January 2002 |
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In This Issue
Kegler Brown Attorneys in the NewsTony White, a former captain of the men's basketball team, has been named to the Board of The Ohio State University's Men's Varsity "O" Alumni Association. S. Martijn Steger has been appointed to serve on the Board of the Rickenbacker Port Authority. Congratulations to Nicole A. Flynn who has been admitted to the Ohio Bar. Kegler Brown was recently named as one of the Top Five Law Firms in Columbus by Corporate Board Member Magazine. Anti-Hacker Legislation May Now Help EmployersBy John Lowe IV Employers have a new arrow in their quiver to protect against the improper dissemination of confidential and proprietary information. This arrow may prove especially helpful in punishing employees who access company information prior to leaving the employer for the employer's competitor and in punishing the competitor if it benefits from the improper conduct. Congress originally passed the Computer Fraud and Abuse Act in 1984 to protect confidential information in government and financial industry computers from "hackers." Through amendments in 1994 and 1996, however, Congress greatly expanded the Act's reach; it now applies to almost anyone who intentionally and without authorization accesses financial information or anything worth more than $5,000.00. Those found guilty of a violation face criminal fines and imprisonment up to 20 years. Most importantly, the Act provides monetary and injunctive relief for anyone who "suffers damage or loss by reason of a violation." Two recent opinions have applied the Act to protect employers. In Shurgard Storage Centers, Inc. v. Safeguard Self Storage, Inc., 119 F.Supp.2d 1121 (W.D. Wash. 2000), the plaintiff sued a former employee's new employer, arguing that the former employee violated the Act when he e-mailed the plaintiff's trade secrets and proprietary information to the new employer. The federal district court for the Western District of Washington overruled the new employer's motion to dismiss, holding: (1) the Act does not merely apply to a "hacker" but also to the former employee because he breached his duty of loyalty to his employer and began acting as the agent for the defendant; and, (2) the term "fraud" within the Act simply means "wrongdoing," and does not require proof of the common law elements of fraud. In United States v. Middleton, 231 F.3d 1207 (9th Cir. 2000), the Ninth Circuit Court of Appeals upheld the criminal conviction of an employer's former computer administrator who quit his job and then hacked into the employer's system, changed passwords, altered the computer's registry, and deleted the employer's entire billing system and two databases. While the recent amendments are broad, the current scarcity of decisions interpreting them makes their breadth and application unclear. These two recent decisions, however, give employers strong arguments in negotiations and suits with unfaithful former employees, and competitors who employ them. * Note this article was previously published in the E-mployment Alert. Use our Publications Subscription Form to be added to that distribution list. When and Why You Should Get It in WritingBy Laurel A. Beatty In the midst of negotiations, it is very easy to dismiss the need for a written contract. Not every contract has to be in writing to be valid and enforceable, but some contracts should be. How do you know when you need a written contract and what to put in it? The following tips can help you. Some kinds of contracts have to be in writing in order for a court to enforce them. Contracts that will not be completely completed within one year should be in writing. If you enter in to a long-term contract with a distributor, for example, it should be in writing if it will not be complete within a year. A contract to buy or sell real estate should always be in writing. Don't rely on a mere promise from the landlord that you'll be able to buy the building that you've been leasing. A contract where one person promises to secure the debt of another person must be in writing in order to be enforced by a court. Also, contracts to buy or sell merchandise over $500.00 need to be in writing. Regardless of whether a contract has to be in writing to be enforced, having a written contract can really help you stay out of court altogether. Putting the terms of the agreement down in writing will help prevent the parties from forgetting exactly what was agreed. Although it may seem to add time to your negotiations, you should get your lawyer's help in drafting and negotiating any contracts that are significant to your business. Update on Ohio's Uninsured and Underinsured Motorist Coverage Lawsby Traci A. McGuire and Christopher J. Weber 
Is a company employee who is injured by an uninsured/underinsured motorist entitled to insurance coverage provided by the company's commercial automobile or general liability policies? The answer, believe it or not, may be "yes," but recent legislation provides an opportunity to close the door on that possibility. Recent decisions of the Ohio Supreme Court expanded the reach of uninsured/underinsured motorists (UM/UIM) laws. Yet, the Ohio legislature recently enacted S.B. 97 Until October 31, 2001, the previous version of the UM/UIM statute (Ohio Revised Code § 3937.18, et seq.) mandated that insurers offering automobile liability and motor vehicle liability insurance policies also offer uninsured and underinsured motorist coverage. The intent of the statute was to provide insurance for injured people who have a legal cause of action against a tortfeasor, but who are uncompensated because the tortfeasor is either (1) not insured (uninsured); or (2) covered in an amount less than the insured's uninsured motorist coverage (underinsured). Recently, these laws have been the subject of a series of controversial cases decided by the Ohio Supreme Court. Two cases in particular set the stage for the recent controversy: Scott-Pontzer v. Liberty Mutual Fire Insurance, 85 Ohio St.3d 660 (1999); and Linko v. Indemnity Ins. Co. of N. America, 90 Ohio St.3d 445 (2000). In the Scott-Pontzer case, Liberty Mutual Insurance issued a commercial automobile liability policy to Superior Dairy which contained UM/UIM coverage. Superior Dairy was listed as the named insured on the