Hale v. Ohio Dept. of Adm. Servs. , 2013 Ohio 4854 ( 2013 )

[Cite as Hale v. Ohio Dept. of Adm. Servs., 2013-Ohio-4854.]
Court of Claims of Ohio
The Ohio Judicial Center
65 South Front Street, Third Floor
Columbus, OH 43215
614.387.9800 or 1.800.824.8263
www.cco.state.oh.us
HARLAND H. HALE
Plaintiff
v.
OHIO DEPARTMENT OF ADMINISTRATIVE SERVICES, et al.
Defendants
Case No. 2012-03484
Judge Patricia A. Cosgrove
DECISION
FINDINGS OF FACT & CONCLUSIONS OF LAW
{¶ 1} On April 13, 2012, the Plaintiff filed a complaint against the Defendants. On
May 11, 2012, the Defendants filed an answer. The crux of the complaint seeks re-
imbursement of the costs of a settlement and attorney fees expended by Plaintiff as a
result of being sued in Federal District Court on a U.S. 1984 action. (United States
District Case No. 2:11-CV-1001.) Plaintiff seeks re-imbursement of the costs and fees
under the Ohio Judges’ Professional Liability Self-Insurance Program. Plaintiff asserts
that Defendants have breached the contract or agreement to provide insurance
coverage in this case and he is a “third-party beneficiary” in this case. Defendants posit
that there is no agreement or contract of insurance between the Plaintiff and the
Defendants (State of Ohio). Further, even if the Ohio Judges’ Professional Liability Self-
Insurance Program can be construed as providing insurance coverage in this case, the
program excludes intentional, malicious, reckless, or deliberate acts.
{¶ 2} On January 25, 2013, the Defendants filed a motion for summary judgment.
On February 19, 2013, Plaintiff filed a memorandum in opposition. On February 21,
Case No. 2012-03484 -2- DECISION
2013, the Defendants filed a reply brief in support of its motion for summary judgment.
The ultimate resolution of this case will pivot on the court’s interpretation of the Ohio
Judges’ Professional Liability Self-Insurance Program.
FACTS
{¶ 3} On November 7, 2011, Lynn Hamilton filed a civil action against Judge Hale
in the United States District Court for the Southern District of Ohio. Hamilton v. Hale,
S.D. Ohio No. 2:11-CV-1001. An amended complaint was filed on November 10, 2011,
and is in all material respects identical to the original complaint. The lawsuit set forth
the following causes of action: First Claim: Violation of Fifth and Fourteenth
Amendments; Second Claim: First Amendment Violation; Third Claim: Unconstitutional
Search; Fourth Claim: Battery; Fifth Claim: Sexual Imposition: Intentional/Reckless
Infliction of Severe Emotional Distress.
{¶ 4} It is uncontroverted by the parties that Lynn Hamilton appeared once in
Franklin County Municipal Court for an arraignment on an OVI offense in front of Judge
Hale on June 22, 2011. The parties agree that no further court appearances were
made by Hamilton before Judge Hale. Hamilton entered a plea of “not guilty” to the
charge and Judge Hale gave her limited driving privileges until 7:30 p.m. Shortly after
the arraignment, according to the complaint, Judge Hale asked Ms. Hamilton to
approach the bench, where he proceeded to ask her personal questions regarding her
marital status and whether she had a boyfriend. Ms. Hamilton never again appeared in
front of Judge Hale in court on her OVI case.
{¶ 5} Later that evening, at around 6:30 p.m., per the complaint, Judge Hale had
an employee, and friend of Hamilton’s (Tammy Weisgerber), call Ms. Hamilton and
arrange for a meeting. Judge Hale picked up Ms. Hamilton and drove them to a bar.
Afterwards, Hamilton asked Weisgerber to drive her home but she was too intoxicated.
Judge Hale drove Hamilton home and insisted upon coming inside her home.
Case No. 2012-03484 -3- DECISION
According to the complaint, Ms. Hamilton was subjected to unwanted sexual advances
by the judge that are outlined in detail in the complaint. According to the complaint, she
did not report it to authorities since she was afraid of retaliation. Judge Hale continued
to call her after the incident. There is no evidence in the record that she returned the
calls.
