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Patterson v. Cincinnati Insurance Companies

Court of Appeals of Ohio, Eighth District, Cuyahoga

May 25, 2017


         Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-14-837641

          ATTORNEYS FOR APPELLANT John F. Burke BurkesLaw, L.L.C. David B. Henderson Raymond J. Schmidlin, Jr. Henderson & Schmidlin Co., L.P.A.

          ATTORNEYS FOR APPELLEE Patrick S. Corrigan Patrick S. Corrigan, Esq. Michael M. Neltner

          BEFORE: Jones, J., Keough, A.J., and Celebrezze, J.


          LARRY A. JONES, SR., J.

         {¶1} The plaintiff-appellant in this case is Jolene Patterson, individually and as administrator of the estate of Douglas Patterson, deceased, and as assignee of Fabrizi Trucking and Paving Co., Inc. ("Trucking and Paving") and Fabrizi Recycling, Inc. ("Recycling") (collectively "Fabrizi entities"). She appeals from the trial court's April 2016 decision granting summary judgment in favor of defendant-appellee, the Cincinnati Insurance Companies. For the reasons that follow, we reverse and remand for further proceedings.

         I. Procedural and Factual History

         {¶2} Jolene Patterson was the wife of Douglas Patterson. Douglas was employed by Trucking and Paving. He was killed in 2011 when the bucket of an excavator disengaged and struck him as he stood in a trench where he was working.

         Underlying Action: Jolene Patterson v. Fabrizi Entities

         {¶3} In 2012, Jolene filed an action against Trucking and Paving under the theory of employer intentional tort liability. Patterson v. Fabrizi Trucking & Paving Co., Cuyahoga C.P. No. CV-12-776212.[1] It was revealed during the course of discovery that Recycling had purchased the subject excavator and transferred it to Trucking and Paving.[2] After this discovery, in 2013, Jolene filed an action against Recycling on the theories of negligence and product liability. Patterson v. Fabrizi Recycling, Cuyahoga C.P. No. CV-13-808900. In July 2013, the two cases were consolidated, and proceeded under the Trucking & Paving case, Case No. CV-12-776212.

         {¶4} At all relevant times, both Trucking and Paving and Recycling were covered under insurance policies issued by Cincinnati Insurance.[3] Cincinnati Insurance provided an attorney to the Fabrizi entities throughout the underlying litigation, but maintained that it did not have a duty to indemnify either entity. The Fabrizi entities were permitted to select their counsel; they chose John Christie ("Christie"), who represented both entities for the majority of the litigation.

         {¶5} Discovery continued after the two cases were consolidated, and included several witnesses being deposed. In December 2013, the parties utilized private mediation in an attempt to settle their dispute, to no avail. Both parties (Jolene and the Fabrizi entities) filed motions for summary judgment in the spring of 2014. A ruling on those motions was held in abeyance, however, because the parties engaged in settlement negotiations.

         {¶6} A settlement conference was scheduled for May 15, 2014, ahead of a June 23, 2014 trial date. The trial court issued an order prior to the settlement conference compelling counsel for the Fabrizi entities to attend the conference. By all accounts, counsel for the entities did appear at the settlement conference, but refused to participate, and a settlement was not reached.

         {¶7} Another settlement conference was held on May 29, 2014, and the trial court's judgment memorializing it states that "all parties appeared through counsel. Parties are working toward a resolution. Settlement conference continued to June 23, 2014 * * *. Trial is converted to a settlement conference." A telephone conference with all parties and the trial court was held on July 9, 2014, during which the "parties informed the court that [a] settlement agreement ha[d] been reached." The settlement conference was continued until July 29, 2014, and the court granted the parties up until that date to finalize their agreement. The court stated that if a finalized agreement was not produced by that date, a new trial date would be set and there would be no further continuances.

         {¶8} A settlement agreement was not produced on July 29, 2014, and thus, the trial court set a September 3, 2014 hearing date for consideration of the pending summary judgment motions, and a trial date of September 29, 2014. A transcript from the September 3 hearing is in the record and demonstrates that attorney Christie appeared on behalf of the Fabrizi entities for the purpose of defending the entities' motion for summary judgment. Attorney Patrick Milligan ("Milligan") also appeared on behalf of the Fabrizi entities, and he, along with Jolene's attorney, represented to the court that the parties had reached a settlement and detailed what it was.[4] The court ordered the parties to submit a "more detailed entry of dismissal within 30 days."

