note: See blog archive from 9-25-2007 regarding Barry A.E. Steel, where the Cuyahoga County Trial Court held to the contrary, that statute was constitutional. However, the Court of Appeals in Barry A.E. Steel has reversed that Trial Court decision. The Barry case now also stands for the proposition that the employment intentional tort statute is unconstitutional.

Kaminski v. Metal & Wire Products,(March 18, 2008), Columbiana County App. No. 07-CO-15. READ THE CASE

HOLDING OF THE COURT:

Pursuant to the Ohio Supreme Court’s holdings in Brady … and Johnson … and consistent with Sections 34 and 35, Article II of the Ohio Constitution, we must conclude R.C. 2745.01 is unconstitutional.

Because of its excessive standard of requiring proof that the employer intended to cause injury, “it is clearly not ‘a law that furthers the “*** comfort, health, safety and general welfare of all employee[e]s.”’ Johnson, 85 Ohio St. 3d at 308, quoting Brady, 61 Ohio St.3d at 633, quoting Section 34, Article II of the Ohio Constitution.

Additionally, “because R.C. 2745.01 is an attempt by the General Assembly to govern intentional torts that occur within the employment relationship, R.C. 2745.01 ‘cannot logically withstand constitutional scrutiny, inasmuch as it attempts to regulate an area that is beyond the reach of constitutional empowerment.’” Id., quoting Brady, 61 Ohio St.3d at 634.

POST EDITOR'S COMMENTS:

As anticipated, the issue of the constitutionality of the employment intentional tort statute is far from decided. The above decision holds that Brady prevents the Ohio Legislature from enacting laws in the field of employment intentional torts.

Our reading of Brady is that 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. The above decision does not seem to interpret the Brady decision in this manner.

Rather, the Court has held that because of Brady, an employment intentional tort is not within the province of the legislature. It is our understanding that the statute that Brady was dealing with was one enacted within the confines of the workers' compensation statutes. As such, because the intentional tort was deemed to not arise within the employment relationship, the statute was beyond legislation within the context of workers compensation. The current employment intentional tort statute is not enacted within the workers compensation statutes.

See our prior post from October 4, 2007 WILL THE NEW EMPLOYMENT INTENTIONAL TORT STATUTE SURVIVE CONSTITUTUIONAL SCRUTINY, wherein we previously noted the following:

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.

The decision in Kaminski clearly states that the standard remains too high. Indeed, the 7th District reads the new statute as, in fact, creating an insurmountable burden on employees and creating an illusory cause of action.

The Ohio Supreme Court will likely be faced with this issue in the near future.

OHIO SUPREME COURT AGREES TO HEAR NEW INSURANCE CASE ("Other Owned Vehicle Exclusion")

2008-02-10T17:27:00.001-05:00

**NOTE: THE OHIO SUPREME COURT HAS RULED ON THIS CASE. SEE BLOG UPDATE OF JANUARY 3, 2009

OHIO SUPREME COURT - Accepts appeal of case interpreting "Other Owned Vehicle" Exclusion.

2007-1760-Lager v. Miller-Gonzalez

Lucas County
Accepted by Ohio Supreme Court on December 12, 2007
Pfeifer, J., dissents

INSURANCE –
OTHER OWNED VEHICLE EXCLUSION –
“BECAUSE OF BODILY INJURY” VS. “FOR BODILY INJURY”

2007-1760-Lager v. Miller-Gonzalez

Lucas County
Accepted on December 12, 2007
Pfeifer, J., dissents

FACTS ON APPEAL

In 2003, Sara Lager died from injuries suffered while riding as a passenger in her own vehicle. The vehicle was insured by appellant Nationwide Mutual Fire Insurance Company. Her parents were also insured through a separate Nationwide policy. The parents filed a claim for Sara’s wrongful death under their own insurance policy.

The parents' policy purports to pay “compensatory damages…because of bodily injury suffered by you or a relative….” The other owned vehicle exclusion provides: “This coverage does not apply to anyone for bodily injury …While any insured operates or occupies a motor vehicle ….owned by….you or a relative, but not insured…under this policy.” The vehicle was owned by Sara and not insured under her parents’ policy.

The successful argument was the the parents wrongful death claim was derivative and clearly "because" of bodily injury, including death. The "other owned vehicle" exclusion only precluded direct claims "for" bodily injury, which did not include a derivative wrongful death action. Therefore, the claim was covered and not excluded.

The trial court granted summary judgment to the parents. The court of appeals affirmed.

ISSUE ON APPEAL

Appellant’s Position

Use of the language “because of bodily injury” in an insurance policy’s coverage section and the language “for bodily injury” in an exclusion does not create an ambiguity, because there is no rational distinction between two phrases. Claims for wrongful death are clearly claims “for bodily injury,” and thus not covered pursuant to the other owned vehicle exclusion.

