531 N.E.2d 1348 | Ohio Ct. App. | 1987
Supplemental defendant-insurer appeals from the trial court's order that the insurer pay the punitive damage award entered against its insured in a defamation action, and the interest accrued. The insurer claims (a) that public policy does not allow insurance coverage for punitive damages and interest on a punitive damage award, and (b) that the terms of the instant insurance policy do not cover the punitive damages and interest. The first assignment of error has merit and we reverse the trial court's order.
During the policy period, Calhoun made remarks which were allegedly slanderous of appellee, Patrick Casey. Casey brought a defamation action against Calhoun which resulted in a judgment in favor of the plaintiff in the amount of $15,403 in compensatory damages and $10,000 in punitive damages. The insurer defended the suit at trial and brought an appeal to this court on behalf of Calhoun. We affirmed *84 the trial court's decision. Casey v. Calhoun (Oct. 9, 1980), Cuyahoga App. No. 41396, unreported. Calhoun then appealed prose to the Supreme Court, but subsequently dismissed the appeal.
The insurer paid the compensatory damages and the interest thereon, but declined to pay the punitive damages and interest accrued. The plaintiff in the original action filed a supplemental petition under R.C.
Punitive damages are awarded to punish an offender for the wanton, reckless, malicious or oppressive character of the act committed and to deter others from committing similar acts.Atlantic Great Western Ry. Co. v. Dunn (1969),
While some jurisdictions expressly authorize insurance for punitive damages, others construe indemnity contracts to exclude that liability on public policy grounds. See Annotation (1982), 16 A.L.R. 4th 12; 1 Ghiardi Kircher (1981 and Supp. 1986), Punitive Damages: Law and Practice, Chapter 7.
Jurisdictions which consider insurance for punitive damages to be against public policy reason that the culpable tortfeasor must not escape the intended punishment by shifting the burden to an insurance company. Further, they argue that the deterrent effect of punitives is greatly diminished if potential tortfeasors know that they can be indemnified against both compensatory and punitive damages. See, e.g., Northwestern Natl. Cas. Co. v.McNulty (C.A. 5, 1962),
The majority of jurisdictions, however, reject these arguments as unpersuasive and inadequate when balanced against other policy concerns. See, e.g., Lazenby v. Universal Underwriters Ins. Co.
(1964),
The majority of jurisdictions hold that there is a competing public policy favoring the freedom to contract and the enforcement of insurance contracts generally, which supports the insurance of punitive damages and which is more compelling. See,e.g., Harris v. Racine Cty. (E.D. Wis. 1981),
Although we might wish to balance the competing policy concerns to side with the majority of jurisdictions which uphold the insurability of punitive damages, we believe that the clear policy of Ohio prohibits such a practice. See, generally, Schumaier McKinsey, The Insurability of Punitive Damages (March 1, 1986), 72 A.B.A.J. 68.
In Key v. Vattier (1983),
The Ohio General Assembly in 1986 amended R.C.
"The General Assembly hereby declares that in the amendment of Section
The legislative intent was again demonstrated recently by the Ohio General Assembly with its passage of Am. Sub. H.B. No. 1, which becomes effective January 5, 1988. Contained within its provisions is R.C.
"* * * and no other policy of casualty or liability insurance that is covered by sections
It is clear that with the passage of this bill the General Assembly has assumed its role as policymaker and has firmly expressed its intention that an individual must be prohibited from insuring against his own intentional or malicious acts.
The Supreme Court, on the other hand, has not reached the issue of the insurability of punitive damages since Hutchinson.
However, it should be noted that the court in cases involving intentional torts restated its longstanding belief that "* * * public policy is contrary to insurance against intentional torts." Wedge Products, Inc. v. Hartford Equity Sales Co. (1987),
In view of the explicit public policy pronouncement contained in R.C.
Accordingly, we sustain appellant's first assignment of error and reverse the trial court's order that the insurer must pay punitive damages and interest on those damages assessed against the insured.
The insurer argues in its second assignment of error that the terms of the "umbrella policy" did not cover punitive damages and the interest on those damages assessed against the insured. In view of our disposition of the previous assignment, we address this contention solely to satisfy our obligation under App. R. 12(A).
