Gnfh, Inc. v. W. Am. Ins. Co.

• Decision Date: 01 June 2007
• Docket Number: No. 06-CA-50.,06-CA-50.
• Citation: 2007 Ohio 2722,873 N.E.2d 345,172 Ohio App.3d 127
• Parties: GNFH, INC. et al., Appellants, v. WEST AMERICAN INSURANCE CO. et al., Appellees.
• Court: Ohio Court of Appeals

873 N.E.2d 345

172 Ohio App.3d 127

2007-Ohio-2722

GNFH, INC. et al., Appellants, v. WEST AMERICAN INSURANCE CO. et al., Appellees.

No. 06-CA-50.

Court of Appeals of Ohio, Second District, Miami County.

Decided June 1, 2007.

Beitzel Law Office and David E. Beitzel, Troy, for appellants.

Droder & Miller Co., L.P.A., and W. John Sellins, Cincinnati, for appellees.

FAIN, Judge.

{¶ 1} Plaintiffs-appellants Hector Gonzalez, GNFH, Inc., Nick Pappas, and Lincoln Square Restaurant appeal from a summary judgment rendered against them on their claim for declaratory judgment. In the trial court, appellants claimed that defendants-appellees West American Insurance Company and Ohio Casualty Insurance Company (collectively, "West American") owed a duty of defense in an underlying lawsuit brought by Linda Trader against Gonzalez, GNFH, and several other parties. The trial court disagreed and found no duty to defend.

{¶ 2} Appellants contend that the trial court erred in finding no duty to defend. We agree. The judgment of the trial court is reversed, and this cause is remanded for further proceedings.

I

{¶ 3} In February 2004, Linda Trader filed a 15-count complaint in Miami County Common Pleas Court against GNFH, Lincoln Square Restaurant, Hector Gonzalez, Stacy Gonzalez, and Debbie Robinson Lawver. Trader alleged that she had been employed as a waitress at Lincoln Square Restaurant between June 1999 and late January 2002. Trader further alleged that Lawver and both Gonzalezes were the owners and operators of Lincoln Square and also managed the restaurant. GNFH was identified as a corporation doing business in Troy, Ohio, as Lincoln Square Restaurant.

{¶ 4} According to the complaint, male co-workers, including Hector Gonzalez, sexually harassed Trader during her employment by making unwelcome and vulgar remarks about her conduct and appearance, by groping her breasts, buttocks, and genitalia, by forcing her face toward them to kiss her mouth, and by inflicting bruises and scratches, which Trader regularly incurred in fending off physical contact. In addition, Trader claimed that she was physically assaulted by a male employee on January 27, 2002, while trying to fend off unwelcome sexual contact. At that point, she quit her employment. The complaint alleged that Trader had repeatedly complained to the Gonzalezes and Lawver about the offensive conduct, but nothing was done.

{¶ 5} After setting forth these facts, Trader listed 15 claims, including (1) quid pro quo sexual harassment in violation of R.C. 4112.02; (2) hostile-employment-environment harassment in violation of R.C. 4112.02; (3) gender discrimination in violation of Title VII of the Civil Rights Act of 1964 and R.C. 4112.02; (4) gender harassment in violation of Title VII; (5) Genaro v. Cent. Transport claims, which allow supervisors or managers to be held jointly and severally liable in their individual capacity for conduct violating R.C. Chapter 4112; (6) intentional infliction of emotional distress based on the failure of the Gonzalezes and Lawver to stop or remedy the harassment; (7) negligent infliction of emotional distress, based on the negligent failure of the Gonzalezes and Lawver to stop the harassment; (8) workplace retaliation in violation of R.C. 4112.02; (9) constructive discharge; (10) violation of Ohio Civil Rights — R.C. 4112.01 et. seq.; (11) negligent hiring, training, retention and supervision; (12) assault and battery; (13) vicarious liability; (14) breach of contract of employment; and (15) a claim for punitive damages.

{¶ 6} Notice of the lawsuit and a request to defend was sent to West American in February 2004. West American agreed to defend Lincoln Square, Stacy Gonzalez, and Lawver under a reservation of rights but declined to provide a defense for either Hector Gonzalez or GNFH. West American claimed that Hector's alleged acts fell outside the scope of employment or his duties related to the conduct of his business. West American also claimed that GNFH did not meet the definition of an insured under the policy. As a result of the denial of defense, both GNFH and Gonzalez were required to retain their own counsel.

