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Stickovich v. City of Cleveland8/2/2001
iability insurance contracts purchased from commercial insurers who are not parties to the construction project and do not involve insurance. This court recently recognized this precise distinction in Britton v. Smythe, Cramer Company (2000), 139 Ohio App.3d 337, as follows:
As a matter of common understanding, usage, and legal definition, an insurance contract denotes a policy issued by an authorized and licensed insurance company whose primary business it is to assume specific risks of loss of members of the public at large in consideration of the payment of a premium. There are, however, other risk- shifting agreements which are not insurance contracts.
These include the customary private indemnity agreement where affording the indemnity is not the primary business of the indemnitor and is not subject to governmental regulation but is merely ancillary to and in furtherance of some other independent transactional relationship between the indemnitor and the indemnitee. The indemnity is, thus, not the essence of the agreement creating the transactional relationship but is only one of its negotiated terms. Id. at 354-355.
The case at bar involves an insurance contract, not a construction indemnity agreement.
Commercial Union and the dissent fail to distinguish the construction indemnity agreement from the liability insurance contract in the case at bar. It is well established that under indemnity agreements, before being reimbursed by the indemnitor, the indemnitee must pay a final judgment against him in favor of the injured party. See e.g., State Auto Mut. Ins. Co. v. Columbus Motor Express (1933), 15 Ohio Law Abs. 747, 748. In the context of liability insurance, however, the insurer becomes liable upon the loss and directly pays the injured party rather than reimbursing its insured.
With these distinctions in mind, a review of the express terms of R.C. 2305.31 reveals that it does not preclude purchasing commercial liability insurance for public works construction projects. To support such a preclusion, one must read the first sentence of R.C. 2305.31 too broadly and the second sentence too narrowly. The first sentence does not prohibit commercial liability insurance policies, because they are not construction indemnity agreements. The second sentence, moreover, expressly permits such liability insurance contracts and does not expressly prohibit naming more than one insured on such insurance contracts. Employers' Fire Ins. Co. v. Danis Bldg. Constr. Co., supra; Brzeczek v. Standard Oil Co. (1982), 4 Ohio App.3d 209, 212.
Purpose of Statute
The purpose of R.C. 2305.31 is to protect worker safety and contractors from being compelled to assume liability for the negligence of others. Neither purpose is harmed by permitting standard commercial liability insurance for which an independent third-party insurer is paid a premium to accept the risk of loss.
Injured workers are compensated and contractors do not bear the harsh burden of bearing the cost for others' negligence. This common sense reading of R.C. 2305.31 is also consistent with the purposes of insurance law.
R.C. 2305.31, significantly, is not codified in the Insurance Code, R.C. Chapter 39, and does not place a limitation on actions on liability insurance policies. When the General Assembly intends to announce a statutory policy limiting recovery on liability insurance contracts, it knows how to do so with clarity. See e.g., R.C. 3937.182 Policies not to cover claims or judgments for punitive or exemplary damages. R.C. 2305.31 does not provide any such clear limitation. Unlike construction workers and contractors, moreover, commercial liabili
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