Case Title: Penn Traffic Co. v. AIU Ins. Co.

Citation: 2003-Ohio-3373

Docket Number: 20011891 and 20020262

State: ohio

Court: Ohio Supreme Court

Date: 2003-07-16T00:00:00Z

Document:
[Cite as Penn Traffic Co. v. AIU Ins. Co., 99 Ohio St.3d 227, 2003-Ohio-3373.] 
 
PENN TRAFFIC COMPANY, D.B.A. BIG BEAR STORES, APPELLANT AND CROSS-
APPELLEE, v. AIU INSURANCE COMPANY; CINCINNATI INSURANCE COMPANY 
ET AL., APPELLEES AND CROSS-APPELLANTS; RAMSEY ET AL., APPELLANTS 
AND CROSS-APPELLEES. 
PENN TRAFFIC COMPANY, D.B.A. BIG BEAR STORES, APPELLANT, v. AIU 
INSURANCE COMPANY ET AL., APPELLEES;  RAMSEY ET AL., APPELLANTS. 
[Cite as Penn Traffic Co. v. AIU Ins. Co., 99 Ohio St.3d 227, 2003-Ohio-3373.] 
Insurance — Commercial general liability insurance policy containing an 
exclusion from coverage for bodily injury to an employee arising out of 
or in the course of employment does not provide coverage for an 
employer’s liability for substantial-certainty intentional torts. 
(Nos. 2001-1891 and 2002-0262 — Submitted January 7, 2003 — Decided July 
16, 2003.) 
APPEAL and CROSS-APPEALS from and CERTIFIED by the Court of Appeals for 
Pike County, No. 00CA653, 2001-Ohio-2567. 
__________________ 
 
O’CONNOR, J. 
{¶1} 
On April 12, 1995, appellant Virginia S. Ramsey was injured when 
she fell off a loading dock while working for plaintiff-appellant Penn Traffic 
Company, d.b.a. Big Bear Stores.  Ramsey and her husband, appellant Marlin K. 
Ramsey, filed intentional tort claims against Penn Traffic.  The complaint alleged, 
inter alia, that Penn Traffic’s failure to place a guardrail on the loading dock made 
Ramsey’s injuries substantially certain to occur.  In September 1997, a jury 
returned a verdict in favor of the Ramseys for more than $2.7 million in 
compensatory damages. 
{¶2} 
When Penn Traffic’s insurance carriers declined to indemnify its 
insured and pay the judgment, Penn Traffic filed this action for declaratory 
SUPREME COURT OF OHIO 
2 
judgment against its various insurers.1  The trial court concluded that Penn Traffic 
was entitled to coverage under an employer’s liability policy, but the court 
reserved final judgment against that insurer in order to resolve some factual 
issues.  The trial court granted summary judgment to the remaining insurance 
companies, including appellees and cross-appellants, Cincinnati Insurance 
Company (“CIC”) and Federal Insurance Company.  The court included Civ.R. 
54(B) language making the order a final, appealable one. 
{¶3} 
The court of appeals affirmed summary judgment in favor of CIC.2  
The court reversed the judgment as to Federal Insurance and remanded the cause, 
concluding that a genuine issue of material fact remained as to coverage under 
Federal’s umbrella policy. 
{¶4} 
The court of appeals certified that its decision was in conflict with 
the decision of the Third District Court of Appeals in Maffett v. Moyer’s Auto 
Wrecking, Inc. (June 7, 2000), Crawford App. Nos. 3-99-11 and 3-99-12, 2000 
WL 743707.  We determined that a conflict exists and ordered the following issue 
to be briefed by the parties: “whether a commercial general liability insurance 
policy which contains an exclusion for ‘bodily injury to an employee’ which 
arises out of or in the course of employment covers an employer’s liability for 
substantially certain intentional torts.”  Penn Traffic Co. v. AIU Ins. Co. (2002), 
95 Ohio St.3d 1406, 765 N.E.2d 875. 
{¶5} 
This cause is now before this court upon our determination that a 
conflict exists (case No. 2002-0262) and pursuant to the allowance of a 
discretionary appeal and cross-appeals (case No. 2001-1891). 
                                          
