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Raudins v. Hobbs

Court of Appeals of Ohio, Eighth District, Cuyahoga

June 14, 2018

ERIC J. RAUDINS, ET AL. PLAINTIFFS
v.
WILLIAM HOBBS, ET AL. DEFENDANTS-APPELLANTS

          Civil Appeal from the Cuyahoga County Court of Common Pleas Case Nos. CV-12-789591 and CV-14-819984

          ATTORNEYS FOR APPELLANTS ERIE INSURANCE COMPANY, RECREATION INSURANCE SPECIALISTS, L.L.C. AND RIS RISK MANAGEMENT SERVICES, L.L.C. Randy L. Taylor Ronald A. Rispo Weston Hurd L.L.P.

          ATTORNEYS FOR APPELLANTS AMICA MUTUAL INSURANCE COMPANY AND WILLIAM HOBBS Shawn W. Maestle Robert E. Goff, Jr. Weston Hurd L.L.P.

          ATTORNEYS FOR APPELLEE WESTFIELD INSURANCE COMPANY Dennis Fogarty Matthew P. Baringer Davis & Young

          ATTORNEYS FOR ERIC AND DEE RAUDINS William Craig Bashein Bashein & Bashein Co., L.P.A. Paul W. Flowers Paul W. Flowers Co. L.P.A.

          BEFORE: E.A. Gallagher, A.J., Blackmon, J., and Celebrezze, J.

          JOURNAL ENTRY AND OPINION

          EILEEN A. GALLAGHER, ADMINISTRATIVE JUDGE.

         {¶1} This case involves the interpretation of various insurance policies. In this consolidated appeal, defendants-appellants Erie Insurance Co. ("Erie") and William Hobbs ("Hobbs") and third-party defendants-appellants Amica Mutual Insurance Co. ("Amica"), Recreation Insurance Specialists, L.L.C. ("Recreation") and RIS Risk Management Services, L.L.C. ("Risk") appeal from the trial court's order granting third-party defendant-appellee Westfield Insurance Co.'s ("Westfield's") motion for summary judgment and denying Erie's motion for summary judgment regarding insurance coverage for injuries sustained by Eric Raudins ("Raudins") arising out of a January 13, 2011 automobile accident.[1] Appellants contend that the trial court erred in concluding that Westfield was not obligated to provide liability insurance coverage to Hobbs, the driver of the accident vehicle, under a non-owned auto liability endorsement to a businessowners policy Westfield issued to Recreation and Risk. Erie, Recreation and Risk further contend that the trial court erred in concluding that the accident was covered under a personal auto liability insurance policy Erie issued to Hobbs. For the reasons that follow, we affirm the decision of the trial court.

         Factual and Procedural Background

         The Accident and the Companies

         {¶2} On January 13, 2011, Hobbs and Raudins were traveling from Risk and Recreation's offices in Akron, Ohio to the Hilton Garden Inn in Mayfield Heights, Ohio where Hobbs was scheduled to make a presentation on trailer insurance to an insurance agency. Raudins accompanied Hobbs to the January 13, 2011 meeting out of "curiosity" and "to get out of the office." Hobbs was driving his 2003 Toyota Tundra truck (the "accident vehicle" or the "Toyota Tundra") and Raudins was the front seat passenger. On their way to the meeting, Hobbs hit a patch of ice on I-271 North, lost control of the vehicle and the vehicle struck a concrete barrier. Raudins injured his neck in the accident, requiring surgery.

         {¶3} At the time of the accident, Hobbs and Raudins were involved in three related business entities - Recreation, Risk and RIS Holdings, L.L.C. ("RIS Holdings").

         {¶4} Recreation was an insurance agency in the business of underwriting insurance policies for recreational vehicles. At the time of the accident, Hobbs was the president of Recreation, Raudins was the company's vice-president and chief operating officer and the two men comprised its board of directors.

         {¶5} Risk was in the business of administering claims made under insurance policies for recreational vehicles. At the time of the accident, Hobbs was the president of Risk and Hobbs and Raudins comprised its board of directors.

