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Seabright Insurance Co. v. Euro Paint, LLC

Court of Appeals of Ohio, Seventh District, Mahoning

March 28, 2017

SEABRIGHT INSURANCE COMPANY PLAINTIFF-APPELLANT
v.
EURO PAINT, LLC DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLEE AND TROY PAINTING, INC. DEFENDANT/THIRD-PARTY PLAINTIFF-APPELLEE AND VIMAS PAINTING CO., INC. DEFENDANT-THIRD PARTYPLAINTIFF-APPELLEE CROSS-APPELLANT
v.
KERNAN INSURANCE AGENCY, INC., et al. THIRD-PARTY DEFENDANTS CROSS-APPELLEES

         Civil Appeals from the Court of Common Pleas of Mahoning County, Ohio Case Nos. 12 CV 3023; 12 CV 3389; 12 CV 3024

          For SeaBright Insurance Co.: Atty. Katheryn M. Lloyd Carpenter Lipps & Leland LLP

          For Euro Paint, LLC, Troy Painting, Inc. & Vimas Painting Co., Inc. Atty. Stuart A. Strasfeld Atty. David S. Barbee Roth Blair LPA

          For Kernan Insurance Agency & Gerald Kernan: Atty. Thomas P. Mannion Atty. Allison E. Hayes Mannion, Gray, Uhl & Hill Co., LPA

          For State of Ohio: Atty. Mike DeWine Attorney General of Ohio Atty. Eric E. Murphy State Solicitor Michael J. Hendershot Chief Deputy Solicitor

          JUDGES: Hon. Cheryl L. Waite Hon. Gene Donofrio Hon. Carol Ann Robb

          OPINION

          WAITE, J.

         {¶1} In this consolidated matter, Appellant SeaBright Insurance Company ("SeaBright") appeals three separate judgment entries from three different Mahoning County Common Pleas Courts. In all of these, the trial court judges granted summary judgment in favor of three separate bridge painting companies. Each of the three were engaged to paint different bridges in the State of Kentucky. The three bridge painting companies are Appellees in this appeal: Euro Paint, LLC ("Euro Paint"); Troy Painting, Inc. ("Troy"); and Vimas Painting Company, Inc. ("Vimas"). In their respective cases, each bridge painting company filed a third party complaint against their insurance agency and agent, Kernan Insurance Agency and Gerald Kernan ("Kernan Defendants"). Amicus curiae briefs were filed by both the Kernan Defendants as well as the State of Ohio.

         {¶2} It should be noted at the outset that each of these cases consist of substantially similar fact issues. In addition to each bridge painting company's business principal's deposition obtained in the respective cases, the depositions from Kernan Defendants (Gerald Kernan and Scott Joseph) as well as depositions of SeaBright auditors (Frank Robinson and Thomas Ward) were used and filed of record in all three cases. In addition, for clarity, each case will be nominally referred to by the name of the respective bridge painting company: (1) "the Euro Paint appeal" (15 MA 0088); (2) "the Troy appeal" (15 MA 0106); and (3) "the Vimas appeal" (15 MA 0125). As a final preliminary note, although the Kernan Defendants are third party defendants in each case and filed their own motions for summary judgment in each case, only the Vimas trial court granted this motion. The Kernan Defendants' motions for summary judgment in the other two cases were denied as moot. Vimas has filed a cross-appeal in this matter directed towards the Kernan Defendants.

