COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 68624 : SOCIETY NATIONAL BANK : : JOURNAL ENTRY Plaintiff-Appellant : : and -vs- : : OPINION : NATIONAL UNION FIRE INSURANCE : COMPANY OF PITTSBURGH, PA., ET AL.: : Defendants-Appellees : : DATE OF ANNOUNCEMENT DECEMBER 20, 1995 OF DECISION: CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court Case No. 254326 JUDGMENT: Affirmed. DATE OF JOURNALIZATION: __________________________ APPEARANCES: For Plaintiff-Appellant: For Defendant-Appellee National Union Fire Ins.: DANIEL R. WARREN, ESQ. STEPHEN J. TEETOR, ESQ. ROBERT F. WARE, ESQ. JAMES H. LEDMAN, ESQ. Thompson, Hine and Flory Isaac, Brant, Ledman & Teetor 1100 National City Bank Bldg. 250 E. Broad St. 629 Euclid Avenue Columbus, Ohio 43215 Cleveland, Ohio 44114 For Defendant-Appellee Cincinnati Insurance Co.: PAUL D. EKLUND, ESQ., Davis & Young, L.P.A., 1700 Midland Bldg., Cleveland, Ohio 43215 - 2 - PATRICIA ANN BLACKMON, J.: Plaintiff-appellant, Society National Bank, appeals a decision from the trial court granting summary judgments in favor of defendants-appellees National Union Fire Insurance Company of Pittsburgh, PA and Cincinnati Insurance Company. Society assigns three errors for our review: I. THE TRIAL COURT ERRED IN GRANTING THE MOTION OF NATIONAL UNION FIRE INSURANCE COMPANY OF PITTSBURGH, PA ("NATIONAL UNION") FOR SUMMARY JUDGMENT BECAUSE NATIONAL UNION HAD A CONTRACTUAL DUTY TO INDEMNIFY SOCIETY NATIONAL BANK ("SOCIETY"), AS SUCCESSOR-IN-INTEREST TO AMERITRUST COMPANY, NATIONAL ASSOCIATION ("AMERITRUST"), FOR THE AMOUNT PAID IN SETTLEMENT OF THE KACHELE FEDERAL LAWSUIT. II. THE TRIAL COURT IMPROPERLY DENIED SOCIETY'S MOTION FOR SUMMARY JUDGMENT AS TO THE LIABILITY OF NATIONAL UNION BECAUSE THE CLAIMS IN THE KACHELE FEDERAL LAWSUIT WERE COVERED UNDER EITHER THE STOP-GAP ENDORSEMENT, COVERAGE A, OR COVERAGE B OF NATIONAL UNION'S POLICY OF INSURANCE. III. THE TRIAL COURT ERRED IN DENYING SOCIETY'S MOTION FOR SUMMARY JUDGMENT AND IN GRANTING THE MOTION FOR SUMMARY JUDGMENT OF DEFENDANT THE CINCINNATI INSURANCE COMPANY ("CINCINNATI") BECAUSE CINCINNATI, AS THE EXCESS INSURER, HAD A DUTY TO INDEMNIFY SOCIETY FOR THE AMOUNT PAID IN SETTLEMENT OF THE KACHELE FEDERAL LAWSUIT TO THE EXTENT THAT NATIONAL UNION WAS NOT SO OBLIGATED. After reviewing the record and the arguments of the parties, we affirm the decision of the trial court. The apposite facts follow. On November 2, 1990, Janine Kachele, a former security guard at Ameritrust Bank, filed a lawsuit in federal district court against Ameritrust Company and her supervisor, Michael Crawford. In her complaint, Kachele alleged Crawford sexually harassed, - 3 - assaulted, and battered her in 1989. She also brought claims of negligent hiring/promotion, and breach of duty to provide a safe 1 work environment against Ameritrust. Finally, she asserted claims of intentional and/or negligent infliction of emotional distress, and invasion of privacy against Crawford and Ameritrust. Kachele claimed to have suffered emotional distress, mental pain, humiliation, embarrassment, apprehension of physical harm, post-traumatic stress disorder, depression, nausea, vomiting, severe headaches, abdominal pains, trembling, and high blood pressure. Ameritrust had a commercial general liability policy with National Union Fire Insurance Company (National Union) and a commercial umbrella liability policy with Cincinnati Insurance. On November 8, 1990, Ameritrust notified National Union and Cincinnati Insurance and asked National Union to provide a defense of the action. On December 5, 1990, Cincinnati Insurance informed Ameritrust that it "will not presently become involved in the defense of this suit as that is the responsibility of your primary carrier." On July 29, 1991, National Union also declined to defend either Ameritrust or Crawford. However, on October 22, 1991, National Union hired counsel to help defend the Kachele action. Shortly thereafter, Ameritrust told National Union of its intent to settle the case for $475,000. In a letter dated November 7, 1991, 1 Kachele's claim of failure to provide a safe work environment was added on October 22, 1991 via an amended complaint. - 4 - National Union expressed its belief that the likely value of Kachele's claims was dramatically less than $475,000. Nevertheless, National Union agreed to pay $50,000 toward the settlement. On November 19, 1991, Ameritrust informed National Union and Cincinnati Insurance that it had settled the Kachele case for $475,000. In the letter, Ameritrust requested indemnification for the settlement amount. Both companies refused. On June 25, 1993, Society, as successor in interest of Ameritrust, filed a complaint against National Union and Cincinnati Insurance alleging breach of the insurance contracts and seeking $425,000 plus $52,455.57 in defense costs and attorney's fees. Society argued National Union breached its agreement under the policy to defend Ameritrust against any suit seeking covered damages. The complaint also alleged that National Union breached its agreement to pay "those sums that the insured becomes legally obligated to pay as damages because of 'bodily injury' or 'property damage' as well as its agreement to pay those sums that Ameritrust becomes obligated to pay as damages due to "personal injury" or "advertising injury." Society also asserted that Kachele's claims were covered by the stop-gap provision of the policy which provided that if an Ameritrust employee