         {¶6} RIS Holdings, a holding company, was the sole member of Recreation and Risk. At the time of the accident, Hobbs and Raudins were two of the members of RIS Holdings. Hobbs was the president of RIS Holdings and Raudins was its vice-president and chief operating officer. Raudins testified that he and Hobbs were responsible for "overseeing [the] strategy and direction" of the three entities and "mak[ing] sure that those companies operated and functioned properly." Raudins testified that he did not have "any defined duties" for the companies and that what he did "varied widely." Although Recreation and Risk each had employees who earned wages reported on W-2 forms, Hobbs and Raudins were not among them. Hobbs and Raudins were compensated for the services they provided through guaranteed payments from Recreation, which were reported on K-1 forms issued by RIS Holdings.

         {¶7} Raudins filed workers' compensation claims for the injuries he sustained in the accident but his claims were denied on the ground that he was not an employee of any of the companies and did not otherwise have workers' compensation coverage.[2]

         The Insurance Policies

         {¶8} At the time of the accident, Erie insured Hobbs under a "family auto insurance policy" (the "Erie policy"). The Toyota Tundra was specifically identified as a "covered auto" on the declarations page of the policy. The Erie policy included bodily injury auto liability coverage with limits of $250, 000 per person and $500, 000 per accident and uninsured/underinsured motorists ("UM/UIM") coverage with limits of $250, 000 per person and $500, 000 per accident.

         {¶9} Amica issued a personal automobile policy to the Raudinses (the "Amica policy"). As it relates to this case, the Amica policy provided UM/UIM coverage with limits of $1, 000, 000 per person and $1, 000, 000 per accident.

         {¶10} Westfield issued a "businessowners package policy" to Recreation and Risk (the "Westfield policy").[3] The policy included an endorsement for "hired auto and non-owned auto" liability coverage with a $2, 000, 000 limit (the "endorsement").

         The Litigation

         {¶11} On August 20, 2012, the Raudinses filed a complaint in the Cuyahoga County Court of Common Pleas (Case No. CV-12-789591) against Hobbs, Erie and Amica to recover for injuries and damages sustained as a result of the accident (the "first lawsuit"). Raudins asserted a negligence claim against Hobbs and claims for breach of contract and declaratory judgment against Erie and Amica, seeking to establish his rights against the insurers under their respective insurance policies. Dee Raudins asserted a claim for loss of consortium against Hobbs, Erie and Amica. Erie filed an answer[4] and counterclaim for declaratory judgment, seeking a declaration that the Erie policy afforded no liability or UM/UIM coverage for Raudins' injuries and damages. Amica filed an answer, a counterclaim for declaratory judgment and a cross-claim against Hobbs for contribution and/or indemnification. Amica sought a declaration that it owed no UM/UIM coverage to Raudins as a result of the accident or, alternatively, that (1) it owed no UM/UIM coverage until all other liability coverage and primary UM/UIM coverage was exhausted or (2) any UM/UIM coverage under the Amica policy applied on a pro rata basis with other applicable UM/UIM coverage. Hobbs filed an answer and a cross-claim against Erie for declaratory judgment, seeking a declaration that he was entitled to liability coverage under the Erie policy. The Raudinses filed an answer to Erie's counterclaim. Hobbs and Erie filed answers to the cross-claims asserted against them.

         {¶12} In March 2013, Hobbs filed a third-party complaint against Recreation, Risk, Westfield and Community Insurance Company d.b.a. Anthem Blue Cross and Blue Shield ("Anthem"). Hobbs asserted a claim for contractual indemnity against Recreation and Risk, alleging that the companies had a duty to indemnify him for Raudins' alleged damages pursuant to indemnification provisions in their operating agreements. Hobbs asserted a claim for breach of contract against Westfield for its failure to defend and indemnify him under the Westfield policy and asserted a claim for declaratory judgment against Anthem, seeking a declaration that Anthem was not entitled to recover medical benefits it paid to Raudins from Hobbs. Westfield and Anthem filed answers to Hobbs' third-party complaint.

