Case Name: Griffey, Appellee, v. Rajan, Appellant
Court: Supreme Court of Ohio
Jurisdiction: Ohio
Decision Date: 1987-11-10
Citations: 33 Ohio St. 3d 75
Docket Number: No. 86-1917
Parties: Griffey, Appellee, v. Rajan, Appellant.
Judges: Sweeney and Douglas, JJ., concur.
Reporter: Ohio State Reports, Third Service
Volume: 33
Pages: 75–86

Head Matter:
Griffey, Appellee, v. Rajan, Appellant.
[Cite as Griffey v. Rajan (1987), 33 Ohio St. 3d 75.]
(No. 86-1917
Decided November 10, 1987.)
Inscore, Rinehardt, Whitney & Enderle, Larry L. Inscore and Michael L. Inscore, for appellee.
Jacobson, Maynard, Tuschman & Kalur Co., L.P.A., Matthew Moriarty, Janis L. Small, Brown, Bemiller, Murray & McIntyre and William Travis McIntyre, for appellant.

Opinion:
Herbert R. Brown, J.
A motion for relief from judgment under Civ. R. 60(B) is addressed to the sound discretion of the trial court, and that court's ruling will not be disturbed on appeal absent a showing of abuse of discretion. See, e.g., Moore v. Emmanuel Family Training Ctr. (1985), 18 Ohio St. 3d 64, 66, 18 OBR 96, 98, 479 N.E. 2d 879, 882; Colley v. Bazell (1980), 64 Ohio St. 2d 243, 18 O.O. 3d 442, 416 N.E. 2d 605; Doddridge v. Fitzpatrick (1978), 53 Ohio St. 2d 9, 11, 7 O.O. 3d 5, 6, 371 N.E. 2d 214, 216; GTE Automatic Electric v. ARC Industries (1976), 47 Ohio St. 2d 146, 1 O.O. 3d 86, 351 N.E. 2d 113. With that narrow standard of review in mind,, this case requires us to resolve the following issues: (1) whether the conduct of P.I.E. is imputable to appellant; (2) whether the conduct of appellant and/or P.I.E. amounted to inexcusable neglect; and (3) whether appellee committed misrepresentation by failing to disclose her receipt of workers' compensation benefits to the trial court? For the following reasons, we affirm the judgment of the court of appeals.
I
In GTE, supra, we held that "the neglect of a party's attorney will be imputed to the party for purposes of Civ. R. 60(B)(1)." Id. at paragraph four of the syllabus. In GTE, the defendant was served with a complaint, which it turned over to its attorney. The attorney failed to plead or otherwise defend, and, thirty-four days after service, a default judgment was taken. The trial court granted the defendant's subsequent Civ. R. 60(B)(1) motion for relief from the judgment, finding that the neglect of the attorney was not imputable to the defendant. We disagreed, adopting the reasoning espoused by the United States Supreme Court in Link v. Wabash RR. Co. (1962), 370 U.S. 626, 633-634 and 634, fn. 10:
" 'There is certainly no merit to the contention that dismissal of petitioner's claim because of his counsel's unexcused conduct imposes an unjust penalty on the client. Petitioner voluntarily chose this attorney as his representative in the action, and he cannot now avoid the consequences of the acts or omissions of this freely selected agent. Any other notion would be wholly inconsistent with our system of representative litigation, in which each party is deemed bound by the acts of his lawyer-agent .
" ' pqeeping this suit alive merely because [defendant] should not be penalized for the omissions of his own attorney would be visiting the sins of [defendant's] lawyer upon the [plaintiff].' " (Emphasis added.) GTE, supra, at 152, 1 O.O. 3d at 89-90, 351 N.E. 2d at 117. See, also, Moore, supra, at 68, 18 OBR at 99-100, 479 N.E. 2d at 883-884; Argo Plastic Products Co. v. Cleveland (1984), 15 Ohio St. 3d 389, 15 OBR 505, 474 N.E. 2d 328, syllabus.
We believe the GTE rule should apply to the cause sub judice. Appellant chose P.I.E. as his malpractice insurance carrier and notified it of the lawsuit pending against him, with the understanding that P.I.E. would provide him with a defense to that suit. Appellee should not be made to suffer for P.I.E.'s neglect, when it was appellant who contracted with P.I.E. and brought P.I.E. into the case.
Appellant contends that he should not be responsible for P.I.E.'s neglect because P.I.E. was not his agent. Appellant reasons that no agency existed here because, he had no right of control over P.I.E. See Ross v. Burgan (1955), 163 Ohio St. 211, 219, 56 O.O. 218, 221, 126 N.E. 2d 592, 596, 50 A.L.R. 2d 1275, 1280. While appellant's argument has a superficial appeal, we resist the temptation to let our determination of whether P.I.E.'s neglect is imputable to appellant rest upon a mechanical labeling of the relationship between an insurer and its insured.
