Preferred Risk Insurance v. Gill

Locher, J.,

dissenting. I cannot agree that Preferred Risk has

stated a claim for which relief can be granted, and would hold that Preferred Risk was not entitled to bring this declaratory judgment action. Moreover, I am not persuaded that we should overrule Transamerica Ins. Co. v. Taylor (1986), 28 Ohio St. 3d 312 , 28 OBR 381, 504 N.E. 2d 15 , and State Farm Fire & Cas. Co. v. Pildner (1974), 40 Ohio St. 2d 101 , 69 O.O. 2d 509, 321 N.E. 2d 600 . Both of these well-reasoned cases are still good law and should be upheld under the principle of stare decisis.

Transamerica, supra, and Pildner, supra, stand for the proposition that where the negligent conduct of an insured is the subject of a complaint and is within the coverage of the insurance contract, the insurer has a duty to defend the insured and may not seek a declaratory judgment that the conduct was intentional and thus excluded from coverage. Today’s decision allows an insurer to evade its responsibilities under an insurance contract by filing a declaratory judgment action that presents facts outside of, and irrelevant to, the allegations of the complaint against the insured. Under this court’s holding in Transamerica, supra, the declaratory judgment action in this case would have been dismissed for failing to state a claim upon which relief could be granted. It is axiomatic that such an action cannot be maintained if the facts presented do not give rise to a justiciable controversy. See, e.g., Hammontree v. Hawley (App. 1943), 40 Ohio Law Abs. 483 , 57 N.E. 2d 319 , dismissed for want of debatable constitutional question (1943), 142 Ohio St. 389 , 27 O.O. 317 , 52 N.E. 2d 346 .

Preferred Risk here seeks a declaration that Gill’s conduct was intentional rather than negligent. The insurer bases its argument on the fact that Gill intentionally murdered the victim. However, it does not follow that just because he intended to kill her, he must also have intended his acts after the murder, which form the basis of the complaint in this action. Preferred Risk’s argument is a red herring, intended only to relieve it of any responsibility for defending Gill and of any obligation it might incur to compensate the victims of Gill’s negligent conduct. It is crucial to note that the cause of action here is the negligent infliction of serious emotional distress on the victim’s family, arising out of Gill’s conduct after the murder. The fact that Gill intended to murder the victim is irrelevant to the determination of liability in this case, and thus presents no justiciable controversy for which a declaratory judgment action may be maintained.

*118 In addition, the majority’s reliance upon R.C. Chapter 2721 is misplaced. R.C. 2721.03 provides in relevant part:

“Any person interested under a * * * written contract * * * may have determined any question of construction or validity arising under such * * * contract * * * and obtain a declaration of rights, status, or other legal relations thereunder.” (Emphasis added.)

It is clear that under the Revised Code only questions of “construction or validity” of an insurance contract may be the subject of a declaratory judgment action. No such question in involved here. The issue Preferred Risk seeks to have resolved is a factual one: Whether Gill’s conduct was intentional or negligent. R.C. 2721.03 does not authorize the use of declaratory judgment actions to resolve such questions. In effect, the majority’s decision allows the Revised Code to be circumvented by removing all restrictions on the use of declaratory judgment actions.

Furthermore, there is evidence in this case which would support a finding that Gill’s conduct following the murder was negligent, not intentional. Proof was established at Gill’s criminal trial that after the murder, he suffered from a form of amnesia which affected his actions thereafter. A trier of fact could have concluded that as a result of this amnesia, Gill’s subsequent conduct was negligent rather than intentional. The majority ignores this possibility when it argues that the acts complained of here and the murder were so “entwined” as to be indistinguishable in terms of intent. In essence, it is conceivable that Gill is entitled to the legal defense and liability protection he contracted for in the insurance policy, and that the victim’s family may be entitled to compensation for Gill’s conduct. Today’s decision thus allows the question of an insurer’s duty to defend, and of its ultimate liability under an insurance policy, to be prematurely decided in a declaratory judgment action. Such a result is just what this court sought to prevent in Transamerica, supra, and Pildner, supra.

Finally, I disagree with the majority’s contention that Preferred Risk will be presented with an ethical ¿lemma if it is forced to defend Gill in this case. Where an insurer is contractually bound to defend the insured in a personal liability action brought by a third party, and does not give the insured notice of its reservation of rights, the insurer is estopped from later contending that the insured is not covered by the policy. See, e.g., 14 Couch on Insurance 2d (Rev. Ed. 1982) 573, Section 51:82. As this court held in Motorists Mutual v. Trainor (1973), 33 Ohio St. 2d 41 , 62 O.O. 2d 402, 294 N.E. 2d 874 , paragraph one of the syllabus, “[a]n insurance company, which by contract is obligated to defend its insured in a negligence action, may defend in good faith without waiving its right to assert at a later time the policy defenses it believes it has, provided that it gives its insured notice of any reservation of rights. ” (Emphasis added.) Here, Preferred Risk did not reserve its right to later assert noncoverage or forfeiture in an action upon the policy. Preferred Risk unconditionally agreed to defend Gill in third-party actions. To defend Gill in good faith in *119 this case, Preferred Risk must contend that Gill did not act negligently or intentionally. If Gill were to be found liable and would bring a claim for damages under the policy, Preferred Risk would be estopped from later contending Gill’s acts were intentional, and consequently excluded from coverage. No conflict of interest is possible here due to the effect of this estoppel rule. See Windt, Insurance Claims and Disputes (1982) 134, Section 4.18. It is to be noted that even if there were a conflict of interest, the most simple and best resolution would be that stated by Chief Justice O’Neill in his concurrence in Pildner, supra, at 106 , 69 O.O. 2d at 511-512, 321 N.E. 2d at 603 :

“Under these facts, I believe that D.R. 5-105, which is mandatory, dictates that the insurance company not be allowed to select counsel to defend the insured.* * *

“The insurance company, when it notifies an insured who is being sued that it denies coverage, should invite the insured to select his own counsel to represent him in the damage action. If the action is one in which the insurance company has a duty to defend, reasonable attorney fees and other proper costs incurred by the insured in making a defense will ultimately have to be assumed by the insurance company. Socony-Vacuum Oil Co. v. Continental Cas. Co. (1945), 144 Ohio St. 382 , 59 N.E. 2d 199 .”

I believe this is a more logical and equitable solution to a conflict of interest problem than a declaratory judgment action, the faults of which I have already discussed.

Public confidence in the decisions of this court is hardly promoted by the overturning of two well-reasoned and valid precedents. As this court has stated before, it “is implicit in the doctrine of stare decisis that some principle be established that the public may rely upon with the understanding that it will not lightly be overturned. The underlying rationale for stare decisis is the importance of constancy and consistency in law. In the absence of consistency and constancy the value of law in society is diminished.” Scott v. News-Herald (1986), 25 Ohio St. 3d 243, 249 , 25 OBR 302, 307, 496 N.E. 2d 699, 705 .

Today’s decision, especially with regard to the very recently decided Transamerica case, in no way promotes constancy and consistency in law. For this reason, and because I believe the precedent set today will lead to illogical and unjust results, I am compelled to dissent.

Sweeney, J., concurs in the foregoing dissenting opinion.