         {¶13} On January 10, 2014, the Raudinses filed a second lawsuit in the Cuyahoga County Court of Common Pleas against Westfield (the "second lawsuit"). Raudins asserted a claim for UM/UIM coverage under the Westfield policy, and Dee Raudins asserted a claim for loss of consortium. In February 2014, the trial court consolidated the two lawsuits. In March 2014, Hobbs voluntarily dismissed his cross-claim against Erie and his third-party complaint against Recreation and Risk in the first lawsuit without prejudice.

         Motions for Summary Judgment

         {¶14} In August 2014, Westfield, Erie and Amica all filed motions for summary judgment on the issue of insurance coverage. Each insurer argued that there was no liability coverage and/or UM/UIM coverage for the accident under its insurance policy and that the other insurers were responsible for coverage for the accident.

         {¶15} Westfield argued that it was entitled to summary judgment on Hobbs' third-party complaint in the first lawsuit because Hobbs did not meet the definition of an "insured" under the endorsement[5] and that it was entitled to summary judgment on the Raudinses' complaint in the second lawsuit because the Westfield policy did not include UM/UIM coverage. Erie argued that it owed no liability coverage or UM/UIM coverage for the accident under its policy because (1) the policy excluded coverage for injuries to an insured's employees occurring in the course of employment and (2) Hobbs was not "legally" required to "pay" for Raudins' injuries and Raudins was not "legally entitled to recover" for his injuries from Hobbs (as necessary to trigger liability coverage or UM/UIM coverage under the policy) based on "fellow employee immunity" under R.C. 4123.741. Erie further argued that the Westfield policy had primary coverage because it insured the accident vehicle as a "non-owned auto." Amica argued that both the Erie policy and the Westfield policy provided liability coverage for the accident vehicle and that, given the amount of liability coverage available under those policies, the accident vehicle was not uninsured or underinsured so as to trigger UM/UIM coverage under the Amica policy. In the alternative, Amica argued that any UM/UIM coverage under the Amica policy was secondary and excess to the UM/UIM coverage under the Erie policy.

         {¶16} The Raudinses also filed a motion for partial summary judgment on the issue of insurance coverage, requesting a finding that liability coverage existed under both the Erie and Westfield policies and that the Amica policy provided UM/UIM coverage to Raudins to the extent the liability limits under the Erie and Westfield policies were insufficient to cover his damages. The Raudinses argued that even if Hobbs was not an "insured" under the non-owned auto liability endorsement, liability coverage nevertheless existed under the Westfield policy because the named insureds, Recreation and RIS, were "derivatively liable for the injuries [Hobbs] negligently caused in furthering their business" under the doctrine of respondeat superior. Each party opposed the motions for summary judgment filed by the other parties.[6]

         {¶17} On January 29, 2016, the trial court ruled on the parties' summary judgment motions. Concluding that Hobbs was entitled to liability coverage under the Erie policy but was not an insured for purposes of the non-owned auto liability endorsement under the Westfield policy, [7] the trial court: (1) granted the Raudinses' motion for summary judgment as to Amica and Erie and denied it as to Westfield; (2) granted Westfield's motion for summary judgment with respect to coverage under its businessowners policy; (3) denied Erie's motion for summary judgment and (4) granted Amica's motion for summary judgment to the extent it requested a declaration that Erie was obligated to provide liability coverage for Hobbs but otherwise denied the motion. The trial court specifically found as follows:

On the record evidence I find no genuine issue of material fact on the lawsuits' claims for declaration of the rights and obligations of the parties under the various insurance contracts. Accordingly, summary declaratory judgment is entered as follows:
1) Erie Insurance Company is required under the terms of insurance policy number Q05-7405925 to indemnify William Hobbs for compensatory damages proximately caused by Hobbs's negligence to Eric Raudins in the January 13, 2011, accident, up to the policy's $250, 000 per person limit;
2) Erie is obligated to defend Hobbs against the negligence claim asserted in case number 789591 by Raudins and his wife;
3) Amica Mutual Insurance Company is obligated under the terms of insurance policy number 910834-1098 to provide underinsured motorists coverage to Raudins for his damages in excess of $250, 000 incurred because of Hobbs's negligence, to limit of $750, 000; and
4) Westfield Insurance Company is not obligated under the terms of insurance policy number BOP 3760387 to provide liability coverage to Hobbs or uninsured/underinsured motorists coverage to Raudins for any claims arising out of the January 13, 2011, accident.

