Supreme Court Says No Duty To Defend Employer Intentional Tort Claims Under Stop Gap Insurance Endorsements
Under Ohio law, employees may sue their employer to recover damages for an employer intentional tort – even when the injuries are otherwise covered by workers' compensation. Because these cases can be costly to defend, employers historically have purchased commercial general liability policies with “stop-gap” insurance endorsements for years, believing these provisions imposed a duty to defend the employer against an employer intentional tort lawsuit.
On July 6, however, the Ohio Supreme Court decided Ward v. United Foundries, Inc., determining that Gulf Underwriters Insurance Company did not have a duty to defend United Foundries, Inc. under such a stop-gap endorsement in an employer intentional tort action.
In the policy, the stop gap endorsement contained standard language for intentional injuries:
This insurance does not apply to:
e. Bodily injury intentionally caused or aggravated by you, or bodily injury resulting from an act which is determined to have been committed by you with the belief that an injury is substantially certain to occur.
The certified conflict to the Supreme Court addressed whether the underlined language requires a final determination made by either a judge or jury before the defense of a claim for a substantial certainty tort can be denied. The parties agreed that the stop-gap endorsement excluded coverage for a “substantial-certainty” intentional tort and that if the employer was ultimately liable to the employee, Gulf would have no duty to indemnify. The only question was whether the policy required Gulf to defend United Foundries in the underlying action.
In a unanimous decision authored by Justice Stratton, the Ohio Supreme Court held that the stop-gap provision does not require such a duty to defend:
An exclusion in a commercial generally liability insurance policy or stop-gap endorsement stating that the insurance does not apply to bodily injury intentionally caused or aggravated by an insured, or bodily injury resulting from an act that is determined to have been committed by an insured with the belief that an injury is substantially certain to occur does not require a final determination by either a judge or a jury before the insurer can refuse to defend a claim alleging a substantial-certainty employer intentional tort.
In so holding, the Court held that the specific language in the stop gap endorsement is clear and unambiguous, disagreeing with the reasoning of the Third District Court of Appeals in Cooper Tire & Rubber Co. v. Travelers Cas. & Sur. Co. The Court further held that the endorsement as interpreted is not illusory, as it provides some limited form of coverage. And finally, in response to the employer’s claim that the policy does not provide it with the coverage it intended to purchase, the Court stated: “But this is an argument for United to assert against the insurance agency and broker who procured the policy, not against the insurer.”
Notably, the injury at issue predated the 2005 enactment of Ohio’s latest intentional tort statute, R.C. 2745.01, which defines “substantially certain” to mean “that an employer acts with deliberate intent to cause an employee to suffer an injury, a disease, a condition, or death.” Thus, the Court followed the earlier line of cases holding that a substantial-certainty intentional tort occurs “when [an] employer does not directly intend to injure [an] employee, but acts with the belief that injury is substantially certain to occur,” citing Penn Traffic Co. v. AIU Ins. Co. It is unclear how the Court would have applied the statute.
Justice Pfeifer concurred in the judgment only.