UN/UNDERINSURED MOTORISTS COVERAGE UPDATE

1

UN/UNDERINSURED MOTORISTS COVERAGE UPDATE

Robert W. Kerpsack, Esq.,

ROBERT W. KERPSACK CO., L.P.A.

21 East State Street, Suite 300

Columbus, OH 43215

Telephone: (614) 242-1000

Facsimile: (614) 242-3948

E-mail: [email protected]

2

UM/UIM UPDATE: TOPICS

• RECENT AMENDMENTS TO UM STATUTE

• RECENT UM DECISIONS RELEASED BY THE OHIO SUPREME COURT

• INTERPLAY BETWEEN CASE LAW AND AMENDMENTS TO THE UM STATUTE

• PENDING CASES BEFORE THE OHIO SUPREME COURT

3

RECENT AMENDMENTS TO RC. 3937.18

AMENDMENT DATE CHANGE

S.B. 20 10/20/94 UIM COV.

NOT EXCESS

H.B. 261 9/3/97 DEFINES “MO. VEH. LIAB. INS. POLICY”

S.B. 57 9/24/99 DEFINES “UMBRELLA POLICY”

4

RECENT AMENDMENTS TO RC. 3937.18

• S.B. 267 (EFFECTIVE 9/21/00): – INSURED WD BENEFICIARY MUST

SUSTAIN BODILY INJURY– POLICY CHANGES PER UM STATUTE

OKAY DURING 2-YR GUARANTEE PRD– NO NEED TO RE-OFFER UM/UIM

COVERAGE AT RENEWAL OF POLICY– INTRA-FAMILY EXCLUSION

ELIMINATED

5

WHICH AMENDMENT TO R.C. 3937.18 APPLIES?

• Ross v. Farmers Ins. Group (1998), 82 Ohio St. 3d 281– Statute in effect on date of policy

issuance or renewal applies.

• Hillyer v. Great Am. Ins. Co. (1999), 85 Ohio St. 3d 410– Same rule applies to liability policies.

6

DID S.B. 20 OVERRULE SEXTON?

• Can an insured present a UM claim against their own policy for the death of a non-resident relative?

Moore v. State Auto. Mut. Ins. Co. (2000), 88Ohio St. 3d 27:

– “R.C. 3937.18(A)(1), as amended by Am. Sub. S.B. 20, does not permit an insurer to limit uninsured motorist coverage in such a way that an insured must suffer bodily injury, sickness, or disease in order to recover damages from the insurer.”

7

OHIO LEGISLATURE AT WORK

• S.B. 267 (EFFECTIVE 9/21/00):– LEGISLATIVELY “OVERRULES” MOORE

• POLICIES WRITTEN AFTER 9/21/00:– INSURED MUST SUSTAIN BODILY

INJURY

8

TWO-YEAR UM/UIM COVERAGE GUARANTEE

• R.C. 3937.31(A)

– Automobile insurance policies shall be issued “for a policy period of not less than two years or guaranteed renewable for successive policy periods totaling not less than two years.”

9

APPLYING POLICY ENDORSEMENTS THAT

CONFORM TO R.C. 3937.31(A)

• Townsend v. State Farm Mut. Auto. Ins. Co. (Aug. 14, 1998), Sandusky App. No. S-97-059, unreported

• 1/25/94 Policy first issued1/25/95 Endorsement added (S.B. 20)8/23/95 DOL

10

Townsend v. State Farm

• HELD: Insurer could not enforce a policy endorsement (reducing UM/UIM coverage consistent with S.B. 20) that is implemented during the two-year coverage guarantee period required by R.C. 3937.31

• HELD: “The language of the policy establishes that the renewals constitute one continuing contract for insurance during the two-year guarantee period.”

11

APPLYING POLICY ENDORSEMENTS THAT

CONFORM TO R.C. 3937.31(A)

• Wolfe v. Wolfe (2000), 88 Ohio St.3d 246

• 12/12/83 Policy first issued• 12/12/93 Policy renewed• 10/20/94 S.B. 20 Effective• 12/12/94 Policy renewed• 4/2/95 DOL

12

Wolfe v. Wolfe

• OH Supreme Court Held:

– R.C. 3937.31(A) provides a two year guarantee period during which a policy cannot be altered. The guarantee period is not limited to the first two years after inception of the policy.

– A new 2-year guarantee period commences every two years

13

Implication of Wolfe v. Wolfe #1

• Every two years, there is a “window” of opportunity (only) for the insurer to add a policy endorsement

• Are endorsements added outside the two-year “window” void?

– Do we now need to obtain a complete policy history in order to determine which policy endorsements, if any, are valid?

14


• It must be determined when the policy was originally issued in order to determine where you are in the two-year guarantee period

– Obtaining applications for insurance policies may become standard practice

15


• Wolfe dicta:– “Were we to adopt the appellee’s (insurer’s)

argument (that each renewed policy is a “new” policy), insurance companies would have the unenviable task of complying with R.C. 3937.18(A) every time a renewal constituted a new policy of insurance.”

