Grange Mut. Cas. Co. v. City of Columbus

• Decision Date: 11 April 1989
• Docket Number: No. 88AP-386,88AP-386
• Citation: 49 Ohio App.3d 50,550 N.E.2d 524
• Parties: GRANGE MUTUAL CASUALTY COMPANY, Appellant, et al., v. CITY OF COLUMBUS et al., Appellees.
• Court: Ohio Court of Appeals

Page 50

49 Ohio App.3d 50

550 N.E.2d 524

GRANGE MUTUAL CASUALTY COMPANY, Appellant, et al., v. CITY OF COLUMBUS et al., Appellees.

No. 88AP-386.

Court of Appeals of Ohio, Tenth District, Franklin County.

April 11, 1989.

Syllabus by the Court

1. R.C. 2744.05(B) is a constitutional exercise of the state's police power as a reasonable measure necessary for the stabilization of the fiscal impact of the abolishment of sovereign immunity and is reasonably related to the maintenance of the public peace, health and safety.

2. R.C. 2744.05(B) does not violate the Equal Protection, Due Process, and Due Compensation Clauses of the Ohio and United States Constitutions.

Sheppard & Bale and David G. Bale, Columbus, for appellant.

Henry W. Eckhart, Columbus, for Jay V. Eckhart.

Ronald J. O'Brien, City Atty., and David W. Insley, for appellees.

WHITESIDE, Judge.

Plaintiff-appellant, Grange Mutual Casualty Company ("Grange"), appeals from a decision of the Franklin County Municipal Court and raises the following three assignments of error:

"1. The trial court erred in its dismissal of appellant-plaintiff Grange's claim under Ohio Revised Code Section 2744.05(B), because the defense of sovereign immunity as applied under that section violates the principles of equal protection, due process, and due compensation for a taking of property, and is therefore unconstitutional.

"2. The trial court erred in its dismissal of appellant-plaintiff Grange's claim under Ohio Revised Code Section 2744.05(B), because laws must be rationally fashioned to meet a legitimate state interest, and this statute arbitrarily bars insurers which is a classification that has nothing to do with the policy of promoting fiscal soundness.

"3. The trial court erred in dismissing appellant's claim because Chapter 2744 of the Ohio Revised Code does not deprive Grange of all rights to recovery, it only deprives Grange of the right to subrogation through its insurance contract, therefore Grange should have been permitted to submit its actual damages under the statute."

On November 20, 1985, defendant Wayne Wharton, a Columbus police officer, drove a police cruiser into the rear of a vehicle owned by plaintiff Jay V. Eckhart, an insured of Grange. Subsequently, Eckhart alleged that defendants-appellees Wharton and the city of Columbus were liable for the diminution in value of his automobile. Grange filed a subrogation claim against defendants for Grange's payment in the amount of $2,491.42 to Eckhart for his collision loss. The trial court held that Eckhart was damaged as a direct and proximate result of Wharton's negligence and awarded Eckhart judgment in the amount of $4,066.65 against the city of Columbus. However, in a separate entry, the trial court dismissed Eckhart's claim against defendant Wharton and Grange's subrogation claim against both defendants pursuant to R.C. 2744.05(B).

Grange in its first two assignments of error contends that the trial court erred in finding R.C. 2744.05(B) constitutional. Grange argues that R.C. 2744.05(B) violates the Equal Protection, Due Process, and Due Compensation Clauses of the United States and Ohio Constitutions and is not rationally fashioned to meet a legitimate state interest.

One primary issue in this case is whether there is a rational basis for the state to treat an insurer whose insured is negligently injured by an employee of a political subdivision differently than an insurer whose insured is negligently injured by an ordinary tortfeasor.

Section 16, Article I, of the Ohio Constitution states that "[s]uits may be brought against the state, in such courts and in such manner, as may be provided by law." Thus, except to the extent the state by law provides for such a suit, the Ohio Constitution does not provide for suits to be brought against the state as a result of its alleged tortious conduct.

The doctrine of sovereign immunity prevailed in Ohio until 1982 when the Ohio Supreme Court in Haverlack v. Portage Homes, Inc. (1982), 2 Ohio St.3d 26, 30, 2 OBR 572, 575, 442 N.E.2d 749, 752, abolished judicially created sovereign immunity, stating that, since Ohio sovereign immunity for municipalities was judicially created, it could also be judicially abolished. The second paragraph of the Haverlack syllabus holds that the defense of sovereign immunity is not available in the absence of a statute providing immunity to a municipal corporation from an action for damages alleged to be caused by its negligence, in that case, negligence in the operation of its sewage treatment plant. Later, in Strohofer v. Cincinnati (1983), 6 Ohio St.3d 118, 6 OBR 178, 451 N.E.2d 787, municipal sovereign immunity was abolished in all actions for damages alleged to be caused by the tortious conduct of the municipality, in the absence of a statute providing immunity. The basic change was in the nature of the General Assembly action required. Under prior judicial decisions, sovereign immunity existed unless otherwise provided by statute. Raudabaugh v. State (1917), 96 Ohio St. 513, 118 N.E. 102; Krause v. State (1972), 31 Ohio St.2d 132, 60 O.O.2d 100, 285 N.E.2d 736. ¹ Under Haverlack and its progeny, sovereign immunity exists only if provided by statute.