Appellees’ Position

The language of the exclusion here does not apply to wrongful death claims. Wrongful death claims are not “for bodily injury,” although they may arise out of bodily injury. Appellees do not seek recovery for their bodily injury, but for the loss of their daughter. The courts should not rewrite insurance contracts.

*We will be sure to follow this case and provide an update once the Ohio Supreme Court renders its decision.

OHIO SUPREME COURT - Agrees to Hear New Insurance Dispute

2008-01-15T12:29:00.002-05:00

**NOTE: THE OHIO SUPREME COURT HAS RULED ON THIS MATTER - SEE BLOG UPDATE OF JANUARY 3, 2009

WHEN DOES THE TIME START RUNNING UNDER THE TWO-YEAR NOTICE LIMITATION IN AN INSURANCE POLICY?

THE ISSUE:
Does the two-year limitation period contained in a policy for Uninsured/Underinsured Motorist Coverage start on the day of the accident or does the "Discovery Rule" apply to delay starting the two-year period until after the insured receives notice of the fact that the other driver was uninsured?

The Ohio Supreme Court has agreed to hear an appeal of the case: Angel v. Reed (March 9, 2007), Geauga App. No. 2005-G-2669.

FACTS ON APPEAL:
On June 14, 2001, appellee Theresa Angel was injured while riding in a vehicle driven by Eric Reed. At the time, Mr. Reed indicated that he was insured by Nationwide. On May 16, 2003, appellee filed suit against Mr. Reed. She voluntarily dismissed the suit on March 4, and on May 2, Mr. Reed’s attorney informed appellee’s attorney that Mr. Reed’s policy had been canceled three months before the accident.

On July 30, 2004, appellee made a claim for uninsured/underinsured motorist (“UM/UIM”) coverage. When her claim was denied, she filed this suit against Mr. Reed and appellant Allstate Insurance Company.

The trial court granted summary judgment to Allstate, because appellee’s suit was filed beyond the two-year limitation period contained in the policy: “Any legal action against Allstate must be brought within two years of the date of the accident.” The court of appeals reversed, adopting a discovery rule for the contractual limitations period.

Here are the stated positions of the parties before the Ohio Supreme Court.

Appellant (Insurance Company)Position:
A cause of action for UM/UIM benefits accrues on the date of the accident when the tortfeasor has no liability insurance on that date. The court of appeals effectively rewrote the contract language by holding that a cause of action does not “accrue” until the policy-holder becomes aware that the tortfeasor lacked coverage at the time of the accident. All a claimant needs to do to “discover” whether the tortfeasor is covered when the tortfeasor claims coverage, is to call that insurance company.

Where the facts giving rise to a cause of action are readily ascertainable, a court may not apply a “discovery rule” to extend a valid, contractual limitations period. A discovery rule may be applied where the elements of a cause of action cannot reasonably be uncovered or the injury does not appear until later. Here, there are no hidden or unforeseeable facts. A simple phone call or letter would have revealed the true facts.

Appellee (Insured) Position:
Where a policyholder cannot discover the tortfeasor’s true insurance status until after the two-year period has elapsed, a UM/UIM claim does not “accrue” until such discovery. When the claimant later learns that coverage does not exist, whether because the tortfeasor misled her or the insurer’s insolvency, the cause of action does not accrue until that notice. Until receiving the notice, appellee had no cause of action against Allstate.

There is no evidence that Mr. Reed’s insurance status was “readily ascertainable.” The court of appeals held that it was “essentially impossible” for appellee to discover that status within the two-year period.

Note: I will post futher on this issue once the Ohio Supreme Court rules.

Court of Appeals - UM / UIM - "Other Owned Vehicle Exclusion" - Valid

2008-01-15T12:20:00.000-05:00

Appellant was injured while driving a car insured by appellee. Appellee issued three policies to appellant’s family, only one of which listed the vehicle involved in the accident in this case. Appellee agreed that it owed coverage, but only under the policy that listed the vehicle. Appellant claimed that coverage was owed under all three policies. The trial court found for appellee.

On appeal, the court found no error. The policies contained “other owned auto” exclusions that excluded coverage for injuries that occurred while occupying a vehicle that the insured owned that was covered under another policy. “Other owned vehicle exclusions are permitted to be included in automobile insurance policies regarding uninsured motorist coverage. In this matter, the language of the Cherokee and Cavalier policies was not ambiguous. Instead, the other owned vehicle exclusions contained in those policies specifically excluded coverage in instances where an accident occurs while an insured is operating a vehicle that she or a relative owned. The undisputed evidence is that Tiffany is an insured under the Cherokee and Cavalier policies, that she was operating the Contour at the time of the accident, and the Contour was owned by Spelich. Thus, the valid other owned vehicle exclusions in the Cherokee and Cavalier policies preclude Spelich from being eligible for uninsured motorist coverage under those policies.” Affirmed.