         {¶3} The central legal issue in this consolidated matter is whether Ohio Bureau of Workers' Compensation Form C-110 signed by Appellees' workers qualifies as proof of "other insurance" as defined in the SeaBright policies, precluding SeaBright from recovering additional post-audit premiums from each Appellee. SeaBright contends the workers' compensation insurance coverage provided by them to Appellees enabled Appellees to obtain the bridge painting contracts with the Kentucky Transportation Cabinet. SeaBright argues, then, that Appellees owe the additional premiums based on employee audits conducted after the projects were complete. SeaBright contends that they bore all of the risk for all of Appellees' employees while they performed work in Kentucky, because Kentucky does not recognize the Ohio C-110 forms as providing proof of workers' compensation coverage. On the other hand, Appellees contend they obtained minimal coverage in Kentucky only in the event they hired Kentucky residents on the jobs and that the C-110 forms completed by their employees evinced "other insurance" coverage as defined by the SeaBright policy because they operated as a contract between Appellees and their employees to agree that Ohio had jurisdiction over any claim for workers' compensation coverage. Further, Appellees contend this has been standard practice in the industry and that the premiums sought by SeaBright total nearly as much, and sometimes more than, the total amount of the project contract. In the Kernan Defendants' amicus curiae brief they make similar arguments and also contend that claims from Appellees' out-of-state workers based on C-110 forms have been recognized and paid by the Ohio Bureau of Workers Compensation ("BWC") in the past. The State of Ohio has filed an amicus curiae brief only to raise the issue that, although several appellate districts have stated mere signing of a C-110 form creates a binding contract and provides Ohio workers' compensation coverage, courts must still take into consideration whether the employer and employee at issue have sufficient contacts within Ohio to permit workers' compensation coverage utilizing the C-110 form. If the C-110 forms executed by Appellees' employees constitute valid binding contracts for workers' compensation coverage in Ohio, they would qualify as "other coverage" under the SeaBright policy language and preclude recovery of the additional premiums sought by SeaBright.

         {¶4} For the reasons discussed below, Appellees paid $15, 000 each to SeaBright with their initial applications to obtain Kentucky workers' compensation coverage. The unrebutted testimony shows that it was Appellees' understanding that this was the minimal amount necessary in order to obtain private workers' compensation coverage for any employees Appellees might hire who were Kentucky residents. Ultimately, Appellees never hired any Kentucky residents. Most of Appellees' employees executed C-110 forms at the time they were hired, agreeing to be bound by Ohio's workers' compensation statutes and Ohio coverage. The record shows Appellees and their employees have sufficient localized contact with Ohio, pursuant to current caselaw, to render the C-110s valid. Workers with signed C-110 forms have "other insurance" pursuant to the SeaBright contract. As SeaBright failed to demonstrate a genuine issue of material fact exists regarding their breach of contract, action on account and unjust enrichment claims, the three trial courts properly denied SeaBright's motions for summary judgment. SeaBright's assignments of error are without merit. Vimas' cross-appeal regarding summary judgment in favor of Kernan Defendants is correct only to the extent that the trial court in the Vimas case should also have denied Kernan Defendants' motion for summary judgment against Vimas as moot.

         Procedural History

         SeaBright v. Euro Paint

         {¶5} On September 27, 2012, SeaBright filed a complaint against Euro Paint for breach of contract. An amended complaint was filed on January 17, 2013, alleging breach of contract, action on account, and unjust enrichment. The claims related to a private workers' compensation insurance policy issued to Euro Paint from SeaBright for the policy periods August 13, 2010 through August 12, 2011 and August 13, 2011 through August 12, 2012. SeaBright filed a second amended complaint on February 27, 2013, attaching as exhibits and incorporating copies of the written policies at issue. On May 6, 2013, Euro Paint filed an answer to the amended complaint. Euro Paint sought leave to file a third-party complaint against its insurance agent and agency, the Kernan Defendants. On August 28, 2013, the third-party complaint was filed.

         {¶6} On October 29, 2014, the Kernan Defendants filed a motion for summary judgment directed at Euro Paint ("Kernan Defendants' first motion for summary judgment") On November 18, 2014, Kernan Defendants filed a second motion for summary judgment directed at SeaBright's claims against Euro Paint ("Kernan Defendants' second motion for summary judgment"). On December 2, 2014, SeaBright filed a combined motion to strike Kernan Defendants' second motion for summary judgment, and a motion for summary judgment regarding its own claims against Euro Paint. On December 12, 2014, Euro Paint filed a motion for summary judgment against SeaBright combined with its opposition to the Kernan Defendants' first motion for summary judgment. On January 15, 2015, SeaBright filed in opposition to Euro Paint's motion for summary judgment.

