By: Stacy V. Pollock
Ever since the Ohio General Assembly amended the state’s teacher termination statute (R.C. §3319.16) years ago to reference a “good and just cause” standard, school boards have struggled to understand what constitutes “good and just cause.” Last week, an Ohio state court of appeals confirmed that a teacher’s failure to enter her student’s final grades constitutes “good and just cause”, and thus is a terminable offense under R.C. §3319.16.
In Thomas v. Dayton Pub. Schools Bd. of Edn., 2018-Ohio-4231 (2nd Dist., Oct. 19, 2018), the Board of Education initiated termination proceedings against a teacher on four counts including a count of failure to enter final grades for her students. Pursuant to her statutory rights, the teacher demanded an administrative hearing. A Referee took three days of testimony and evidence, and ultimately recommended no termination on all counts except on the charge that the teacher failed to enter final grades for her students.
The Board reviewed the hearing transcript and evidence, rejected the recommendation on the first three counts, and found that all counts were sufficiently supported so as to constitute good and just cause for termination under R.C. §3319.16. As she was permitted to do, the teacher appealed the Board’s decision to the common pleas court. The teacher argued, in part, that the intent of §3319.16 is not served if the Board can reject the Referee’s findings without an explanation. The trial court may only reverse a board’s order of termination of a teacher’s contract where it finds that the board’s termination order is not supported by or is against the weight of the evidence. The trial court vacated the Board’s Order as to each of the charges except the charge relating to the teacher’s failure to enter final grades.
The trial court affirmed the Board’s decision to terminate based upon the charge of her failure to enter her students’ final grades. The Ohio Second Appellate District reviewed the trial court’s decision to ensure that the trial court had not abused its discretion. The Second District held that the trial court had not abused its discretion.
Like the Referee, the Board and the trial court, the Second District determined that the teacher’s failure to enter final grades into the school’s electronic grading system was sufficiently good and just cause for termination. The evidence did not support the teacher’s explanation that she was unfamiliar with the electronic system used for grades and was therefore unable to submit the grades. The teacher knew that the grades were due, knew that the final grades were critical to students, and she knew that the grades would be due a month before their due date. Yet, she made scant effort to input the grades on time.
While this matter ultimately was determined in favor of the Board (pending any possible appeal by the teacher to the Ohio Supreme Court), the Board spent over two years of energy and possibly significant financial resources defending the termination. Boards are encouraged to stay apprised of court decisions that assist in defining the §3319.16 “good and just cause” standard. Mazanec, Raskin & Ryder (MRR) will continue to keep an eye on any other noteworthy cases and report them, accordingly.
Stacy is a Partner in MRR’s Columbus office and is a certified specialist in employment and labor law, in addition to a certified Professional in Human Resources. She has considerable experience in education law, representing schools and school administrators involving employee and student disciplinary matters. Stacy also advises public and private employers in matters involving leave and discipline issues, personnel policy matters and labor negotiations and arbitrations.
On October 9, 2018, The Ohio Supreme Court issued its anticipated Decision in Ohio Northern University v. Charles Construction Services, Inc., et al., Slip Opinion No. 2018-Ohio-4057 holding that a subcontractor’s faulty work is not an “occurrence” under a commercial general liability (“CGL”) policy. The Court determined that in the commercial construction setting, an insurer underwriting and issuing CGL coverage is not required to defend or indemnify its policyholder or any named insured against claims for property damage caused by a subcontractor’s faulty workmanship.