         {¶18} On January 20, 2017, the Raudinses, Hobbs, Erie and Amica voluntarily dismissed all claims between and among them with prejudice, pursuant to Civ.R. 41(A). In the notice of partial dismissal, Erie and Amica reserved their right to appeal the trial court's decision on summary judgment as to Westfield. On August 10, 2017, Hobbs dismissed his third-party complaint against Anthem with prejudice.

         {¶19} Appellants appealed. In Appeal Nos. 106232 and 106233, Amica and Hobbs raised the following assignment of error for review:

The trial court erred in determining that Westfield's insurance policy issued to Recreation and Risk did not provide coverage for the William Hobbs automobile accident and Eric Raudins' subsequent injuries.

         {¶20} In Appeal Nos. 106236 and 106238, Erie, Recreation and Risk raised the following three assignments of error for review:

Assignment of Error No. 1: The Trial Court erred when it failed to find that Appellee, Westfield Insurance Company, is primarily obligated under the terms of its Insurance Policy to provide primary coverage for the claims out of the January 13, 2011 Accident, because the policy provided primary coverage for "insured contracts" such as the Indemnity provisions found in the Company's Operating Agreement.
Assignment of Error No. 2: The Trial Court erred when it failed to find that the policy exclusion contained in Erie Insurance Company's Policy was applicable to the January 13, 2011 Accident, thereby eliminating coverage under the Erie Policy.
Assignment of Error No. 3: Alternatively, the Trial Court erred when it failed to hold that a finding of coverage under Erie Insurance Company's policy should have resulted in a Pro-Rata Apportionment of liability between Erie Insurance Company and Westfield Insurance Company.

         {¶21} Appellants' assignments of error overlap. Accordingly, we address them together where appropriate.

         Law and Analysis

         Standard of Review

         {¶22} We review summary judgment rulings de novo, applying the same standard as the trial court. Grafton v. Ohio Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). We accord no deference to the trial court's decision and conduct an independent review of the record to determine whether summary judgment is appropriate.

         {¶23} Under Civ.R. 56, summary judgment is appropriate when no genuine issue exists as to any material fact and, viewing the evidence most strongly in favor of the nonmoving party, reasonable minds can reach only one conclusion that is adverse to the nonmoving party, entitling the moving party to judgment as a matter of law.

         {¶24} On a motion for summary judgment, the moving party carries an initial burden of identifying specific facts in the record that demonstrate his or her entitlement to summary judgment. Dresher v. Burt, 75 Ohio St.3d 280, 292-293, 662 N.E.2d 264 (1996). If the moving party fails to meet this burden, summary judgment is not appropriate; if the moving party meets this burden, the nonmoving party has the reciprocal burden to point to evidence of specific facts in the record demonstrating the existence of a genuine issue of material fact for trial. Id. at 293. Summary judgment is appropriate if the nonmoving party fails to meet this burden. Id.