 
1. 
After the underlying trial, Penn Traffic settled the Ramseys’ claims and assigned to them 
certain rights of recovery against Penn Traffic’s insurers.  Consequently, the Ramseys are parties 
to this action. 
2. 
The court also affirmed the summary judgment in favor of the other insurance companies.  
They settled with Penn Traffic and are not parties to this appeal. 
January Term, 2003 
3 
{¶6} 
The parties agree that the underlying judgment in the Ramsey case 
was premised upon a “substantial certainty” intentional tort.  This type of 
“employer intentional tort” occurs when the employer does not directly intend to 
injure the employee, but acts with the belief that injury is substantially certain to 
occur.  Van Fossen v. Babcock & Wilcox Co. (1988), 36 Ohio St.3d 100, 522 
N.E.2d 489.  “[W]here substantial certainty exists, intent to harm will be inferred 
as a matter of law.”  Buckeye Union Ins. Co. v. New England Ins. Co. (1999), 87 
Ohio St.3d 280, 289, 720 N.E.2d 495 (Cook, J., concurring in judgment only). 
{¶7} 
Appellants ask us to determine which CIC policy applied when 
Mrs. Ramsey was injured, and to find coverage for substantial-certainty 
intentional torts under the applicable policy or policies as a matter of law.  With 
respect to Federal Insurance, appellants urge us to conclude that there is no 
genuine issue of material fact and that the umbrella policy provides coverage as a 
matter of law. 
{¶8} 
For the reasons that follow, we conclude that the CIC policy in 
effect at the time of Ramsey’s injury does not provide coverage for substantial-
certainty intentional torts.  However, there exists a genuine issue of material fact 
with respect to the Federal policy.  Therefore, we affirm the judgment of the court 
of appeals. 
{¶9} 
An insurance policy is a contract, and its construction is interpreted 
as a matter of law.  Alexander v. Buckeye Pipe Line Co. (1978), 53 Ohio St.2d 
241, 7 O.O.3d 403, 374 N.E.2d 146.  In determining the meaning of the insurance 
contract, we look at the policy language, giving terms their plain and ordinary 
meaning, to ascertain a reasonable understanding of the contract.  Gomolka v. 
State Auto. Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 167-168, 24 O.O.3d 274, 436 
N.E.2d 1347.  We begin by examining the policies at issue. 
 
