Leber v. Smith

• Citation: 70 Ohio St.3d 548,639 N.E.2d 1159
• Decision Date: 19 October 1994
• Docket Number: No. 93-646,93-646
• Parties: LEBER et al., Appellants, v. SMITH et al., Appellees.
• Court: United States State Supreme Court of Ohio

Page 548

70 Ohio St.3d 548

639 N.E.2d 1159

LEBER et al., Appellants, v. SMITH et al., Appellees.

No. 93-646.

Supreme Court of Ohio.

Submitted May 16, 1994.

Decided Oct. 19, 1994.

This case involves two lawsuits. The first ("Leber I ") was a personal injury suit brought against various officials of Erie County. The second ("Leber II ") was a suit brought against insurance companies alleging, among other things, that the insurers had acted in bad faith when they defended the county officials in Leber I.

On April 7, 1979, plaintiff-appellant Eugene A. Leber was accidentally shot by Erie County Deputy Sheriff Steven A. Smith, defendant-appellee. The shooting occurred when Smith stopped a car driven by Leber. As he approached Leber's car with his firearm drawn, Deputy Smith slipped on a patch of ice. Smith accidentally discharged his weapon. Leber was struck by the shot and rendered a paraplegic.

In 1981, Leber and his parents, plaintiffs-appellants Richard P. and June M. Leber, filed suit in the United States District Court for the Northern District of Ohio, claiming a civil rights violation. The federal trial court granted summary judgment for the defendants, which was affirmed on appeal. Leber v. Smith (C.A.6, 1985), 773 F.2d 101.

Leber I, the personal injury action, was filed in the Erie County Court of Common Pleas in June 1983. Leber and his parents were plaintiffs in this action, while appellees Smith, the Sheriff of Erie County, the Board of Commissioners of Erie County ("the board") and its individual members were defendants.

At the time of the accident, the Sheriff's Department was insured by American Home Assurance Company ("American Home"). American Home assigned the law firm of Eastman & Smith to defend its insured.

At the time of the accident, the board was insured by Buckeye Union Insurance Company ("Buckeye Union"). Buckeye Union assigned attorney Raymond N. Watts, defendant-appellee, to defend its insured.

In an entry, the trial court in Leber I held that the board was liable under the doctrine of respondeat superior for any negligence of the Erie County Sheriff or his deputies that proximately caused injury to the Lebers.

Settlement negotiations began. The Lebers demanded $2,300,000 in full and final settlement of their claims against the county officials. The Lebers calculated this amount by adding $2 million of coverage allegedly available to the board under the Buckeye Union policy to the $300,000 of coverage allegedly available under the American Home policy. The board's position was that settlement of the case could not be discussed until Buckeye Union offered to participate and contribute to that amount. Buckeye Union, however, contended that there was no coverage in its policy for the Sheriff of Erie County or deputy sheriff and, therefore, made no settlement offer. An internal office memorandum, however, indicated that Buckeye Union analysts believed that Buckeye Union was liable under the terms of its policy.

Ultimately, Leber I was tried before a jury. The jury found thirty-five percent of the total negligence to be attributable to Smith, sixty- five percent of the negligence to be attributable to the Erie County Sheriff and no negligence to be attributable to Eugene Leber.

Upon reviewing the jury's verdict in favor of the Lebers, the trial court ordered that "judgment is rendered in favor of plaintiffs and against defendants; that defendant Steven A. Smith shall pay plaintiff Eugene A. Leber the sum of three million five hundred four thousand dollars ($3,504,000.00); that defendant Erie County Sheriff (i.e., the Erie County Sheriff's Department) shall pay to Eugene A. Leber the sum of six million four hundred ninety-six thousand dollars ($6,496,000.00); that defendant Steven A. Smith shall pay to Richard Leber and June Leber the sum of fifty-two thousand five hundred dollars ($52,500.00); and that defendant Erie County Sheriff * * * shall pay to Richard Leber and June Leber the sum of ninety-seven thousand five hundred dollars ($97,500.00).

"It is further the ORDER, JUDGMENT, and DECREE of this Court, in accordance with the approved judgment entry filed July 27, 1984, that Erie County, Ohio, by and through defendant Board of Erie County Commissioners, is liable for the entire judgment in the sum of ten million one hundred fifty thousand dollars ($10,150,000.00), plus all interest which may accrue thereon.

" * * * [I]nterest shall accrue at the rate of ten (10%) percent per annum from the date of the filing of this entry and * * * defendants shall pay all court costs incurred herein." (Footnote omitted.)

