- Public Policy Does Not Bar Insurance Coverage For Plaintiff's Attorney's Fees
- May 14, 2010 | Author: Laura (Megan) Faust
- Law Firm: Roetzel & Andress A Legal Professional Association - Akron Office
On May 4, 2010, the Supreme Court of Ohio ruled that an award of attorney's fees in a civil lawsuit is distinct from an award of punitive damages, and the public policy of the state does not prevent an insurance policy from providing coverage for attorney's fees when they are awarded solely as a result of an award for punitive damages. (2009-0325. Neal-Pettit v. Lahman, slip opinion No. 2010-Ohio-1829.)
The matter was on appeal from a decision from the Cuyahoga County Court off Appeals, Eighth District, (Case No. 91551, 2008-Ohio-6653). In the Court of Appeals Decision, Neal-Pettit was injured in a 2003 motor vehicle accident when her vehicle was struck by Lahman. Lahman was driving while intoxicated and fleeing the scene of an earlier collision. Neal-Pettit sued Lahman for damages arising from her injuries. A jury awarded Neal-Pettit compensatory damages of $113,800 and an additional $75,000 in punitive damages. Based upon a finding that Lahman had acted "with malice" in causing Neal-Pettit's injuries, the jury also awarded Neal-Pettit attorney's fees that the Court later set at $46,825 along with an additional sum for litigation expenses. Lahman's insurance company, Allstate, paid Neal-Pettit the amounts awarded as compensatory damages, interest and expenses, but denied any coverage under its policy for either the punitive damages or attorney's fees.
Neal-Pettit filed suit against Allstate in the Cuyahoga County Court of Common Pleas, seeking payment for the attorney fee portion of the jury verdict. The Trial Court granted summary judgment in favor of Neal-Pettit. Allstate appealed, arguing that it had not contracted to pay attorney's fees and that an attorney fee award is an element of punitive damages, which public policy prevents an insurer from covering. The Eighth District Court of Appeals affirmed the Trial Court's decision, holding that attorney fees are "conceptually distinct" from punitive damages in that attorney fees were not expressly excluded from coverage by the language of the Allstate policy issued to Lahman. Allstate sought and was granted Supreme Court review of the Eighth District's Decision.
In the May 4th Decision, Justice Lanzinger affirmed the Eighth District's Decision and rejected Allstate's argument that the attorney fee award is an element of the jury's award of punitive damages. Justice Lanzinger wrote: "[T]he fact that the awards have similar bases is irrelevant. We have recognized that attorney-fee awards and punitive-damages awards are distinct: 'in an action to recover damages for a tort which involves the ingredients of fraud, malice, or insult, a jury may go beyond the rule of mere compensation to the party aggrieve, and award exemplary or punitive damages...in such a case, the jury may, in their estimate of compensatory damages, take into consideration and include reasonable fees of counsel employed by the plaintiff in the prosecution of his action.'" Quoting Roberts v. Mason (1859).
Allstate argued that the exclusion in their policy for "punitive or exemplary damages, fines or penalties" included the attorney's fees or litigation expenses. In response, Justice Lanzinger wrote: "[T]he exclusion does not refer in any way to attorney's fees or litigation expenses. It specifically mentions only punitive or exemplary damages, which, as we have discussed, are conceptually distinct from attorney's fees. Therefore, the term 'punitive or exemplary damages' does not clearly and unambiguously encompass an award of attorney's fees. We decline to read such language into the contract. We instead construe the policy strictly against the insurer...Allstate, as the drafter, is responsible for ensuring that the policy states clearly what it does and does not cover."
The Court also rejected Allstate's claim that it would be against public policy for an insurer to pay attorney fees on behalf of the policyholder when those fees are awarded solely as a result of a punitive damages award. The Court noted "it is true that public policy prevents insurance contracts from insuring against claims for punitive damages based upon an insured's malicious conduct....In addition, R.C. 3937.182(B) prohibits insurance coverage of punitive damages: 'no policy of automobile or motor vehicle insurance...shall provide coverage for judgments or claims against an insured for punitive or exemplary damages.' But R.C. 3937.182(B) mentions only punitive and exemplary damages, not attorney's fees. The General Assembly chose not to mention attorney's fees when it drafted the statute, and we decline to add them...Our holding will not encourage wrongful behavior merely because it permits insurers to cover attorney's fees for which tortfeasors become liable. The tortfeasors remain liable for punitive damages awarded for their malicious actions, and these punitive damages remain uninsurable. Payment by the insurer of an attorney-fee award violates neither public policy nor R.C. 3937.182(B)."