Spelich v. State Farm Ins. Co. (Slaby) Appeal from the court of common pleas for Summit County. 2007-Ohio-7128 (12/28/07)

Read the Case: Spelich v. State Farm Ins. Co.

Court of Appeals - Life and Disability - Proof of Claim - Statute of Limitations

2008-01-15T12:08:00.000-05:00

Appellant purchased a car from a dealership that was financed through Bank One. Bank One issued a life insurance and disability policy to appellant through appellee to cover the payments. When appellant became disabled, he notified appellee. Appellee denied coverage, stating that it had not been initiated because his loan terms did not meet their requirements. The trial court determined that no coverage existed.

On appeal, the court found error. Appellee did not provide notice that the coverage would not be afforded until after the disability arose. Further, appellant sent notice of the claim with in the limitations period of the insurance agreement. “UULIC improperly denied coverage in both 1999 and 2001. The record reflects that Fazenbaker provided notice of his disability ‘within 30 days after the disability [began] or as soon after that as [was] reasonably possible.’ However, because UULIC maintained that it had properly denied coverage, it did not send Fazenbaker claim forms within 15 days as set forth in the Rules. The Rules provide that if claim forms are not sent to the insured within 15 days after UULIC receives notice of the disability, there is no minimum time period for filing proof of the disability.” Reversed and remanded.

Midland Funding NCC-2 Corp. v. Fazenbaker (Moore) Appeal from the court of common pleas for Summit County. 2007-Ohio-7041 (12/28/07)

Read the Case: Midland Funding NCC-2 Corp. v. Fazenbaker

Court of Appeals - Intentional Act - Homeowner Policy - Severability Clause

2008-01-15T11:46:00.000-05:00

Supervising and Controlling Other Insureds

Severability Clause Creates Coverage Ambiguity for Negligent Supervision and Control by "other" insureds.

Insured's son stabbed a teen girl while she was jogging. His parents were sued for negligent supervision and tendered coverage to their homeowner’s policy. The policy excluded coverage for injuries caused by the intentional conduct of an insured. The policy also contained a severability of insurance clause, which stated that “this insurance applies separately to each insured.” The trial court concluded that the severability clause rendered the exclusion ambiguous.

The court of appeals agreed. In so finding, the appellate court recognized that Ohio public policy did not preclude coverage for the negligent claims. The court then held that the injury was an occurrence under the policy. While occurrence was defined as an accident, the conduct of the parents was alleged to have been negligent, even though the actual injurious conduct was intentional.

The court concluded that the intentional act exclusion was rendered ambiguous by the severability of insurance clause. “When reading the severability condition in conjunction with the exclusions in the Safeco policies, we hold that the exclusions are ambiguous. Construing that ambiguity in favor of the insureds, in light of the policyholder expectation recognized in Doe, we hold that the exclusions for intentional conduct do not apply to insureds who have been merely negligent, when the policies contain language indicating that coverage applies ‘separately to each insured.’”

Safeco Ins. Co. v. Federal Ins. Co. (Dinkelacker) Appeal from the court of common pleas for Hamilton County. 2007-Ohio-7068 (12/28/07)

Read the Case: Safeco Ins. Co. v. Federal Ins. Co.

Court of Appeals - UM/UIM Employer Policy

2008-01-15T11:33:00.000-05:00

Drive Other Car Coverage - Named Individuals (Endorsement)

The court of appeals (dealing with the pre-H.B. No. 261 version of R.C. 3937.18(A))concluded that the insurer in this case owed coverage for the adult son of an employee who was injured in a accident involving a car that was not a company car. The insurance policy contained a DOCC endorsement that included as insured “An individual named in the Schedule and his or her ‘family members’ are ‘insured’ while ‘occupying’ or while a pedestrian when being struck by any ‘auto’ you don’t own.” The employee was named in the schedule.

Hans v. Hartford Fire Ins. Co. (Hildebrandt) Appeal from the court of common pleas for Hamilton County. 2007-Ohio-7064 (12/28/07)

Read the Case: Hans v. Hartford Fire Ins. Co.

TRIPRA Update - Terrorism Risk Insurance Program Reauthorization and Extension Act of 2007

2007-12-28T15:02:00.000-05:00

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

Court of Appeals - Property Damage Coverage

2007-12-17T16:09:00.000-05:00

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

2007-12-17T16:01:00.000-05:00

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

2007-12-17T15:55:00.000-05:00

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

2007-12-17T15:50:00.000-05:00

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

2007-12-17T15:46:00.000-05:00

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

2007-12-17T15:37:00.000-05:00

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.