policy. Mr. Pontzer, an employee of Superior Dairy, was killed in an accident while driving his wife's car (and not while acting within the scope of his employment). The negligent driver was an underinsured motorist. Mrs. Pontzer sued Liberty Mutual alleging that because her husband was an employee of Superior Dairy, she (on behalf of her husband's estate) was entitled to the UM/UIM benefits under the policy. The Ohio Supreme Court agreed ruling that Mr. Pontzer, as an employee of Superior Dairy, was included within the definition of an insured for purposes of UM/UIM coverage, even though he was not acting within the scope of his employment at the time of the accident. Mrs. Pontzer was entitled to underinsured motorist benefits. The Court concluded that the use of the word "you" in the definition of the "insured," while referring to Superior Dairy, also includes Superior Dairy's employees because a corporation can only act by and through its employees. The Court further held that if a policy providing automobile liability coverage fails to offer UM/UIM coverage (as required under R.C. 3937.18), the court would read such coverage into the policy as a matter of law. Essentially, the effect of Scott-Pontzer was to provide comprehensive auto insurance coverage to any employee working for an insured employer, regardless of whether the worker was within the scope of employment at the time of the accident. Ohio courts following the Scott-Pontzer decision have concluded that family members of employees injured by an uninsured/underinsured motorist are likewise entitled to UM/UIM coverage. Another case recently before the Ohio Supreme Court, Linko v. Indemnity Ins. Co. of N. America, 90 Ohio St.3d 445 (2000), again implied UM/UIM coverage into insurance policies where no UM/UIM coverage had otherwise been intended by the insurer or employer. In 1996, Mike Linko, of Hudson, Ohio, was killed in a car accident in New York while on company business for Saint Gobain Industrial Ceramics, Inc. The tortfeasor was insured by Nationwide, who tendered its $100,000 liability policy limits. Linko's estate sought underinsured motorist benefits under Linko's employer's policy with Indemnity Insurance Company of North America, but the employer had rejected UM/UIM coverage as allowed by the UM/UIM statute. Linko's employer had general liability coverage with limits of $3 million aggregate insurance. Linko's estate filed suit challenging the validity of the rejection form. The Ohio Supreme Court considered what constituted an express and knowing rejection of UM/UIM coverage by a parent corporation on behalf of its related corporations or other insureds. Ultimately, the Court held that the rejection form was incomplete because it did not state the details of the UM/UIM coverage that was offered because the form was signed by the wrong party — the parent company, and not the subsidiary. (Under R.C. § 3937.18, only the named insurer may reject or accept UM/UIM coverage.) As a result, the Court created UM/UIM coverage by operation of law, in the same amount as the liability coverage — $3 million. Some say that the recent Supreme Court cases have had a devastating impact on Ohio's insurance market place. Likewise, employers have expressed concern about the breadth of the effects of the recent court decisions, which essentially conclude that employers must provideworking for an insured employer, regardless of whether the worker was within the scope of employment at the time of the accident. In an effort to supercede these recent decisions of the Ohio Supreme Court, the Ohio legislature recently enacted S.B. 97, effective October 31, 2001 that amends Ohio's UM/UIM laws. Prior to its passage, parties on both sides of the fence made their views known. Proponents of S.B. 97, namely the insurance industry and business groups, expressed concerns that claims being paid by insurers were often beyond the scope of coverage outlined in the insurance policy and represent claims for which no premiums were assessed or collected. Proponents also expressed concern that the Supreme Court decisions undermined Ohio's reputation as a healthy, available and affordable insurance marketplace. Opponents of S.B. 97 felt that mandatory UM/UIM coverage is one of the most important consumer protection measures of insurance laws, providing a safety net for consumers. Despite these opposing viewpoints, S.B. 97 went into effect on October 31, 2001 and brought forth the following changes to Ohio's UM/UIM laws:
Although most employers and insurance companies believe S.B. 97 brings welcome changes, the analysis does not end here. For those claims arising prior to October 31, 2001, Pontzer and Linko and their progeny will still apply. What does this mean? It means that an employer could still find themselves in a position where they are required to provide coverage for an employee injured in a car accident, regardless of whether the employee was within the scope of employment while injured, or whether the injury was caused by a company owned vehicle. Nonetheless, employers (and their insurance carriers) faced with these Pontzer claims have several potential defenses available to them, depending in large part upon the language of the policy itself, including:
To properly reject UM/UIM coverage, the rejection must be in writing and received by the insurer prior to the commencement of the policy. A valid rejection can only follow a valid written offer, which must contain a brief description of the coverage, the premium for that coverage and an express statement of the UM/UIM coverage limits. In sum, with the enactment of S.B. 97, the Ohio legislature has brought sweeping changes to Ohio's UM/UIM laws, including superceding the Ohio Supreme Court holding of Pontzer. Likewise, because there is no longer a mandate that UM/UIM coverage be offered, the requirement that there be an express and knowing rejection, as set forth in Linko, would appear to be nullified as well. Being aware of the language contained in insurance policies and being "up to speed" on the current changes in the law are among the best ways of being able to identify who may be a covered insured in the event of an injury sustained by an employee. Directory of Trial LawyersYou can contact our trial lawyers via the Litigation Practice Team web page.
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