Hutchinson v. J.C. Penney Cas. Ins. Co.

• Decision Date: 05 June 1985
• Docket Number: No. 84-534,84-534
• Parties: , 17 O.B.R. 432 HUTCHINSON, Appellant and Cross-Appellee, v. J.C. PENNEY CASUALTY INSURANCE COMPANY, Appellee and Cross-Appellant.
• Court: Ohio Supreme Court

Page 195

17 Ohio St.3d 195

478 N.E.2d 1000, 17 O.B.R. 432

HUTCHINSON, Appellant and Cross-Appellee, v. J.C. PENNEY CASUALTY INSURANCE COMPANY, Appellee and Cross-Appellant.

No. 84-534.

Supreme Court of Ohio.

June 5, 1985.

Syllabus by the Court

1. Language in a contract of insurance reasonably susceptible of more than one meaning will be construed liberally in favor of the insured and strictly against the insurer. (Buckeye Union Ins. Co. v. Price [1974], 39 Ohio St.2d 95 , approved and followed.)

2. As a matter of public policy, and in the absence of specific contractual language to the contrary, punitive or exemplary damages may be awarded to an insured under an uninsured motorist provision, where the issuer of the policy promises to pay damages for which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person and caused by an accident.

On May 7, 1979, plaintiff-appellant, Natalie S. Hutchinson, was legally walking across Sunbury Road in front of Ohio Dominican College in Columbus when she was struck by an uninsured motorist, one Raymond Garrett, who was attempting to elude the police. Shortly after the accident, the police arrived on the scene and apprehended Garrett. Subsequently, Garrett pleaded guilty to operating a motor vehicle while intoxicated, reckless operation and failure to obey a traffic control device.

Plaintiff was deemed to be a "covered person" within the uninsured motorist provisions of four insurance policies carried by her father that were issued by defendant-appellee, J.C. Penney Casualty Insurance Company.

The parties were unable to reach a negotiated settlement, and on September 8, 1980, pursuant to the insurance contracts, plaintiff formally demanded arbitration of her claim.

On August 17, 1982, the three-member arbitration panel awarded plaintiff $70,000 in damages as follows: $17,500 compensatory, $35,000 punitive, and $17,500 in attorney fees. Pursuant to R.C. 2711.09, plaintiff applied to the court of common pleas to confirm the award to judgment. Defendant then filed applications to the court requesting it to vacate or modify the award on the basis that the arbitration panel exceeded its power in awarding plaintiff punitive damages and attorney fees. The trial court confirmed the award for compensatory damages, but held that the award of punitive damages and attorney fees exceeded the arbitrator's authority and constituted misconduct on the part of the arbitrators.

Upon appeal, the court of appeals reversed and held that the award of punitive damages was proper under the terms of the insurance policies, but that the record was insufficient to make an accurate award of attorney fees. The appellate court remanded the cause to the trial court for consideration of the total award in light of the local rules of procedure.

The cause is now before this court upon the allowance of a motion and cross-motion to certify the record.

Isaac, Brant, Ledman & Becker, Charles E. Brant and J. Stephen Teetor, Columbus, for appellant and cross-appellee.

Denmead, Gerrity & Tsitouris and Chris C. Tsitouris, Columbus, for appellee and cross-appellant.

SWEENEY, Justice.

The instant cause presents a question of first impression before this court in which we must decide whether punitive damages and reasonable attorney fees are recoverable by the plaintiff under the uninsured motorist provisions of her father's insurance policies. The uninsured motorist provisions each provide as follows:

"We will pay damages which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person and caused by an accident. * * * "

The defendant insurance company contends on cross-appeal that the foregoing provision allows coverage solely for compensatory damages, and cannot be construed to encompass an award for exemplary damages and attorney fees. In support of its argument defendant submits that Ohio adheres strictly to the punishment theory of punitive damages as evidenced by this court's prior rulings in Roberts v. Mason (1859), 10 Ohio St. 277; Saberton v. Greenwald (1946), 146 Ohio St. 414, 66 N.E.2d 224, 32 O.O. 454; and Detling v. Chockley (1982), 70 Ohio St.2d 134, 436 N.E.2d 208, 24 O.O.3d 239. The defendant asserts that the sanctioning of punitive damages in the instant cause will thwart the central purposes of punishment and deterrence that these types of damages were designed to foster.

