Preferred Risk Ins. Co. v. Gill

• Decision Date: 20 May 1987
• Docket Number: No. 86-882,86-882
• Citation: 30 OBR 424,507 N.E.2d 1118,30 Ohio St.3d 108
• Parties: , 30 O.B.R. 424 PREFERRED RISK INSURANCE COMPANY, Appellee and Cross-Appellant, v. GILL, et al., Appellants and Cross-Appellees.
• Court: Ohio Supreme Court

Page 108

30 Ohio St.3d 108

507 N.E.2d 1118, 30 O.B.R. 424

PREFERRED RISK INSURANCE COMPANY, Appellee and Cross-Appellant, v. GILL, et al., Appellants and Cross-Appellees.

No. 86-882.

Supreme Court of Ohio.

May 20, 1987.

Syllabus by the Court

1. An insurer may maintain a declaratory judgment action under R.C. Chapter 2721 for purposes of establishing its rights and obligations under a contract of insurance. The insurer, if proceeding in good faith, is entitled to bring such an action for purposes of adjudicating its duty to defend and/or indemnify its insured in a tort action brought by a third party, even where the underlying tort complaint alleges conduct within the coverage of the contract of insurance. (Transamerica Ins. Co. v. Taylor [1986], 28 Ohio St.3d 312, 28 OBR 381, 504 N.E.2d 15, and State Farm Fire & Cas. Co. v. Pildner [1974], 40 Ohio St.2d 101, 69 O.O.2d 509, 321 N.E.2d 600, overruled.)

2. Where the insurer does not agree to defend groundless, false or fraudulent claims, an insurer's duty to defend does not depend solely on the allegations of the underlying tort complaint. Absent such an agreement, the insurer has no duty to defend or indemnity its insured where the insurer demonstrates in good faith in the declaratory judgment action that the act of the insured was intentional and therefore outside the policy coverage.

On March 24, 1984, Bradford Alan Gill killed eleven-year-old Kerri Hintermeister and concealed her body in the garage of his residence. Gill then joined in organized searches for Kerri and communicated with her family concerning her whereabouts, without revealing that the child was dead and that her body was in his garage. The body was discovered the next day, and Gill eventually pleaded guilty to aggravated murder with specifications. He was convicted and sentenced to life imprisonment on June 25, 1984.

Appellants and cross-appellees, Marcia and Roger Hintermeister, Kerri's parents, filed a complaint against Gill on July 6, 1984, asserting causes of action in wrongful death and negligent infliction of emotional distress. While this action was pending, appellee and cross-appellant Preferred Risk Insurance Company, Gill's liability insurer, instituted the instant declaratory judgment action, seeking a determination of its duty to defend Gill against appellants' lawsuit, and of its obligation to indemnify Gill for any judgment obtained therein. Appellee asserted that it is not obligated to defend Gill or to pay any adverse judgment on the basis that Gill's murder conviction demonstrated that he intentionally killed Kerri, and the subject insurance policy expressly excludes coverage for any intentional act.

Appellee moved for summary judgment on the issues of its obligation to defend or indemnify Gill. The trial court granted the motion on both issues, concluding that reasonable minds could not dispute that Gill had intentionally killed Kerri and intentionally pursued a course of conduct which he hoped would disarm any suspicion of his guilt. Gill's conduct was, therefore, outside the coverage of the policy, and appellee had no duty to defend Gill as a matter of law.

The court of appeals affirmed in part and reversed in part, holding that the trial court erred in ruling that appellee was not obligated to defend Gill. In so holding, the appellate court stated that since the underlying tort complaint is couched in terms of negligence only, appellee must defend both claims regardless of the fact that Gill was convicted of intentionally killing the child. However, the court upheld the award of summary judgment to appellee on the issue of its obligation to indemnify Gill in the event a judgment is obtained against him on either claim. The court reasoned that the attendant facts along with the plea of guilty lead to the indisputable conclusion that Gill intended to kill Kerri, and appellee therefore has no duty to indemnify Gill on the wrongful death claim.

The court of appeals rejected appellants' assertion that a material issue of fact remained as to the intentional nature of Gill's infliction of emotional distress on appellants after Kerri's death. Appellants argued that reasonable minds could conclude that Gill's conduct at that point was negligent rather than intentional, relying on certain evidence, introduced in the penalty phase of Gill's murder trial, that Gill had suffered from a form of traumatic amnesia immediately after the murder and could not have formed the mental state necessary to commit an intentional tort. The court of appeals held that even assuming the truth of this evidence, Gill would not be legally liable in negligence since he would have been mentally incapable of foreseeing the possibility of harm resulting from his conduct. Therefore, the court of appeals held that appellee is not obliged to indemnify Gill on that claim, since appellee agreed to pay only those damages "for which the insured is legally liable * * *."

