What’s On Their Minds: Insurance Coverage for Employer Intentional Torts. O What a Tangled Web They’ve Woven! Duane Allen Hoyle v. DTJ Enterprises, Inc., et al.

Update: On March 12, 2015, the Supreme Court of Ohio handed down a merit decision in this case.  Read the analysis here.

On June 10, 2014, the Supreme Court of Ohio heard oral argument in the case of Duane Allen Hoyle v. DTJ Enterprises, Inc., et al., 2013-1405. The issue in this case is insurance coverage for employer intentional torts.

Case Background

Duane Hoyle (Hoyle) was employed as a carpenter for DTJ Enterprises and Cavanaugh Building Corporation (collectively, Cavanaugh) He was severely injured when the ladder jack scaffolding he was standing on collapsed, causing him to fall thirteen feet onto the concrete pavement.  Pins had not been inserted to hold the ladder jack into the ladder to stabilize the scaffolding equipment.  Hoyle filed a workplace intentional tort action. Pertinent to this appeal is Hoyle’s claim brought pursuant to R.C. 2745.01(C), the section of the intentional tort statute dealing with deliberate removal of an equipment safety guard.

Cavanaugh was insured by the Cincinnati Insurance Company (CIC) under a Commercial General Liability Policy and a Commercial Umbrella Liability Policy. The policy also included an Employers’ Liability Coverage endorsement, for which a separate premium was paid. The endorsement expressly excludes coverage for acts committed with the deliberate intent to injure, but provides coverage for certain intentional acts which are substantially certain to cause bodily injury.

Procedural Posture

CIC intervened in the action, seeking a declaratory judgment that it was not required to indemnify Cavanaugh based upon the deliberate acts exclusions in the policy. (CIC did provide a defense).

The parties filed for summary judgment both on Cavanaugh’s liability to Hoyle on the intentional tort claims, and on CIC’s duty to indemnify Cavanaugh for any judgment on those tort claims.

The trial court granted summary judgment to Cavanaugh on the intentional tort claims filed under subsections (A) and (B) of the statute, finding no deliberate intent to injure.  But the trial court found genuine issues of material fact on the subsection (C) claim, on whether the pins constituted an equipment safety guard and on whether there was a deliberate intent to remove them. The trial court also granted summary judgment to CIC on the ground that the (C) claim also required proof of deliberate intent to injure, and thus, even if proven, was excluded from coverage.

In a split decision, the Ninth District Court of Appeals reversed the trial court’s order of summary judgment to CIC. The majority held that, based upon the presumption of intent to injure under subsection (C) of the statute, an employee could prevail on claims of an intentional tort without invoking the “deliberate intent” to injure exclusion provisions of the insurance policy.

Read the oral argument preview of this case here.

Key Statute and Precedent

R.C. 2745.01 – Liability of employer for intentional tort – intent to injure required – exceptions.

(C) Deliberate removal by an employer of an equipment safety guard … creates a rebuttable presumption that the removal … was committed with intent to injure another if an injury … occurs as a direct result.

Houdek v. ThyssenKrupp Materials N.A., Inc., 2012-Ohio-5685 (Absent a deliberate intent to injure another, an employer is not liable for a claim alleging an employer intentional tort, and the injured employee’s exclusive remedy is within the workers’ compensation system.)

Harasyn v. Normandy Metals, Inc., 49 Ohio St.3d 173 (Ohio 1990) (Ohio public policy does not prohibit an employer from insuring against tort claims by employees in cases where the injury was “substantially certain” to occur but the employer did not intend to injure the employee.)

Fyffe v. Jeno’s, Inc. 59 Ohio St. 3d 115, 570 N.E. 2d 1108 (1991). (`intent’ for the purpose of proving the existence of a common law intentional tort committed by an employer against his employee can be established by showing knowledge by the employer that harm to the employee will be a substantial certainty.)

At Oral Argument

CIC’s Argument

There is now only one way for an employee to prove an employer intentional tort under R.C. 2745, and that is to show deliberate intent to injure. Subsection (C) does not create some lesser standard for this tort. The language in subsections (A) and (C) is identical—“intent to injure” appears in both sections.  Since it appears in the same statute, the phrase must be interpreted consistently throughout.

The presumption in subsection (C) does not change the employee’s burden of proof of specific intent to harm.  It does not create the equivalent of the common law substantial certainty tort.  There is no difference between the direct proof and the presumptive proof. Since the trial court did find, by way of summary judgment for Cavanaugh in an issue not directly before the Court in this appeal, that there was no deliberate intent to injure under subsection (A), there can also be no employer liability under subsection (C) and thus, nothing to indemnify. Alternatively, if there were a deliberate intent to injure found, that would be excluded under the policy. So no matter what happens on remand between Hoyle and Cavanaugh in this case, there will be no insurance coverage.

