City of Willoughby Hills v. Cincinnati Ins. Co.

• Decision Date: 15 February 1984
• Docket Number: Nos. 82-1727,83-350,s. 82-1727
• Citation: 459 N.E.2d 555,9 Ohio St.3d 177,9 OBR 463
• Parties: , 9 O.B.R. 463 CITY OF WILLOUGHBY HILLS, Appellant, v. CINCINNATI INSURANCE COMPANY, Appellee.
• Court: Ohio Supreme Court

Page 177

9 Ohio St.3d 177

459 N.E.2d 555, 9 O.B.R. 463

CITY OF WILLOUGHBY HILLS, Appellant, v. CINCINNATI INSURANCE COMPANY, Appellee.

Nos. 82-1727, 83-350.

Supreme Court of Ohio.

Feb. 15, 1984.

Byron & Cantor, Barry M. Byron and Patrick T. Ryan, Willoughby, for appellant.

Dyson, Schmidlin & Foulds Co., L.P.A., James J. Dyson and Robert J. Foulds, Lyndhurst, for appellee.

Gallagher, Sharp, Fulton & Norman, John B. Robertson, Cleveland, Lane, Alton & Horst, Jeffrey W. Hutson and Jeffrey D. Boyd, Columbus, urging affirmance for amicus curiae, Ohio Ass'n of Civil Trial Attys.

FRANK D. CELEBREZZE, Chief Justice.

In Motorists Mut. v. Trainor (1973), 33 Ohio St.2d 41, 294 N.E.2d 874 , this court held at paragraphs one and two of the syllabus:

"1. An insurance company, which by contract is obligated to defend its insured in a negligence action, may defend 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.

"2. The test of the duty of an insurance company, under a policy of liability insurance, to defend an action against an insured, is the scope of the allegations of the complaint in the action against the insured, and where the complaint brings the action within the coverage of the policy the insurer is required to make a defense, regardless of the ultimate outcome of the action or its liability to the insured. (Socony-Vacuum Oil Co. v. Continental Cas. Co., 144 Ohio St. 382, 59 N.E.2d 199 , approved and followed.)"

The question presented in this appeal is whether the determination of the duty to defend is limited solely to an examination of the pleadings in the action against the insured. The resolution of this question necessitates that we define the term "scope of allegations" as it is used in Motorists Mut., supra.

Our decisions in Motorists Mut., supra, and Socony-Vacuum, supra, clearly stand for the rule that the duty to defend may arise from the complaint alone if the allegations in the complaint unequivocally bring the action within the policy coverage. Appellee suggests that the converse must also be true, i.e., where the pleadings do not establish a claim within the policy coverage, no duty to defend arises. However convenient appellee's suggestion may be, we feel that the duty to defend need not arise solely from the allegations in the complaint but may arise at a point subsequent to the filing of the complaint. Milliken v. Fidelity & Cas. Co. of N.Y. (C.A.10, 1964), 338 F.2d 35; Spruill Motors, Inc. v. Universal Underwriters Ins. Co. (1973), 212 Kan. 681, 512 P.2d 403; Pendleton v. Pan American Fire & Cas. Co. (C.A.10, 1963), 317 F.2d 96, 100; Employers Mut. Liability Ins. Co. v. Puryear Wood Products Co. (1969), 247 Ark. 673, 676, 447 S.W.2d 139, 141. For instance, in Allen v. Standard Oil Co. (1982), 2 Ohio St.3d 122, 443 N.E.2d 497, this court held that, in the context of an indemnification agreement, the duty to defend could attach at some later stage in the litigation despite the fact that the pleadings did not conclusively establish the duty.

The rationale for the rule was stated in Milliken, supra, at page 40, as follows:

"The reason for this rule is that ' * * * [u]nder the Federal Rules of Civil Procedure the dimensions of a lawsuit are not determined by the pleadings because the pleadings are not a rigid and unchangeable blueprint of the rights of the parties. * * * ' "

Further, in Solo Cup Co. v. Federal Ins. Co. (C.A.7, 1980), 619 F.2d 1178, the court stated at 1185:

" * * * especially since the advent of notice pleading, in a case where there is doubt as to whether a theory of recovery within the policy coverage has been pleaded in the underlying complaint, the insurer must defend, and its defense obligations will continue until such time as the claim against the insured is confined to a recovery that the policy does not cover." See, also, Hagen Supply Corp. v. Iowa National Mut. Ins. Co. (C.A.8, 1964), 331 F.2d 199, 204.

Like the federal system, Ohio has embraced notice pleading through adoption of the Ohio Rules of Civil Procedure. See Civ.R. 8(A) and (E). No longer must a complaint set forth specific factual allegations. All that Civ.R 8(A) requires is " * * * (1) a short and plain statement of the claim showing that the pleader is entitled to relief, and (2) a demand for judgment for the relief to which he deems himself entitled. * * * "

In addition, no longer is a trial strictly limited to the issues raised in the pleadings. See Civ.R. 15(B).

It follows that the pleadings alone may not provide sufficient factual information to determine whether the insurer has an obligation to defend the insured. It remains true that where the pleadings unequivocally bring the action within the coverage afforded by the policy, the duty to defend will attach. Motorists Mut., supra; State Farm Fire & Cas. Co. v. Pildner (1974), 40 Ohio St.2d 101, 321 N.E.2d 600 . However, where the insurer's duty to defend is not apparent from the pleadings in the case against the insured, but the allegations do state a claim which is potentially or arguably within the policy coverage, or there is some doubt as to whether a theory of recovery within the policy coverage had been pleaded, the insurer must accept the defense of the claim. Thus, the "scope of the allegations" may encompass matters well outside the four corners of the pleadings.

In the courts below, the inquiry was erroneously confined strictly to the specific allegations raised in the respective complaints. Pursuant to the rule announced herein, we hereby remand the cause to the trial court where it will be determined whether the underlying factual allegations in the Kondrat complaint arguably or potentially fall within the coverage afforded by appellee. ¹

With respect to the Macko complaint, however, we recently held in Embers Supper Club, Inc. v. Scripps-Howard Broadcasting Co. (1984), 9 Ohio St.3d 22, 457 N.E.2d 1164, as follows:

"In cases involving defamation of private persons, where a prima facie showing of defamation is made by the plaintiff, the question which a jury must determine by a preponderance of the evidence is whether the defendant acted reasonably in attempting to discover the truth or falsity or defamatory character of the publication."

Having adopted the "negligence" standard for defamation, the Macko complaint clearly comes within the policy coverage. The Macko complaint alleged that appellant caused a defamatory newspaper story to be published in the Cleveland Plain Dealer and claimed, inter alia, that:

"At the time of such publication, the defendants knew or could within the exercise of reasonable care have ascertained that the matter was untrue."

The allegations of negligence asserted by Macko et al., as a result, fall...