         Principles Governing Interpretation of Insurance Policies

         {¶25} The interpretation of an insurance policy is an issue of law that we review de novo. See, e.g., Laboy v. Grange Indemn. Ins. Co., 144 Ohio St.3d 234, 2015-Ohio-3308, 41 N.E.3d 1224, ¶ 8; Sarrough v. Budzar, 2015-Ohio-3674, 38 N.E.3d 921, ¶ 19 (8th Dist.); see also Sharonville v. Am. Emps. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 N.E.2d 833, ¶ 6 ("An insurance policy is a contract whose interpretation is a matter of law."). Insurance policies are interpreted by applying the same rules and principles used to interpret other contracts. Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd., 64 Ohio St.3d 657, 665, 597 N.E.2d 1096 (1992). The fundamental goal when interpreting an insurance policy is to ascertain the intent of the parties from a reading of the policy. Laboy at ¶ 8. We "examine the insurance contract as a whole and presume that the intent of the parties is reflected in the language used in the policy." Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶ 11. To that end, the words and phrases used in an insurance policy are given their plain and ordinary meaning, "unless manifest absurdity results, or unless some other meaning is clearly evidenced from the face or overall contents" of the policy. Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146 (1978), paragraph two of the syllabus; see also Laboy at ¶ 8; Smith v. Erie Ins. Co., 148 Ohio St.3d 192, 2016-Ohio-7742, 69 N.E.3d 711, ¶ 18 (When interpreting policy language, "we keep in mind that '[a]n insurance policy is a contract; in interpreting contracts, courts must give effect to the intent of the parties, and that intent is presumed to be reflected in the plain and ordinary meaning of the contract language.'"), quoting Granger v. Auto-Owners Ins., 144 Ohio St.3d 57, 2015-Ohio-3279, 40 N.E.3d 1110, ¶ 20. We give meaning to every word used and "cannot overlook the fact that certain words exist." Am. Chem. Soc. v. Leadscope, Inc., 10th Dist. Franklin No. 04AP-305, 2005-Ohio-2557, ¶ 34, citing Cleveland Elec. Illum. Co. v. Cleveland, 37 Ohio St.3d 50, 524 N.E.2d 441 (1988).

         {¶26} "Where the provisions of an insurance policy are clear and unambiguous, courts may not indulge themselves in enlarging the contract by implication in order to embrace an object distinct from that contemplated by the parties." Crum & Forster Indem. Co. v. Ameritemps, Inc., 8th Dist. Cuyahoga No. 99610, 2013-Ohio-5419, ¶ 11, citing Gomolka v. State Auto. Mut. Ins. Co., 70 Ohio St.2d 166, 168, 436 N.E.2d 1347 (1982). The court looks only to the plain language of the policy in determining the rights and obligations of the parties. Acuity, A Mut. Ins. Co. v. Siding & Insulation Co., 2016-Ohio-1381, 62 N.E.3d 937, ¶ 9 (8th Dist.). Where, however, the provisions of an insurance policy are "reasonably susceptible to more than one interpretation, " the ambiguity in the policy language is construed against the insurer and liberally in favor of the insured. Sharonville at ¶ 6; King v. Nationwide Ins. Co., 35 Ohio St.3d 208, 519 N.E.2d 1380 (1988), syllabus; but see Oriani v. Reach Out Disposal, L.L.C, 8th Dist. Cuyahoga No. 103128, 2016-Ohio-7392, ¶ 14 ("[W]here the plaintiff is not a party to the insurance contract, the plaintiff is not in a position to urge that the contract be strictly construed against the other party. * * * Where a court decides whether a claimant is insured, under a policy, ambiguities are construed in favor of the policyholder, not the claimant."), citing Westfield Ins., 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, at ¶ 14, 35. "'[A]n exclusion in an insurance policy will be interpreted as applying only to that which is clearly intended to be excluded.'" (Emphasis omitted.) World Harvest Church v. Grange Mut. Cas. Co., 148 Ohio St.3d 11, 2016-Ohio-2913, 68 N.E.3d 738, ¶ 30, quoting Hybud Equip. Corp. at 665.

         {¶27} Applying these principles, we turn to the policy language at issue in this case. Liability Coverage under the Westfield Policy Issued to Recreation and Risk Management

         {¶28} The Westfield policy provides in relevant part:

BUSINESSOWNERS COVERAGE FORM
* * *
SECTION II - LIABILITY
A. Coverages
1 Business Liability
a. We will pay those sums that the insured becomes legally obligated to pay as damages because of "bodily injury", "property damage" or "personal and advertising injury" to which this insurance ...

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