was injured in the course of his employment but not entitled to receive Workers' Compensation benefits, then the National Union policy would cover Ameritrust's legal liability for the bodily injury, disease, or death of the employee. - 5 - In addition to its claims against National Union, Society claimed that Cincinnati Insurance breached its agreement as secondary insurer to pay losses in excess of the underlying insurance or for occurrences excluded or not covered by the underlying National Union policy. According to Society, Cincinnati also breached its agreement that "if there is no underlying insurer obligated to do so, we shall have the right and duty to defend any suit against the insured" seeking damages for personal injury. In its answer, Cincinnati Insurance claimed that it had no duty to indemnify Ameritrust because the policy specifically excluded "any liability for personal injury arising out of discrimination including fines and penalties imposed by law if insurance coverage therefore is prohibited by law or statute or committed by or at your direction" as well as personal injury liability to employees arising out of and in the course of their employment by Ameritrust. Cincinnati Insurance filed a cross claim against National Union seeking to recover its costs incurred due to National Union's refusal to defend Ameritrust and indemnification for any judgment in favor of Society on Society's claim against Cincinnati Insurance for defense costs. On July 21, 1994, Society moved for summary judgment. On the same day, Cincinnati Insurance filed its motion for summary judgment alleging that it had no liability as secondary insurer to pay the Kachele settlement because Kachele's claims were covered by the stop gap provision of the National Union primary policy. - 6 - Cincinnati Insurance also argued that Kachele's claims were excluded by policy exclusions denying coverage for "personal injury arising out of discrimination with respect to the employment of or failure to employ any person" and "personal injury liability to any employee of the Insured arising out of and in the course of his employment by the Insured." In a motion for summary judgment filed on July 22, 1994, National Union argued that it had no duty to defend Ameritrust against Kachele because the agreement between the parties was that National Union should "have the right but not the duty to defend." National Union also argued that it never refused to honor its agreement to indemnify Ameritrust but merely asserted that some of Kachele's claims were not covered by the policy. National Union also claimed that Ameritrust's settlement with Kachele was a voluntary payment made without National Union's consent for which National Union could not be sued. In support of their argument, they cited policy provisions authorizing an insured to sue National Union only for an agreed settlement or a final judgment obtained after a trial. An agreed settlement was defined as a settlement signed by National Union, the insured or the insured's representative. In an order journalized February 3, 1995, the trial court granted summary judgment in favor of National Union and Cincinnati Insurance. Society's motion for summary judgment was denied. This appeal followed. In its first assignment of error, Society argues that National - 7 - Union had a contractual duty to indemnify Ameritrust for the amount of the Kachele settlement. According to Society, this duty arose under Section I, Coverage A, Paragraph 1(a) of the policy of insurance which read: We will 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. National Union argues that Ameritrust's voluntary settlement of Kachele's claim without its consent relieved National Union of its duty to reimburse Ameritrust for the amount of the settlement. In support of its argument, National Union cites the following policy provisions: No insureds will, except at their own cost, voluntarily make a payment, assume any obligation, or incur any expense, other than for first aid, without our consent. Section IV, Paragraph 2(d). A person or organization may sue us to recover on an agreed settlement *** but we will not be liable for damages that are not payable under the terms of the applicable limit of insurance. An agreed settlement means a settlement and release of liability signed by us, the insured and the claimant or the claimant's legal representative. Section IV, Paragraph 3(b). National Union argued below that, pursuant to the above cited provisions, Ameritrust's voluntary settlement of Kachele's claim without National Union's consent made it impossible for Ameritrust to sue to recover on the settlement. Ameritrust argues that National Union waived its right to - 8 - consent to the settlement by refusing Ameritrust's request to provide them with a defense to the action. According to Society, the contract of insurance imposed upon National Union a duty to defend Ameritrust against Kachele's action. Section I, Coverage A, Paragraph 1(a) provides that National Union "will have the right and duty to defend" any suit seeking damages for bodily injury or property damage. National Union argues that its duty to defend was modified by Endorsement #3 to the policy (effective 7/1/88) which provided "[w]e shall have the right but not the duty to participate with you at our own expense in the defense or settlement of any claim or suit seeking damages covered under this policy." Or review of the applicable provisions reveals