Westfield Ins. Co. v. Hunter

• Decision Date: 20 April 2011
• Docket Number: Nos. 2009–2214,2010–0024.,s. 2009–2214
• Citation: 948 N.E.2d 931,128 Ohio St.3d 540
• Parties: WESTFIELD INSURANCE COMPANY, Appellee,v.HUNTER et al.; Grinnell Mutual Reinsurance Company, Appellant.
• Court: Ohio Supreme Court

128 Ohio St.3d 540

948 N.E.2d 931

2011 -Ohio- 1818

WESTFIELD INSURANCE COMPANY, Appellee,

v.HUNTER et al.; Grinnell Mutual Reinsurance Company, Appellant.

Nos. 2009–2214

2010–0024.

Supreme Court of Ohio.

Submitted Jan. 19, 2011.Decided April 20, 2011.

[Ohio St.3d 540] Syllabus of the Court

An exclusion in a homeowner's insurance policy for claims “arising out of ” premises owned by the insured other than the insured location excludes coverage for premises-based liability claims, such as claims that arise from the quality or condition of the premises. Moreover, although the exclusion does not bar coverage of claims that arise from the insured's alleged negligence if that negligence is unrelated to the quality or condition of the premises, it does exclude coverage for claims based upon the insured's ownership of the property upon which the injury occurred.

Isaac, Brant, Ledman & Teetor, L.L.P., James H. Ledman, J. Stephen Teetor, Brandi L. Dorgan, and Scyld D. Anderson, Columbus, for appellee, Westfield Insurance Company.

Robbins, Kelly, Patterson & Tucker, Daniel J. Temming, and Jarrod M. Mohler, Cincinnati, for Terrell, Vince, and Tara Whicker.Rendigs, Fry, Kiely & Dennis, L.L.P., James J. Englert, and Lynne M. Longtin, Cincinnati, for appellant.

O'CONNOR, C.J.

{¶ 1} In this appeal, we interpret an exclusion in a homeowner's policy that denies coverage for claims “arising out of ” premises that are owned by the insured but are not an insured location under the policy. We hold that an exclusion in a homeowner's insurance policy for claims “arising out of ” premises owned by the insured other than the insured location excludes coverage for claims that arise from the quality or condition of the premises and claims based merely upon the insured's ownership of the property upon which the injury occurred.

{¶ 2} Because the barren record before us does not sufficiently establish whether the claims raised in the underlying action are claims related to the quality or condition of the premises or whether the claims are based on another theory of negligence, we remand the cause to the trial court to make that determination and then apply our holding.

[Ohio St.3d 541] Relevant Background

{¶ 3} Michael and Marilyn Hunter are Ohio residents who reside in a home in Hamilton. The Hunters' Ohio premises are insured by a homeowner's policy issued by appellee, Westfield Insurance Company. Westfield's policy also provides the Hunters with personal liability coverage for damages arising from bodily injury or property damages.¹ It excludes, however, coverage for claims “arising out of ” premises owned by an insured that are not an insured location.²

{¶ 4} The Hunters own a farm in Indiana that is not a named insured location under the Westfield policy. Rather, the Hunters purchased liability insurance from appellant, Grinnell Mutual Reinsurance Company, to insure the farm.

{¶ 5} On July 7, 2001, the Hunters' minor grandchild, Terrell Whicker, and another minor relative, Ashley Arvin, were riding all-terrain vehicles (“ATV”) on the farm. Terrell was injured in an accident that he alleged was caused when Ashley drove her vehicle toward Terrell but failed to turn away in time, thereby running over him and his vehicle. Terrell alleges that he suffered fractures to his femurs, ankle, and skull, as well as other injuries, as a result of the accident.

{¶ 6} Terrell and his parents brought suit against Ashley, her mother and stepfather (who were present at the farm during the incident), and the Hunters. Insofar as the complaint pertains to Ashley's mother and stepfather, it pleads a cause of negligent entrustment. And as pleaded against the Hunters, it alleges that they knew of Ashley's “reckless and/or negligent tendencies” and “had the ability and duty to exercise control” over Ashley, but breached that duty, and that as “a proximate and foreseeable result of the negligence” of the Hunters, [Ohio St.3d 542] Terrell sustained injuries. The complaint is devoid of any allegation that a condition on the property contributed to the incident giving rise to the accident.

{¶ 7} Westfield brought a declaratory-judgment action against Grinnell, the Hunters, and the Whickers, seeking a declaration that it had no duty to defend or indemnify the Hunters for the claims asserted in Terrell's lawsuit. Grinnell answered and counterclaimed, asserting that both insurers were obligated to provide coverage, on a pro rata basis, to the Hunters.

{¶ 8} On cross-motions for summary judgment, the trial court granted Westfield's motion and denied Grinnell's and the Whickers'. The court reasoned that the claims raised by the Whickers “arose out of” premises that were not insured by Westfield, i.e., the farm, and therefore that Westfield had no obligation to defend or indemnify the Hunters for the Whickers' claims.

