World Harvest Church v. Grange Mut. Cas. Co. (Slip Opinion)
148 Ohio St. 3d 11
| Ohio | 2016Background
- A two-year-old child in World Harvest Church’s (WHC) daycare was physically abused by WHC employee Richard Vaughan; a jury found Vaughan liable for battery and WHC vicariously liable and awarded large compensatory, punitive damages, and attorney fees. WHC admitted Vaughan acted within the scope of employment.
- WHC was insured by Grange under a commercial general liability (CGL) policy and umbrella policy; Grange defended under reservation of rights but later disputed indemnity based on policy exclusions.
- The policies contained an Abuse or Molestation Exclusion that barred coverage for bodily injury “arising out of” actual or threatened abuse by anyone of a person in the care, custody, or control of an insured, and for negligent hiring/supervision/retention of a person whose conduct would be excluded.
- Lower courts split: trial court ordered Grange to indemnify WHC for certain compensatory damages, attorney fees, and postjudgment interest; the court of appeals limited coverage but required Grange to pay some vicarious-liability compensatory damages, all attorney fees, and postjudgment interest on the full judgment.
- The Ohio Supreme Court accepted Grange’s appeal and limited review to whether the abuse exclusion bars coverage for damages based on WHC’s vicarious liability for Vaughan’s abuse, and whether attorney fees and postjudgment interest on noncovered amounts are covered.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether abuse/molestation exclusion bars coverage for damages award based on insured’s vicarious liability for employee’s physical abuse | WHC: exclusion applies only to direct liability of the bad actor; vicarious liability is not expressly excluded, so coverage exists | Grange: exclusion is broad and excludes any bodily injury arising out of abuse by anyone while victim is in insured’s care, including vicarious-liability awards | Held: exclusion unambiguously bars coverage for vicarious-liability damages arising from the employee’s abuse; reversed appellate court’s indemnity for those amounts |
| Whether attorney fees awarded in underlying suit are covered when incurred solely in relation to noncovered conduct | WHC: fees are not allocable and thus must be indemnified by insurer | Grange: because the underlying claims are excluded, insurer need not pay attorney fees tied to noncovered conduct | Held: because no covered claims remain, Grange has no obligation to indemnify attorney fees |
| Whether policy’s supplementary-payments clause requires insurer to pay postjudgment interest on full judgment even if parts are noncovered | WHC: the policy required payment of interest on “any judgment” entered in defended suits | Grange: interest attaches only where the policy applies; exclusion removes the suit from coverage for abuse-related injuries | Held: insurer need not pay postjudgment interest on amounts excluded by the abuse exclusion; no obligation to pay any interest here |
| Whether policy language is ambiguous and must be construed against insurer | WHC: absence of express mention of vicarious liability creates ambiguity favoring insured | Grange: language is plain and broad—no ambiguity | Held: court finds language plain and unambiguous; no ambiguity to construe for insured |
Key Cases Cited
- Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd., 64 Ohio St.3d 657 (1992) (general rule: exclusions construed narrowly; interpret insurance contracts like other contracts)
- Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216 (2003) (examine insurance contract as whole; use plain and ordinary meaning)
- Safeco Ins. Co. of Am. v. White, 122 Ohio St.3d 562 (2009) (same interpretive principles; look to plain meaning unless context shows otherwise)
- Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130 (1987) (presume parties’ intent reflected in policy language)
- Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241 (1978) (use plain and ordinary meaning of policy terms unless another meaning clearly appears)
- S & M Constructors, Inc. v. Columbus, 70 Ohio St.2d 69 (1982) (clear contract terms are enforced even if they produce hardship)