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

Gustin & Lawrence Co., L.P.A., and James W. Gustin, Cincinnati, for appellee and cross-appellant.

Rogers & Olivas, R.T. Rogers and Adolf Olivas, Hamilton, for appellants and cross-appellees.

DOUGLAS, Justice.

The threshold question presented herein is whether the instant action is properly before this court. More specifically, we must determine whether an insurance company may bring a declaratory judgment action to adjudicate its duty to defend or indemnify its insured in an action brought against the insured by a third party. In resolving this question, we are called upon to reexamine this court's holding in Transamerica Ins. Co. v. Taylor (1986), 28 Ohio St.3d 312, 28 OBR 381, 504 N.E.2d 15.

Transamerica involved facts similar to those presented in the cause sub judice. In Transamerica, the insured shot and killed a man and eventually pleaded guilty to, and was convicted of, involuntary manslaughter. The victim's widow brought an action in wrongful death alleging that the insured had negligently caused the death of her husband. The insurers instituted a declaratory judgment action seeking a declaration of their obligation to defend the insured in the wrongful death suit and to indemnify him in the event of an adverse judgment. In a four to three decision, this court held that the insurers may not maintain such an action:

"Where the complaint in the underlying tort action against the insured alleges only negligence, a declaratory judgment action brought by the tortfeasor's insurers seeking a declaration that their insured's conduct was intentional rather than negligent, and is thus excluded from coverage, presents no justiciable controversy and may properly be dismissed for failure to state a claim upon which relief can be granted." Id. at syllabus.

The Transamerica court reasoned that the insurers therein "seek to avoid their obligation to the insured via a declaratory judgment action asserting that the insured had acted intentionally rather than negligently. As this court noted in [State Farm Fire & Cas. Co. v.] Pildner [ (1974), 40 Ohio St.2d 101, 69 O.O.2d 509, 321 N.E.2d 600], this assertion is utterly premature, since the underlying tort claim against the insured alleged only negligence. Although the insurers are not obligated to provide coverage for intentionally inflicted injury, no such recovery is sought by the plaintiff in the wrongful death action. Thus, the complaint for declaratory judgment fails to state a claim upon which relief can be granted, since it presents no facts giving rise to a justiciable controversy. Pildner, supra, at 104, . The insurers' duty to defend is not a proper subject for a declaratory judgment action, and no question of intentional conduct has been raised in the underlying wrongful death suit." Id. at 314, 28 OBR at 383-384, 504 N.E.2d at 17.

The instant cause presents this court with an opportunity to reexamine the rule of law set forth in Transamerica. Upon considerable study and deliberation, we conclude that Transamerica cannot withstand objective scrutiny.

R.C. Chapter 2721, governing declaratory judgment actions, clearly contemplates the maintenance of such an action by an insurance company seeking a declaration of its rights and obligations under a contract of insurance. R.C. 2721.03 provides in pertinent part:

"Any person interested under a deed, will, written contract, or other writing constituting a contract, or whose rights, status, or other legal relations are affected by a constitutional provision, statute, rule as defined in section 119.01 of the Revised Code, municipal ordinance, contract, or franchise, may have determined any question of construction or validity arising under such instrument, constitutional provision, statute, rule, ordinance, contract, or franchise and obtain a declaration of rights, status, or other legal relations thereunder. * * *" (Emphasis added.)

This statute plainly permits a party to a contract to bring a declaratory judgment action for purposes of obtaining a binding judicial interpretation of the agreement. The comment ¹ to R.C. 2721.03 bolsters the conclusion that the statute was intended to apply to contracts of insurance:

"This section makes it possible for any person interested in any of the instruments specified or affected by any of the legislation mentioned, to have any question of construction or validity, and also * * * [his] rights determined. This covers a large field of possibilities, among which are disputes between lessor and lessee, mortgagor and mortgagee, questions concerning insurance policies, deeds of trust, disputes between a city and a street railway company, or any public utility, and a vast number of other disputes too numerous to mention." (Emphasis added.)

Moreover, R.C. 2721.04 provides that "[a] contract may be construed by a declaratory judgment either before or after there has been a breach thereof."...