A. 
CIC Insurance Policies 
SUPREME COURT OF OHIO 
4 
{¶10} CIC issued commercial insurance policies to Penn Traffic.  For the 
period March 1, 1992, to March 1, 1995, CIC issued to Penn Traffic a commercial 
general liability policy (“CGL”) and also an “Ohio Stop-Gap Employers’ Liability 
Coverage Form.”  CIC contends that, pursuant to a General Change Endorsement, 
it deleted Penn Traffic’s stopgap coverage and added the Ohio Liability Coverage 
Enhancement, Form GA216OH, effective March 1, 1994. 
{¶11} When Penn Traffic renewed the CGL policy from CIC for the 
period March 1, 1995, to March 1, 1998, the enhancement coverage was also 
renewed as part of the policy.  CIC also issued an excess liability policy to Penn 
Traffic for this period.  According to CIC, this CGL policy and the liability 
enhancement endorsement were in effect at the time Mrs. Ramsey was injured. 
{¶12} Penn Traffic, however, contends that it had no knowledge of and 
did not consent to deletion of the stopgap form and issuance of the liability 
enhancement endorsement.  Penn Traffic argues that any change by CIC in 1994 
was an improper unilateral modification and that the renewal of the CGL policy in 
March 1995 did not become effective until countersigned by Penn Traffic’s agent 
on April 14, 1995, two days after Mrs. Ramsey was injured.  Consequently, Penn 
Traffic contends that the stopgap form remained in effect when Mrs. Ramsey was 
injured and provided coverage as a matter of law. 
{¶13} The trial court, without explanation, determined that “there is no 
genuine issue as to any material fact based on the clear and unambiguous 
language of the underlying policies that injury to an employee by an intentional 
tort of the insured is not covered by the CIC policies.”  The appellate court 
performed its own review of the policies and agreed that neither the 1992 nor the 
1995 policy provided coverage to Penn Traffic.  Consequently, the court did not 
reach the issue of which policy applied at the time of Ramsey’s injury. 
January Term, 2003 
5 
{¶14} We note that the courts below addressed these issues in the wrong 
order.  We will begin with a determination of which policy was in effect at the 
time of the Ramsey injury and then analyze only the relevant policy. 
{¶15} CIC issued a CGL to Penn Traffic in 1992.  The 1992 CGL 
contained the stopgap coverage form discussed above as a subpolicy.  CIC 
notified Penn Traffic that it was replacing the stopgap subpolicy with the Ohio 
Liability Coverage Enhancement endorsement, effective March 1, 1994.  The 
change was countersigned on Penn Traffic’s behalf by its designated agent, just as 
the original 1992 policy had been.  Penn Traffic, through its agent, agreed to the 
1994 coverage change.  Thus, the stopgap coverage ceased a year prior to 
Ramsey’s injury. See, e.g., Nagle Heating & Air Conditioning Co. v. Heskett 
(1990), 66 Ohio App.3d 547, 585 N.E.2d 866. 
{¶16} Penn Traffic argues that the agent it authorized to countersign CIC 
policies was not its agent, but that of CIC.  However, “[a] well-settled doctrine of 
the law of agency is that a principal may ratify the acts of its agent performed 
beyond the agent’s scope of authority, and such ratification relates back to the 
time of performance of the acts and binds the principal from that time.”  State v. 
Warner (1990), 55 Ohio St.3d 31, 65, 564 N.E.2d 18.  Penn Traffic’s acceptance 
of the 1995 policy, whether before or after Ramsey’s injury, served to ratify the 
agent’s acceptance of the 1994 change. 
1. 
CGL and Enhancement Endorsement 
{¶17} Under Section 1(A)(1)(a) of the CGL policy for the period March 
1, 1995, through March 1, 1998, CIC agreed to pay “those sums that the insured 
becomes legally obligated to pay as damages because of ‘bodily injury’ or 
‘property damage’ to which this insurance applies.”  Section 1(A)(1)(b)(1) 
provided coverage for bodily injury and property damage “only if” it is “caused 
by an ‘occurrence.’ “  (Emphasis added.)  The policy defined “occurrence” as 
“an accident, including continuous or repeated exposure to substantially the 
SUPREME COURT OF OHIO 
6 
same general harmful conditions.”  (Emphasis added.)  The policy did not define 
the word “accident.” 
{¶18} The CGL policy expressly excluded coverage for bodily injury that 
is “expected or intended from the standpoint of the insured” and bodily injury to 
“[a]n employee of the insured arising out of and in the course of employment by 
the insured.”  (Emphasis added.) 
{¶19} The Ohio Liability Coverage Enhancement Endorsement modified 
the insurance provided under the CGL.  The enhancement provided additional 
Ohio liability coverage as follows: 
{¶20} “COVERAGE D—OHIO LIABILITY COVERAGE 
{¶21} “1.  Insuring Agreement. 
{¶22} “We will pay those sums that the insured becomes legally 
obligated to pay as damages because of ‘bodily injury’ sustained by any employee 
of the insured arising out of or in the course of his or her employment by the 
insured, provided the employee is reported and declared under the Workers’ 
Compensation Fund of the State of Ohio. * * * The ‘bodily injury’ must be caused 
by an ‘occurrence.’ “ 
{¶23} The enhancement excludes coverage for: 
{¶24} “h.  ‘bodily injury’ expected or intended from the standpoint of the 
insured.  This exclusion includes but is not limited to: 
{¶25} “(1)  any liability for acts committed by or at the direction of an 
insured with the deliberate intent to injure; and 
{¶26} “(2)  any liability for acts committed by or at the direction of an 
insured in which the act is substantially certain to cause ‘bodily injury.’  For 
purposes of this insurance, an act is substantially certain to cause ‘bodily injury’ 
when all three of the following conditions are met:   
{¶27} “(a) an insured knows of the existence of a dangerous process, 
procedure, instrumentality or condition within its business operation; 
January Term, 2003 
7 
{¶28} “(b)  an insured knows that if an employee is subjected by his 
employment to such dangerous process, procedure, instrumentality or condition, 
then harm to the employee will be substantially certain; and  
{¶29} “(c) an insured under such circumstances and with such 
knowledge, does act to require the employee to continue to perform the dangerous 
task.”  (Emphasis added.) 
{¶30} When construing a general policy with an attached endorsement, 
we look at the contract in its entirety.  Burris v. Grange Mut. Cos. (1989), 46 
Ohio St.3d 84, 89, 545 N.E.2d 83, overruled on other grounds, Savoie v. Grange 
Mut. Ins. Co. (1993), 67 Ohio St.3d 500, 620 N.E.2d 809, paragraph one of the 
syllabus.  Therefore, we read the endorsement as if its terms were printed within 
the body of the general policy. 
a. 
Enhancement Endorsement 
{¶31} The plain language of the Ohio Liability Enhancement clearly 
excludes coverage for both direct-intent and substantial-certainty employer 
intentional torts.  The language in exclusion (h) mirrors the legal definition of a 
substantial-certainty intentional tort adopted from Section 8A of Restatement of 
the Law 2d, Torts (1965).  Fyffe v. Jeno’s, Inc. (1991), 59 Ohio St.3d 115, 118, 
570 N.E.2d 1108, paragraph one of the syllabus.  Consequently, the enhancement 
endorsement expressly excludes the coverage that Penn Traffic seeks. 
{¶32} Nevertheless, Penn Traffic makes an argument for coverage based 
upon the section titled “Who is an Insured.”  This section in the enhancement 
endorsement replaces the “Who is an Insured” section of the CGL policy.3   The 
                                          