The plaintiff counters that the defendant undertook to indemnify her for those damages that she would be legally entitled to recover if she were to sue the tortfeasor directly in a bodily injury action. Plaintiff argues that the subject uninsured motorist provision does not exclude other types of damages, except property damages, and that a liberal construction of this ambiguous provision necessarily permits the recovery of punitive damages in a proper case, inasmuch as the subject provision is not qualified in a manner that expressly excludes such damages. Plaintiff submits that approximately thirty-five jurisdictions around the country have allowed the recovery of punitive damages under various insurance policies; see, e.g., Hensley v. Erie Ins. Co. (W.Va.1981), 283 S.E.2d 227; see, also, Annotation (1982), 16 A.L.R.4th 11; and that the rationale for allowing punitive damages is much stronger with respect to an uninsured motorist clause, given the fact that this court has interpreted uninsured motorist coverage to be a much broader form of coverage than that found in an ordinary liability policy. See Kish v. Central Natl. Ins. Group (1981), 67 Ohio St.2d 41, 424 N.E.2d 288, 21 O.O.3d 26, where we held, inter alia, that an uninsured motorist provision extends to injuries which were intentionally inflicted by an uninsured motorist.

In determining the scope of the subject uninsured motorist provision, one can readily ascertain the plausibility of the arguments advanced by both parties with respect to the recoverability of exemplary or punitive damages. However, given the nature of the provision in issue, our interpretation is guided by that central canon of insurance contract construction which states that "[l]anguage in a contract of insurance reasonably susceptible of more than one meaning will be construed liberally in favor of the insured and strictly against the insurer." Buckeye Union Ins. Co. v. Price (1974), 39 Ohio St.2d 95, 313 N.E.2d 844, 68 O.O.2d 56; see, also, Ohio Farmers Ins. Co. v. Wright (1969), 17 Ohio St.2d 73, 246 N.E.2d 552, 46 O.O.2d 404; Gomolka v. State Auto. Mut. Ins. Co. (1984), 15 Ohio St.3d 27, 472 N.E.2d 700, and 57 Ohio Jurisprudence 3d (1985) 348, Insurance, Section 285.

Based on the arguments submitted by both parties, we are persuaded that the uninsured motorist provision in issue is reasonably susceptible to differing interpretations, and that, therefore, a liberal construction of this provision in plaintiff's favor is necessary.

In applying the principles of liberal construction to the subject uninsured motorist provision, we find plaintiff's arguments to be well-taken in that punitive damages are the type of damages which a party would be legally entitled to recover from an uninsured motorist where the facts and circumstances of the particular case warrant such an award. By structuring the language of the uninsured motorist provision as it did, the defendant insurance company has agreed to subrogate itself into the position of the uninsured motorist tortfeasor. Since the subject provision is not limited or qualified so as to clearly prohibit an award of punitive damages, it is logical and reasonable to assume that punitive damages could be proper in an appropriate case as a consequence of a bodily injury accident. Thus, in a proper case, such as the one sub judice, and given the language employed in the subject provision, we find that the defendant has contractually agreed to stand in the shoes of the tortfeasor and pay those damages which the insured would have been able to recover from the uninsured motorist as if she had sued the uninsured motorist herself. Such an interpretation is consonant with the reasoning enunciated in Kish, supra. Moreover, the punishment or deterrent effect of punitive damages is not ignored under this analysis, since the defendant insurance company may subrogate and bring an action against the tortfeasor for the full measure of damages that it agreed to indemnify plaintiff, its insured.

Therefore, we hold that as a matter of public policy, and in the absence of specific contractual language to the contrary, punitive or exemplary damages may be awarded to an insured under an uninsured motorist provision, where the issuer of the policy promises to pay damages for which a covered person is legally entitled to recover from the owner or operator of an uninsured motor vehicle because of bodily injury sustained by a covered person and caused by an accident.

Such an approach is not novel in the state of Ohio as evidenced by the court's holding in Cuppett v. Grange Mut. Co. (1983), 12 Ohio App.3d 82, 466 N.E.2d 180. Accordingly, we affirm the decision of the court of appeals that punitive damages are recoverable under the uninsured motorist provision in the subject policies.

Having decided that punitive damages could be properly awarded in the instant cause, the next issue presented will determine whether the court of appeals was correct in remanding the determination of the amount of punitive damages to the trial court. This second issue asks us whether the arbitration award was limited to the amount demanded by the complaining party.

The defendant submits that the policies in question provide with respect to arbitration that "[l]ocal rules of law as to procedure and evidence will apply." It is the defendant's contention that since the policies...