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Britton v. Smythe9/21/2000
or extended coverage under the legal defense plan. Smythe, Cramer points to an affidavit in which she originally insisted she had not seen a copy of the engineer's report, but notes plaintiff later recanted that statement in light of an affidavit by another potential buyer who swore that plaintiff had sent him a copy of the engineering report, thus proving she did in fact have possession of the engineering report.
Plaintiff disputes this point, saying that her counsel at the time (who also represented Smythe, Cramer in the Lamb litigation) erroneously prepared for the Lamb litigation an affidavit, which plaintiff signed, in which plaintiff denied having a copy of the engineering report. Counsel later tried to retract that affidavit, telling the court that she erroneously concluded that Ms. Dietz had never had a copy of the engineer's report.
Counsel's retraction does not explain why plaintiff signed the affidavit knowing it contained inaccurate information, but we nonetheless note the dispute over plaintiff's possession of the engineer's report arose in June 1993, two and one-half years before Smythe, Cramer questioned coverage. The dispute over plaintiff's possession of the engineering report also occurred almost three months before she asked Smythe, Cramer's president to grant her extended coverage under the legal defense plan. At the time of plaintiff's request for extended coverage under the legal defense program, members of Smythe, Cramer management who participated in the decision to grant plaintiff extended coverage had received counsel's retraction of plaintiff's affidavit, so it had actual knowledge prior to granting extended coverage that plaintiff did have the engineer's report. Smythe, Cramer cannot now complain that its president lacked sufficient information to make an informed decision about granting extended coverage under the legal defense plan when his own lieutenants had that information and did not tell him.
In any event, we cannot accept Smythe, Cramer's argument that it needed to wait to determine whether the allegations of the complaint alleged conduct that would be excluded conduct under the legal defense program. Lamb's complaint alleged plaintiff engaged in intentional deceit by failing to advise him of the latent defects in the property. As we see it, an allegation of intentional deceit would arguably encompass both fraud or intentional wrongdoing as set forth in the exclusion to the legal defense program. This was sufficient notice to Smythe, Cramer that plaintiff's alleged intentional deceit might come within an exclusion in the legal defense program. Nevertheless, Smythe, Cramer undertook plaintiff's defense without immediately reserving its rights under the legal defense program and did not reserve its rights even after it became clear that plaintiff's conduct as alleged in the Lamb complaint, if true, would be excluded from coverage.
Smythe, Cramer also argues that regardless whether it timely reserved its rights under the legal defense program, application of waiver and estoppel would expand coverage under the legal defense program, particularly since the jury in the Lamb litigation found plaintiff liable for fraud.
It is true as a general proposition that the doctrine of waiver cannot be used to expand coverage. Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd. (1992), 64 Ohio St.3d 657, 688, citing 16B Appleman, Insurance Law and Practice (1981), 579, Section 9090. However, in Turner Liquidating Co., 93 Ohio App.3d at 299, the court of appeals found the general rule unpersuasive in a case where a late reservation of rights occurred:
An insurer should not be able to avoid liability under all circumstances in
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