         {¶7} On April 3, 3015, the magistrate issued a decision: (1) denying SeaBright's motion for summary judgment; (2) granting Euro Paint's motion for summary judgment; (3) granting SeaBright's motion to strike Kernan Defendants' second motion for summary judgment; (4) dismissing Euro Paint's third-party complaint against Kernan Defendants; and (5) denying Kernan Defendants' first motion for summary judgment as moot. SeaBright filed timely objections to the magistrate's decision on April 17, 2015. On April 27, 2015, Euro Paint filed its own objections to the magistrate's decision. Euro Paint also filed its response to SeaBright's objections to the magistrate's decision on April 30, 2015. On May 12, 2015, the trial court affirmed the magistrate's decision. This timely appeal followed.

         SeaBright v. Troy

         {¶8} On November 1, 2012, SeaBright filed a complaint against Troy alleging breach of contract, action on account, unjust enrichment and quantum meruit. The complaint related to private workers' compensation insurance for the policy period June 7, 2011 through June 7, 2012.

         {¶9} On December 18, 2012, Troy filed an answer. On March 12, 2013, SeaBright filed a motion for summary judgment, alleging that because Troy failed to respond to SeaBright's request for admissions they should be deemed admitted. On April 25, 2013, Troy filed a response to SeaBright's motion for summary judgment. On May 9, 2013, the trial court issued a judgment entry denying SeaBright's motion for summary judgment. SeaBright did not appeal.

         {¶10} On November 14, 2013, after seeking leave from the trial court, Troy filed a third-party complaint against the Kernan Defendants, alleging they failed to secure the appropriate workers' compensation coverage and seeking indemnification for any damages awarded to SeaBright. The Kernan Defendants filed their answer on December 5, 2013.

         {¶11} On October 29, 2014, the Kernan Defendants filed a motion for summary judgment directed at Troy on the third-party claims ("Kernan Defendants' first motion for summary judgment"). On December 4, 2014, the Kernan Defendants filed a motion for summary judgment on SeaBright's claims against Troy ("Kernan Defendants' second motion for summary judgment"). On December 1, 2014, SeaBright filed a combined motion for summary judgment for its own claims against Troy and to strike Kernan Defendants' second motion for summary judgment. On December 12, 2014, Troy filed a combined motion for summary judgment on SeaBright's claims and a response to the Kernan Defendants' first motion for summary judgment.

         {¶12} On April 16, 2015, the magistrate issued a decision: (1) denying SeaBright's motion for summary judgment; (2) granting Troy's motion for summary judgment; (3) granting SeaBright's motion to strike Kernan Defendants' second motion for summary judgment; (4) dismissing Euro Paint's third-party complaint against Kernan Defendants; and (5) denying Kernan Defendants' first motion for summary judgment as moot.

         {¶13} On May 15, 2015, SeaBright timely filed objections to the magistrate's decision after receiving an extension from the court. Troy filed its own objections to the magistrate's decision on May 27, 2015 as well as a response to SeaBright's objections. Kernan Defendants filed a response to SeaBright's objections on May 29, 2015. On June 2, 2015, the trial court adopted the magistrate's decision and this timely appeal followed.

         SeaBright v. Vimas

         {¶14} On September 27, 2012, SeaBright filed a complaint against Vimas seeking judgment in the amount of $2, 321, 408, with a copy of an invoice attached. On December 17, 2012, Vimas filed a motion to dismiss pursuant to Civ.R. 12(B)(6), asserting SeaBright failed to allege there was any contract of insurance nor did SeaBright raise any allegations of breach of contract. In a judgment entry dated May 15, 2013, the trial court denied Vimas' motion to dismiss and granted SeaBright's motion for leave to file an amended complaint. On December 24, 2012, SeaBright filed an amended complaint alleging breach of contract, action on account and unjust enrichment. On May 23, 2013, Vimas filed its answer and a counterclaim against SeaBright, seeking a refund on its premium. SeaBright replied to the counterclaim.

