Portaro v. American Guarantee and Liability Ins. Co.

• Citation: 210 F. Supp. 411
• Decision Date: 10 January 1962
• Docket Number: No. 35880.,35880.
• Parties: Joseph PORTARO, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant.
• Court: U.S. District Court — Northern District of Ohio

210 F. Supp. 411

Joseph PORTARO, Plaintiff, v. AMERICAN GUARANTEE AND LIABILITY INSURANCE COMPANY, Defendant.

No. 35880.

United States District Court N. D. Ohio, E. D.

January 10, 1962.

William J. Kraus, Cleveland, Ohio, for plaintiff.

Leslie R. Ulrich, Robert F. Hesser, Jamison, Ulrich, Hope, Johnson & Burt, Cleveland, Ohio, for defendant.

McNAMEE, District Judge.

This is an action for a declaratory judgment in which plaintiff prays for a construction of a policy of insurance issued to Lady Beautiful, Inc. and to plaintiff that will require the defendant to defend an action brought by Louise Cooper against plaintiff herein and to pay any judgment that may be rendered against plaintiff in said action. In its answer defendant asserts that under the terms of the policy it is not obligated to defend the action brought by Louise Cooper against plaintiff and denies that it is under a duty to pay any judgment that may be rendered against plaintiff in said action. The case was submitted on the following agreed statement of facts:

1. Joseph Portaro is a citizen and resident of the City of Cleveland Heights, County of Cuyahoga and State of Ohio.

2. The defendant is a corporation duly organized under the laws of the State of Illinois and a citizen thereof and is engaged in the business of writing insurance and issuing insurance policies and entering into insurance contracts and is licensed to conduct its business in the State of Ohio.

3. The matter in controversy exceeds, exclusive of interest and costs, the sum of Ten Thousand Dollars ($10,000.00).

4. On or about July 30, 1958, the defendant issued a policy of insurance numbered XX-XX-XXX to Lady Beautiful, Inc. d/b/a Jo Portaro for a period of three years from and after July 30, 1958.

5. The following clauses in said insurance policy numbered XX-XX-XXX are relevant to the issues:

A) "I. Coverage A — Bodily injury liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person and caused by accident."

B) "II. Defense settlement and supplementary payments. With respect to such insurance as is afforded by this policy the company shall:

(a) defend any suit against the insured alleging such injury * * * and seeking damages on account thereof even if such suit is groundless, false or fraudulent * * *"

C) "III. Definition of Insured. The unqualified word `insured' includes the named insured and also includes any executive officer, director or stockholder thereof while acting within the scope of his duties as such, * * *"

6. The following definition is relevant to the issues presented in plaintiff's complaint:

"3(d) Assault and battery. Assault and battery shall be deemed an accident unless committed by or at the direction of the insured."

7. Lady Beautiful, Inc. on September 12, 1959 was an Ohio corporation engaged in the business of operating what is commonly known as a beauty salon and that it operated and maintained a beauty salon at 1222-24 Huron Road, Cleveland, Ohio.

8. That on September 12, 1959 plaintiff Joseph Portaro was an executive officer, director and shareholder of Lady Beautiful, Inc., the named insured under Policy No. 87-21-862 and that plaintiff's duties as an officer of Lady Beautiful, Inc. included the duty of advising beauty operators employed by said corporation at its Huron Road salon; and that plaintiff as an officer was involved in the public relations of the salon.

9. That on September 12, 1959, and at various times prior to that date one Louise Cooper was a patron of the Huron Road salon operated by Lady Beautiful, Inc.

10. That on or about December 5, 1959 said Louise Cooper filed a civil suit against plaintiff in the Cuyahoga County Common Pleas Court alleging bodily injuries and damages arising from an alleged assault and battery by plaintiff herein, said action being case No. 731,800 and she prayed for judgment against plaintiff herein in the sum of $100,000.00.

11. That concurrently with the filing of said case No. 731,800 in the Court of Common Pleas against plaintiff Joseph Portaro, said Louise Cooper also filed a similar and independent suit for damages against Lady Beautiful, Inc. in the Court of Common Pleas of Cuyahoga County, being case No. 731,801.

12. That on December 11, 1959 plaintiff mailed to defendant insurance company the petition in case No. 731,800 and a letter requesting said defendant to proceed to defend him in said action.

13. That by letter dated December 28, 1959 defendant insurance company returned to plaintiff all papers relating to case No. 731,800 and stated that defendant was not obligated to afford plaintiff a defense in said case and to this letter plaintiff replied on December 31st, 1959.