A Review of Westfield Inc. Co. v. Custom Agri Sys., Inc. (2012) 133 Ohio St.3d 476, 2012-Ohio-4712, 979 N.E.2d 269
In reaching this Decision, the Court re-visited its 2012 holding in Westfield Inc. Co. v. Custom Agri Sys., Inc. In this earlier case, Custom Agri, as a subcontractor, had allegedly faultily constructed a steel grain storage bin. Custom Agri was an insured under a CGL policy issued to it by Westfield Insurance which covered property damage caused by an “occurrence.” Westfield Inc. Co. v. Custom Agri Sys., Inc., 133 Ohio St.3d 476, 2012-Ohio-4712, 979 N.E.2d 269 at ¶ 3.At the trial court level, Westfield intervened, seeking declaratory judgment and a determination that it had no duty to defend or indemnify Custom Agri, inasmuch as all claims were related to Custom Agri’s own work and did not involve “property damage” caused by an “occurrence”, as those terms were defined within the Westfield policy. Ohio N. Univ. v. Charles Constr. Servs., Inc., Slip Opinion No. 2018-Ohio-4057 at ¶¶ 13-15, citing Westfield Inc. Co. v. Custom Agri Sys., Inc., 133 Ohio St.3d 476, 2012-Ohio-4712, 979 N.E.2d 269.
The Ohio Supreme Court ultimately decided that the Westfield’s policy definition of “occurrence” as being an “accident, including continuous or repeated exposure to substantially the same general harmful conditions” did not include property damage caused by the insured contractor’s own faulty work. Ohio N. Univ. v. Charles Constr. Servs., Inc., Slip Opinion No. 2018-Ohio-4057, citing Westfield Inc. Co. v. Custom Agri Sys., Inc., 133 Ohio St.3d 476, 2012-Ohio-4712, 979 N.E.2d 269 at ¶¶ 11-14. The Court reasoned that because an “accident” inherently involves fortuity, and faulty work is not fortuitous, there was no coverage under the Westfield CGL policy related to claims for property damage caused by faulty work. Id. at ¶ 18.
While Custom Agri Sys. was a subcontractor and its policy may have included a products-completed operations-hazard (“PCOH”) clause as well as a subcontractor clause, the Court determined that these separate provisions were not addressed directly. Now, and in its most recent Decision on the issue, the Ohio Supreme Court has directly addressed the effect of PCOH and subcontractor clauses. Id. at ¶ 19.
Ohio Northern University v. Charles Construction Services, Inc., et al. (2018)
Slip Opinion No. 2018-Ohio-4057
In Ohio Northern University v. Charles Construction Services, Inc., et al., Ohio Northern University contracted with Charles Construction Services, Inc. to construct the University Inn and Conference Center. The contract required Charles Construction to maintain a CGL policy that included a PCOH clause. Charles Constr. at ¶ 4. Charles Construction obtained a CGL policy with both a PCOH clause as well as a subcontractor clause from Cincinnati Insurance Company. The policy included terms specific to work performed by subcontractors. Charles Construction paid an additional premium for the PCOH coverage. Id. at ¶ 5.
After work was completed, Ohio Northern University discovered water damage from leaks believed to be caused by defective work of Charles Construction and its subcontractors. Ohio Northern University filed suit, and Charles Construction answered and filed third-party complaints against its subcontractors. Charles Construction submitted its claim to Cincinnati Insurance Company and asked that it defend and indemnify Charles Construction. In response, Cincinnati Insurance Company intervened at the trial court level, seeking declaratory judgment and a determination that it was not obligated to either defend or indemnify Charles Construction, due to the earlier Decision in Custom Agri. Id. at ¶¶ 7-8.
The particular PCOH clausecovered property damage “occurring away from premises you own or rent and arising out of *** ‘your work’ except *** work that has not yet been completed or abandoned”. Charles Constr. at ¶ 24. It further excluded coverage for property damage to the policyholder’s work arising out of it or any part of it. However the Court specifically stated the exclusion did not apply if the damaged work was performed by a subcontractor. Id. at ¶ 26.
The Ohio Supreme Court’s Analysis
Despite the Cincinnati Insurance Co. CGL policy containing both PCOH language as well as subcontractor-specific language, the Court found there was no coverage for the subcontractor’s faulty work. Specifically, the Court found the PCOH and subcontractor-specific language had no effect, since the damage was not due to an “occurrence” under the Coverage A portion of the Cincinnati Insurance Co. CGL policy:
“The language within the Coverage A portion of the CGL policy is critical to the policy’s overall effect. It states that CIC agrees to pay for property damage under certain circumstances. But the damage must be due to an “occurrence,” which the policy defines as “an accident, including continuous or repeated exposure to substantially the same general harmful conditions.” Again, there is no question that the water-related damage to the inn was “property damage” and was discovered after the work had been completed. But unless there was an “occurrence,” the PCOH and subcontractor language has no effect, despite the fact that Charles Construction paid additional money for it.