In response to a question by Justice O’Donnell, CIC’s lawyer gave a lengthy explanation about what Cavanaugh’s Employers’ Liability endorsement actually covered. He said that when the policy went into effect, which was between the time this version of the employer intentional tort went into effect (April 2005) and its constitutionality upheld (March of 2010) CIC wanted to provide some level of coverage, so that if the statute were to be struck down again, there would be no gaps in coverage for that employer. The coverage that was provided mirrored the substantial certainty language in Fyffe v. Jeno’s, Inc. The notice provided with this policy explained this. After the constitutionality of the current statute was upheld, CIC stopped offering this coverage. CIC gave a refund to policyholders under any such policies if there was a gap between date of Kaminski and the end of the coverage period. The injury to Hoyle occurred in 2008, when the constitutionality of the statute had not yet been determined.

CIC also argued that since liability is now only triggered when there is proof of deliberate intent to injure, such liability would now be uninsurable under Ohio public policy. Employers cannot be given incentive to engage in intentional wrongdoing.

Appellees’ Arguments

Plaintiff-employee Hoyle and defendant-employer Cavanaugh were strange bedfellows here, both arguing as appellees against CIC, but not supporting each other’s positions.

Hoyle’s Argument

The burden shifting presumption in subsection (C) of the statute has a substantive, not just a procedural effect. It cannot and does not mean that the burden just shifts temporarily and the employee is then right back where he started. Under subsection (C) an employee does not have to prove deliberate or specific intent to injure, only substantial certainty that injury will occur. Subsection (C) is the one remaining path to recovery for an injured worker without proving a deliberate intent to injure. And under that scenario, insurance coverage is available.

Specifically, what that means in this case is that the lack of pins, if they are found to be safety guards, is evidence of deliberate intent to injure, which Cavanaugh would have the right to rebut.  In this case the trial court has already said, by way of summary judgment, there is no deliberate intent to injure here, so there is nothing that would preclude insurance coverage. The remaining contested facts here are whether the pins are equipment safety guards and whether the presumption in subsection (C) has been rebutted.

Cavanaugh’s Argument

Cavanaugh’s counsel, acknowledging being in an awkward positon,  disagrees that subsection (C) requires something less than deliberate intent to injure, but agrees that if that interpretation is correct, it is entitled to coverage in this case per the Court’s precedent in Harasyn.

Cavanaugh believes that under subsection (C) Hoyle gets a presumption, which means Cavanaugh must counter with evidence of lack of deliberate intent to remove the pins. But subsection (C) does not override the necessity of a plaintiff having to prove deliberate intent. Subsection (C) does not provide a way of getting a judgment without proof of deliberate intent. The same deliberate intent is required in subsection (C) as in (A) and (B).

Cavanaugh also disagrees with CIC’s interpretation of duty to indemnify. He argued that his client was sold a policy with old, out-of-date language, and received no refund, to the best of his recollection. If the policy uses an out-of-date standard, the fact that the legislature may have narrowed exposure doesn’t take away coverage in this case.

What Was On Their Minds

The Interpretation of Subsection (C) and the Meaning of the Rebuttable Presumption

The key comment of the day was the opening comment which came from Justice Pfeifer. He observed that all the presumption does is give the injured party a leg up, and imposes some burden on the employer if a safety guard is removed to show it did it for other reasons than to cause injury, but the injured party still has to show the removal was intended to cause injury, which would take this out of coverage in this case.

Doesn’t the claimant have the right to rely on the rebuttable presumption, asked Justice O’Donnell? And what evidence could the employer offer in this case? If the pins are determined to be equipment safety guards, their removal is evidence of deliberate intent to injure? (yes, said Hoyle’s counsel, adding that if Cavanaugh rebuts the presumption, Cavanaugh wins, but if it doesn’t Hoyle wins) Later he asked if the rebuttable presumption was a question of fact or law?

Subsection (C) does not offer a way to re-enact substantial certainty, does it, asked Justice Lanzinger in a key question of the day?

Isn’t this a catch-22 asked Justice O’Neill? If Hoyle proves there was no deliberate intent to injure him, that would bring back coverage, but wouldn’t he lose on the tort?

Justice French expressed her confusion about the remaining factual dispute in the case, indicating the trial court had already found no evidence of deliberate intent. Was there only a legal question left on that issue? Justice Lanzinger followed this up with the comment that it seemed that the legal question was whether subsection (C) was substantive or procedural. Hoyle’s counsel agreed.

Chief Justice O’Connor asked if Hoyle could prevail just by showing a deliberate intent not to put the pins in, but not showing deliberate intent to injure him? (No, said CIC’s counsel) What happens if they find the pins are not safety guards? (then the presumption never arises and the case is over, said CIC)

What the Policy Does Cover

If the employee prevails and shows this was a deliberate injury, then there is no coverage, asked Justice O’Donnell? Otherwise there would be no liability because there was no deliberate intent. Does that make the coverage illusory?

