State Farm Mutual v. Knight

GWIN, J.

On March 18, 1988, defendant-appellee, Keith L. Knight (defendant), was operating a motor vehicle in such a manner as to come into contact with and injure John Boldman and Michael Bush. Boldman and Bush subsequently filed complaints against defendant in the Common Pleas Court of Fairfield County. Both complaints alleged that their injuries were the result of defendant’s intentional or negligent conduct.

At the time of the March 18th incident, defendant had motor vehicle insurance with plaintiff-appellant, State Farm Mutual Automobile Insurance Company (State Farm). On May 24, 1989, State Farm filed a declaratory judgment action against defendant seeking a declaration that State Farm's policy precluded coverage for defendant's March 18th conduct because there is no duty under the policy to defend or indemnify for an insured's intentional torta

On August 28,1989, and September 7,1989, respectively, Bush and Boldman dismissed, without prejudice, their intentional tort claims against defendant in the underlying law suits Thereafter, defendant moved the trial court to grant summary judgment or, in the alternative, dismiss State Farm's declaratory judgment action. On October 23, 1989, the trial court sustained defendant's motions and stated in its October 6,1989, memorandum:

"Whether the actions taken by the defendant in this case were intentional or negligent may remain as issued in Mr. Boldman's case If they were intentional, then a jury may find in Keith Knight's favor inasmuch as no such allegation remains pending against Keith Knight in that case If a jury were to find his actions to have been merely negligent, Mr. Boldman would be entitled, under the allegations of that complaint, to recover on a theory of negligence for his injuries and damages.

"The question is not one of interpretation of State Farm's contract to insure, but simply one of factfinding to be done by a jury in Mr. Boldman' case

"That being the case the Court finds not merit to State Farm's declaratory action and accordingly rules in the defendant's favor on both motions."

State Farm now seeks our review and assigns the following as error:

"ASSIGNMENT OF ERROR NO. I "THE TRIAL COURT ERRED UNDER OHIO LAW IN GRANTING DEFENDANT'S MOTION TO DISMISS/MOTION FOR SUMMARY JUDGMENT BECAUSE AN INSURANCE COMPANY MAY MAINTAIN A DECLARATORY JUDGMENT ACTION FOR PURPOSES OF ADJUDICATING ITS DUTY TO DEFEND AND/OR INDEMNIFY ITS INSURED IN A TORT ACTION BROUGHT BY A THIRD PARTY, EVEN WHERE THE UNDERLYING TORT COMPLAINT ALLEGES CONDUCT WITHIN THE COVERAGE OF THE INSURANCE POLICY.

"ASSIGNMENT OF ERROR NO. II "IF IT IS DETERMINED THAT THE COMPLAINT FOR DECLARATORY JUDGMENT DID NOT STATE A VALID CLAIM, THE TRIAL COURT ERRED IN NOT GRANTING PLAINTIFF LEAVE TO FILE AND AMENDED COMPLAINT BECAUSE LEAVE OF COURT SHOULD BE FREELY GIVEN WHEN JUSTICE SO REQUIRES."

We sustain State Farm's assignments and our reasons follow.

I

In Preferred Risk Ins. Co. v. Gill (1987), 30 Ohio St.3d 108, syllabus 1, our Supreme Court unambiguously gave insurers the right to bring a declaratory judgment action for the determination of "its duty to defend and/or indemnify its insured in a tort action brought by a third party, even where the underlying tort complaint alleges conduct within the coverage of the contract of insurance." (Also see R.C. §2721.10 which allows for the determination of an issue of fact in declaratory judgment actions)

Furthermore, the declaratory judgment action is the proper avenue for an insurer "to demonstrate that the facts alleged in the underlying tort complaint differ from the actual facts ascertained by the insurer, and that the actual facts remove the insured's conduct from coverage." Preferred Risk, supra, at 113.

From the above, it is clear that State Farm properly brought the declaratory judgment action to determine whether defendant's conduct was intentional and therefore outside the insurance coverage. State Farm should have been permitted the opportunity to establish in its declaratory judgment action whether defendant's actions were intentional as opposed to the allegations of negligence in the underlying complaints Thus, the trial court erred in preventing State Farm that opportunity.

We find no merit in defendant's claim that this appeal is moot/premature because the trial court sustained State Farm's motion to intervene in the underlying actions involving Boldman and Bush. State Farm's intervention was merely an effort to protect its rights and prevent an unfavorable verdict. For State Farm to have done otherwise would have been improvident had this appeal been unfavorable to State Farm.

Additionally, we find no merit in defendant's claim that the trial court's dismissal of the declaratory judgment action was proper under R.C. §2721.07. That section provides:

"Courts of record may refuse to render or enter a declaratory judgment or decree when such judgment or decree would not terminate the uncertainty or controversy giving rise to the proceeding."

If it is determined in the declaratory judgment action that defendant's conduct was intentional and not negligent then State Farm will not be obligated to defend the underlying law suits Therefore, the declaratory judgment may terminate the uncertainty or controversy giving rise to the proceeding and R.C. §2721.07 is inapplicable here.

Accordingly, State Farm's first assignment of error is hereby sustained.

II

Because we find that State Farm's amended complaint for a declaratory judgment action stated a valid claim even after the dismissals of the intentional tort claims in the underlying actions, we need not determine whether the trial court erred in not granting State Farm leave to file an amended complaint following such dismissals

For the foregoing reasons, the judgment of the Court of Common Pleas of Fairfield County, Ohio, is hereby reversed.

Judgment reversed.

HOFFMAN, J., concurs and MILLIGAN, P.J., concurs separately.