 
3. 
{¶a} 
The section states: 
{¶b} 
 “Section II - WHO IS AN INSURED is deleted in its entirety and replaced by 
the following: 
{¶c} 
 “1.  If you are designated in the Declarations as: 
 
{¶d} 
 “ * * *  
 
{¶e} 
 “c. an organization other than a partnership or joint venture, you are an insured.  
Your executive officers and directors are insureds, but only with respect to liability to which this 
SUPREME COURT OF OHIO 
8 
enhancement endorsement names any corporation designated on the declarations 
page as the insured, including its officers, directors and stockholders, but unlike 
the CGL policy, the enhancement endorsement definition does not include 
employees of the corporation. 
{¶33} According to Penn Traffic, it was a corporate employee who 
caused Mrs. Ramsey’s injury.  Because the enhancement endorsement excludes 
coverage only for injuries expected or intended by an insured, Penn Traffic 
contends that the instant injury is not excluded from coverage because a corporate 
employee, by the enhancement’s own definition, is not an insured. 
{¶34} The appellate court rejected this argument, and so do we.  The 
Ramsey complaint was lodged against the corporate entity, Penn Traffic.  The 
enhancement excludes such claims against the insured, i.e., Penn Traffic.  The 
fact that employees are not included as insureds does not create coverage where it 
otherwise does not exist.  Therefore, the enhancement endorsement provides no 
coverage. 
 
b. 
CGL Policy 
{¶35} We find that, even if appellants are correct that the enhancement 
endorsement was not in effect at the time of Mrs. Ramsey’s injury, coverage for 
substantial-certainty intentional torts is still precluded under the CGL policy. 
{¶36} The appellate court resolved the question of coverage under the 
CGL policy based upon the policy exclusion for bodily injury to an employee of 
the insured “arising out of and in the course of employment by the insured.”  The 
appellate court determined that Mrs. Ramsey was performing her job when she 
was injured; thus, her injuries clearly occurred “in the course of employment,” 
and coverage was expressly excluded under the CGL policy. 
                                                                                                                   
