In City of Sharonville v. American Employers Ins. Co., No. 2004-1735, 2006 WL 1193875 (Ohio May 17, 2006), the Ohio Supreme Court ruled that public policy did not require a law enforcement liability policy's exclusions for criminal activity and fraud to be enforced.

 

The city of Sharonville, Ohio , and three of its police officers were sued in a federal action alleging ongoing conspiracy to cover up evidence relating to two murders. The complaint alleged that the officers “destroyed evidence of a murder and conspired for over 20 years to cover up facts crucial to solving the murder.” Four claims were asserted: a civil rights action under federal law; conspiracy under state law; spoliation of evidence; and intentional infliction of emotional distress.

 

The officers and the city sought defense from various insurers that insured the city from 1979 to 2002. The insurers denied a defense, claiming that the police officers' conduct was outside the scope of their employment, that their intentional acts were explicitly excluded from coverage, and that it was bad public policy to require insurers to defend insureds for committing criminal acts.

 

The court, however, said, “Allegations of improper officer activity, with the exception of sexual assaults, have been held to be within the scope of employment,” and held that the insurers owed a duty to defend. The court added, “Public policy does not dictate that exclusions concerning criminal activity or fraud should be enforced in this case, for the record does not show that the current or former police officers were ever charged with, let alone convicted of, a crime.”

 

One of the insurers, North East Insurance Company, also refused a defense because the city lost its insurance policy for one of the years covered in the lawsuit. The court determined that the city produced sufficient evidence of the relevant contents of the missing policy and that it was not lost due to bad faith.