Although the courts are divided on the issue, there is a wealth of authority from outside Ohio supporting the imputation of an insurance company's neglect in defending a lawsuit to its insured. See, e.g., Stevens v. Gulf Oil Corp. (1971), 108 R.I. 209, 274 A. 2d 163; Stevens v. Childers (1952), 236 N.C. 348, 72 S.E. 2d 849; Leslie v. Spencer (1935), 170 Okla. 642, 42 P. 2d 119; Chmielewski v. Marich (1954), 2 Ill. 2d 568, 119 N.E. 2d 247, 42 A.L.R. 2d 1023. In Ward v. Cook United, Inc. (Mo. App. 1975), 521 S.W. 2d 461, 473, the court persuasively reasoned:
"Reason and logic render impossible the acceptance of any real distinction between the inexcusable neglect of a lawyer (held in Missouri to be imputable to his client) and the inexcusable neglect of a claims manager and attorney for the defendant's insurer. Both occupy a contractual relationship with the client, the prime purpose of which is to handle the litigation within the framework of judicial proceedings. But even of more significant force is that by undertaking such responsibilities they also assume an obligation to third parties interested in the matter and to the courts administering and judicially determining the controversy."
We agree. Therefore, we hold that for purposes of a Civ. R. 60(B)(1) motion for relief from a default judgment on the grounds of excusable neglect, the neglect of a defendant's insurance company in failing to file an answer or other responsive pleading to a complaint against defendant is imputable to the defendant.
II
Because we hold that an insurance company's neglect in failing to file an answer or other responsive pleading is imputable to its insured, it follows that the conduct of the insurance company and the conduct of the insured must be examined together to determine whether excusable or inexcusable neglect has occurred. See GTE, supra, at 153, 1 O.O. 3d at 90, 351 N.E. 2d at 117.
We make this examination in light of our holding in Colley v. Bazell, supra. In Colley, the defendant, an attorney, was served with a complaint which he forwarded to his insurance agent within two days. Four days later, the insurance agent sent the complaint to the broker for the defendant's insurance carrier, who mailed the complaint to the carrier within nine more days. Apparently due to a delay in the mails, the complaint did not reach the insurance carrier until nineteen days after it was sent — on the same day that a default judgment was taken against the defendant. The trial court overruled the defendant's Civ. R. 60(B)(1) motion, holding that the defendant should have independently taken steps to ensure that a responsive pleading was filed by the answer day. We disagreed, and stated:
"In our view, the concept of 'excusable neglect' must be construed in keeping with the proposition that Civ. R. 60(B)(1) is a remedial rule to be liberally construed, while bearing in mind that Civ. R. 60(B) constitutes an attempt to 'strike a proper balance between the conflicting principles that litigation must be brought to an end and justice should be done.' 11 Wright & Miller, Federal Practice & Procedure 140, Section 2851, quoted in Doddridge v. Fitzpatrick (1978), 53 Ohio St. 2d 9, 12. We note that the default judgment was granted within a week of the defendant's failure to file a timely answer or a responsive pleading. Under these circumstances, the inaction of the defendant had not ripened to the point where it could be labeled as a 'complete disregard for the judicial system' as condemned in GTE Automatic Electric, supra, at page 153." (Emphasis added.) Id. at 248, 18 O.O. 3d at 445, 416 N.E. 2d at 609.
In Colley we held that the determination of whether excusable or inexcusable neglect had occurred "must of necessity take into consideration all the surrounding facts and circumstances." Id. at 249, 18 O.O. 3d at 445, 416 N.E. 2d at 609. Although we are committed to the principle that Ohio courts should strive to decide cases upon their merits rather than upon procedural grounds, see, e.g., National Mut. Ins. Co. v. Papenhagen (1987), 30 Ohio St. 3d 14, 30 OBR 21, 505 N.E. 2d 980, and DeHart v. Aetna Life Ins. Co. (1982), 69 Ohio St. 2d 189, 23 O.O. 3d 210, 431 N.E. 2d 644, we refuse to let Civ. R. 60(B) serve as an emasculation of the pleading rules and time limits. The neglect in this case goes well beyond that in Colley.
In the case sub judice, fully fifty-one days passed between the answer day and the day appellee moved for a default judgment. Appellant's attempt to exonerate himself by claiming his duty was discharged upon notifying P.I.E. of the lawsuit against him is thwarted by Colley, supra, wherein we cautioned that "even though a defendant has promptly notified an insurance company of the filing of the lawsuit, his neglect in failing to independently determine whether an answer has been filed on his behalf may well change from 'excusable' to 'inexcusable' upon the passage of time, without regard to the one year provision regulating the timeliness of the motion." (Emphasis added.) Id at 249, 18 O.O. 3d at 446, 416 N.E. 2d at 609, fn. 4.
Appellant further argues that P.I.E. 's failure to respond to appellee's complaint was due to a "breakdown in routine channels of communication." Such wordage is more an admission of neglect than an excuse for it. A carrier who contracts to provide a defense should equip itself to file a responsive pleading when notified of a suit which falls within its coverage. We are not prepared to say that the trial court abused its discretion in finding that P.I.E.'s failure to make any response on behalf of appellant constituted inexcusable neglect. A disregard for the judicial system and the right of appellee does not necessarily mean an intentional disregard.
