Harasyn v. Normandy Metals, Inc.

• Decision Date: 07 March 1990
• Docket Number: No. 88-1700,88-1700
• Citation: 49 Ohio St.3d 173,551 N.E.2d 962
• Parties: HARASYN, et al., Appellants, v. NORMANDY METALS, INC., Appellant; Fireman's Fund Insurance Company of Ohio, Appellee.
• Court: Ohio Supreme Court

Page 173

49 Ohio St.3d 173

551 N.E.2d 962

HARASYN, et al., Appellants, v. NORMANDY METALS, INC., Appellant Fireman's Fund Insurance Company of Ohio, Appellee.

No. 88-1700.

Supreme Court of Ohio.

Submitted Nov. 8, 1989.

Decided March 7, 1990.

Syllabus by the Court

Public policy does not prohibit an employer from securing insurance against compensatory damages sought by an employee in tort where the employer's tortious act was one performed with the knowledge that injury was substantially certain to occur.

Appellant Dick Harasyn ("Harasyn") was employed by appellant Normandy Metals, Inc. ("Normandy"). On October 28, 1983, he suffered the loss of four fingers of his left hand in an industrial accident. He filed suit, alleging that his injuries were the result of an intentional tort by Normandy within the meaning of Blankenship v. Cincinnati Milacron Chemicals, Inc. (1982), 69 Ohio St.2d 608, 23 O.O.3d 504, 433 N.E.2d 572.

Normandy was insured by appellee Fireman's Fund Insurance Company of Ohio ("Fireman's") under a "General Liability Policy" (the "Policy") and an "Employers' Liability Stop-Gap Coverage Endorsement" subtitled "Supplementary State Endorsements: Ohio" (the "Endorsement"). The Policy provided coverage for claims arising from bodily injury caused by an "occurrence." It contained the following language:

" * * * '[O]ccurrence' means an accident, including continuous or repeated exposure to conditions, which results in bodily injury or property damage neither expected nor intended from the standpoint of the insured[.]" (Emphasis added.)

The Endorsement contained the following language:

"It is agreed that such insurance as is afforded by the policy under Bodily Injury Liability applies also to the liability of the Insured for damages because of bodily injury by accident or disease, including death at any time resulting therefrom, sustained by any employee of the Insured arising out of and in the course of his employment by the Insured * * * subject to the following provisions:

" * * *

"B. As respects the insurance afforded by this endorsement, the exclusions of the policy are deleted. This insurance does not apply:

"a. [to injuries to crewmembers of ships and aircraft subject to specified federal compensation systems, or to any employee not covered by workers' compensation];

"b. a liability assumed by the Insured under any contract or agreement * * *;

"c. (1) to punitive or exemplary damages on account of bodily injury to or death of any employee employed in violation of law, or (2) with respect to any employee employed in violation of law with the knowledge or acquiescence of the Insured * * *;

"d. [to any claim not brought within thirty-six months of the expiration date of the policy];

"e. to any obligation for which the Insured * * * may be held liable under any workmen's compensation or occupational disease law, any unemployment compensation or disability benefits law, or under any similar law;

"f. to fines or penalties imposed on the Insured for failure to comply with the requirements of any workmen's compensation, occupational disease or industrial safety law.

"C. Definitions

" * * *

"b. Assault and Battery. Assault and battery shall be deemed an accident unless committed by or at the direction of the Insured." (Emphasis added.)

Robert Grevey, the independent insurance agent who sold Normandy the Policy and Endorsement, testified at a deposition that he believed the Endorsement would "provide a defense" in employer intentional tort cases "until the case reached the point where the act * * * was deemed intentional." He commented that "Ohio stop-gap coverage became the thing to buy" in the wake of the decision in Blankenship, supra.

Fireman's, though denying coverage, provided counsel for Normandy's defense against Harasyn. On December 31, 1985, Harasyn and Normandy entered into a consent judgment entry awarding Harasyn $200,000 plus costs and interest. The counsel provided by Fireman's signed the entry as attorney for Normandy.

On January 31, 1986, Harasyn filed a supplementary complaint, pursuant to R.C. 3929.06, naming Fireman's as "New Party Defendant" and praying that Normandy's insurance be used to satisfy the judgment. Harasyn also sought punitive damages and attorney fees because of Fireman's alleged bad faith refusal to satisfy the judgment against Normandy. Normandy cross-claimed against Fireman's, alleging bad faith denial of coverage and seeking punitive damages.

The trial court granted summary judgment for Harasyn and Normandy on the indemnity claim and ordered Fireman's to pay the judgment. It granted judgment in favor of Fireman's on the bad faith claims, and overruled a motion by Fireman's to transfer the case to the Industrial Commission pursuant to R.C. 4121.80, the then-newly enacted employer intentional tort statute.

