What’s on their Minds: Insurer’s Duty to Defend in a Case of Housing Discrimination. Steve Granger, et al. v. Auto Owners Insurance, et al.

Update: on August 18, 2015, the Supreme Court of Ohio handed down a merit decision in this case.  Read the analysis here.

On June 25, 2014, the Supreme Court of Ohio heard oral argument in the case of Steve Granger, et al. v. Auto-Owners Insurance, et al., 2013-1527. The issue on appeal is an insurer’s duty to defend in a housing discrimination case.

Case Background

Steve Granger refused to rent one of his properties to Valerie Kozera because she had a child. This is a direct violation of Ohio and Federal Fair Housing Laws. Granger claimed he did not know it was illegal to do this.  Granger’s refusal to rent to Kozera ultimately resulted in a federal lawsuit against him. The federal complaint alleged, among other things, that Kozera suffered emotional distress.

At issue in this case is an Auto-Owners’ umbrella policy covering Granger. The policy provides personal injury coverage for “humiliation,” which is not defined, and excludes “personal injury expected or intended by the insured.”

Auto-Owners refused to defend or indemnify Granger. The federal lawsuit with Kozera was eventually settled without the involvement of Auto Owners.

Procedural Posture

Granger filed suit against Auto-Owners in state court, alleging that the insurer violated its duty to defend under the umbrella policy. The trial court granted summary judgment to Auto-Owners.

The Ninth District Court of Appeals reversed in a split decision, finding that the emotional distress alleged could constitute “humiliation,” and thus a covered personal injury under the policy, and also finding that a question of fact existed regarding the application of the intentional acts exclusion.

Read the oral argument preview of the case here.

Useful Precedent

Allstate Ins. Co. v. Campbell, 2010-Ohio-6312 (The doctrine of inferred intent applies only in cases in which the insured’s intentional act and the harm caused are intrinsically tied so that the act has necessarily resulted in the harm)

At Oral Argument

Auto-Owners’ Argument

The umbrella policy at issue in this case includes a clear and unambiguous intentional acts exclusion. This Court should apply the inferred intent doctrine to this housing discrimination case. The pertinent fair housing laws do not even require proof of intent to establish a violation of those laws. Ignorance of the law is no defense. As in the earlier murder and sexual molestation cases involving the inferred intent doctrine, here, too the harm and the act were so intrinsically tied that the act necessarily results in the harm. In this case Granger’s statement to Kozera that he would not rent to her because she had a child violated the act and immediately caused the harm. In this case, the inferred intent doctrine precludes both a defense and indemnification.

The other issue is the duty to defend under the umbrella policy and what it takes to trigger a duty to defend. The umbrella policy does cover personal injuries under limited circumstances. The federal statute under which Kozera brought her action does not allow for emotional distress damages. Nor is emotional distress the same thing as humiliation. The statement of emotional distress in Kozera’s federal complaint is a mere factual allegation, not an actual claim. There must be an actual claim, not a mere recitation, in order to trigger a duty to defend. And humiliation is not a separate claim in Ohio.

Granger’s Argument

Granger bought coverage for humiliation in this umbrella policy. The term “humiliation” is included in this policy as a personal injury, but is not defined. Any ambiguity in an insurance policy must be strictly construed against the drafter.  So that term must be defined by the courts. Two of three appellate judges correctly defined it to include emotional distress.

As for inferred intent, Granger never intended any harm toward Kozera.  He did not know that the refusal to rent to people with children was illegal.  As with the case of Allstate v. Campbell it must be determined as a question of fact whether Granger intended or expected the harm resulting from his action.  He had no intent to harm at the time he refused the rental. If you don’t know you are discriminating, you don’t know you could be harming someone. Any statement Granger made about intent to discriminate in deposition testimony was made after the fact, after he was made aware that what he had done was illegal.  At the time of his actions, he had no intent to harm. The policy language is whether the insured intended or expected the harm that resulted.

What Was on their Minds

Granger’s Intent

What evidence was there here that the insured did or did not intend the harm, asked Justice French? Are we just talking about discrimination here or are we talking about the inability to find another place to live? Is it just the impact this would have on Kozera personally and emotionally, or something that goes beyond that? Even if Granger didn’t know he was being discriminatory in a legal sense, he did know he was discriminating, between people who have children and those who didn’t—he knew he was making a distinction between those two categories of people, French commented. Can we infer that if you choose only people who don’t have children, that is an intentional act whether you know it is illegal or not?

Must we determine Granger’s intent as of the date he actually refused to rent to Kozera, not on his educated response some months later, asked Chief Justice O’Connor? (yes, said Granger’s counsel) In a key question of the day, the Chief went on to ask, whether the appropriate question was whether Granger intended to exclude families with children from the residence, whether he knew it was wrong or not.  Isn’t that the intent the Court must look at? (no, Granger’s counsel insisted.)

