Curtin & Associates, LLP

Contract of Insurance – Rules of Construction

Felton v. Nationwide Mutual Fire Insurance Company, (2005) 163 Ohio App.3d 436

In Felton v. Nationwide Mutual Fire Insurance Company, the Ninth District Court of Appeals handed down a decision which clearly refutes the often cited argument, by the plaintiff’s bar, that ambiguities in the insurance contract are strictly construed against the insurance company. By way of background, plaintiff Felton had recovered a monetary judgment against the son of the named insureds of a Nationwide home owner’s policy. The son had been living apart from the parents for several years, but had set up “temporary residence” at his parents’ house simply for the purposes of looking after the family dog while his parents were on vacation. During his two-week tenure, while his parents were on vacation, the dog bit an individual, causing injury, resulting in a lawsuit and an eventual judgment against the son. Subsequent to the judgment, the plaintiff, armed with the verdict against the son, filed a direct action as against Nationwide Insurance Company seeking satisfaction of the judgment through the parents’ homeowner’s policy.

The plaintiff’s argument was summarized in paragraphs 15 – 16 of the opinion when the court stated the following:

“As Felton points out, it is axiomatic that a policy will be construed liberally in favor of the insured and strictly against the insurer where the provisions at issue are reasonably susceptible of more than one interpretation. (citation omitted)

Felton has argued that such a strict interpretation should be used in the instant case because the policy’s definition of ‘insured’ – ‘liv[ing] in [the policy-holder’s] household’ – could reasonably be interpreted to include one who is temporarily staying at the insured premises.”

Based upon the foregoing, the Ninth District Court of Appeals dealt with the plaintiff arguing, as is often the case, that a potential ambiguity automatically means interpretation of the policy in favor of the plaintiff. In a refreshing decision, the Ninth District rejected this request for extension of insurance coverage and indicated in paragraph 17 that the plaintiff basically lacked “standing” to even challenge the insurance contract. The court stated the following:

“First, it is well established that a plaintiff who is not a party to the contract of insurance is not in a position to urge, as one of the parties, that the contract be construed strictly against the other party. (citation omitted). Because Felton is not a party to the contract of insurance at issue, it is improper for her to now urge this court to strictly interpret the language of the policy against Nationwide.”

The court went on to conclude that absurd results should not be reached in the rules of construction portion of judicial analysis and, in rejecting the proposed analysis of the plaintiff, the court stated in paragraph 18, the following:

“While the rule of strict interpretation is a fundamental principle in insurance law, it is tempered by other canons of construction that seek to bring balance and reason to the analysis. For instance, this court has held that a contract ‘should be construed reasonably, so as not to arrive at absurd results.’ ... Furthermore, a contract of insurance ‘must be given a fair and reasonable interpretation to cover the risks anticipated by the parties.’”

Based upon the foregoing rules of construction, the court concluded that a temporary stay by the son at his parents’ house did not confer upon the son the status of an insured and Nationwide Insurance Company’s motion for summary judgment was affirmed.

Long Arm Statute – Jurisdictional Standard

Joffe v. Cable Tech, Inc. (2005) 163 Ohio App.3d 479:

At the inception of many cases, issues arise as to potential indispensable parties to the litigation. In that context, oftentimes discussions center around the propriety of including an out-of-state party, if appropriate, as a party. In that context, it is worthwhile to review briefly, the standards with regard to when Ohio courts can exercise jurisdiction over an out-of-state defendant. In a nutshell, cases turn on whether or not the out-of-state potential defendant has sufficient “minimum contacts” to comply with the out-of-state defendant’s due process rights.

In Joffe v. Cable Tech, Inc., the Tenth District Court of Appeals dealt with the issue of the juxtaposition between Ohio’s “long-arm statute” and the due process clause of the Constitution. In paragraphs 7 through 10 of its syllabus, the court reviewed the appropriate standard:

“7. When determining whether an Ohio court has personal jurisdiction over a nonresident defendant, the court must (1) determine whether Ohio’s long-arm statute and the applicable civil rule confer personal jurisdiction and, if so, (2) whether granting jurisdiction under the statute and rule comports with the defendant’s due process rights under the Fourteenth Amendment to the United States Constitution.

8. Out-of-state employer and employee were not ‘transacting business’ in Ohio within meaning of long-arm statute and rule of civil procedure, so as to subject them to personal jurisdiction in Ohio in action brought against them by prospective independent contractor; transactions that contractor claimed induced him to move to Ohio did not take place in Ohio, but rather, contractor was residing in California when an employment placement agency provided information about him to employer, contractor was living in California when he was interviewed, and he was residing in California when he was offered the position.

9. Out-of-state employer and employee were not ‘contracting to supply services or goods’ in Ohio within meaning of long-arm statute and rule of civil procedure, so as to subject them to personal jurisdiction in Ohio in action brought against them by prospective independent contractor.

10. Out-of-state employer and employee did not have sufficient ‘minimum contacts’ with Ohio within meaning of long-arm statute and rule of civil procedure, so as to subject them to specific jurisdiction in Ohio in action brought against them by prospective independent contractor; employer’s and employee’s decision to create and terminate the independent-contractor arrangement with contractor did not take place in Ohio, given that employee was never physically in Ohio for business related to contractor’s case, no employer representatives were in Ohio in matters related to contractors’ case, and employer did not maintain an office in Ohio.”