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An Ohio jury is allowing the estates of two people killed in a crash with an alleged drunken driver to collect $5.6 million in compensatory damages from their employer’s insurer — even though the crash occurred off-duty and in a private car. The verdict is one of dozens stemming from an Ohio Supreme Court decision three years ago that opened a new avenue of litigation for plaintiffs’ lawyers and left insurers scrambling to rewrite policies. And a lead attorney in the case predicts rulings resembling the Ohio case could spread to several states. The recent verdict, handed down by a Cuyahoga County, Ohio, jury in Meden v. Leiendecker, No. CV-01-443684, awarded the estates of David Austin and Janet Meden a total of $15.6 million — $10 million in punitive damages and $5.6 million in compensatory damages. The two were friends and co-workers at OSI Sealants Inc. in Mentor, Ohio. After work on May 25, 2001, they went to look at a car that Meden was considering purchasing when their vehicle was struck by another, driven by Scott Leiendecker. Leiendecker, who was allegedly intoxicated at the time, ran a flashing red light and stop sign, and was later charged with his fourth alleged driving under the influence offense. Only he survived the collision that killed Austin, Meden and a third passenger in Leiendecker’s car. Police determined that Leiendecker was negligent for the crash, but his criminal trial has been repeatedly postponed because of chronic health problems. The plaintiffs’ attorneys agree they will probably never collect the $10 million in punitives levied against Leiendecker. Paul W. Flowers, a Cleveland-based solo practitioner, prepared the plaintiffs’ case with Thomas I. Michals, a partner at Cleveland’s Calfee, Halter & Griswold, who represented the Austin estate. The rest of the verdict, $5.6 million, was compensatory damages against three insurers of OSI: Commerce and Industry Insurance Co., American International Specialty Lines Insurance Co. and Illinois National Insurance Co. The three are owned by the national conglomerate American Insurance Group. Leiendecker was not employed and there was limited automobile coverage to compensate the victims in the accident. The Ohio Supreme Court’s earlier decision in Scott-Pontzer v. Liberty Mutual Insurance Co., No. 98-442 (1999) gave plaintiffs’ lawyers the loophole they needed to tap OSI’s commercial carrier to compensate for underinsured or uninsured motorists. The Ohio Supreme Court rejected the insurers’ argument that “you” referred only to the corporate entity named on the declarations page of the policy. “It would be nonsensical to limit protection solely to the corporate entity since a corporation, itself, cannot occupy an automobile,” the court stated. Further, the court found no language in the policy that limited coverage to employees only when acting in the scope of employment. ‘AN EXPLOSION’ Since then, “It’s been an explosion,” admitted Jonathan Phillip, the lead trial attorney for the three insurers in Leiendecker. Phillip, of Cleveland’s Janik & Dorman, said the defense plans to appeal Leiendecker. Most commercial policies take their language from the Insurance Services Office, an industry group that develops standard coverage forms and rating-loss costs. It is typical for large and medium-size employers to have policies that contain uninsured motorists’ coverage, Flowers noted. But while agents may sell the coverage to employers with the idea that it extends only to officers, owners or employees in the course and scope of employment, Flowers said, there is no provision that specifies that. Dan Sonders, a senior executive of business development for The Westfield Group, the second largest commercial insurer in Ohio, said his company has just about exhausted the $50 million fund it set up to pay out Scott-Pontzer claims. He estimates that the decision has cost the Ohio insurance industry about $1 billion. Outside of Ohio, other courts have rejected the Scott-Pontzer theory. The 1st U.S. Circuit Court of Appeals noted in Seaco Insurance Co. v. Davis-Irish, No. 02-1143 (Aug. 20, 2002), that the Ohio court was sharply divided when it consciously abandoned a well-established tenet “that contracts be interpreted consistent with the parties’ intent.” Despite that division, Flowers maintains that Scott-Pontzer could apply to many other states, including California, where he is also licensed to practice.

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