that National Union was not under a duty to participate in the defense or settlement of the Kachele litigation. Under the clear language of Endorsement #3, National Union had the option of whether to participate in the litigation. National Union decided to hire counsel to investigate the case. After concluding its investiga- tion, National Union declined to defend either Ameritrust or Michael Crawford in the Kachele litigation. (See Peduto Depo. Exh. 30) National Union advised Ameritrust of its intentions in a letter dated November 7, 1991 which read, in part, as follows: [W]ithout prejudice to our position, National Union is willing to contribute $50,000.00 at this time toward settlement. This offer is open unless and until revoked in a letter to Ameritrust and is offered with the understanding that it resolves all claims arising out of this incident and lawsuits. - 9 - This will also confirm that you did not request contribution from National Union toward settlement until October 24, 1991. While you earlier said you felt the case should settle for approximately $700,000.00, you have now indicated your intent to settle for $475,000. National Union believes that is dramatically more than the likely value of the plaintiff's claims, but since all of the potentially valid claims are not within the coverage terms of your policy, it is certainly within your discretion to settle with Ameritrust funds as you see fit. With this letter, National Union clearly communicated its opinion that it did not agree with the $475,000 settlement amount. Peduto testified in his deposition that National Union felt only the invasion of privacy claim was arguably covered and that he valued Kachele's claims at less than $100,000. (Peduto Dep. 163). Ameritrust's subsequent decision to enter into a settlement agreement with Kachele without National Union's consent meant that Ameritrust could not sue to recover on the settlement. See Section IV, Paragraph 3(b). Because we find no genuine issue of material fact about whether National Union was liable to Ameritrust for the amount of the settlement, we overrule Society's first assignment of error. In its second assignment of error, Society argues the Kachele claims were covered under either Endorsement #14 (the stop-gap endorsement), Coverage A, or Coverage B of the insurance policy. Our review of the record indicates admissions by National Insurance that at least some of Kachele's claims were covered under the policy. In their July 29, 1991 letter to Ameritrust, National - 10 - wrote: [W]e agree that there may be coverage under Coverage B -- Personal and Advertising Injury Liability for some of the plaintiff's claims against Ameritrust***. [T]o the extent that the plaintiff alleges that such negligence on the part of Ameritrust resulted in damages to her for "personal injuries," some of the plaintiff's claims may be covered. In that regard we note especially the allegations of the complaint concerning invasion of plaintiff's right to privacy (Fourth Claim for Relief); such damages as may be awarded the plaintiff against Ameritrust under the Fourth Claim for Relief may well be covered under the personal injury coverage available to Ameritrust. [W]e do not mean to foreclose further discussion of issues involving potential coverage of Ameritrust's liability to the plaintiff. As evidenced by the above letter, there is no indication that National ever denied coverage for Kachele's claims. Also, the coverage provisions became irrelevant once Ameritrust settled the case because the insurance policy contained specific provisions relevant to suits against the insurance company to recover amounts paid in settlement of claims. Society's second assignment of error is overruled. In its third assignment of error, Society argues that Cincinnati Insurance had a duty to indemnify Society as successor in interest of Ameritrust for the Kachele settlement. Cincinnati Insurance's policy specified that Cincinnati Insurance would pay "the ultimate net loss for occurrences during the policy period in excess of the underlying insurance or for occurrences covered by - 11 - this policy which are either excluded or not covered by underlying insurance because of personal injury, property damage or adver- tising liability anywhere in the world." The National Union policy limits covered up to $1 million in damages. Ameritrust's liability on the Kachele claim was only $417,930.57, well within the policy limits of the National Union insurance policy. Consequently, Ameritrust did not sustain any losses "in excess of the underlying insurance" so as to trigger Cincinnati Insurance's liability under that provision. As discussed in our evaluation of Society's first assignment of error, some of Kachele's claims were at least arguably covered by the National Union policy. Though Cincinnati Insurance's policy may have covered those claims deemed not covered by the National Union policy, the settlement of the case has rendered it impossible to apportion the amount of damages attributable to such claims. Accordingly, Cincinnati Insurance has no liability under its policy with National Union. Society's third assignment of error is without merit. Judgment affirmed. - 12 - It is ordered that Appellees recover of Appellant their costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. JAMES D. SWEENEY, P.J., and O'DONNELL, J., CONCUR. PATRICIA ANN BLACKMON JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journaliza- .