insurance applies.  Your stockholders are also insureds, but only with respect to their liability as 
your stockholders.” 
January Term, 2003 
9 
{¶37} The Third District Court of Appeals reached the opposite 
conclusion in Maffett v. Moyer’s Auto Wrecking, Inc. (June 7, 2000), Crawford 
App. Nos. 3-99-11 and 3-99-12, 2000 WL 743707.  The Maffett court held that 
the exclusion did not apply because an employer intentional tort occurs outside 
the employment relationship.  Id. at * 5.  See Brady v. Safety-Kleen (1991), 61 
Ohio St.3d 624, 576 N.E.2d 722, paragraph one of the syllabus; Blankenship v. 
Cincinnati Milacron Chemicals, Inc. (1982), 69 Ohio St.2d 608, 23 O.O.3d 504, 
433 N.E.2d 572. 
{¶38} This exclusion gives rise to the certified conflict before us.  There 
is no dispute that Ramsey was working when she was injured.  Consequently, on 
its face, the CGL policy excludes coverage because Ramsey’s injuries clearly 
arose “in the course of employment.”  The issue before us is whether the 
reasoning of Blankenship recognizing a cause of action for an employer’s 
intentional tort applies to negate an express exclusion in an insurance contract.  
For the reasons that follow, we find that it does not. 
{¶39} In Blankenship v. Cincinnati Milacron Chemicals, Inc., 69 Ohio 
St.2d 608, 23 O.O.3d 504, 433 N.E.2d 572, this court determined that the 
immunity bestowed upon employers under Ohio’s workers’ compensation laws 
does not reach intentional torts committed by an employer.  The court reasoned 
that an employer’s intentional tort occurs outside the employment relationship.  
See, also, Brady v. Safety-Kleen, 61 Ohio St.3d 624, 576 N.E.2d 722, paragraph 
one of the syllabus.  But in Jones v. VIP Dev. Co. (1984), 15 Ohio St.3d 90, 15 
OBR 246, 472 N.E.2d 1046, this court clarified that an injured worker may both 
recover under the workers’ compensation system and pursue an action against his 
or her employer for intentional tort.  Therefore, an injury that is the product of an 
employer’s intentional tort is one that also “arises out of and in the course of” 
employment. 
SUPREME COURT OF OHIO 
10 
{¶40} Blankenship and Jones involve a common-law action for employer 
intentional tort as it relates to a workers’ compensation claim.  They do not 
involve analysis of the terms of a private insurance policy or the relationship 
between an employee and the employer’s liability insurer.  Although an employer 
intentional tort occurs outside the employment relationship for purposes of 
recognizing a common-law cause of action for intentional tort, the injury itself 
must arise out of or in the course of employment; otherwise, there can be no 
employer intentional tort. 
{¶41} For purposes of the employer’s insurance coverage, language in a 
CGL policy that excludes injuries that “arise out of or in the course of 
employment” merely means that the injury is causally related to one’s 
employment.  In this case, because Mrs. Ramsey’s injuries arose out of and in the 
course of her employment, they are expressly excluded from coverage under the 
CGL policy. 
{¶42} Consequently, we hold that a CGL insurance policy that contains 
an exclusion from coverage for bodily injury to an employee arising out of or in 
the course of employment does not provide coverage for an employer’s liability 
for substantial-certainty intentional torts. 
 
B. 
Federal Insurance Umbrella Policy 
{¶43} Federal Insurance issued an excess umbrella policy to Penn Traffic 
that included “Coverage A” and “Coverage B.”  Penn Traffic has abandoned its 
argument under Coverage B.  Therefore, only Coverage A, “Excess Follow Form 
Liability Over Claims Made or Occurrence Coverage,” remains at issue.  It 
provides: 
{¶44} “We will pay, on behalf of an insured, damages in excess of the 
total Limits of Liability of Underlying Insurance as stated in the Schedule of 
Underlying Insurance.  The terms and conditions of the Scheduled Underlying 
insurance are with respect to Coverage A made a part of this policy, except for: 
January Term, 2003 
11 
{¶45} “a.  any definition, term or condition therein relating to:  any duty 
to investigate and defend, the Limits of Liability, premium, cancellation, other 
insurance, our right to recover payment, Extended Reporting Periods, or 
{¶46} “b.  * * * 
{¶47} “ * * * 
{¶48} “With respect to all Scheduled Underlying Policies, the injury or 
damage must be caused by an occurrence * * *.”  (Boldface deleted.) 
{¶49} The policy defined “occurrence” as “with respect to bodily injury 
or property damage liability, an event, including continuous and repeated 
exposure to substantially the same general harmful conditions neither expected 
nor intended from the standpoint of the insured.”  (Boldface deleted.) 
{¶50} The trial court granted summary judgment to Federal.  The court 
concluded that “there is no genuine issue as to any material fact that Federal’s 
policy does not extend to bodily injury expected or intended from the standpoint 
of the insured, Penn Traffic; accordingly, it does not extend to an employer’s 
intentional tort.” 
{¶51} Applying the applicable law, the appellate court focused on the 
plain language of the policy.  The court concluded that Mrs. Ramsey’s fall was 
clearly an “event” as that term is used in the policy’s definition of occurrence, 
“unless it was caused by ‘continuous and repeated exposure to substantially the 
same general harmful conditions’ which were ‘expected or intended’ by Penn 
Traffic.” (Emphasis sic.)  Because this was not apparent from the record, the 
appellate court determined that there remained a genuine issue of material fact as 
to whether Mrs. Ramsey’s injuries were caused by “continuous and repeated 
exposure to substantially the same general harmful conditions neither expected 
nor intended from the standpoint of the insured.”  The court reversed the 
judgment and remanded the cause.  We agree. 
 
