Presrite Corp. v. Commercial Union Ins. Co.

• Decision Date: 25 July 1996
• Docket Number: No. 68704,68704
• Citation: 680 N.E.2d 216,113 Ohio App.3d 38
• Parties: PRESRITE CORPORATION, Appellant, v. COMMERCIAL UNION INSURANCE COMPANY et al., Appellees. *
• Court: Ohio Court of Appeals

Page 38

113 Ohio App.3d 38

680 N.E.2d 216

PRESRITE CORPORATION, Appellant, v. COMMERCIAL UNION INSURANCE COMPANY et al., Appellees. ^*

No. 68704.

Court of Appeals of Ohio Eighth District, Cuyahoga County.

Decided July 25, 1996.

Wegman, Hessler, Vanderburg & O'Toole, Keith A. Vanderburg and Christopher A. Holecek, Cleveland, for appellant.

Thompson, Hine & Flory, Christopher M. Bechhold, Jack F. Fuchs and Donald P. Screen, Cleveland; Calfee, Halter & Griswold and Walter A. Rogers, Cleveland, for appellees.

KARPINSKI, Judge.

Presrite Corporation appeals from a judgment of the trial court finding that Presrite was not entitled to insurance coverage from Commercial Union Insurance Companies ("CUIC") for an intentional tort action brought against Presrite by one of its employees. Because the unambiguous language of the exclusion does not apply to the facts of this claim, we reverse the judgment of the court below.

This case arose when Quang Phan was injured while working at Presrite. Phan subsequently brought suit against Presrite alleging an intentional tort based on substantial certainty. Phan never argued that Presrite had directly intended to cause Phan's injury. CUIC, Presrite's insurer, agreed to provide a defense for Presrite, but reserved its right to disclaim coverage under the insurance policy. Presrite eventually settled with Phan and agreed to pay Phan $195,000 in exchange for a full release of Presrite.

After settlement, Presrite initiated the present action seeking a declaration that the CUIC insurance policy afforded Presrite the right to be indemnified for the money paid to Phan to settle the initial lawsuit. Both parties moved for summary judgment based on the language of the insurance policy. Holding that the policy did not provide indemnification for intentional torts, the trial court granted summary judgment for CUIC. Presrite appealed, raising four assignments of error. The first three assignments concern the trial court's granting of summary judgment for CUIC on the issue of insurance coverage and state as follows:

"I. The trial court's award of summary judgment in favor of CUIC was erroneous because CUIC's employers liability-stop gap endorsement policy provides coverage against compensatory damages sought by an employee in tort where the employer does not desire or intend to injure the employee but knew that injury was substantially certain to occur.

"II. The trial court erred as a matter of law in declaring that defendant-appellee's employers liability-stop gap insurance endorsement does not provide coverage for any type of intentional tort in the workplace.

"III. The trial court erred as a matter of law in denying plaintiff-appellant's motion for summary judgment."

In these assignments, Presrite argues that the policy expressly provides coverage for injuries suffered by employees in the workplace and that the exclusion found in the CUIC stopgap policy excludes only torts directly intended, not torts based on inferred intent. CUIC responds that the unambiguous language of the policy specifically excludes coverage for all intentional torts, whether directly intended or for which intent is inferred.

Provisions of a contract of insurance that are reasonably susceptible of more than one interpretation will be construed strictly against the insurer and liberally in favor of the insured. King v. Nationwide Ins. Co. (1988), 35 Ohio St.3d 208, 519 N.E.2d 1380. However, if a contract of insurance is clear and unambiguous, its interpretation is a question of law to be decided by the judge. Olmstead v. Lumbermens Mut. Ins. Co. (1970), 22 Ohio St.2d 212, 51 O.O.2d 285, 259 N.E.2d 123; Leber v. Smith (1994), 70 Ohio St.3d 548, 639 N.E.2d 1159. Additionally, exclusions in an insurance policy must be clear and exact in order to be given effect. Lane v. Grange Mut. Cos. (1989), 45 Ohio St.3d 63, 543 N.E.2d 488.

The insurance policy at issue in this case is CUIC's Employers Liability Stop Gap Insurance Endorsement policy. The stopgap endorsement contained the following provisions:

"1. Insuring Agreement

"a. We will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' to an employee of yours arising out of and in the course of his or her employment by you in a state indicated in the schedule. No other obligation or liability to pay sums or perform acts or services is covered unless explicitly provided for under SUPPLEMENTARY PAYMENTS-COVERAGES A and B.

"2. Exclusions.

"This insurance does not apply to:

"a. 'Bodily injury' caused intentionally by you or at your direction." (Emphasis added.)