Before Leber I was reviewed on appeal, the Lebers settled their case with all three of the original defendants--Deputy Smith, the Sheriff of Erie County and the board. Pursuant to the agreement, the board agreed to pay the Lebers $2 million over a five-year period. The board, Deputy Smith and the Sheriff assigned all of their rights against their insurance carriers and attorneys to the Lebers. The agreement required the Lebers to repay the board in the event they recovered money from the insurance carriers. All appeals of Leber I were then dismissed.

Following this settlement, the Lebers filed a complaint against American Home and the law firm of Eastman & Smith. The Lebers also intervened in the board's declaratory judgment action against Buckeye Union and were joined as party-plaintiffs. A motion to consolidate all three of these actions was granted on January 23, 1987. The Lebers became the principal plaintiffs in the consolidated action, and the defendants were Buckeye Union, American Home, Eastman & Smith and Raymond Watts.

With the claims of the board having been assigned to the Lebers in the settlement agreement, the Lebers now claimed that Buckeye Union had in bad faith failed to settle Leber I on behalf of its insured, the board, within the policy limits. Similar claims were made against American Home. The Lebers alleged that Eastman & Smith had committed legal malpractice, causing damage to the board. The Lebers also claimed that Raymond Watts breached the fiduciary duty owed to his client, the board.

Leber II proceeded to trial. During the trial, the Lebers agreed to dismiss their actions against American Home for $2 million.

On August 10, 1987, Judge McMonagle filed a judgment entry deciding the declaratory judgment action. The trial court found that "[f]or purposes of the insurance policy issued by the Buckeye Union Insurance Company * * *, the terms Board of Erie County Commissioners and Erie County are synonymous. Steven A. Smith is an employee of Erie County and the Board of Erie County Commissioners. Both Steven A. Smith and the Erie County Sheriff are insureds under the policy of insurance issued by the Buckeye Union Insurance Company." The trial court then declared that $2 million in coverage was available to the board.

The jury then returned a verdict in favor of the Lebers on their bad faith claim against Buckeye Union but also returned a verdict in favor of Watts and Eastman & Smith. The jury unanimously found that Buckeye Union's conduct "imported a dishonest purpose, moral obliquity, conscious wrongdoing, breach of a known duty through some ulterior motive or ill will partaking of the nature of fraud or embracing actual intent to mislead or deceive another." Six of the eight jurors found that Buckeye Union's "conduct in failing to settle the [Lebers'] claims was motivated by actual malice." As a result of the verdict, the trial court entered a judgment for $13,336,232.80 in favor of the Lebers and against Buckeye Union. The amount of this judgment was calculated by adding the $10,150,000 judgment from Leber I to $3,064,465.74 in interest accumulating from the date that Leber I was decided and $2,121,767.06 in prejudgment interest accruing from July 5, 1982, to August 7, 1984. The trial court then subtracted from the judgment the $2 million settlement paid to the Lebers by American Home.

The Court of Appeals for Erie County reversed the judgment of the trial court. The appellate court found that Deputy Smith and the Erie County Sheriff's Department were not insureds under the Buckeye Union policy. The appellate court then upheld the trial court's judgment in favor of Watts and Eastman & Smith and against the Lebers.

The Supreme Court of Ohio remanded the cause to the Court of Appeals for Erie County to determine the merits of five assignments of error that the appellate court had determined to be moot and, thus, declined to decide. See 46 Ohio St.3d 702, 545 N.E.2d 1277.

Upon remand, the court of appeals again reversed the trial court's judgment in favor of the Lebers and against Buckeye Union.

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

Murray & Murray Co., L.P.A., Dennis E. Murray, Kirk J. Delli Bovi and W. Patrick Murray, Sandusky, for appellants.

Fritz Byers, Toledo, for appellee, Buckeye Union Ins. Co.

Kitchen, Deery & Barnhouse, Charles W. Kitchen and Eugene B. Meador, Cleveland, for appellee, Raymond N. Watts.

Peck, Shaffer & Williams and Thomas A. Luebbers, Cincinnati, urging reversal for amicus curiae, County Com'rs' Ass'n of Ohio.

PFEIFER, Justice.

For the reasons that follow, we reverse the judgment of the court of appeals in part, affirm it in part, and reinstate all of the judgments rendered by the trial court.

I

The Claims against Buckeye Union

A

The appellate court reversed the trial court's judgment, in part, because it held that the trial judge improperly instructed the jury that the $10,150,000 judgment in Leber I and the Leber I trial court's finding of respondeat superior between the board and employees of the Sheriff's Department were binding on the parties in Leber II. The Lebers contest this reversal.

The law regarding contesting improper jury instructions on appeal is clearly articulated in Civ.R. 51(A), which provides:

"[A] party may not assign as...