Accordingly, we hold that a trial court does not abuse its discretion in overruling a Civ. R. 60(B)(1) motion for relief from a default judgment, on the grounds of excusable neglect, if it is evident from all of the facts and circumstances in the case that the conduct of the defendant, combined with the conduct of those persons whose conduct is imputable to the defendant, exhibited a disregard for the judicial system and the rights of the plaintiff.
Ill
We now turn to an examination of whether appellee committed misrepresentation of her recoverable damages by failing to disclose her receipt of workers' compensation benefits to the trial court.
Appellee concedes that she failed to disclose her receipt of workers' compensation benefits, but claims that such failure did not amount to misrepresentation because (1) it is an "open question" whether workers' compensation benefits constitute "other collateral recovery," under R.C. 2305.27, and (2) the constitutionality of R.C. 2305.27 and 2307.42 is unclear. We agree that no misrepresentation occurred.
In Simon v. St. Elizabeth Medical Center (C.P. 1976), 3 O.O. 3d 164, 355 N.E. 2d 903, and Graley v. Satayatham (C.P. 1975), 74 O.O. 2d 316, 343 N.E. 2d 832, the Courts of Common Pleas for Montgomery and Cuyahoga Counties, held that (1) R.C. 2307.42 is invalid under Section 5(B), Article IV of the Ohio Constitution because it conflicts with the Ohio Rules of Civil Procedure, and (2) R.C. 2305.27 and 2307.42 are invalid as violative of the Equal Protection Clause, except as applied to claims against the state of Ohio. However, in Holaday v. Bethesda Hosp. (1986), 29 Ohio App. 3d 347, 29 OBR 475, 505 N.E. 2d 1003, the Court of Appeals for Hamilton County, faced with a different type of equal protection argument, held that "R.C. 2305.27 represents a rational response by the General Assembly to a compelling state interest in the malpractice crisis and is therefore constitutional." Id. at 349, 29 OBR at 478, 505 N.E. 2d 1006.
The constitutional issues and the question of whether workers' compensation benefits constitute "other collateral recovery" under R.C. 2305.27 are not properly before us. Suffice it to say that the questionable status of R.C. 2305.27 and 2307.42, as evidenced by the decisions of the lower Ohio courts, mandates the conclusion that appellee did not misrepresent her recoverable damages.
For the foregoing reasons, the judgment of the court of appeals is affirmed.
Judgment affirmed.
Sweeney and Douglas, JJ., concur.
Moyer, C.J., concurs in the syllabus and judgment only.
Locher and Wright, JJ., dissent with opinion.
Holmes, J., dissents.
See Maxman v. Farmers Ins. Exchange (1978), 85 Mich. App. 115, 122, 270 N.W. 2d 534, 536, fn. 3, wherein the court states:
" On balance, we believe that the courts have resorted to calling this relationship agency almost by default. There is no other term in the law which can accurately describe the relationship. Because there is a void in this area, courts have resorted to calling the relationship agency and have applied agency rules."
See, also, 7C Appleman, Insurance Law and Practice (1979) 6, Section 4681, wherein the author states:
"It was early stated that an insurer which elected to exercise its right to conduct the defense was not regarded as being an agent of the insured, but was rather in the position of an independent contractor. But the more modern rule is that under such a policy provision the insurer becomes the agent of the insured."
The author cautions, however, that:
" [T]he relationship is more complex than will fit precisely into one of the neat niches of the law, partaking in part of an agency relationship, in part of that of an independent contractor, in many respects that of a fiduciary." Id. at 6, fn. 16.
We emphasize that the cause sub judice is between appellant and appellee, not between appellant and P.I.E. Therefore, we express no opinion as to where, as between appellant and P.I.E., the fault lies.
R.C. 2307.42 provided, in part:
"Any complaint or other pleading which sets forth a medical claim, as defined in division (D) of section 2305.11 of the Revised Code, shall contain the following: a
"(B) A listing of all benefits of any kind paid or payable to the claimant from any source other than the claimant's own assets or assets of the claimant's immediate family as a result of the incident or occurrence forming the basis of the medical claim." (Emphasis added.)
In a similar vein, R.C. 2305.27 states, in part:
"Except as provided in section 2743.02 of the Revised Code, in any medical claim, as defined in division (D) of section 2305.11 of the Revised Code, an award of damages shall not be reduced by insurance proceeds or payments or other benefits paid under any insurance policy or contract where the premium or cost of such insurance policy or contract was paid either by or for the person who has obtained the award, or by his employer, or both, or by direct payments from his employer, but shall be reduced by any other collateral recovery for medical and hospital care, custodial care or rehabilitation services, and loss of earned income. (Emphasis added.)
R.C. 2307.42 has been amended; the new provisions took effect on October 20, 1987.