{¶ 6} Judge Hale requested a defense of the Hamilton suit along with
indemnification arising out of any judgment under the Ohio Judges’ Self-Insurance
Program (hereinafter referred to as “Program”) as well as attorney fees. Judge Hale
gave timely notice of the lawsuit to the Ohio Department of Administrative Services
(DAS). On November 15, 2011, DAS wrote a letter to Judge Hale informing him that the
lawsuit was not within the scope of coverage under the Program. Judge Hale, the
Plaintiff in this case, filed the instant complaint alleging four causes of action: 1)
declaratory judgment; 2) breach of contract for damages; 3) breach of contract for
specific performance, and 4) bad faith.
LAW
{¶ 7} Civ.R. 56(C) “provides that before summary judgment may be granted, it
must be determined that: 1) no genuine issue as to any material fact remains to be
litigated; 2) the moving party is entitled to judgment as a matter of law; and 3) it appears
from the evidence that reasonable minds can come to but one conclusion, and viewing
such evidence most strongly in favor of the party against whom the motion for summary
judgment is made, that conclusion is adverse to that party.” Temple v. Wean United,
Inc., 50 Ohio St.2d 317, 327 (1977).
{¶ 8} It is well established that the party seeking summary judgment bears the
burden of demonstrating that no issues of material fact exist for trial. Celotex Corp. v.
Catrett, 477 U.S. 317, 330 (1986); Mitseff v. Wheeler, 38 Ohio St.3d 112, 115 (1988).
Doubts must be resolved in favor of the nonmoving party. Murphy v. Reynoldsburg, 65
Ohio St.3d 356 (1992). “The moving party bears the initial responsibility of informing the
Case No. 2012-03484 -4- DECISION
trial court of the bases for the motion, and identifying those portions of the record which
demonstrate the absence of a genuine issue of fact or material element of the
nonmoving party’s claim.” Dresher v. Burt, 75 Ohio St.3d 280, 296 (1996).
Contract of Insurance
{¶ 9} The first issue to be determined by this court is whether the Ohio Judges’
Self-Insurance Program establishes a contract between Judge Hale and the
Defendants, Ohio Department of Administrative Services and the Ohio Supreme Court.
The self-insurance program is funded by the employer (Ohio Supreme Court) and
enacted through the laws of the State of Ohio. The Program is administered by the
Office of Risk Management at DAS.
{¶ 10} Effective September 1, 2011, the Supreme Court of Ohio instituted an
Ohio Judges’ Professional Liability Self-Insurance Program (“Program”) to provide
professional liability coverage and the Office of Risk Management agreed to pay
professional liability claims and judgments properly made and rendered against named
self-insureds. (Defendants’ Exhibit A, (August 2011 letter advising judges of Program)
and Defendants’ Exhibit B (Program: Purpose Clause).)
{¶ 11} The scope of coverage “applies to personal or combined official and
personal claims. The coverage does not extend or apply to official capacity only
claims.” (Defendants’ Exhibit A, Program: Professional Liability.) The specific wording
of this section is logical as a judge who is sued in his/her official capacity, only, would
have complete judicial immunity for their acts.
{¶ 12} Under the Program, exclusions for coverage of any claims include: “Any
claim arising out of any criminal, dishonest, intentional, malicious, reckless, or deliberate
act, error or omission. There is no self-insured coverage for these claims expenses.”
(Program: Exclusions.)
Case No. 2012-03484 -5- DECISION
{¶ 13} The Plaintiff asserts that he is either a party to the contract or “third-party
beneficiary” to the Program. Defendants deny that there is a contract of insurance
between the parties. It is a basic tenet of contract law that a binding agreement will not
be deemed to have been formed unless the parties have had a meeting of the minds,
through the presentation of an offer by one side and acceptance of that offer by the
other. Marshall v. Beach, 143 Ohio App.3d 432, 436-437 (11th Dist.2001). There are
three paradigm elements essential to contract formation: offer, acceptance, and
consideration. Helle v. Landmark, Inc., 15 Ohio App.3d 1, 8 (6th Dist.1984).