The landmark case, Blankenship v. Cincinnati Milacron Chemicals, Inc. (1982), 69 Ohio St.2d 608, 23 O.O.3d 504, 433 N.E.2d 572, established the cause of action for workplace intentional torts in Ohio. A workplace intentional tort requires proof that the employer either specifically desired to injure the employer or knew that injury was substantially certain to occur. Jones v. VIP Dev. Co. (1984), 15 OBR 246, 15 Ohio St.3d 90, 472 N.E.2d 1046. Later, in Fyffe v. Jeno's, Inc. (1991), 59 Ohio St.3d 115, 570 N.E.2d 1108, the court clarified what must be demonstrated in order to establish "intent" for purposes of intentional torts in the workplace. In paragraph one of the syllabus the court stated as follows:

"Within the purview of Section 8(A) of the Restatement of the Law 2d, Torts, and Section 8 of Prosser & Keeton on Torts (5 Ed.1984), in order to establish 'intent' for the purpose of proving the existence of an intentional tort committed by an employer against his employee, the following must be demonstrated: (1) knowledge by the employer of the existence of a dangerous process, procedure, instrumentality or condition within its business operation; (2) knowledge by the employer that if the employee is subjected by his employment to such dangerous process, procedure, instrumentality or condition, then harm to the employee will be a substantial certainty; and (3) that the employer, under such circumstances, and with such knowledge, did act to require the employee to continue to perform the dangerous task. (Van Fossen v. Babcock & Wilcox Co. [1984], 36 Ohio St.3d 100, 522 N.E.2d 489, paragraph five of the syllabus, modified as set forth above and explained.)"

The court has thus established that for intentional torts intent can be proved by establishing that the harm either was directly intended or was substantially certain to occur. Harasyn v. Normandy Metals, Inc. (1990), 49 Ohio St.3d 173, 551 N.E.2d 962.

Presrite settled the intentional tort claim with the original plaintiff, Quang Phan. Presrite now seeks to have the CUIC insurance cover this settlement. CUIC questions, first, whether Ohio law permits intentional tort insurance. It had long been held that intentional tort insurance was against public policy. Blankenship, supra, 69 Ohio St.2d at 615, 23 O.O.3d at 508-509, 433 N.E.2d at 577-578; Wedge Products, Inc. v. Hartford Equity Sales Co. (1987), 31 Ohio St.3d 65, 31 OBR 180, 509 N.E.2d 74. The Supreme Court, however, departed from this position in Harasyn, supra, stating in the syllabus as follows:

"Public policy does not prohibit an employer from securing insurance against compensatory damages sought by an employee in tort where the employer's tortious act was one performed with the knowledge that injury was substantially certain to occur."

CUIC questions, however, whether Harasyn is still good law. In Royal Paper Stock Co. v. Meridian Ins. Co. (1994), 94 Ohio App.3d 327, 640 N.E.2d 886, the Franklin County Court of Appeals declined to follow Harasyn. The court noted that Harasyn was written at the same time that R.C. 4121.80 was enacted to create a state fund for intentional torts. The court in Royal Paper held that since R.C. 4121.80 was repealed in 1992, ¹ the Harasyn decision is no longer valid and insurance coverage for intentional torts is contrary to public policy.

We do not share this disregard of Harasyn. The United States Court of Appeals for the Sixth District reviewed Ohio law in this area and found that Ohio public policy does not forbid employers from insuring against liabilities arising from those acts where the employer knew of a risk that injury to an employee was substantially certain to occur. Lumbermens Mut. Cas. Co. v. S-W Industries, Inc. (C.A.6, 1994), 39 F.3d 1324. The court in Lumbermens cited and expressly approved of Harasyn. Since the Lumbermens decision was issued almost two years after R.C. 4121.80 was repealed, it may be presumed that the court was aware of the change. Moreover, in making its decision, the court in Harasyn did not rely solely on R.C. 4121.80. Harasyn distinguished the different policy considerations in denying insurance for torts directly intended, on the one hand, and in allowing insurance, on the other, for those substantially certain to occur. The court stated as follows:

"The better view is to prohibit insurance only for those intentional torts where 'the fact of insurance coverage can be related in some substantial way to the commission of wrongful acts of that character. * * * In the case of a 'direct intent' tort, the presence of insurance would encourage those who deliberately harm another. In torts where intent is inferred from 'substantial certainty' of injury, the presence of insurance has less effect on the tortfeasor's actions because it was not the tortfeasor's purpose to cause the harm for which liability is imposed. * * * In the latter situation, the policy of assuring victim compensation should prevail."

The court in Harasyn then noted that the Ohio legislature had enacted R.C. 4121.80 to provide a state fund for intentional tort injuries. The fact that R.C. 4121.80 was repealed, however, does not affect the policy reasons stated in Harasyn for allowing intentional tort insurance. Because those reasons remain persuasive, we reaffirm that Ohio public policy does...