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Charles J. Ozvath v. the Buckeye Union Insurance

November 10, 2011

CHARLES J. OZVATH PLAINTIFF-APPELLEE/ CROSS-APPELLANT
v.
THE BUCKEYE UNION INSURANCE COMPANY DEFENDANT-APPELLANT/ CROSS-APPELLEE



T.C. NO. 06CV6132 (Civil appeal from Common Pleas Court)

The opinion of the court was delivered by: Froelich, J.

Cite as Ozvath v. Buckeye Union Ins. Co.,

OPINION

{¶1} This appeal arises out of a dispute between Charles Ozvath ("Ozvath") and Buckeye Union Insurance Company over whether Buckeye (now Continental Insurance Company) was required to defend Ozvath in a "collection action" filed by Robert Harbin and the extent to which Buckeye was required to reimburse Ozvath for his attorney fees and settlement costs. By way of summary judgment, the trial court found that Continental (the successor by merger with Buckeye) had a duty to defend Ozvath in the collection action, but did not have to indemnify Ozvath for the amount he paid in a settlement with Harbin. After a hearing, the court ordered Continental to pay some, but not all, of the attorney fees and prejudgment interest that Ozvath sought from Continental.

{¶2} Continental appeals, claiming that the trial court erred in determining that the insurance company had a duty to defend Ozvath and in granting attorney fees to Ozvath. Ozvath cross-appeals, claiming that the trial court should have ordered Continental to indemnify Ozvath for the amount of the collection action settlement and that it erred in reducing the amount of claimed attorney fees and prejudgment interest.

{¶3} For the following reasons, the trial court's judgment in favor of Ozvath will be reversed, and the case will be remanded for the trial court to enter judgment in favor of Continental.

I.

{¶4} In 1994, Robert Harbin, an employee of Ohi-Tec Manufacturing, Inc., was injured at work by a 150-ton mechanical press, resulting in the amputation of two fingers and the loss of use of another finger. Harbin sued Ohi-Tec in the Clark County Common Pleas Court for his personal injuries, and he alleged intentional tort, negligence, and punitive damages; he also claimed that the employment intentional tort statute (R.C. 2745.01) was unconstitutional. Buckeye defended Ohi-Tec under a reservation of rights pursuant to an insurance policy issued to Ohi-Tec (and of which Charles Ozvath was a named insured). Buckeye informed Ohi-Tec that, while the policy excluded claims based on intentional acts, the policy would "provide indemnity for any damages which would be awarded as a result of the negligence claims made in Count 2." Ozvath was not named as a defendant in the personal injury action.

{¶5} After a jury trial, a jury awarded Harbin $750,000 in compensatory damages on his employer intentional tort claim and $300,000 in punitive damages. Ohi-Tec moved for judgment notwithstanding the verdict, which the trial court granted; the trial court also stated in its decision that if the appellate court reverses the judgment of the trial court on the JNOV, the trial court provisionally granted Ohi-Tec's motion for a new trial. On June 14, 2002, we reversed the trial court and ordered it to enter judgment in favor of Harbin, as found by the jury. Harbin v. Ohi-Tec Mfg., Inc., Clark App. No. 2001 CA 70, 2002-Ohio-2923. The parties represent that Harbin sought to collect the judgment from Buckeye, but he was unsuccessful.

{¶6} In August 2002, Harbin brought suit ("the collection action") in the Montgomery County Common Pleas Court against Charles Ozvath, his wife, and his three sons (all of whom were allegedly owners of Ohi-Tec) and Ohi-Tec. Harbin stated in his complaint that Ohi-Tec had failed to satisfy the employer intentional tort judgment and, through various claims of fraud, Harbin sought to pierce Ohi-Tec's corporate veil. Stated generally, Harbin alleged that Ozvath had fraudulently transferred the assets of Ohio Pressed Steel (an alleged predecessor company of Ohi-Tec) to himself (Ozvath), created Ohi-Tec, and then fraudulently transferred shares of Ohi-Tec to his sons.*fn1

{¶7} In early 2003, Ohi-Tec filed for protection under Chapter 11 of the United States Bankruptcy Code, and the collection action was stayed. Ohi-Tec also removed the collection action to federal district court. In March 2005, the federal district court remanded the collection action back to the Montgomery County Common Pleas Court, and the bankruptcy court granted Harbin derivative standing to pursue the collection action against the Ozvaths in the Common Pleas Court. The bankruptcy stay was lifted in April 2005.

{¶8} In January 2006, Harbin filed a second amended complaint in the collection action, which indicated that he was pursuing the case against the Ozvaths with derivative standing for the bankruptcy estate of Ohi-Tec. In March 2006, Ozvath filed a notice of claim with Buckeye seeking to have Buckeye defend him against Harbin's collection action and to indemnify any damages. On May 23, 2006, Buckeye notified Ozvath that it was denying coverage because the complaint alleged intentional acts, it did not allege an "occurrence" as defined by the policy, and punitive damages are not covered as a matter of public policy. Harbin filed a third amended complaint in the collection action in June 2006.

