Court decisions: A monthly roundup of judicial wisdom

Rough Notes, Jun 1999

State Auto had issued a general business liability policy to attorneys D. L. Mains, Jr., Ted R. Howard, and another attorney who later died. The evidence showed that each attorney shared office space in June 1980, and each had separate practices. However, at times they

shared staff, telephones and equipment. In July 1992, Mains hired Springer as a secretary. Not long after that, Springer told Mains that she was HIV positive. She later alleged that she was fired in February 1993 because of her health condition.

In December 1993, Springer filed suit for damages because of wrongful termination, intentional infliction of emotional distress, negligent infliction of emotional distress, and tort damages for termination in violation of public policy. State Auto was notified of the action and was requested to defend the insureds. It refused, contending that Dawn Springer's claims did not fall within the policy coverage for either personal or bodily injury. Mains and Howard successfully defended the action on the ground of substandard work by Springer, and the jury found in their favor. The insureds then filed this action against State Auto to recover their costs. The trial court found that State Auto's policy did not cover the action filed by Dawn Springer and that the company had acted in good faith in refusing to defend the insureds. The insureds appealed.

The higher court noted that the policy expressly excluded bodily injury "expected or intended from the standpoint of the insured," and it also excluded bodily injury to an employee arising out of and in the course of employment. Inasmuch as emotional distress is an expected result of termination of employment, the damages claimed by Springer would clearly be excluded by the policy.

The court decided that the insureds had failed to demonstrate that the action filed by Springer was covered by the policy, and the judgment entered in the trial court in favor of State Auto was affirmed. Mains et al., Appellants v. State Automobile Mutual Insurance CompanyNo. 96APE101434-Court of Appeals of Ohio, Tenth District, Franklin County-June 24, 1997(Discretionary appeal to Supreme Court of Ohio was not allowed, 685 N. E. 2d 546)698 North Eastern Reporter 2d 488.

HO policy excludes swimming pool damage from hydrostatic pressure

Michael Murray had an inground swimming pool which was empty during a period of heavy rains in May 1995. It was badly damaged by hydrostatic pressure (buoyant force) caused by the rain. Murray filed a claim for the damages with All American from whom he had secured his HO policy. The company denied coverage of such a loss since one of the policy's exclusions specified water damage. An endorsement provided additional coverage for certain risks but, again, excluded damage caused by "freezing, thawing, pressure or weight of water." Another provision excluded damage from such risks to "...patio or swimming pool."

The lower court found no ambiguity in the policy or endorsement and ruled that the policy did not cover the loss. Judgment was entered in favor of the company, and the insured appealed.

The court, on appeal, ruled that the endorsement did not affect the exclusion of water damage in the policy but merely added to that section of the policy relating to personal property. It decided that the exclusion was clear and the policy did not cover damage to the in-ground swimming pool caused by subsurface water.

The judgment entered in the trial court in favor of the insurance company was affirmed.

Murray, Appellant v. All American Insurance Company-No. CA96-11249-Court of Appeals of Ohio, Twelfth District, Butler CountyJune 16, 1997-698 North Eastern Reporter 2d 1027.

HO claim includes structure, contents & additional living expenses

Ronald and Shirley Hines filed a proof of loss under the HO policy issued by Allstate for fire damage to their home on May 23, 1992. Their policy included (1) loss of contents, (2) repair costs on structure up to $68,OOO or full replacement costs in the event the repairs exceeded that amount, and (3) additional living expenses during the time needed to repair or replace the structure, "using due diligence and dispatch."

Allstate paid the insureds the maximum amount for the contents in January 1993, and paid $63,343.94 for the structural loss on August 18,1993. At that time, the insureds demolished the remains of their home and started rebuilding it. It was completed in February 1994. Allstate made partial payments of their living expenses which included a payment in November 1992, $8,457 in June 1993, and $1,425 on July 26,1993.

The parties began negotiating the repair costs immediately after the fire but could not agree upon the settlement for the structural loss until Allstate threatened to terminate reimbursement for living expenses in November 1992. At that time the insureds offered to settle for $68,000, but Allstate rejected the offer. At about the same time, Allstate notified the insureds it would not reimburse them for living expenses as of December 15, 1992, because of their failure to exercise due diligence and dispatch in resolving the structural claim.