14. That the defendant insurance company has undertaken the defense of Lady Beautiful, Inc. in case No. 731,801 under Policy No. 87-21-862.

15. That there exists between plaintiff Joseph Portaro and defendant insurance company an actual controversy as to the rights, liabilities, duties and legal relations under and pursuant to said Policy No. 87-21-862 and more particularly the duty of said defendant insurance company to defend plaintiff in said Cuyahoga Common Pleas Court case No. 731,800 and/or pay any judgment that may be rendered against plaintiff in said action.

16. Offered as part of the evidence herein to be considered by the Court are (a) a specimen copy of Comprehensive General Liability Policy No. 87-21-862 marked "Exhibit A", (b) the original petition on file in this cause, (c) the original answer of defendant insurance company on file in this case and the admissions therein contained; (d) a copy of the petition and amended petition filed by Louise Cooper against Joseph Portaro in case No. 731,800 marked "Exhibits B and C", (e) a copy of the answer filed by Joseph Portaro in case No. 731,800 marked "Exhibit D", and (f) a copy of the letter of December 11, 1959 referred to in paragraph 16 hereof marked "Exhibit E" and a copy of the letters of December 28, 1959 and December 31, 1959 referred to in paragraph 17 hereof marked "Exhibits F and G."

After submission of the case it was discovered that the parties had failed to include in their stipulation an endorsement styled "Occurrence" Basis which, in pertinent part, provides:

"It is agreed that such insurance as is afforded by the policy for Bodily Injury Liability applies subject to the following provisions:

"1. In Insuring Agreement I, the words `and caused by accident' and `caused by accident,' whichever appear, are deleted, and elsewhere the word `accident' is amended to read `occurrence.'

"2. `Occurrence' means an event, or continuous or repeated exposure to conditions, which unexpectedly causes injury during the policy period. All such exposure to substantially the same general conditions existing at or emanating from each premise's location shall be deemed one occurrence.

"3. The premium for this indorsement shall be TWO % of the Bodily Injury Liability premium determined in accordance with the other terms of the policy."

It was thereupon agreed that the above endorsement should be incorporated in and made a part of the stipulation of facts. The effect of paragraph 1 of said endorsement is to amend Coverage A of the policy as set out above to read:

A) "I. Coverage A — Bodily injury liability. To pay on behalf of the insured all sums which the insured shall become legally obligated to pay as damages because of bodily injury * * * sustained by any person."

and to amend paragraph 3(d) to read:

"3. (d) Assault and battery. Assault and battery shall be deemed an occurrence unless committed by or at the direction of the insured."

DISCUSSION AND CONCLUSIONS OF LAW

Portaro, as an executive officer and director of Lady Beautiful, Inc., is an insured and entitled to the benefits of the policy. Before its amendment the policy provided that the insurer would pay all damages for which the insured became liable for bodily injury caused by accident and would defend on behalf of the insured any suit seeking damages for such injuries. In its original form paragraph 3(d) provided that assault and battery shall be deemed an accident unless committed by or at the direction of the insured. It is settled in Ohio, whose law governs here, that an insurer's duty to defend a suit against its insured is dependent upon the allegations of the petition filed against the insured. Only if those allegations bring the case within the coverage of the policy is the insured bound to defend the action. Lessak v. Metropolitan Casualty Ins., 168 Ohio St. 153, 151 N.E.2d 730 (1958); Socony-Vacuum Oil Co. v. Continental Corp., 144 Ohio St. 382, 383, 59 N.E.2d 199; 30 O. J.2d, Insurance, 649. See also 50 A.L.R. 2d 465, 497. The petition filed by Louise Cooper in Common Pleas Court Case No. 731,800 alleges, inter alia, that plaintiff herein committed an assault and battery upon her. Under the original terms of paragraph 3(d) the insurer was not required to defend an action for assault and battery committed by the insured. The allegations of Cooper's petition therefore stated no claim against Portaro that the insurer was required to defend. Under the terms of the policy as amended, however, a more difficult question arises relative to the insurer's duty to assume the defense of the assault and battery action against Portaro. The endorsement eliminated accidental causation from Coverage A as an element of the insurer's liability and did not substitute liability predicated upon an "occurrence." Consequently Coverage A of the policy as amended obligates the insurer literally to pay on behalf of the insured damages for bodily injury irrespective of the cause of such injury or damage. Amended paragraph 3(d) defines assault and battery as "an `occurrence' unless committed by or at the direction of the insured." Since the word "occurrence" does not appear in Coverage A the...