The insurer's "Personal Catastrophe Policy" contained the following clauses:
"Part II — Liability Insuring Agreements
"I. Coverage
"(a) Personal Liability — The company will indemnify the Insured for all sums which the Insured shall be legally obligated to pay as damages and expenses * * * on account of:
"(1) Personal Injuries * * *.
"* * *
"Definitions (Applicable Only to Part II)
"2. Personal Injuries: The term `Personal Injuries' wherever used herein shall include but is not limited to bodily injury, mental injury, mental anguish, shock, sickness, disease, disability, false arrest, false imprisonment, wrongful eviction, wrongful entry, *87 detention, malicious prosecution, discrimination, humiliation, libel, slander, defamation of character or invasion of rights of privacy." (Emphasis added.)
In reviewing these two clauses we must conclude that it was the clear intent of the parties that punitive damages were to be covered under the "umbrella" policy. Section I(a) unambiguously covers "all sums which the Insured shall be legally obligated to pay as damages * * *." "Punitive damages are a form of damages; when liquidated by judgment [as in this case] they are a `sum.'"Norfolk Western Ry. Co. v. Hartford Acc. Indemn. Co. (N.D. Ind. 1976),
The insurer argues that the boundaries of liability under the policy are set not only by the coverage provision but also by the limit of liability clause. The latter clause states:
"(a) As respects Coverage (a), the Company's liability shall be only for the ultimate net loss in excess of the `underlying limits' defined as
"* * *
"(II) the retained limit as defined in the last paragraph of Insuring Agreement II if the occurrence is not covered in whole or in part by such underlying policy(ies) or insurance;
"and then up to an amount not exceeding the limit indicated in Item 4(a) of the Declarations as the result of any oneoccurrence; provided that the Company shall not be required to assume any obligation of any underlying insurer, which shall be deemed uncollectible or invalid by reason of bankruptcy or insolvency of such insurer. There is no limit to the number ofoccurrences during the policy period for which claim may be made." (Emphasis added.)
The policy defines "occurrence" as "an accident, involving injurious exposure to conditions which results, during the policy period, in personal injury or property damage neither expected nor intended from the standpoint of the insured." Therefore, St. Paul contends that punitive damages are beyond the limits of its liability as they were not awarded as the result of an "occurrence." Calhoun's actions were not an accident; he acted with (1) the intent to injure another, or (2) the belief that such injury was substantially certain to occur. Cf. Jones v. VIPDevelopment Co. (1984),
Recently, the Ohio Supreme Court interpreted a nearly identical clause to preclude coverage for intentional torts. WedgeProducts, Inc. v. Hartford Equity Sales Co. (1987),
We may be able to reconcile coverage for libel with the limitations on liability imposed by the policy's definition of "occurrence." The fault in libel need only amount to negligence when the defamed is other than a public figure and, therefore, libel may be an accidental act. However, express coverage for false imprisonment or malicious prosecution cannot be reconciled with a provision which limits liability to "accidental" acts. Clearly, both torts are defined by an intentional act. Cf. Sayre
v. Chilcott (May 16, 1985), Cuyahoga App. No. 48802, unreported (elements of false imprisonment); Crawford v. Euclid Natl. Bank
(1985),
Therefore, so as to honor the intent of the parties and to prevent a significant portion of the coverage from becoming illusory, we will not recognize the "occurrence" language as placing a limitation on recovery in the case of punitive damages. See, generally, State, ex rel. Gordon, v. Taylor (1948),
Finally, we agree with the trial court that the policy requires the insurer to pay the interest accrued on the damage awards. The policy specifically states in Part II, Section II(c) that the Company shall "pay all expenses incurred by the company, all costs taxed against the Insured in any such suit and all interest accruing after entry of judgment until the Company has paid or tendered or deposited in court such part of such judgment as does not exceed the limit of the Company's liability thereon * * *."
We overrule the insurer's second assignment of error. Based on our resolution of the first assignment of error, that the contract is unenforceable with respect to punitive damages, however, the insurer cannot be held liable for the punitive damages or the interest accrued thereon.
Judgment reversed.
STILLMAN, P.J., and MARTIN, J., concur.
THOMAS J. PARRINO, J., and SAUL G. STILLMAN, P.J., retired, of the Eight Appellate District, were assigned to active duty under authority of Section
WILLIAM J. MARTIN, J., of the Carroll County Court of Common Pleas, sitting by assignment in the Eighth Appellate District.