{¶ 9} On appeal by Grinnell and the Whickers, the court of appeals affirmed. Like the trial court, it held that there was no coverage for the Hunters under the Westfield policy for the Whickers' claims because the Hunters' farm was not an “insured location” under the Hunters' homeowner's policy and, therefore, that coverage was precluded by the “other premises” exclusion. 2009-Ohio-5642, 2009 WL 3415894, ¶ 36. Grinnell appealed to us for discretionary review and secured an order from the court of appeals certifying that its decision in this case is in conflict with that of another court of appeals. We granted discretionary review, 124 Ohio St.3d 1492, 2010-Ohio-670, 922 N.E.2d 227, and recognized the conflict, 124 Ohio St.3d 1490, 2010-Ohio-670, 922 N.E.2d 226, which presents the following question: “When construing an insurance policy exclusion, does an injury ‘arise out’ of a premises only if some dangerous condition exists on the premises that caused or contributed to the injury, or must the injury only originate in or have a causal connection with the premises?” We answer that question by holding that an exclusion in a homeowner's insurance policy for claims “arising out of ” premises owned by the insured other than the insured location excludes coverage for premises-based liability claims, such as those that arise from the quality or condition of the premises. Moreover, although the exclusion does not bar coverage of claims that arise from the insured's alleged negligence if that negligence is unrelated to the quality or condition of the premises, it does exclude coverage for claims based upon the insured's ownership of the property upon which the injury occurred. Accordingly, we reverse the court of appeals.

Analysis

A

{¶ 10} At the outset, we reiterate some well-settled principles of insurance law that guide us here.

[Ohio St.3d 543] {¶ 11} Ambiguous provisions in an insurance policy must be construed strictly against the insurer and liberally in favor of the insured. See, e.g., King v. Nationwide Ins. Co. (1988), 35 Ohio St.3d 208, 519 N.E.2d 1380, syllabus. This is particularly true when considering provisions that purport to limit or qualify coverage under the policy. Am. Fin. Corp. v. Fireman's Fund Ins. Co. (1968), 15 Ohio St.2d 171, 174, 44 O.O.2d 147, 239 N.E.2d 33. “ ‘[A]n exclusion in an insurance policy will be interpreted as applying only to that which is clearly intended to be excluded.’ (Emphasis sic.) Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd. (1992), 64 Ohio St.3d 657, 665, 597 N.E.2d 1096.” Sharonville v. Am. Emps. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 N.E.2d 833, ¶ 6.

{¶ 12} With those guiding principles set forth, we proceed with our review of the courts' decisions on summary judgment. We apply the de novo standard of review to a decision granting or denying summary judgment based on interpretation of an insurance contract. Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm (1995), 73 Ohio St.3d 107, 108, 652 N.E.2d 684.

B

{¶ 13} The issue here is to what degree a negligence claim must be connected to the premises in order for the exclusion to be triggered. As the Massachusetts Appeals Court phrased the inquiry, “[t]he question is whether the exclusion ought to be read as pertaining to anything that occurs on the off-policy premises or whether the exclusion is limited to accidents that occur because of a condition of the off-policy premises, such as a hole in the walkway, a loose step, defective plumbing, or faulty electric wiring.” Callahan v. Quincy Mut. Fire Ins. Co. (2000), 50 Mass.App.Ct. 260, 261, 736 N.E.2d 857.

{¶ 14} As the court of appeals in this case recognized, we have not interpreted the exclusion for claims “arising out of ” other property in the context of homeowner's policies. And the Ohio appellate courts that have considered the question have reached different results.

{¶ 15} The Eighth District Court of Appeals interprets the exclusion broadly. It holds that “ ‘[a]rising out of’ means generally ‘flowing from’ or ‘having its origin in’ ” and that in order for coverage to be excluded, there need only be some causal link to the property rather than a showing that the premises were the proximate cause of the injury. Nationwide Mut. Fire Ins. Co. v. Turner (1986), 29 Ohio App.3d 73, 77, 29 OBR 83, 503 N.E.2d 212, quoting Ins. Co. of N. Am. v. Royal Indemn. Co. (C.A.6, 1970), 429 F.2d 1014, 1017. The court of appeals in this case followed the rationale of Turner.

{¶ 16} A narrower view of the exclusion was adopted by the Second District Court of Appeals in a more recent case, [Ohio St.3d 544] Am. States Ins. Co. v. Guillermin (1996), 108 Ohio App.3d 547, 671 N.E.2d 317. Guillermin holds that an injury arises out of the premises, and coverage is therefore excluded, only if there is a dangerous condition on the premises that causes or contributes to the bodily injury for which coverage is sought. Id. at 565.

{¶ 17} Although both approaches are understandable, for the reasons that follow, we hold that the Guillermin rule is better reasoned and that the exclusion in Westfield's...