{¶9} In August 2006, Ozvath initiated this action against Buckeye seeking a declaratory judgment and damages for breach of contract. Ozvath requested that the trial court "declare that Buckeye is obligated to provide coverage under the Policy to Mr. Ozvath for the Montgomery County Collection Case, including reimbursement of defense fees and costs, payment of future defense fees and costs and indemnification for any judgment (however unlikely) against Mr. Ozvath." Ozvath also sought damages for the attorney fees and costs that he had expended in defending himself in the collection action.

{¶10} The parties filed cross-motions for summary judgment on Buckeye's (now Continental's) alleged duty to defend and to indemnify Ozvath in the collection action. The trial court concluded that Continental had a duty to defend Ozvath in the collection action, but did not have a duty to indemnify Ozvath. (While motions in the declaratory judgment/breach of contract case were pending in the trial court, the collection action settled for $315,000.) The court subsequently held hearings on the amount of attorney fees and prejudgment interest that Continental owed to Ozvath. After a hearing, the court awarded attorney fees and prejudgment interest to Ozvath, although in an amount less than what Ozvath had requested.

{¶11} Continental appeals from the trial court's rulings. Ozvath has cross-appealed. We find Continental's first assignment of error to be dispositive.

II.

{¶12} Continental's first assignment of error states:

{¶13} "THE TRIAL COURT ERRED WHEN IT DETERMINED THAT APPELLANT [CONTINENTAL] HAD A DUTY TO PROVIDE A DEFENSE TO CHARLES OZVATH IN CERTAIN UNDERLYING LITIGATION UNDER THE TERMS OF THE SUBJECT INSURANCE POLICY."

{¶14} In its first assignment of error, Continental claims that the trial court erred in granting summary judgment to Ozvath on his claim that Continental had a duty to defend him in the collection action.

{¶15} "The purpose of a motion for summary judgment is to test whether genuine issues of material fact exist such that a trial is necessary to resolve those issues." Abroms v. Synergy Bldg. Sys., Montgomery App. No. 23944, 2011-Ohio-2180, ¶34. Summary judgment should be granted only if no genuine issue of material fact exists, the moving party is entitled to judgment as a matter of law, and reasonable minds can come to but one conclusion, which is adverse to the nonmoving party. Civ.R. 56; Harless v. Willis Day Warehousing Co. (1978), 54 Ohio St.2d 64, 66.

{¶16} Upon a motion for summary judgment, the moving party bears the initial burden of showing that no genuine issue of material fact exists for trial. Dresher v. Burt (1996), 75 Ohio St.3d 280, 292-93. Once the moving party satisfies its burden, the nonmoving party may not rest upon the mere allegations or denials of the party's pleadings. Id.; Civ.R. 56(E). Rather, the burden then shifts to the non-moving party to respond, with affidavits or as otherwise permitted by Civ.R. 56, setting forth specific facts which show that there is a genuine issue of material fact for trial. Id. Throughout, the evidence must be construed in favor of the non-moving party. Id.

{¶17} An appellate court reviews summary judgments de novo, meaning that we review such judgments independently and without deference to the trial court's determinations. Koos v. Cent. Ohio Cellular, Inc. (1994), 94 Ohio App.3d 579, 588.

{¶18} "An insurance policy is a contract between the insurer and the insured. If we must interpret a provision in the policy, we look to the policy language and rely on the plain and ordinary meaning of the words used to ascertain the intent of the parties to the contract. We examine the contract as a whole, which means that an endorsement is read as though it is within the policy.

{¶19} "*** [T]he duty to defend is broader than and distinct from the duty to indemnify. The duty to defend is determined by the scope of the allegations in the complaint. If the allegations state a claim that potentially or arguably falls within the liability insurance coverage, then the insurer must defend the insured in the action. But if all the claims are clearly and indisputably outside the contracted coverage, the insurer need not defend the insured." (Internal citations omitted.) Ward v. United Foundries, Inc., 129 Ohio St.3d 292, 2011-Ohio-3176, ¶18-19.

{¶20} It is undisputed that Ozvath is a named insured on the Comprehensive Business Policy issued by Buckeye to Ohi-Tec for the period of June 14, 1994, to July 14, 1995. That policy included a Commercial General Liability Coverage Part and a Special Employers Liability Coverage Form (Stop-Gap Endorsement). The Commercial General Liability Coverage Part provided, in part:

{¶21} "SECTION I - COVERAGES

{¶22} "COVERAGE A. BODILY INJURY AND PROPERTY DAMAGE LIABILITY

{¶23} "1. Insuring Agreement

{ΒΆ24} "a. We [Buckeye] will pay those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' to which this insurance applies. We will have the right and duty to defend any 'suit' seeking those damages. We may at our discretion ...


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