Raudins v. Hobbs
104 N.E.3d 1040
Oh. Ct. App. 8th Dist. Cuyahog...2018Background
- On Jan. 13, 2011 William Hobbs drove his 2003 Toyota Tundra (a vehicle listed on his Erie personal auto policy) with Eric Raudins as front-seat passenger; Hobbs lost control on ice and Raudins was severely injured.
- Hobbs and Raudins were officers/members of three related entities: Recreation (an insurance agency), Risk (a claims administrator), and RIS Holdings (holding company).
- Westfield issued a Businessowners Policy (with a hired/non‑owned auto liability endorsement) to Recreation and Risk; the endorsement included express "who is an insured" grants and exclusions.
- Erie issued a personal (family) auto policy to Hobbs that listed the Tundra as a covered auto; Amica issued UM/UIM coverage to Raudins.
- Multiple suits and cross/third‑party claims ensued seeking declarations of coverage. The trial court held Erie must indemnify/defend Hobbs (Erie primary liability) and Westfield had no duty to defend/indemnify under its non‑owned auto endorsement. Parties appealed.
Issues
| Issue | Raudins/Amica/Hobbs (plaintiff) argument | Erie/Recreation/Risk/Westfield (defendant) argument | Held |
|---|---|---|---|
| Whether Westfield's non‑owned auto endorsement covers Hobbs’ liability for Raudins’ injuries | Endorsement covers "bodily injury arising out of use of any non‑owned auto in your business by any person," and Hobbs was using his vehicle in company business, so Westfield provides primary coverage | The endorsement limits who is an "insured"; an executive officer driving his own vehicle is expressly excluded, so Westfield has no duty | Held: No coverage under Westfield for Hobbs; Hobbs was excluded as an insured when driving his own car despite the non‑owned auto language |
| Whether the endorsement is ambiguous (requiring construction for insured) | The endorsement is confusing and therefore ambiguous; ambiguity must be construed against Westfield, producing coverage for Hobbs | The provisions, read as a whole, are not reasonably susceptible to multiple meanings; exclusions (owner/executive officer) must be given effect | Held: Not ambiguous; plain reading excludes an executive officer driving his own auto; exclusion controls |
| Whether Westfield's endorsement is illusory (because it both grants and takes away coverage) | The grant followed immediately by exclusions makes coverage illusory and should be voided in favor of insured | The endorsement provides gap coverage for situations (e.g., officer driving another employee’s car); it is not illusory because it affords real, limited protection | Held: Not illusory; endorsement provides limited, sensible gap coverage and the exclusion is enforceable |
| Whether Erie’s Exclusion 7 (injury to employees in course of employment) bars Hobbs’ coverage | Erie argues Raudins was an employee of the companies (or de facto employee of Hobbs), so the employee injury exclusion removes coverage | Raudins was compensated via guaranteed payments/K‑1s, not W‑2 wages; workers’ comp claims were denied; no evidence Hobbs was Raudins’ employer | Held: Exclusion inapplicable to Hobbs; Erie failed to prove Raudins was Hobbs’ employee, so Erie must indemnify/defend Hobbs under Erie policy |
Key Cases Cited
- Laboy v. Grange Indem. Ins. Co., 41 N.E.3d 1224 (Ohio 2015) (insurance policy interpretation governed by contract rules; plain meaning controls)
- Sharonville v. Am. Emps. Ins. Co., 846 N.E.2d 833 (Ohio 2006) (ambiguities in insurance policies construed against insurer)
- Westfield Ins. Co. v. Galatis, 797 N.E.2d 1256 (Ohio 2003) (presume parties’ intent is reflected in policy language; read policy as a whole)
- Alexander v. Buckeye Pipe Line Co., 374 N.E.2d 146 (Ohio 1978) (words in contract given plain and ordinary meaning unless contrary intent appears)
- Hybud Equip. Corp. v. Sphere Drake Ins. Co., 597 N.E.2d 1096 (Ohio 1992) (exclusion clauses will be read narrowly; insurer bears burden to show exclusion applies)