{¶ 14} The record is clear that Judge Hale has never entered into a contract with
DAS or the Ohio Supreme Court to obtain benefits under the Program. The Plaintiff has
failed to provide any evidence of consideration that he paid a premium to obtain
coverage under the Program or even produce a pay stub showing a deduction for
coverage under the Program. He did not sign any document agreeing to the terms of
the Program. The Supreme Court pays DAS an annual allocation that costs the
Supreme Court $515.00 per judge out of its budget to provide self-insured coverage
under the Program. (Plaintiff’s Exhibit B.) The Plaintiff has failed to meet its burden to
produce any evidence that the Program constitutes a contract of insurance between the
parties. He has produced no evidence of any meeting of the minds between the parties
or his tender of consideration for coverage of claims/indemnification.
{¶ 15} In addition, when deciding whether an entity or person is an insurer, some
of the factors to consider are: 1) whether the plan is mandatory; 2) whether a profit
motive exists in offering the plan; and 3) whether the plan is intended to be actuarially
sound. E.g. Cherry v. Tanda, Inc., 940 S.W. 2d 457 (Ark.1997). The Ohio Supreme
Court is not mandated by law to establish a self-insurance plan and there is no evidence
that Defendants make a profit for participating in the Program.
Case No. 2012-03484 -6- DECISION
Third-Party Beneficiary Claim
{¶ 16} The Defendant argues that he is a “third party beneficiary” to the Program.
It is axiomatic that if there is no contract, there can be no “third party beneficiary.”
Guyuron v. Bergdorf, 9th Dist. No. 16075, 1994 Ohio App. LEXIS 2937 (June 29, 1994),
quoting 4 Corbin on Contracts, Section 773 (1951). Pursuant to R.C. 2743.02(E), “the
only defendant in an original action in the court of claims is the state.” One arm of the
state may not sue another. Ohio Dept. of Human Serv. v. Ohio Dept. of Transp., 78
Ohio App.3d 658 (10th Dist.1992), Gugar v. Univ. of Akron, Ct. of Cl. No. 2010-11129
(Jan. 25, 2013), Bungard v. Ohio Dept. of Job & Family Servs., 10th Dist No. 07AP-447,
2007-Ohio-6280, ¶ 24.
{¶ 17} The Ohio Department of Administrative Services and the Ohio Supreme
Court are both arms of the State of Ohio. A party cannot contract with himself. North v.
Higbee Co., 131 Ohio St. 507, 533 (1936). A single party cannot be both promisor and
promissee, and the State cannot sue itself to enforce an agreement it reaches with
itself. See Ohio Dept. of Human Serv. v. Ohio Dept. of Transp., supra. The Plaintiff has
failed to produce any evidence that there is a contract of insurance between him and
the Defendants (State of Ohio). Since there is no contract between the Plaintiff and
Defendants, Judge Hale cannot be deemed a third-party beneficiary to a non-existent
contract.
Self-Insurance Issue
{¶ 18} Although, Plaintiff’s complaint sets forth two separate claims sounding in
contract, in his brief in opposition to the Defendants’ motion for summary judgment, he
posits that it is of no consequence what the Program is denominated since the self-
insurance Program is “akin or analogous” to insurance, and, therefore, he is entitled to
be reimbursed for the costs of defense and indemnification. (Memorandum in
Opposition at 3.)