C. 
Conclusion 
SUPREME COURT OF OHIO 
12 
{¶52} We agree with the conclusions reached by the court of appeals that 
there is no coverage under the applicable CIC policies to Penn Traffic for 
substantial-certainty intentional torts.  As to Federal Insurance, there remains a 
genuine issue of material fact as to the existence of coverage under Federal’s 
umbrella policy.  Consequently, we affirm the judgment of the court of appeals. 
{¶53} We resolve the conflict certified to this court in accordance with 
the analysis of the court below.  We hold that a CGL insurance policy containing 
an exclusion from coverage for bodily injury to an employee arising out of or in 
the course of employment does not provide coverage for an employer’s liability 
for substantial-certainty intentional torts. 
Judgment affirmed. 
 
MOYER, C.J., F.E. SWEENEY, SLABY and LUNDBERG STRATTON, JJ., 
concur. 
 
RESNICK, J., concurs in judgment. 
 
PFEIFER, J., concurs in part and dissents in part. 
 
LYNN C. SLABY, J., of the Ninth Appellate District, sitting for COOK, J. 
__________________ 
 
PFEIFER, J., concurring in part and dissenting in part. 
{¶54} I concur with the bulk of the majority opinion.  I write separately 
because I disagree with the majority’s determination that the Stop-Gap 
Employer’s Liability Coverage (“stopgap policy”) was not in effect, apparently  
as a matter of law. 
{¶55} The issue of whether the stopgap policy provides coverage in this 
case was not decided by the trial court.  The trial court apparently presumed that 
the stopgap policy was in effect and determined as a matter of law that Ramsey’s 
injury was not covered by the stopgap policy.  The court of appeals affirmed that 
determination, without reaching the issue of whether the stopgap policy was in 
effect at the time of Ramsey’s injury. 
January Term, 2003 
13 
{¶56} The parties disagree about which policy was in effect at the time of 
Ramsey’s injury.  The majority states: 
{¶57} “According to CIC, this CGL [commercial general liability] policy 
and the liability enhancement endorsement were in effect at the time Mrs. Ramsey 
was injured. 
{¶58} “Penn Traffic, however, contends that it had no knowledge of and 
did not consent to deletion of the stopgap form and issuance of the liability 
enhancement endorsement.” 
{¶59} Whether the stopgap policy was in effect at the time of the injury, a 
question of fact, was not ruled on by the trial court or the court of appeals and was 
neither briefed nor argued to this court.  Accordingly, I would remand that issue 
to the trial court. 
__________________ 
 
Robert P. Rutter; Lamkin, Van Eman, Trimble, Beals & Rourke and 
Kenneth Blumenthal, for appellants and cross-appellees, Penn Traffic and 
Virginia S. and Marlin K. Ramsey. 
 
Roetzel & Andress, Laura M. Faust, Kevin J. Osterkamp and Alisa Labut 
Wright, for appellee and cross-appellant Cincinnati Insurance Company. 
 
Gallagher, Sharp, Fulton & Norman, D. John Travis and Gary L. 
Nicholson, for appellee and cross-appellant Federal Insurance Company. 
Daniel J. Kelso, urging affirmance for amicus curiae Ohio Insurance 
Institute. 
 
Murray & Murray Co., L.P.A., Steven C. Bechtel, W. Patrick Murray and 
Dennis E. Murray Sr., urging reversal for amicus curiae Ohio Academy of Trial 
Lawyers. 
__________________