State Farm Fire & Cas. Co. v. Hiermer, C2-87-350.

• Decision Date: 26 October 1988
• Docket Number: No. C2-87-350.,C2-87-350.
• Citation: 720 F. Supp. 1310
• Parties: STATE FARM FIRE & CASUALTY COMPANY, Plaintiff, v. Ronald W. HIERMER, et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

720 F. Supp. 1310

STATE FARM FIRE & CASUALTY COMPANY, Plaintiff, v. Ronald W. HIERMER, et al., Defendants.

No. C2-87-350.

United States District Court, S.D. Ohio, E.D.

October 26, 1988.

COPYRIGHT MATERIAL OMITTED

Brian Bradigan, Hamilton, Kramer, Myers & Cheek, Columbus, Ohio, for plaintiff.

James S. Mowery, Jr., Worthington, Ohio, and James K. Reuss, Columbus, Ohio, for defendants.

MEMORANDUM OPINION AND ORDER

GRAHAM, District Judge.

This matter is before the Court on the cross-motions for summary judgment of all the parties: plaintiff, State Farm Fire & Casualty Company ("State Farm"), a corporation with its principal place of business in Illinois; defendant Ronald W. Hiermer and defendant Cincinnati Insurance Company ("CIC") who are both citizens of Ohio. The parties seek declaratory judgment pursuant to 28 U.S.C. § 2201 with respect to whether or not State Farm or CIC have any duty to defend and to indemnify Mr. Hiermer under their policies.

I. Jurisdiction and Declaratory Relief

Plaintiff has asserted subject matter jurisdiction pursuant to 28 U.S.C. §§ 2201 and 1441. The former provision provides for declaratory relief by a district court "in a case of actual controversy within its jurisdiction." Section 1441, the removal statute, does not apply to this case which was originally filed in this Court. Neither statute would confer subject matter jurisdiction. Fed.R.Civ.P. 12(h) provides for dismissal of any action at any time whenever "it ... appears that the court lacks subject matter jurisdiction." However, the complaint alleges the facts necessary to establish diversity jurisdiction under 28 U.S.C. § 1332.

Even though a district court may have diversity jurisdiction, it is discretionary whether or not to grant relief pursuant to the declaratory relief statute, 28 U.S.C. § 2201. Green v. Mansour, 474 U.S. 64, 106 S.Ct. 423, 88 L.Ed.2d 371 (1985). Several factors must be considered: (1) whether the judgment would settle the controversy; (2) whether the declaratory judgment would serve a useful purpose in clarifying the relations at issue; (3) whether an action for declaratory relief is being used merely for "procedural fencing" or "to provide an arena for a race for res judicata"; (4) whether declaratory relief would increase friction between the federal and state courts or improperly encroach on state jurisdiction; (5) whether there is a more effective alternative. Grand Trunk Western Railroad v. Consolidated Rail Corp., 746 F.2d 323, 326 (6th Cir.1984). Declaratory relief has been held appropriate in construing insurance contract provisions:

A declaratory judgment proceeding which involves only the extent of the coverage of an insurance policy and not the liability of the insured to the persons injured in the accident, will be entertained in the Federal Court, and the insurer is entitled to have the extent of the coverage of its policy declared in such a proceeding,—other essentials of jurisdiction being present.

American States Insurance Co. v. D'Atri, 375 F.2d 761, 763 (6th Cir.1967) (quoting, Maryland Casualty Co. v. Faulkner, 126 F.2d 175, 178 (6th Cir.1942)); accord State Farm Fire and Casualty Co. v. Odom, 799 F.2d 247 (6th Cir.1986).

The factors set forth in Grand Trunk do not preclude the granting of declaratory relief in this case. The insurance contracts at issue will be construed under Ohio law. The Sixth Circuit has held:

The general rule in diversity cases is that a federal court must apply the law as expressed by the highest court of the state. Clutter v. Johns-Manville Sales Corp., 646 F.2d 1151 (6th Cir.1981); Ruth v. Bituminous Casualty Corp., 427 F.2d 290 (6th Cir.1970). If the highest court of the state has not spoken, however, then the federal court ascertains what the state law is and applies it. See West v. American Telephone and Telegraph Co., 311 U.S. 223, 61 S.Ct. 179, 85 L.Ed. 139 (1940); Clutter, supra at 1153.

McPherson v. Cleveland Punch and Shear Co., 816 F.2d 249, 251 (6th Cir.1987) (quoting, Coleman v. Western Electric Co., 671 F.2d 980 (6th Cir.1982)).