{¶ 7} After a jury trial, the trial court entered judgment in June 2005 against GNFH/Lincoln Square and Hector Gonzalez, jointly and severally, in the amount of $8,750 on the hostile employment or discrimination claim; against GNFH/Lincoln Square in the amount of $875 on the battery claim; against GNFH/Lincoln Square in the amount of $7,000 on the negligent supervision or retention claim; and against GNFH/Lincoln Square and Hector Gonzalez, jointly and severally, in the amount of $17,500 for punitive damages. The trial court also noted that jury interrogatories had found damages for negligent infliction of serious emotional distress to be $875. However, because the jury had answered all three interrogatories on this issue in favor of the three defendants, the court concluded that the jury did not find liability on negligent infliction of emotional distress. Accordingly, the court did not assess damages on this claim.

{¶ 8} The trial court also awarded attorney fees to Trader. A judgment entry was filed in August 2005 awarding Trader $119,801.03 and costs for compensatory and punitive damages and for attorney fees.

{¶ 9} In October 2005, the present action was filed by GNFH, Lincoln Square, Hector Gonzalez, Stacy Gonzalez, Nick Pappas, and NG & G, Inc., against West American and various John Doe defendants. The complaint included claims for breach of contract, bad faith, and breach of fiduciary duty, based on West American's failure to defend and the denial of insurance coverage. The complaint also requested compensatory and punitive damages and attorney fees.

{¶ 10} West American filed an answer and counterclaim for declaratory judgment, asking the court to declare that West American had no duty to defend or to pay defense costs and that West American had no duty to pay the judgment awarded to Trader. The trial court subsequently consolidated Trader's civil action with the present action. In addition, the court ordered Trader to file a supplemental complaint pursuant to R.C. 3929.06. Trader complied with the court's request and filed a supplemental complaint seeking payment of the judgment.

{¶ 11} After the parties filed cross-motions for summary judgment, the trial court rendered summary judgment in favor of West American, finding that West American had no duty to defend or to pay the judgment. The court reasoned that the acts alleged in the complaint were sexual-harassment and sexual-battery torts and classified them as "direct intent" torts, which are precluded in Ohio from being covered by insurance. In addition, the court rejected estoppel. The court noted that while West American had defended three insureds in the underlying action, appellants had failed to specifically plead estoppel when they sought declaratory judgment. Accordingly, the court refused to consider estoppel, other than noting that West American would be estopped from denying that GNFH was an insured. The basis of this decision was that GNFH was the party operating the restaurant at the address listed on the insurance policies and GNFH was also the party who had paid the premiums to West American.

{¶ 12} From the summary judgment rendered against them, appellants appeal.

II

{¶ 13} Appellants' sole assignment of error is as follows:

{¶ 14} "The trial court erred in finding there was no duty to defend Hector Gonzalez or GNFH, Inc. (plaintiff-appellants herein)."

{¶ 15} Under this assignment of error, appellants contend that the trial court improperly engaged in Monday morning quarterbacking by basing its coverage decision on the outcome of the trial in the underlying case. Appellants claim that the trial court should have instead looked to the complaint in the underlying case, which contains allegations that place GNFH and Gonzalez arguably or potentially within policy coverage.

{¶ 16} "A trial court may grant a moving party summary judgment pursuant to Civ. R. 56 if there are no genuine issues of material fact remaining to be litigated, the moving party is entitled to judgment as a matter of law, and reasonable minds can come to only one conclusion, and that conclusion is adverse to the nonmoving party, who is entitled to have the evidence construed most strongly in his favor." Smith v. Five Rivers MetroParks (1999), 134 Ohio App.3d 754, 760, 732 N.E.2d 422. We review decisions granting summary judgment de novo, which means that we apply the same standards as the trial court. Broadnax v. Greene Credit Serv. (1997), 118 Ohio App.3d 881, 887, 694 N.E.2d 167, and Long v. Tokai Bank of California (1996), 114 Ohio App.3d 116, 119, 682 N.E.2d 1052.

{¶ 17} Regarding the duty to defend, the Ohio Supreme Court has said:

{¶ 18} "The duty of defense is much broader than the duty of indemnification and can be invoked even though no liability is ultimately established. * * * In Motorists Mut. Ins. Co. v. Trainor (1973), 33 Ohio St.2d 41, 62 O.O.2d 402, 294 N.E.2d 874, this court held that under a liability insurance policy, it is the scope of the allegations against the insured that determines whether an insurance company has a duty to defend the insured. * * * `[W]here the complaint brings the action within the coverage of the policy the insurer is required to make defense, regardless of the ultimate outcome of the action or its liability to the insured.' * * * The Motorists holding was expanded in Willoughby Hills v. Cincinnati Ins. Co. (1984), 9 Ohio St.3d 177, 179, 9 OBR 463, 459 N.E.2d 555, in which we stated 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.'" Pilkington N. Am., Inc. v. Travelers Cas. & Sur. Co., 112 Ohio St.3d 482, 2006-Ohio-6551, 861 N.E.2d 121, at ¶ 35.

{¶ 19} In Willoughby Hills, the Ohio Supreme Court also...