General Acc. Ins. Co. v. Insurance Co. of North America

• Decision Date: 28 June 1989
• Docket Number: No. 88-677,88-677
• Citation: 44 Ohio St.3d 17,540 N.E.2d 266
• Parties: GENERAL ACCIDENT INSURANCE COMPANY et al., Appellants, v. INSURANCE COMPANY OF NORTH AMERICA, Appellee, et al.
• Court: Ohio Supreme Court

Page 17

44 Ohio St.3d 17

540 N.E.2d 266

GENERAL ACCIDENT INSURANCE COMPANY et al., Appellants, v. INSURANCE COMPANY OF NORTH AMERICA, Appellee, et al.

No. 88-677.

Supreme Court of Ohio.

Submitted April 11, 1989.

Decided June 28, 1989.

Bethlehem Steel Corporation ("Bethlehem") and McKee-Otto, a joint venture, entered into a contract on July 2, 1979 for the design and construction of a battery of new coke ovens at Bethlehem's Sparrows Point Plant. The construction of these ovens was completed by April 19, 1982.

Subsequent to the completion, problems arose with the coke ovens. As a result Bethlehem brought a complaint ("Bethlehem complaint") against McKee-Otto, as a principal obligor under the contract. The McKee-Otto joint venture was composed of Davy McKee Corporation and Dr. C. Otto & Company, a German corporation, each fifty-percent partners. Davy McKee Corporation, Davy, Inc., Davy International, Inc., Davy Corporation Limited, and Dr. C. Otto & Company also were sued derivatively as a result of their affiliation with McKee-Otto. Bethlehem in its complaint contended that because of alleged defects by McKee-Otto, it suffered damages and incurred expenses as a result of integration of defective coke ovens into its steel plant.

General Accident Insurance Company of America ("General Accident"), appellant, had issued "Architects and Engineers Professional Liability Insurance" to McKee Otto, Davy McKee Corporation, Davy, Inc., and Davy International ("the insureds") for the period April 1, 1982 to April 1, 1983. The liability limit on this policy was twenty-five million dollars.

The Bethlehem complaint contained allegations falling within the coverage of the General Accident insurance policy. A demand was made on behalf of the insureds for appellant to assume the defense of the Bethlehem complaint. Appellant assumed the defense.

Insurance Company of North America ("INA"), appellee, had issued a comprehensive general liability policy to McKee-Otto, Davy McKee, Davy, Inc., and Davy International for the period April 1, 1982 to April 1, 1983 for one million dollars. In the INA policy, appellee was to pay all sums "which the Insured shall become legally obligated to pay as damages because of [A.] bodily injury or [B.] property damage to which this insurance applies caused by an occurrence." Appellee also agreed to defend any suit brought against the insured seeking "damages on account of such bodily injury or property damage, even if any of the allegations of the suit are groundless, false or fraudulent."

National Union Fire Insurance Company of Pittsburgh ("National Union") provided the same insurance coverage as INA with limits of ten million dollars in excess of the INA policy.

Upon filing of the Bethlehem complaint, a demand also was made upon appellee for defense and indemnity. Appellee refused to defend or contribute to the defense of the insureds and denied any liability for indemnity under the Bethlehem complaint.

The Bethlehem complaint further alleged that the negligent design of the coke ovens by Dr. C. Otto & Company ("Dr. C. Otto"), caused it damages at the Sparrows plant. Dr. C. Otto was insured by Gerling-Konzern Allgemeine Versicherungs ("Gerling") for the period from January 1, 1983 to January 1, 1984. The policy provided coverage for "legal liability arising from the character, legal relationship, and activities * * * [of Dr. C. Otto's] planning and construction as well as the design of * * * coke oven plants." Gerling refused to defend Dr. C. Otto on the Bethlehem complaint.

Dr. C. Otto also was insured by Nordstern Allgemeine Versicherungs ("Nordstern") for property damage for the period October 27, 1982 to October 27, 1983. Nordstern coverage was for "legal liability arising from * * * [the] [p]lanning and construction of coke plants." Nordstern also refused to defend or indemnify Dr. C. Otto regarding the Bethlehem complaint.

A negotiated settlement was agreed to between Bethlehem and the insureds. Appellee agreed to tender one million dollars for use by appellant in settling the case on behalf of the insureds. Appellee, however, reserved the right to contest in an appropriate forum its obligation to defend and indemnify under the allegations of the Bethlehem complaint. On March 1, 1985, the claim of Bethlehem was settled for $18,500,000. One million dollars of the settlement amount was contributed by appellee.

The insureds assigned over to appellant their claims, demands, rights and causes of action against appellee and National Union.