Subsequently, the General Assembly adopted R.C. Chapter 2744, governing, inter alia, municipal tort liability. R.C. 2744.02 defines the extent of the municipal liability. R.C. 2744.02(A)(1), in pertinent part, states that " * * * a political subdivision is not liable in damages in a civil action for injury, death, or loss to persons or property allegedly caused by any act or omission of the political subdivision * * * in connection with a governmental or proprietary function," except as provided in R.C. 2744.02(B). Among other provisions, R.C. 2744.02(B)(1) provides that political subdivisions are liable for injury, death, or loss to persons or property caused by the negligent operation of any motor vehicle by their employees upon the public roads, highways, or streets when the employees are engaged within the scope of their employment and authority. In other words, sovereign immunity exists and a municipal corporation (or other political subdivision) is not liable unless R.C. 2744.02 provides otherwise, which it does in the instance of the negligent operation of a motor vehicle.

When the state consents to be sued, it may qualify and draw perimeters around that granted right without violating due process or equal protection. When a state has the power to give, it may give only part and limit that which is granted. This is true whether the initial "grant" is by judicial decision or by legislative act. In the exercise of the state's right (as defined by Haverlack and Strohofer and their progeny) to circumscribe or limit the power given to persons to sue the state for damages, the state enacted R.C. 2744.05(B), which limits damages to be awarded and states in part:

"If a claimant receives or is entitled to receive benefits for injuries or loss allegedly incurred from a policy or policies of insurance or any other source, the benefits shall be disclosed to the court, and the amount of the benefits shall be deducted from any award against a political subdivision recovered by that claimant. No insurer or other person is entitled to bring an action under a subrogation provision in an insurance or other contract against a political subdivision with respect to such benefits. * * * "

R.C. 2744.05 became effective on November 20, 1985, the day on which the subject accident occurred. Consequently, Grange's subrogation rights were limited by the legislature to suits not involving political subdivisions of the state. Sovereign immunity has long been recognized as not denying any right to equal protection. See Krause v. State, supra, at paragraph four of the syllabus. * * * ²

R.C. 2744.05(B) predicates application of sovereign immunity not upon the basis of the nature of the governmental activity involved but, instead, upon the nature of the claim and of the claimant. Insureds are not permitted to collect alleged damages for which they were reimbursed by insurance, and insurers are not permitted to assert subrogation rights. Essentially, R.C. 2744.05(B) merely abolishes the collateral source rule. The injured claimant cannot recover for damages reimbursed by insurance. Once the collateral source rule is abolished, the very basis for subrogation no longer exists. There is no right of the insured to which the insurer can be subrogated. The abolition of subrogation is a concomitant of the abolishment of the doctrine of the collateral source rule. No due process rights of the insurer are involved.

R.C. 2744.05 does not violate the Equal Protection Clause of Section 2, Article I, of the Ohio Constitution, which requires the state to give equal protection to the people. Further, the Ohio Supreme Court in Wargetz v. Villa Sancta Anna Home for the Aged (1984), 11 Ohio St.3d 15, 17-18, 11 OBR 49, 51, 462 N.E.2d 1215, 1217, stated:

"A statutory classification which involves neither a suspect classification nor a fundamental interest does not violate the Equal Protection Clause of the Ohio Constitution if it bears a rational relationship to a permissible governmental objective. Kinney v. Kaiser Aluminum & Chemical Corp. (1975), 41 Ohio St.2d 120, 123 [70 O.O.2d 206, 322 N.E.2d 880]; State, ex rel. Lourin, v. Indus. Comm. (1941), 138 Ohio St. 618, 620 [21 O.O. 490, 37 N.E.2d 595]. * * * "

R.C. 2744.05(B) creates a limited distinction between persons asserting claims under subrogation provisions of an insurance contract or other contract (insurance claimants) and persons asserting claims for tortious injury. Under this distinction, injured persons have remedies only for unreimbursed damages caused by the torts of municipalities, while an insurance claimant has no remedy against tortfeasor municipalities based upon subrogation. Again, the subrogation right necessarily is related...