Were refunds given to policy holders for premiums that were paid for this coverage, asked Justice Lanzinger? Do these policies read differently now? (yes, said CIC’s counsel) In a follow up question Justice Pfeifer asked if that meant no coverage at all? (answer, from CIC-in essence, yes, defense only coverage) This brought a wry grin from Justice Pfeifer who has long declared this tort dead or on life support, and the statute only satisfied by a crime.

Justice Pfeifer asked Cavanaugh if its position was that CIC gave it a policy that used the Fyffe standard, but the fact that the legislature narrowed the exposure did not take away coverage for any remaining exposure? (answer: yes)

Chief Justice O’Connor asked if Cavanaugh thought it was buying coverage for intentional acts that were less than deliberate?

Public Policy

As a matter of public policy, should there be insurance for intentional torts, asked Justice Lanzinger? Should there be insurance coverage for something less than deliberate intent?

And The Winner Is…….May we have the envelope, please?

The following exchange occurred with Justice O’Donnell and Cavanaugh’s counsel:

“What is the outcome you want us to write in this case,” O’Donnell asked, as he almost always does.

Answer: “It depends on whether the court wants to address the bigger picture of the intentional tort statute or whether it just wants to address coverage. ”

Question-“Isn’t this case just limited to coverage?”

Answer- “yes, but you get sucked into it.”

Justice Lanzinger asked if the Court were to reverse and hold that deliberate intent means exactly that, would that mean no liability for the employer, which received its defense? (answer: yes)

How it Looks from the Bleachers

To Professor Bettman

Both my student contributors disagree with me, but I am calling this one as a win for CIC.

Despite the efforts of the Court to separate the issues of coverage from the interpretation of subsection (C), I don’t think that can be done, because the determination of whether subsection (C) requires proof of deliberate intent, or does create some “lesser” way to recovery, akin to substantial certainty, drives the coverage question.  So, in for a penny, in for a pound here.

I think that the Court is going to find, as Justice Pfeifer stated in his opening remarks, that while subsection (C) does give the plaintiff a bit of a leg up procedurally, it does not substantively, which is what Hoyle was arguing. It is unlikely the Court will agree that subsection (C) revives the old substantial certainty tort. The legislature has pounded deliberate intent into this statute, and the Court is likely to complete its jurisprudence on this statute by finding subsection (C) does ultimately require deliberate intent to injure as the other sections do.  I think the Court will find that all the employee needs to prove initially is the deliberate removal of something that is a safety guard. The fact that the statute says that creates a rebuttable presumption of intent to injure sure sounds like it requires proof of deliberate intent to injure for this section, as well as the other two. That burden then shifts to the employer to rebut the statutory presumption, but to me it doesn’t create some lesser degree of intent. The employee could win if the presumption created in subsection (C) is unrebutted or the jury doesn’t believe the employer.

The argument about what Cavanaugh actually got when it purchased the Employers’ Liability Endorsement is an interesting one.  It is true that when this accident occurred, it was not clear whether the latest statute would be upheld, or whether the common law intentional tort still existed. But I wonder if Cavanaugh really knew what it was purchasing. CIC clearly knew what it was selling, and given the history of the employer intentional tort in Ohio, it made some sense (if any of this does).

All of this must seem like deju vu all over again to Justice Pfeifer, who has long considered this tort dead or on life support.

To Student Contributor Elizabeth Chesnut

Judging by the questions and answers between the bench and counsel, too much emphasis during oral argument was placed on issues not properly before the court on this appeal. The three lawyers struggled to address each others’ arguments, and the justices struggled to keep them each on track.

Ultimately, I expect a substantial majority of the Court to find for Hoyle and his employer, affirming the Ninth District’s decision.

To Student Contributor Michael Elliot

I think the fact that counsel for Hoyle and Cavanaugh shared argument time really hurt their case against CIC. They couldn’t resist taking a few shots at each other during their arguments, and didn’t really have enough time to fully develop their points. That said, I still think the Court will rule in their favor.

Justice Pfeifer seemed to be the most active of the justices, and for obvious reason, given his feelings about the employer intentional tort. He asked some tough questions on both sides, but ultimately I think he will end up siding with the appellees. RC 2745.01(C) is the only portion of that statute that doesn’t require specific intent. A ruling for CIC could effectively render that provision meaningless, and really would leave “nothing left but crime”.

The Chief Justice stressed that Cavanaugh purchased this coverage and anticipated it would cover a situation like this, and I think this is key. The idea that Cavanaugh may have purchased an additional insurance provision that was essentially illusory bothers me. Justice O’Donnell asked whether this was the case, to which counsel for CIC responded that the policy covering intentional torts went into effect with the presumption that RC 2745.01 would be overturned, and that the coverage was removed once the Court affirmed the legislation in Kaminski v. Metal & Wire Prods. Co. To me, the fact that they removed the policy altogether in this manner shows that they thought they would lose a case like this under existing law, and I think they may be right.



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