         {¶15} On November 14, 2013, after seeking leave of the trial court, Vimas filed a third-party complaint against the Kernan Defendants, alleging they had failed to secure the appropriate workers' compensation coverage and seeking indemnification for any damages awarded to SeaBright.

         {¶16} On October 28, 2014, the Kernan Defendants filed a motion for summary judgment on the claims raised by Vimas ("Kernan Defendants' first motion for summary judgment"). On November 18, 2014, the Kernan Defendants filed a motion for summary judgment on SeaBright's claims against Vimas ("Kernan Defendants' second motion for summary judgment"). SeaBright filed a combined motion for summary judgment on its claims against Vimas and a motion to strike the summary judgment motion filed by the Kernan Defendants with respect to SeaBright's claims against Vimas.

         {¶17} On December 12, 2014 Vimas filed a combined motion for summary judgment on SeaBright's claims and a response to the Kernan Defendants' first motion for summary judgment. On January 16, 2015, SeaBright filed its opposition to Vimas' motion for summary judgment. On March 30, 2015, Vimas filed a combined motion in opposition to SeaBright's motion for summary judgment and a reply, defending its own motion for summary judgment.

         {¶18} On April 3, 2015, the magistrate issued a decision: (1) denying SeaBright's motion for summary judgment; (2) granting Vimas' motion for summary judgment; (3) denying SeaBright's motion to strike Kernan Defendants' second motion for summary judgment; (4) dismissing Euro Paint's third-party complaint against Kernan Defendants; and (5) granting Kernan Defendants' first motion for summary judgment.

         {¶19} On April 17, 2015, SeaBright filed objections to the magistrate's decision. On April 27, 2015, Vimas filed objections to the magistrate's decision as well as a response to SeaBright's objections. Kernan Defendants filed a response to SeaBright's objections on May 22, 2015.

         {¶20} On July 10, 2015, the trial court overruled the objections and adopted the decision of the magistrate. This timely appeal followed. We consolidated the three appeals in a judgment entry dated September 23, 2015.

         Factual History

         {¶21} The record reveals the following facts. Each of the three Appellees has operated as an Ohio entity, with their principal places of businesses located in Mahoning County, Ohio. Evelyn Klimis ("Klimis") is the sole owner of Euro Paint, LLC, an Ohio limited liability company. Troy was an Ohio corporation with four shareholders. Michael Xipolitas was the principal officer and, although no longer operating, Troy was an active corporation during the policy period in question. Vimas is an Ohio corporation in operation since 1996. Nick Frangopoulos is a principal officer.

         {¶22} The companies bid for bridge painting contracts throughout the United States. From their inception, Euro Paint and Troy have included C-110 forms in the pre-employment packets they provided to prospective employees. If an opportunity to work outside of Ohio arises, the companies have signed C-110 forms from their employees on file, in which both the employees and companies agree to be bound by the Ohio workers' compensation system. Vimas does not require execution of a C-110 form as a condition of employment, but a majority of their employees do sign C-110 forms rather than obtaining separate workers' compensation insurance on their own. Most of Appellees' employees are local union members and are hired based on word of mouth.

         {¶23} Each of the three lawsuits are the result of bridge painting contracts obtained by each company in Kentucky after they won bids on three separate projects awarded by the Kentucky Transportation Cabinet ("KYTC"). Euro Paint was awarded a bridge painting contract in Hopkins County, Kentucky. Troy was awarded a bridge painting job in Hazard, Kentucky. Vimas was awarded a bridge ...


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