II. Facts

On August 14, 1986, John D. Penn filed suit against Rockwell International Corporation and Ronald W. Hiermer, Penn's supervisor at Rockwell, in the United States District Court, Southern District of Ohio, Eastern Division, Case Number C-2-86-0992. That case is pending before The Honorable John D. Holschuh. In that action, Penn alleges that defendant Hiermer violated 42 U.S.C. § 1981; Title VII of the Civil Rights Act of 1964, 42 U.S.C. § 2000e et seq., and Ohio common law by engaging in racial discrimination, retaliation, slander, and intentional and negligent infliction of emotional distress. At the time of the actions alleged by Penn, defendant Hiermer was covered by State Farm Homeowners Policy, Number XX-XXXXXX-X, Form FP7185.1. That policy generally insured against personal liability of the insured for bodily injury and for property damage with a limit of liability of $300,000. Defendant Hiermer was also covered by CIC's personal umbrella liability policy, Number CCC 289 00 11 which provides liability coverage up to one million dollars.

Neither insurance company disputes that the policies were in effect. However, both companies insist that the terms of their policies as interpreted under Ohio law do not provide coverage to Mr. Hiermer.

III. The Standard for Summary Judgment

Fed.R.Civ.P. 56(c) provides:

The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.

The evidence must be viewed in a light favorable to the party opposing the summary judgment and that party must be given the benefit of all reasonable inferences. Potters Medical Center v. City Hospital Association, 800 F.2d 568 (6th Cir. 1986). However, the movant need not present evidence to negate every aspect of the non-movant's claim, it need only support its own claim that there is no genuine issue of material fact. See Celotex Corp. v. Catrett, 477 U.S. 317, 106 S.Ct. 2548, 2553, 91 L.Ed.2d 265 (1986).

IV. Discussion and Law

In his suit, Penn claims violations of 42 U.S.C. § 1981 and Title VII alleging that defendant Hiermer intentionally discriminated and retaliated against him. The only claims that could be based upon negligence are the claims of emotional distress and slander.

An insurer that is obligated to provide a defense to a negligence claim is also required to make a defense of the intentional tort claims, "regardless of the ultimate outcome of the action or the insurance company's ultimate liability to the insured." Preferred Mutual Insurance Co. v. Thompson, 23 Ohio St.3d 78, 80, 491 N.E.2d 688, 690 (1986). However, an insurer may conduct a defense "in good faith without waiving its right to assert at a later time the policy defenses it believes it has, provided that it gives its insured notice of any reservation of rights." Id. at 82, 491 N.E.2d at 691 (quoting Motorists Mutual Insurance Co. v. Trainor, 33 Ohio St.2d 41, 294 N.E.2d 874 (1973)). The insurers in the case at bar have followed this procedure and they have provided a defense in the Penn lawsuit pending a ruling by this Court in this action.

The facts in the record establish that all actions of which Penn complains occurred on the premises of Rockwell. Furthermore, all encounters between Penn and Hiermer occurred in Penn's role as employee and Hiermer's role as supervisor. In Penn's EEOC charge he states that "All instances of Ronalds sic Hiermer's assaulting and battering me and his verbal abuse of me took place while I was performing my job duties on the premises of Rockwell International Corporation, and the managerial superiors of Ronald Hiermer had knowledge of these instances." See also the Hiermer affidavit (Doc. No. 34).

Both State Farm and CIC assert that their insurance policies do not cover the sort of actions alleged in Penn's complaint against Hiermer. Consequently, both State Farm and CIC argue that they do not have a duty to defend or to indemnify defendant Hiermer.

Under Ohio law, the burden is on the insured to prove that he is entitled to coverage by showing facts sufficient to establish that his loss was within the description of the policy. Sterling Merchandise Co. v. Hartford Insurance Co., 30 Ohio App.3d 131, 506 N.E.2d 1192 (Summit Cty.1986). The burden is on the insurer to prove that a particular insurance policy exclusion applies. Gibbons v. Metropolitan Life Insurance Co., 135 Ohio St. 481, 21 N.E.2d 588 (1939). In construing the language in an insurance policy exclusion, clear and unambiguous language is to be understood in its ordinary, usual or popular sense. Randolf v. Grange Mutual Casualty Co., 57 Ohio St.2d 25, 385 N.E.2d 1305 (1979). Courts may not rewrite, through rules of construction, the unambiguous terms of an insurance contract. Gomolka v. State Automobile Mutual Insurance Co., 70 Ohio St.2d 166, 168, 436 N.E.2d 1347, 1349 (1982). However, if the language of a policy is unclear or ambiguous, it should be strictly construed against the insurance company that drafted the contract. American Financial Corp. v. Fireman's Fund Insurance Co., 15 Ohio St.2d 171, 239 N.E.2d 33 (1968); Ohio Farmers Insurance Co. v. Wright, 17 Ohio St.2d 73, 246 N.E.2d 552 (1969). Finally, courts must examine insurance contracts in their entirety to determine if there are any applicable exceptions to their coverage. Zanco, Inc. v. Michigan Mutual Insurance Co., 11 Ohio St.3d 114, 115, 464 N.E.2d 513, 515 (1984).

A. The State Farm Policy

The State Farm policy does not promise to defend false or fraudulent claims. Therefore, State Farm may show that there is no coverage based on the actual facts, regardless of the allegations of the complaint. "In a declaratory action, the insurer may proceed to...