Is Employer Intentional Tort Insurance Done For Good?

Posted on March 18th, 2015 by Kevin W. KitaKevin Kita

The Supreme Court of Ohio’s opinion in Hoyle et al., v. DTJ Ents., Inc. appears to nullify insurance provisions purporting to cover employer intentional torts.  The case arose from an injury to Duane Hoyle when he fell from ladder-jack scaffolding while working on a construction project for his employers, DTJ Enterprises (“DTJ”) and Cavanaugh Building Corporation (“Cavanaugh”). The ladder-jack was missing security brackets, allegedly because the employer’s superintendent refused to give them to the employees.  Mr. Hoyle sued his employers alleging employer intentional tort. DTJ and Cavanaugh’s insurance company, Cincinnati Insurance Company (“CIC”) intervened in the lawsuit, requesting declaratory judgment that it had no duty to indemnify its insured for Hoyle’s injuries.

In Ohio, because of the comprehensive worker’s compensation system, an employee’s right to sue his or her employer is limited to situations in which the employer acted with a deliberate intent to injure the employee (deliberate intent claims), or with a belief that injury was substantially certain to occur (substantially certain claims).  For many years, Ohio public policy prohibited an employer from obtaining insurance coverage for deliberate intent claims, but permitted insurance for substantially certain claims.  The reasoning behind this distinction is that coverage for the latter is less likely to encourage wrongdoing while ensuring victims can be compensated if they should prevail.

In 2005, the Ohio General Assembly passed R.C. 2745.01, which re-defined the term “substantially certain” to mean that an employer acts with deliberate intent to injure his employee.  In doing so, the Hoyle Court recognized, the legislature significantly restricted the ability to recover under intentional tort theory because what were once two distinct bases for liability (intent and substantially certain) appear to have become one in the same.

Despite the statutory change, CIC sold a commercial general liability endorsement to DTJ and Cavanaugh, charging an additional premium, agreeing to provide coverage for intentional torts under a “substantially certain” theory while excluding “deliberate intent” claims.  CIC told DTJ and Cavanaugh it would continue to offer and provide liability coverage until any challenges to R.C. 2745.01 were resolved.  DTJ and Cavanaugh paid these premiums, and CIC accepted them, for nearly three years before Mr. Hoyle filed his lawsuit.

In his Complaint, Mr. Hoyle alleged DTJ and Cavanaugh were liable because they acted with intent to injure and because they were substantially certain that an injury would occur.  Mr. Hoyle also relied, in part, on a statutory provision stating the removal of a safety guard creates a rebuttable presumption that the employer intended to cause injury.  The trial court granted partial summary judgment in favor of DTJ and Cavanaugh on Plaintiff’s “deliberate intent” and “substantially certain” claims due to a lack of evidence the defendants had “specific intent” to injure Mr. Hoyle. However, the trial court held issues of material fact remain as to whether the statutory presumption applied.

Meanwhile, CIC argued it had no duty to indemnify DTJ and Cavanaugh under its policy because any recovery to which Mr. Hoyle would be entitled under R.C. 2745.01 would be based on a finding that his employers intended to cause injury.  Mr. Hoyle argued the statutory presumption does not involve “deliberate intent” and therefore is not excluded from coverage.  The trial court agreed with CIC and granted summary judgment in its favor.  On review, a divided Ninth District reversed the trial court’s decision holding that deliberate intent may be presumed for purposes of the statute where there is removal of a safety guard. However, the appellate court concluded that this does not amount to deliberate intent for purposes of the insurance exclusion.  The Supreme Court disagreed.

Writing for the majority, Justice French held, pursuant to R.C. 2745.01, DTJ and Cavanaugh can only be held liable based upon a finding that they acted with the intent to injure Mr. Hoyle.  Thus, intent to injure will be a necessary element of Mr. Hoyle’s case regardless of whether it’s proven with direct evidence or through a statutory presumption.   Because the CGL endorsement specifically excluded deliberate intent claims, the Court held DTJ and Cavanaugh were not entitled to coverage.

Notably, what was left unanswered – at least directly – by the Hoyle decision is whether substantially certain intentional tort claims, under R.C. 2745.01 also include the necessary element of intent such that they too would be precluded from insurance coverage.  The Court punted on directly addressing this issue stating its decision was based on the intent exclusion of the CGL endorsement, and thus, does not technically abrogate Ohio’s exception permitting insurance for substantially certain claims.  It is questionable that the implications of the Hoyle decision will be limited to the intent exclusion, however, in light of the case’s procedural history and the Court’s own interpretation of the statute.

The trial court dismissed Mr. Hoyle’s substantially certain claim due to lack of evidence of “specific intent.”  The trial court’s holding and rationale in this regard was unchallenged by the Supreme Court.  In fact, the Court’s analysis of the statute tacitly recognizes that, under R.C. 2745.01, separating “deliberate intent” and “substantially certain” claims is a distinction without a difference.  The Court even quoted its holding in Houdek v. ThyssenKrupp Materials N.A., Inc., 134 Ohio St.3d 491, 2012-Ohio-5685, 983 N.E.2d 1253, stating “absent a deliberate intent to injure another, an employer is not liable for a claim alleging an employer intentional tort.”  Thus, while the Court attempted to limit its holding to the specific policy at issue, it seems difficult to imagine a scenario in which its interpretation of the statute will not result in the abrogation of employer intentional tort insurance once and for all.

While the overall impact the Hoyle decision will have on the area of employer intentional torts remains to be seen, the implications of eliminating all insurance for employer intentional tort claims could be significant.  The case provides strong dicta for any insurance company to challenge or refuse indemnification in the event of an employer intentional tort lawsuit.  Thus, businesses and employers who have spent years paying for CGL policies and/or endorsements purporting to cover “substantially certain” claims may now find that they have been paying for unenforceable provisions and illusory coverage.  Employees with valid claims may not be so confident in their ability to recover and be made whole.    Unfortunately, a final answer to these questions will have to wait for another day.

The text of the full opinion can be found here.