Case No. 2012-03484 -7- DECISION
{¶ 19} “Self-insurance is, ‘the practice of setting aside a fund to meet losses
instead of insuring against such through insurance.’” Dorsey v. Fed. Ins. Co., 154 Ohio
App.3d 568, 2003-Ohio-5144, ¶ 20 (7th Dist.), quoting Black’s Law Dictionary 1360 (6th
Ed.1990). In determining whether an entity is self-insured, courts look at who bears the
risk of loss. “‘Self-insurance is not insurance; it is the antithesis of insurance.’” Archer
v. ACE USA, 152 Ohio App.3d 455, 2003-Ohio-1790, ¶ 36 (10th Dist.), quoting
Physicians Ins. Co. of Ohio v. Grandview Hosp. & Med. Ctr., 44 Ohio App.3d 157, 158
(2nd Dist.1988). “[W]hile insurance shifts the risk of loss from the insured to the insurer,
self-insurance involves no risk-shifting. Rather, in the self-insurance context, the risk is
borne by the one whom the law imposes it. The defining characteristic of insurance, the
assumption of specific risks from customers in consideration for payment, is entirely
absent where an entity self-insures.” Jennings v. City of Dayton, 114 Ohio App.3d 144,
148 (2nd Dist.1996); see also Dalton v. Wilson, 10th Dist. No. 01AP-1014, 2002-Ohio-
4015, ¶ 35.
{¶ 20} Plaintiff argues that regardless of its title since the Program is analogous to
insurance, Defendants have the duty to defend and indemnify him. Plaintiff relies on the
holding in Ohio Gov. Risk Mgmt. Plan v. Mgmt. Plan v. Cty. Risk Sharing Auth., Inc.,
130 Ohio App.3d 174 (6th Dist.1998), for the proposition that self-insurance is
analogous to insurance. However, later, in the opinion, the court makes the following
distinction, “[W]e are not finding that self-insurance is insurance; rather, we find that its
structure is analogous to insurance.” Id. at 180.
{¶ 21} Plaintiff’s reliance on this case is misplaced. There are many types of self-
insurance plans. For instance, under R.C. 2744.081, individual counties are permitted
to join a self-insurance pool allowing each separate county to spread its risk of its own
loss among other counties who have paid premiums. Ohio Gov. Risk Mgmt., supra.
This program of self-insurance is different than the one established by the Ohio
Supreme Court. Under the authority of R.C. 2744.081, political subdivisions, separate
entities, may enter into pooling agreements that transfer liability risks or portions,
Case No. 2012-03484 -8- DECISION
thereof, away from the individual county, city or township into the pool. In this case
there is no transfer of risk as the State of Ohio is the only party that bears the risk.
There can be no transfer of risk from the State to itself.
Duty to Defend
{¶ 22} An insurer’s duty to defend is broader than and distinct from its duty to
indemnify. Socony-Vacuum Oil Co. v. Continental Cas. Co., 144 Ohio St. 382 (1945).
The scope of the allegations in the complaint against the insured determines whether an
insurance company has a duty to defend the insured. Motorists Mut. Ins. Co. v. Trainor,
33 Ohio St.2d 41 (1973). The insurer must defend the insured in an action when the
allegations state a claim that potentially or arguably falls within the liability insurance
coverage. Willoughby Hills v. Cincinnati Ins. Co., 9 Ohio St.3d 177, 179 (1984).
However, an insurer need not defend any action or claims within the complaint when all
the claims are clearly and indisputable outside the contracted coverage. Preferred Risk
Ins. Co. v. Gill, 30 Ohio St.3d 108, 113 (1987).
{¶ 23} Here, the scope of the allegations against the Plaintiff are not genuinely in
issue. Whether the actions of the Plaintiff were sexual in nature or merely
inappropriate, is of no import. According to Ms. Hamilton’s complaint, all of Plaintiff’s
inappropriate conduct occurred at Ms. Hamilton’s residence or in a bar. Under no
stretch of any legal theory can the Defendants be required to defend Judge Hale when
no reasonable mind could conclude that he was acting within his “judicial capacity.”
(See Program: Definitions.)
{¶ 24} Further, while an insurer may be obligated under a contract of insurance to
provide a defense to an insured entity or individual, a self-insurer is under no obligation
to provide a defense. Williamson v. Walles, 6th Dist. No. L-08-1010, 2009-Ohio-1117.
The court finds that Plaintiff is not required to provide a defense or indemnification of the
Hamilton lawsuit.