         {¶9} At the hearing, attorney Christie informed the court that attorney Milligan had negotiated on behalf of the Fabrizi entities to reach the settlement for Jolene. Christie further represented that Cincinnati Insurance was not aware that a settlement had been reached, but admitted that he was present, along with attorney Milligan, for the negotiations, that he discussed the negotiations with attorney Milligan, and that he "notified Cincinnati [Insurance] of the process and * * * asked them if they wanted to play a role in the settlement and they have declined."

         {¶10} After the hearing, Jolene submitted "evidence of damages, " and the parties submitted a proposed consent judgment. Under the proposed agreement, judgment was to be entered against Trucking and Paving and Recycling, jointly and severally, and in favor of Jolene, in the amount of $3, 119, 000. After review, the proposed consent judgment was signed by the trial court judge, and the entry stated that the court had considered Jolene's evidence of damages and found the "amount of the judgment to be fair and reasonable, " and that the parties' counsel had also reviewed the evidence and reached the same conclusion. In addition to the trial court judge's signature, the judgment was also signed by Jolene's attorney, and attorney Milligan for the Fabrizi entities. The case was removed from the trial court's docket. In July 2015, Jolene filed a motion to enforce the settlement agreement, which the trial court denied, citing its lack of jurisdiction.

         This Action: Jolene Patterson v. Cincinnati Insurance

         {¶11} Meanwhile, in December 2014, Jolene had filed the instant action against Cincinnati Insurance, which was filed as a supplemental complaint under R.C. 3929.06 and a complaint for declaratory judgment.[5] This case was handled by a different trial judge than the underlying action. Jolene alleged in her complaint that during the underlying litigation, the insurance company maintained that it did not have to indemnify the Fabrizi entities and, therefore, refused to participate in settlement conferences, mediation, or alternative dispute resolution mechanisms. She also alleged that the insurance company failed to conduct an adequate and complete investigation of the claims against the Fabrizi entities.

         {¶12} Attached to the complaint was a "covenant not to execute and assignment of rights." The covenant and assignment was entered into between Jolene and Emilio Fabrizi and Maria Fearer, the presidents of Trucking and Paving and Recycling, respectively. Under the covenant and assignment, the Fabrizi entities agreed to pay $119, 000 of the $3, 119, 000 judgment to Jolene, and assigned their rights under the Cincinnati Insurance policy to Jolene.

         {¶13} In her complaint, Jolene alleged that she requested payment of the $3 million balance from the insurance company, but the company denied that it had any obligation to indemnify the Fabrizi entities under the policy. Count 1 of the complaint was for breach of contract and bad faith, and Count 2 sought a declaratory judgment that the Fabrizi entities were entitled to coverage, including indemnification, under their insurance policy, and that as an assignee of the entities, Jolene was entitled to judgment against the insurance company for the remaining $3 million balance of the settlement.

         {¶14} The insurance company filed a Civ.R. 12(B)(6) motion to dismiss, which was denied. Thereafter, the company filed its answer and counterclaimed for declaratory judgment that there was no coverage for Trucking and Paving against Jolene's claim of an employer intentional tort, and no coverage for Recycling against Jolene's claims of negligence and product liability.

         {¶15} In regard to the employer intentional tort claim, the company alleged that the policy excluded coverage for "acts committed by or at the direction of an insured with the deliberate intent to injure." In regard to the negligence and product liability claims, the insurance company claimed that Jolene never proved that Recycling was negligent or that its negligence contributed to her damages. According to Cincinnati Insurance, shortly after raising the negligence claim, Jolene "unilaterally cut off all possibility for [the company] to rebut these allegations, make any settlement, or disprove the theory by entering into the * * * 'Consent Judgment' and dismissing the tort action against all Fabrizi entities." Answer and counterclaim, ¶ 40.

         {¶16} In addition to other defenses set forth in its answer and counterclaim, the insurance company also contended that the consent judgment that Jolene and the Fabrizi entities entered into was "fraudulent, collusive, improper, a sham and * * * contrary to Ohio law." Id. at ΒΆ 48. The company therefore ...

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