Posted In: Insurance Recovery
By Christopher J. Carney on May 14, 2019
The Sixth Circuit Court of Appeals recently held that the sexual assault claims of three women against an independent dealer of vacuum cleaners constituted a single occurrence for insurance purposes because the company was negligent in hiring and supervising the independent dealer. The Scott Fetzer Company v. Zurich American Insurance Company, 2019 BL 154148 (6th Cir., No. 18-3057, unpublished April 30, 2019). As a result, Scott Fetzer was required only to satisfy a single deductible under its liability policies with Zurich before the insurance company was required to pay three separate settlements of the women’s claims.
Here are the facts.
The women claimed that The Kirby Company, a subsidiary of The Scott Fetzer Company, was negligent in hiring and supervising John Fields as an independent field representative. According to the women’s complaint, Fields had a long history as a direct employee and independent contractor for The Kirby Company despite the fact that he had committed a number of crimes, including forcible rape, domestic violence, unlawful imprisonment, and assault. In their complaint, the three women alleged multiple instances of verbal abuse and harassment, inappropriate touching, forced sexual acts, and rape. Without admitting any liability, Scott Fetzer entered into settlements with each of the three women.
After settling, Scott Fetzer requested reimbursement from Zurich under two general insurance policies that required Zurich to pay $2 million per occurrence of bodily injury, after Scott Fetzer paid the first $1 million for each occurrence. One of the three settlements exceeded the $1 million deductible, and Zurich paid the excess. Zurich, however, refused to pay anything on the other two settlement agreements, arguing that Fields’ actions against each woman were separate occurrences and that Scott Fetzer was responsible for paying three separate deductibles. Scott Fetzer, on the other hand, argued there was a single occurrence, that being the negligent hiring and supervision of Fields, and that Zurich was required to pay the full amount of the other two settlements.
In reversing the district court and ruling in favor of Zurich, the Sixth Circuit relied on several principles of Ohio law governing the interpretation of insurance contracts. First, where an insurance contract is susceptible of more than one interpretation, the contract is to be construed liberally in favor of the insured and strictly against the insurer. Second, in order to defeat coverage, an insurer must establish that its interpretation is the only one that can be fairly placed upon the language at issue. In holding in favor of Scott Fetzer that the relevant occurrence was the company’s negligent supervision of Fields, the court stated that it was unnecessary for it to take a position on whether Scott Fetzer’s interpretation was the best interpretation so long as it was reasonable. Finally, the court noted that its conclusion was supported by Ohio law, which follows the “cause” test, under which the number of occurrences is determined by reference to the cause of the injury, rather than the number of individual claims.
The takeaway from this decision is that the Sixth Circuit reinforced blackletter principles of Ohio insurance law, albeit in the context of a very unique and troubling fact pattern.
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