The typical liability policy contains a provision that no action may be brought against the insurance company unless there has been full compliance with all the terms of the policy’s liability coverage. Generally, the provision states that no one has the right to join the liability insurer as a party to any action against its insured until the alleged injured party has obtained a judgment against the insured, or the injured party has reached an agreement signed by the insurance company.
Ohio’s Supplemental Complaint Statute, Ohio Revised Code Section 3929.06, sets forth that a plaintiff who obtains a final judgment against an insured for injury, death, or loss to the plaintiff or property of the plaintiff (a “judgment creditor”) is entitled to recover from the insurance company an amount equal to its remaining limit of liability coverage towards the satisfaction of the final judgment. If the insurance company has not paid such amount within thirty (30) days after the entry of the final judgment, Ohio Revised Code Section 3929.06 provides that the judgment creditor may file a supplemental complaint against the insurance company in the court that entered the final judgment.
The insured is not required to be a party to the supplemental complaint. Ohio Revised Code Section 3929.06 provides, though, that the insurance company has and may assert against the judgment creditor as an affirmative defense any coverage defense that the insurance company may have asserted against its insured in a declaratory judgment action. A plaintiff who obtains a final judgment against an insured should not collect from the insurance company any amount that the company is not obligated to indemnify its insured under the terms and conditions of the insurance policy.
Ohio case law and Ohio Revised Code Section 3929.06 is clear that the insurance company is not restricted to asserting that its insurance does not apply to the injury, death, or loss to the plaintiff or property of the plaintiff. The insurance company may raise as well the insured’s failure to comply with any policy condition if the insured’s non-compliance with policy condition prevented, or would have prevented, the insured from seeking any indemnity from the insurer for the judgment. “The basic rule is that the same defenses that an insurance company has against its insured, such as breach of the duty to cooperate and to give notice of the claim, are available against an insured party seeking to recover against the insurance company on a supplemental complaint.” Howell v. Frost, 98 Ohio App. 127, 128 N.E.2d 189, Syllabus, ¶1 (10th Dist. 1954).