Case No. 2012-03484 -9- DECISION
Program Definitions & Exclusions
{¶ 25} Although the court has already found that there is no duty to defend or
indemnify the Plaintiff under either a theory or contract or self-insurance, the court will
also discuss the applicable exclusions in the Program. The Program provides that the
Defendants will “pay professional liability claims and judgments properly made and
rendered against the named self-insureds.” (Program, “Purpose” clause.) Under the
Program, a “Claim” is defined to be “any demand received by a self-insured for
damages arising out of your acts, errors, omissions, in your judicial * * * capacity.”
(Program, “Program Definitions” clause.) The Plaintiff would have the court believe that
when Judge Hale had unwanted inappropriate or even sexual conduct with
Ms. Hamilton at a bar or her residence that he was acting in his “judicial capacity.” (See
Memorandum in Opposition at 9.)
{¶ 26} “[F]actors determining whether an act by a judge is a ‘judicial’ one relate to
the nature of the act itself, i.e., whether it is a function normally performed by a judge,
and to the expectations of the parties, i.e., whether they dealt with the judge in his
judicial capacity.” Stump v. Sparkman, 435 U.S. 349, 362 (1978). Plaintiff’s unwanted
sexual conduct or inappropriate conduct with Ms. Hamilton at a bar or her residence, on
his own time, cannot be reasonably construed to mean that the judge was acting in his
“judicial capacity.” The court finds that Plaintiff was acting on his own personal motives
and not in his “judicial capacity” when he had contact with Ms. Hamilton at her
residence and the tavern.
{¶ 27} The Program further provides exclusions of coverage for “any claim arising
out of any criminal, dishonest, intentional, malicious, reckless or deliberate act, error or
omission.” (Program, “Program Exclusions” clause.) Plaintiff’s decision to pursue
contact with Ms. Hamilton comes squarely within the ambit of “intentional or reckless
acts” as described above. (See Hamilton complaint.) The court will also discuss this
exclusion in connection with the public policy behind this exclusion.
Case No. 2012-03484 - 10 - DECISION
Public Policy Against Indemnification
{¶ 28} Pursuant to R.C. 9.821, the Department of Administrative Services shall
direct and manage all risk management and insurance programs authorized under
section 9.822 of the Ohio Revised Code. R.C. 9.822(A) requires that DAS “through the
office of risk management shall establish an insurance plan or plans that may provide
for self-insurance or the purchase of insurance, or both” for the purpose of insuring the
State or its officers. R.C. 9.822(A)(2) provides coverage for claims arising out of any
civil actions or claims “against the state or its officers and employees arising out of the
performance of official duties, except acts and omissions for which indemnification
is prohibited under section 9.87 of the Revised Code.” (Emphasis added.)
{¶ 29} R.C. 9.87(B)(2) states in its entirety:
{¶ 30} The state shall not indemnify an officer or employee under
any of the following circumstances:
{¶ 31} When the officer or employee acts manifestly outside the
scope of the officer’s or employee’s employment or official responsibilities,
with malicious purpose, in bad faith, or in a wanton or reckless manner, as
determined by the employer of the officer or employee or by the attorney
general.
{¶ 32} The term “scope of employment” is an elusive concept and depends on the
facts in any particular case. Posin v. A.B.C. Motor Court Hotel, 45 Ohio St.2d 271(1976). Subsequent to Posin decision, the Ohio Supreme Court noted that “an
employer is not liable for independent self-serving acts of his employees which in no
way facilitate or promote his business.” Byrd v. Faber, 57 Ohio St.3d 56, 59 (1991).
But see Shrout v. Black Clawson Co., 689 F.Supp. 774 (S.D.Ohio 1998), Kerans v.
Porter Paint Co., 61 Ohio St.3d 486 (1991) (sexual harassment of an employee that
occurs during work hours, at the office, and was carried out by someone with authority
will normally fall within the supervisor’s scope of authority).
Case No. 2012-03484 - 11 - DECISION
{¶ 33} Having considered all of the evidence, when reasonable minds can come
to but one conclusion on the issue regarding the scope of employment, it becomes a
question of law for the court. Osborne v. Lyles, 63 Ohio St.3d 326, 330 (1992).