If the subcontractors’ faulty work were fortuitous, the PCOH and subcontractor-specific terms would require coverage. But as we explained in Custom Agri, CGL policies are not intended to protect owners from ordinary “business risks” that are normal, frequent or predictable consequences of doing business that the insured can manage. Here we cannot say that the subcontractors’ faulty work was fortuitous.”
Ohio N. Univ. v. Charles Constr. Servs., Inc., Slip Opinion No. 2018-Ohio-4057 at ¶¶ 28-29, citing Westfield Inc. Co. v. Custom Agri Sys., Inc., 133 Ohio St.3d 476, 2012-Ohio-4712, 979 N.E.2d 269.
The Court acknowledged its decision to be contrary to recent decisions of other courts, and cited its duty to look to the plain and ordinary meaning of the language in the CGL policy to find the intent of the parties. Id. at ¶ 32.
It seems clear from this Decision that the Court considers faulty construction work to be an anticipated business risk of a contractor or general contractor, and will not require an insurer to defend or indemnify against claims or damages arising out of faulty work, at least in cases where a CGL policy exists limiting covered damages to those caused by an “occurrence.”
Contractor and subcontractors should revisit their current insurance risk plans and coverages, and work directly with their respective brokers, agents and insurers to determine the current status of their risk coverages.
We also recommend those contractors that are either anticipating or presently involved in pending litigation reach out to their insurers, agents and/or brokers, immediately, for further guidance.
Mazanec, Raskin & Ryder (MRR) is proud to once again sponsor the Kentucky League of Cities (KLC) “City Employee of the Year Award” which brings recognition to an exceptional city employee who performs at a distinguished level to improve his or her local government and community. KLC represents more than 20,000 municipal employees.
MRR Lexington’s Administrative Partner, Barry Miller, presented Hopkinsville Police Chief Clayton Sumner with the honor on September 18, 2018 during the KLC Conference & Expo.
By sponsoring this award, MRR will provide a $1,000 donation to Hopkinsville/Christian County Boys and Girls Clubs in honor of Chief Sumner.
To view the official KLC press release, click here.
Ohio’s Data Protection Act becomes effective November 2, 2018
Ohio’s incentive for businesses to actively create, maintain and comply with cybersecurity programs becomes effective November 2, 2018. Senate Bill 220, also known as the Data Protection Act, will amend Ohio Revised Code Sections 1306.1 and 3772.01 and enact Chapter 1354, and will encourage businesses to comply with an industry-recognized cybersecurity framework. Those who do, may use such compliance as an affirmative defense to any tort action arising out of an alleged failure to implement reasonable information security controls.
Personal and Restricted Information
The safe harbor defense is available not only for those actions based on an alleged breach of personal information, but restricted information as well. Personal information is defined as the connection of a person’s name with another identifier such as their Social Security number, driver’s license or state identification number, or a financial account number. Businesses are currently required to disclose data breaches involving personal information under O.R.C. § 1349.19.
Restricted information is much broader in that it includes “any information about an individual, other than personal information, that, alone or in combination with other information, can be used to distinguish or trace the individual’s identity or that is linked or linkable to an individual”. Consider information such as email addresses, member ID numbers, or PINs being released without any connection to the individual’s name. The inclusion of restricted information in O.R.C. Chapter 1354 gives businesses an opportunity to demonstrate compliance even if the information affected is not of a nature which would trigger the disclosure requirements of O.R.C. § 1349.19.
To be eligible for the affirmative defense, the cybersecurity program must 1) protect the security and confidentiality of the information; 2) protect against any anticipated threats or hazards to the security or integrity of the information; and 3) protect against unauthorized access to and acquisition of the information that is likely to result in a material risk of identity theft or other fraud to the individual to whom the information relates.