In order to deprive a person of a statutorily protected right, doesn’t the individual have to know that right exists, asked Justice Lanzinger?

Intentional Acts Exclusion

The intentional acts exclusion means no liability, but the emotional distress issue relates to the duty to defend, asked Justice Lanzinger? (answer from insurer: yes)

The Meaning of Humiliation

If the Court were to agree that emotional distress is not the same as humiliation, must the Court even reach the first proposition of law about inferred intent, asked Justice French? (insurer’s answer: no it need not)

Can’t humiliation lead to emotional distress, asked Chief Justice O’Connor? Is emotional distress ambiguous?

In the most amusing moment of the day, Justice O’Donnell asked insurance counsel his definition of humiliation, and he answered, “not being able to answer a question from a Supreme Court justice.”

Summary Judgment

The insured can’t just create a factual issue himself, can he, asked Justice O’Donnell, adding that this is summary judgment and any factual dispute seems to have been created wholly by the insured himself.

Duty to Defend

Would the insured get a defense for accidentally humiliating someone, asked Justice O’Neill?

How it Looks from the Bleachers

To Professor Bettman

I’m calling this for Auto-Owners, as are both student contributors, despite an oddly cold bench on this one. I doubt that the Court is going to let Granger get away with saying he didn’t intend any harm at the time he refused to rent to Kozera because he didn’t know his action was illegal.  Subjective intent should not control here.  I think the Chief hit it on the head, despite Granger’s disagreement, that the  question was whether Granger intended to exclude families with children from the residence, whether he knew it was wrong or not. He clearly did, and that clearly was an intended harm.  In the sexual molestation case, Gearing v. Nationwide Ins. Co., the man who molested the girls said he didn’t intend any harm, either, and the Court didn’t buy it.  As I tell my students, watch what they do, not what they say. So even if the Court gives Granger the definition of humiliation he wants  (but it may not) I think the Court will apply the inferred intent doctrine  and find as the insurer has argued that in this housing discrimination case, the harm and the act were intrinsically tied such that the act necessarily results in the harm, and the policy exclusion applies.

Justice French really took the lead here, which is not surprising since she authored the court of appeals decision in Allstate v.Campbell and wrote a veritable treatise on the inferred intent doctrine.  She clearly saw a distinction between those boys and the Styrofoam deer in the road as a prank and this refusal to rent to people with children, with a  factual dispute over intent to harm in the former, but not in this one.

To Student Contributors Austin LiPuma and Michael Elliott

Interestingly, Austin found the case well argued; Michael, not so much.

Austin’s Take 

First, I must credit both attorneys for their presentations; I found both to be articulate, informative, and composed. However, the justices did not share the energy that both attorneys projected. With the exception of Justice French, and to a lesser extent Justice Lanzinger, the Court often appeared aloof. The central focus of each argument primarily hinged on when inferred intent is appropriate to apply.

Justice French alluded to the fact that discriminatory practices are intentional by nature—Granger intentionally did not rent to a potential tenant because he did not want children in his complex and therefore inflicted harm. In response to this (and my personal favorite quote of the day), Granger’s attorney asserted that characterization of discrimination also applies to “deciding to eat a waffle or an omelet for breakfast.” Another issue briefly discussed was the lack of factual dispute. Based on the record indicating that Granger intended to discriminate, I believe the Court will likely find that the inflicted harm was also intended and rule in favor of Auto Owners.

Michael’s Take

I’m fairly certain the Court will overturn the Court of Appeals on this one. I was not too impressed by the oral argument for Granger. As counsel for Auto-Owners was quick to point out, the underlying claim in this case is for a violation of the Fair-Housing Act, and I think the inferred intent doctrine will apply in this case. In addition, emotional distress was only mentioned briefly in the prayer for relief, and I think this fact will be key to the outcome.

During argument, both attorneys struggled to respond to questioning at times. Regarding the inferred intent doctrine, on two occasions Justice French asked if there had been evidence presented that proved Granger did not intend to harm Kozera when he denied her the rental opportunity because of her familial status; both times Granger’s counsel was unable to give a satisfactory response. This seemed to frustrate Chief Justice O’Connor, and Auto-Owners’ counsel was quick to jump on this, asserting in his rebuttal that Granger did intend to discriminate and that the resulting harm was certain to occur. On the other side, when questioned by Justices O’Donnell and O’Neill, Auto-Owners’ counsel was unable provide an example of a situation where the provision in the umbrella policy for “humiliation” was actionable. Overall, it seemed like the majority of Justices were a bit more skeptical of Granger’s argument.


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