{¶ 34} Judge Hale argues that R.C. 9.87 does not bar coverage because he is an
elected official of a political subdivision. Plaintiff may be an elected official, but he has
statewide jurisdiction under the Ohio Constitution, Art. 1V. Sect. 6, to preside over
cases in other Ohio counties. He is considered an employee of the State and receives
a paycheck from the State of Ohio every month for his services.
{¶ 35} Lastly, while the court addressed the merits of this lawsuit, there is some
question as to whether the Plaintiff is entitled to sue DAS for its refusal to defend or
indemnify the Plaintiff in the Hamilton lawsuit. All named self-insured or named self-
insured designees agree that they shall not file any claims or bring any legal actions for
any cause relating to the administration of the Ohio Judges’ Professional Liability Self-
Insurance Program. (Program: No Action Against the ORM.)
CONCLUSION
{¶ 36} In conclusion, the court finds that reasonable minds can only come to one
conclusion considering the facts of this case. The Plaintiff has produced no evidence
that he entered into a contract of insurance with the Defendants, DAS or the Ohio
Supreme Court, to provide defense and or indemnification for any judgments. Both
DAS and the Ohio Supreme Court are arms of the State of Ohio and cannot enter into a
contract with itself. In light of the fact, the court has found no contract of insurance
exists between the Plaintiff and the Defendants, the Plaintiff cannot, as a matter of law,
be a third-party beneficiary to a non-existent contract.
{¶ 37} The Ohio Judges’ Self-Insurance Program is a program of self-insurance,
not a contract of insurance. Unlike a contract of insurance, there is no duty to defend or
indemnify Plaintiff under the Program under a theory of contract or self-insurance. Even
if the court considered the Program to be a contract of insurance, the conduct of the
Case No. 2012-03484 - 12 - DECISION
Plaintiff was not performed in his “judicial capacity” as required by the Program
definition of claim, when he had unwelcome sexual or inappropriate conduct with
Ms. Hamilton at a bar and her home. The court further finds that public policy as
delineated in R.C. 9.87(B)(2) mandates that the court, based on the undisputed facts of
this case, find that Judge Hale’s conduct, was “manifestly outside the scope” of his
employment, and therefore, Ohio law, prohibits payment of any claim, defense, or
indemnification of Plaintiff in reference to the Hamilton lawsuit.
{¶ 38} For the above reasons, the court concludes that there are no genuine
issues of material fact and that defendant is entitled to judgment as a matter of law.
Accordingly, Defendants’ motion for summary judgment shall be granted and judgment
shall be rendered in favor of Defendants.
_____________________________________
PATRICIA A. COSGROVE
Judge
Case No. 2012-03484 - 13 - DECISION
Court of Claims of Ohio
The Ohio Judicial Center
65 South Front Street, Third Floor
Columbus, OH 43215
614.387.9800 or 1.800.824.8263
www.cco.state.oh.us
HARLAND H. HALE
Plaintiff
v.
OHIO DEPARTMENT OF ADMINISTRATIVE SERVICES, et al.
Defendants
Case No. 2012-03484
Judge Patricia A. Cosgrove
JUDGMENT ENTRY
{¶ 39} A non-oral hearing was conducted in this case upon Defendants’ motion
for summary judgment. For the reasons set forth in the decision filed concurrently
herewith, Defendants’ motion for summary judgment is GRANTED and judgment is
rendered in favor of Defendants. There is no just cause for delay. All other pending
motions are DENIED as moot. All previously scheduled events are VACATED. Court
costs are assessed against Plaintiff. The clerk shall serve upon all parties notice of this
judgment and its date of entry upon the journal.
Case No. 2012-03484 - 14 - DECISION
_____________________________________
PATRICIA A. COSGROVE
Judge
cc:
Christopher P. Conomy Patrick M. Quinn
Peter E. DeMarco 35 North Fourth Street, Suite 200
Assistant Attorneys General Columbus, Ohio 43215
150 East Gay Street, 18th Floor
Columbus, Ohio 43215-3130
PAC/007
Filed June 19, 2013
To S.C. Reporter October 31, 2013