As this safe harbor provision is available to businesses of all sizes, Ohio legislators have recognized that a “one size fits all” approach is not appropriate when it comes to evaluating a cybersecurity program. Whether the scale and scope of a cybersecurity program is appropriate will depend on a number of factors, including the business’s size and complexity, the nature and scope of its activities, the sensitivity of the information to be protected, the cost and availability of tools to improve information security and vulnerabilities, and the resources available to the business.
An eligible business will create, maintain, and comply with at least one of multiple frameworks identified in the legislation, including frameworks developed by the National Institute of Standards and Technology (NIST), the Center for Internet Security Controls for Effective Cyber Defense, the security requirements of HIPAA, and the Payment Card Industry Data Security Standard (PCI DSS).
These programs contain administrative, technical and physical safeguards as required under O.R.C. Chapter 1354. Administrative safeguards address security and information management, incident procedures, and contingency plans, among other items. Technical safeguards include controls on access, audits, and integrity. Finally, physical safeguards relate to who physically accesses the information and how the information is used.
A business complies with one of the identified frameworks so long as it updates its own program within one year of any revisions to the framework itself.
Implementation and Looking Forward
A compliant cybersecurity program will touch on every aspect of a business and should influence employee training, vendor selection and agreements, and top-to-bottom evaluation of access to information.
Vendors should be able to provide information as to their own cybersecurity measures and policies. Employees should be made aware of your cybersecurity program, and they should be trained in its procedures as much as they are in the day-to-day operations of your business. Finally, there should be an ongoing evaluation as to who should have necessary access to information, what kind of information they should be able to access, and when they should be able to access the information.
Generally, cybersecurity firms differ from IT firms, and as such businesses should feel comfortable having a conversation with their current IT vendors about their ability to assist in implementing and maintaining a cybersecurity program. It may be necessary to retain a cybersecurity firm.
It is important to note that the safe harbor only provides an affirmative defense-not an absolute immunity- to tort actions. This will not apply to actions arising out of breach of contract, and the business will still need to demonstrate its compliance with its chosen framework.
Also noteworthy is the legislation’s allowance of transactions and contracts via blockchain technology, which allows transactions with cryptocurrencies such as Bitcoin to take place. While not all businesses are comfortable using these technologies, currencies like Bitcoin are increasing in use and popularity due in part to the ability to verify the legitimacy of the transaction. Ohio’s Data Protection Act gives some peace of mind to businesses who have been hesitant to participate in blockchain technology.
Ohio’s Data Protection Act encourages businesses to jumpstart their cybersecurity programs and provides them with the frameworks to do so. While there is certainly an up-front cost to implementing a cybersecurity program, the amount of data and privacy breaches in recent years makes it a worthwhile investment.
MRR is proud to announce that partner Casey C. Stansbury is a newly elected Federation of Defense and Corporate Counsel (FDCC) Board of Director for 2018-2019. He is the youngest attorney to be elected to the distinguished Board’s membership over the organization’s 80-year history.
Casey focuses his practice on insurance defense, civil rights, and governmental liability issues. He regularly counsels and represents police officers, correctional officials, municipalities, and public officials in a variety of matters including employment concerns, contract disputes, and civil rights actions. Casey has a diverse practice including the defense of employers, both public and private. In addition to his representation of public entities and officials, Mr. Stansbury has experience in handling various other types of litigation matters including cases concerning construction disputes, commercial law, and motor vehicle accidents.
Casey received the Defense Research Institute’s (DRI) 2014 Albert H. Parnell Outstanding Program Chair Award and served as the DRI Government Liability Committee Chair. He is also a newly appointed member of the National Retail and Restaurant Defense Association (NRRDA).
The FDCC is dedicated to promoting knowledge, fellowship, and professionalism of its members as they pursue the course of a balanced justice system and represent those in need of a defense in civil lawsuits. Fellows are hand-picked and are proven leaders in-house and in the courthouse. It is an elite group that drives the agenda and educates the defense legal community.