On March 19, 1985, appellant, the insureds and Dr. C. Otto brought a declaratory judgment action against appellee, National Union, Gerling, and Nordstern. Appellant seeks a declaration that appellee had a duty to defend the insureds against the Bethlehem complaint. Appellant also seeks reimbursement for costs, charges and expenses incurred in the defense of the Bethlehem complaint and those incurred in the prosecution of the declaratory judgment action. The insureds and Dr. C. Otto seek reimbursement from appellee, Gerling and Nordstern for all expenses incurred as a result of cooperating in their own defense of the Bethlehem complaint. Appellant, the insureds and Dr. C. Otto also seek reimbursement for indemnification paid by appellant.

Appellee answered the declaratory judgment action and asserted a counterclaim alleging that it owed no duty to defend or indemnify its insureds regarding the Bethlehem complaint and was entitled to the one million dollars contributed to the settlement of the Bethlehem complaint as well as interest, attorney fees, and other incidental damages. In sum, appellee prayed for $1,500,000 from appellant, the insureds and Dr. C. Otto.

Appellant and the insureds moved for partial summary judgment on their claim that appellee had a duty to defend the insureds. Appellee filed a cross-motion also seeking partial summary judgment on the duty-to-defend claim. The trial court in its judgment declared that appellee owed no duty to defend as the allegations in the Bethlehem complaint were outside the scope of its insurance policy. It also added that there was "no just reason for delay."

Appellant and the insureds appealed this adverse decision. Appellee countered that the appeal should be dismissed because the trial court's order did not constitute a final appealable order. The court of appeals dismissed the appeal without comment.

Appellant and the insureds appealed to this court, alleging that the court of appeals incorrectly found that the trial court's order was not final and appealable.

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Arter & Hadden, Hugh M. Stanley, Jr., and Anthony J. Damelio, Jr., Cleveland, for appellants.

Gallagher, Sharp, Fulton & Norman, Michael Gallagher and Mark B. Smith, Cleveland, for appellee.

ALICE ROBIE RESNICK, Justice.

We must once again consider what is a final appealable order pursuant to R.C. 2505.02 and Civ.R. 54(B).

It is well-established that an order must be final before it can be reviewed by an appellate court. If an order is not final, then an appellate court has no jurisdiction. "Courts of appeals shall have such jurisdiction as may be provided by law to review and affirm, modify, or reverse judgments or final orders of the courts of record inferior to the court of appeals within the district and shall have such appellate jurisdiction as may be provided by law to review and affirm, modify, or reverse final orders or actions of administrative officers or agencies." Section 3(B)(2), Article IV of the Ohio Constitution. See, also, R.C. 2505.03.

R.C. 2505.02 provides in part:

"An order that affects a substantial right in an action which in effect determines the action and prevents a judgment, an order that affects a substantial right made in a special proceeding or upon a summary application in an action after judgment, or an order that vacates or sets aside a judgment or grants a new trial is a final order that may be reviewed, affirmed, modified or reversed, with or without retrial."

Determining what is a final order is difficult in litigation involving multiple parties and/or multiple claims. Historically, an appeal could not be taken until all claims and parties in an action had been disposed of. Permitting only one appeal from any one action was adequate at a time when most litigation involved only two parties and one claim. However, as joinder of parties and claims became more prevalent, it came to be accepted that to "deny an immediate appeal from the disposition of an identifiable and separable portion of a highly complex action might result in an injustice. * * * " 10 Wright & Miller, Federal Practice and Procedure (1983) 20, Section 2653. Hence, Civ.R. 54(B) was created "to make a reasonable accommodation of the policy against piecemeal appeals with the possible injustice sometimes created by the delay of appeals--a possibility rendered more likely by procedural rules allowing liberalized joinder of parties and claims." Alexander v. Buckeye Pipe Line Co. (1977), 49 Ohio St.2d 158, 160, 3 O.O.3d 174, 175, 359 N.E.2d 702, 703.

Civ.R. 54(B) is based on its federal counterpart, Fed.R.Civ.P. 54(b), see Staff Notes to Civ.R. 54(B), and provides:

"When more than one claim for relief is presented in an action, whether as a claim, counterclaim, cross-claim or third-party claim, or when multiple parties are involved, the court may enter final judgment as to one or more but fewer than all of the claims or parties only upon an express determination that there is no just reason for delay. * * * "

Thus, a party may appeal a judgment in some instances even though other claims and/or parties still remain in the action. However, when a court enters final judgment as to fewer than all of the claims or parties, it must expressly state that there is no just reason to delay an appeal on that judgment. Without such express...