Directors & Officers ( D&O) Renewal Checklist

2007-11-29T13:54:00.000-05:00

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

TRIPRA Terrorism Risk Insurance Program Reauthorization Act

2007-10-25T17:20:00.000-04:00

* 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

Will The New Employment Intentional Tort Statute Survive Constitutional Scrutiny?

2007-10-04T13:22:00.002-04:00

*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

2007-10-04T08:52:00.001-04:00

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.

OHIO SUPREME COURT (Sept. 27, 2007): Ohio Govt. Risk Mgt. Plan v. Harrison, Ohio St.3d , 2007-Ohio-4948

2007-09-28T10:45:00.000-04:00

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

2007-09-28T09:53:00.000-04:00

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

2007-09-27T17:17:00.000-04:00

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

2007-09-26T09:59:00.000-04:00

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

2007-09-25T14:04:00.000-04:00

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

2007-09-25T13:36:00.000-04:00

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.

Ohio Insurance - Law/Policy/Advocacy

SUIT AGAINST US - LIMITATION OF ACTION CLAUSE

BODILY INJURY TO RELATIVES RESIDING IN YOUR "HOUSEHOLD"

FIGHT OVER BASEBALL PARKING FEE RESULTING IN DEATH

OHIO SUPREME COURT Employment Intentional Tort - Defense

OHIO SUPREME COURT

OHIO SUPREME COURT

OHIO SUPREME COURT

OHIO SUPREME COURT

Ohio Supreme Court - Insurance for Multiple Stabbing:

UNSOLICITED FAXES - INCLUDING TREBLE DAMAGES

NEW EMPLOYMENT INTENTIONAL TORT STATUTE

8TH DISTRICT (CUYAHOGA COUNTY) SELECTED INSURANCE CASES FROM 2008

OHIO SUPREME COURT - SELECTED INSURANCE CASES FROM 2008

UNITED STATE SUPREME COURT

CHANGES IN THE LAW REGARDING: Stranger-Originated Life Insurance (STOLI) Transactions In The Ohio Life Insurance Market

SUPREME COURT OF THE UNITED STATES OF AMERICA Reviews 6th Circuit Decision

COURT OF APPEALS - 7th District ( Employment Intentional Tort Statute )

OHIO SUPREME COURT AGREES TO HEAR NEW INSURANCE CASE ("Other Owned Vehicle Exclusion")

OHIO SUPREME COURT - Agrees to Hear New Insurance Dispute

Court of Appeals - UM / UIM - "Other Owned Vehicle Exclusion" - Valid

Court of Appeals - Life and Disability - Proof of Claim - Statute of Limitations

Court of Appeals - Intentional Act - Homeowner Policy - Severability Clause

Court of Appeals - UM/UIM Employer Policy

TRIPRA Update - Terrorism Risk Insurance Program Reauthorization and Extension Act of 2007

Court of Appeals - Property Damage Coverage

Court of Appeals - One "Primary" Residence - Uninsured/Underinsured Motorist Coverage

Court of Appeals - Contractual Interpretation and Choice of Law

Court of Appeals - Liability Insurance

Court of Appeals - Underinsured Motorist Coverage

Court of Appeals - Commercial Property Insurance Coverage

Directors & Officers ( D&O) Renewal Checklist

TRIPRA Terrorism Risk Insurance Program Reauthorization Act

Will The New Employment Intentional Tort Statute Survive Constitutional Scrutiny?

Assault & Battery - Duty To Defend

OHIO SUPREME COURT (Sept. 27, 2007): Ohio Govt. Risk Mgt. Plan v. Harrison, ____ Ohio St.3d ____, 2007-Ohio-4948

OHIO SUPREME COURT (Sept. 27, 2007): Cincinnati Ins. Co. v. CPS Holdings, Inc., ___ Ohio St.3d ___, 2007-Ohio-4917

Commercial Insurance Rates - Steady for August 2007

CGL - Business Sued for Liability Arising out of Premises Owned Personally by Shareholder

Cuyahoga County Common Pleas Court finds New Intentional Tort Statute Constitutional

Ohio Employment Intentional Tort Statute

OHIO SUPREME COURT (Sept. 27, 2007): Ohio Govt. Risk Mgt. Plan v. Harrison, Ohio St.3d , 2007-Ohio-4948

OHIO SUPREME COURT (Sept. 27, 2007): Cincinnati Ins. Co. v. CPS Holdings, Inc., _ Ohio St.3d _, 2007-Ohio-4917