Fireman's appealed, contending that the Endorsement did not cover the intentional torts of an employer. Even if it did, Fireman's claimed, such insurance would be void as against public policy. The court of appeals held that the Endorsement did cover employer intentional torts, but such coverage was void as against public policy. Harasyn and Normandy appealed to this court.

This cause is before the court pursuant to the allowance of motions to certify the record.

Joseph L. Coticchia Co., L.P.A., and Joseph L. Coticchia, for appellants, Dick and Louella Harasyn.

Petro, Rademaker, Matty & McClelland, Robert C. McClelland and James M. Petro, Cleveland, for appellant, Normandy Metals, Inc.

Crabbe, Brown, Jones, Potts & Schmidt, Steven B. Ayers and Jeffrey M. Lewis, Columbus, for appellee, Fireman's Fund Ins. Co. of Ohio.

Dinsmore & Shohl and George B. Wilkinson, Cincinnati, urging reversal for amicus curiae, Cincinnati Die Casting Co.

Vorys, Sater, Seymour & Pease Russell P. Herrold, Jr., and Robert A. Minor, Columbus, urging reversal for amicus curiae, Ohio Mfrs' Ass'n.

Dinsmore & Shohl and Mark A. VanderLaan, Cincinnati, urging reversal for amicus curiae, Quantum Chemical Corp.

Harris, Bella & Burgin, Jerald D. Harris and Barry R. Levy, Cincinnati, urging reversal for amicus curiae, Ohio Academy of Trial Lawyers.

HERBERT R. BROWN, Justice.

In this case, we must decide whether public policy prohibits an employer from insuring against tort claims by employees in cases where the employer did not intend to injure the employee but knew that injury was substantially certain to occur. For the reasons which follow, we find that it does not.

I

We begin our discussion with an analysis of the nature of employer intentional torts. In Van Fossen v. Babcock & Wilcox Co. (1988), 36 Ohio St.3d 100, 522 N.E.2d 489, paragraphs five and six of the syllabus, we adopted, in effect, the definition of an "intentional tort" contained in 1 Restatement of the Law 2d, Torts (1965) as the law of Ohio. Under this standard, an intentional tort occurs when " * * * the actor desires to cause consequences of his act, or * * * he believes that the consequences are substantially certain to result from it." 1 Restatement of the Law 2d, Torts (1965) 15, Section 8A. This definition encompasses two different levels of intent. The first level, which we will refer to as "direct intent," is where the actor does something which brings about the exact result desired. In the second, the actor does something which he believes is substantially certain to cause a particular result, even if the actor does not desire that result. ¹

It appears that most employer intentional torts, including the claim pled in the instant case, fall into the latter category. ² Where the employer's alleged tortious actions were not taken with deliberate intent to injure the employee, and where the damages sought are to compensate for injury rather than to punish wrongdoing, the public policy argument for depriving the employer of insurance protection is not compelling.

All liability insurance protects the tortfeasor from economic loss resulting from legal liability. Prosser & Keeton, The Law of Torts (5 Ed.1984) 585, Section 82 ("Prosser"); Keeton & Widiss, Insurance Law (1988) 517, Section 5.4(c)(5) ("Keeton"). At one time, liability insurance was attacked on public policy grounds "as an encouragement to antisocial conduct and a relaxation of vigilance toward the rights of others, by relieving the actual wrongdoer of liability. * * * " Prosser, supra, at 585, Section 82. As tort law evolved toward an emphasis on victim compensation, id. at 7, Section 2, and "it became apparent that no dire consequences in fact resulted," id. at 586, Section 82, public policy came to favor liability insurance for negligent acts as a means of assuring that innocent persons are made whole. This policy of assuring victim compensation has been extended to "wanton" and "reckless" torts. Keeton, supra, at 524-525, Section 5.4(d)(3).

It is often said that public policy prohibits liability insurance for intentional torts. Keeton, supra, at 519, Section 5.4(d)(1). This statement is based on "the assumption that such conduct would be encouraged if insurance were available to shift the financial cost of the loss from the wrongdoer to his insurer. * * * " Farbstein & Stillman, Insurance for the Commission of Intentional Torts (1969), 20 Hastings L.J. 1219, 1245-1246. However, this blanket prohibition "makes no distinctions as to the various forms of intentional wrongdoing and does not admit the possibility that some torts might not be particularly encouraged if insurance were available for them." Id. at 1251. The better view is to prohibit insurance only for those intentional torts where "the fact of insurance coverage can be related in some substantial way to the commission of wrongful acts of that character. * * * " Isenhart v. General Cas. Co. (1962), 233 Or. 49, 52-53, 377 P.2d 26, 28; Farbstein & Stillman, supra, at 1251-1253. In the case of a "direct intent" tort, the presence of insurance would encourage...