• Implication: Insurers need to obtain a new rejection of UM coverage every 2 years!

16


• When a court declares insurance policy language to be ambiguous, is the insurer precluded from curing the ambiguity until the arrival of the two-year anniversary of the last policy renewal?

17

BUT . . .

• S.B. 267 (EFFECTIVE 9/21/00) ADDED R.C. 3937.18(E):

– INSURERS ARE PERMITTED TO CHANGE THEIR POLICIES DURING THE TWO-YEAR GUARANTEE PERIOD SO LONG AS THOSE CHANGES ARE IN ACCORDANCE WITH SUBSEQUENT STATUTORY CHANGES

18

BUT . . .

• S.B. 267 ALSO CHANGES

R.C. 3937.18(C):

– ELIMINATES THE REQUIREMENT OF AN ADDITIONAL MANDATORY OFFERING/EXPRESS REJECTION (OR REDUCTION) OF UM/UIM COVERAGE

19

VALID OFFERS/REJECTIONS OF UM COVERAGE

Linko v. Indemn. Ins. Co. of N. Am. (2000), 90 Ohio St.3d 445

– Decided December 27, 2000– Holdings:

1) Any insured under an auto insurance policy has standing to challenge the validity of the UM rejection

20

LINKO HOLDINGS (CON’T)

2) A valid offer of UM coverage must contain:a) A written description of the

coverage;b) A written disclosure of the

premium for the coverage; andc) A written statement of the

coverage limits

21


3) A valid offer of UM coverage must

contain the name of each named insured under the policy;

4) A valid rejection of UM coverage must contain the signature of each named insured under the policy; and

22


5) A valid rejection of UM coverage by a parent corporation on behalf of its subsidiary companies must contain each subsidiaries’ written authorization for rejection.

23

IMPLICATION OF LINKO #1

• ALL STANDARD ISO UM OFFER/REJECTION FORMS ARE INVALIDATED!

– ALL REJECTIONS/SELECTIONS OF LESSER UM/UIM COVERAGE IN OHIO ARE INVALID!

24


• DOES LINKO SURVIVE H.B. 261’S PRESUMPTION THAT A REJECTION OF UM COVERAGE IS VALID? (EFFECTIVE 9/3/97)

– A rejection that is presumed valid is not necessarily a legally adequate rejection

25


• LOOK FOR THE OHIO GENERAL ASSEMBLY TO “LEGISLATIVELY OVERRULE” LINKO

26

UM COVERAGE BY OPERATION OF LAW

• Commercial General Liability Policies

• Employers’ Auto/Commercial Policies

• Homeowners, Renters, Farmowners Policies

27

GENERAL COMMERCIAL LIABILITY POLICIES

Selander v. Erie Ins. Group (1999), 85 Ohio St. 3d 54:

Business liability policies do not cover a particular vehicle, but do cover an insured’s vicarious liability for the use of unspecified, non-owned (hired) vehicles; therefore, they are “motor vehicle liability insurance policies” subject to R.C. 3937.18.

28

EMPLOYERS’ AUTO/COMMERCIAL

INSURANCE POLICIES

• Policies insuring corporate named insureds define the “insured” to include “1) you (the named insured corporation); and 2) if you are an individual, your relatives.”

29


INSURANCE POLICIES

• The word “you” is ambiguous when applied to a corporation.

• “You” can be construed to mean employees of the corporation because it is nonsensical to provide UM/UIM insurance to a corporation.

30


INSURANCE POLICIES

• Scott-Pontzer v. Liberty Mut. Fire Ins. Co. (1999), 85 Ohio St. 3d 660; Bagnoli v. Northbrook Prop. & Cas. Ins. Co. (1999), 86 Ohio St. 314 (employee need not be in the scope and course of employment or operating a company auto).

• Ezawa v. Yasuda Fire & Marine (1999), 86 Ohio St. 3d. 557 (resident relatives of employee’s household are covered under employer’s UM policy).

31

HOMEOWNERS-TYPE POLICIES

• Coverage for “Motor Vehicles” Excluded

• Policies then Undefine the Term “Motor Vehicle:”

“A ‘motor vehicle’ means . . . a motorized land vehicle owned by an insured and

designed for recreational use off public roads, while off an insured location.”

32


IMPLICATION:

Non-owned recreational vehicles used on an insured location are not excluded.

33


• LEGAL ARGUMENT:

– If an insurance policy provides liability coverage for motor vehicles, even in a limited scope, then it is a “motor vehicle liability insurance policy” that is subject to R.C. 3937.18.

34


UNDISPUTED:

UM/UIM coverage was not offered and expressly rejected by insured; therefore,

the policy provides UM/UIM coverage by operation of R.C. 3937.18.

35


• CASE LAW:

– Davidson v. Motorists Mut. Ins. Co. (Dec. 8, 1999), Franklin App. No. 99AP-163, unreported • Accepted 4/19/00 by Ohio Supreme Court

on discretionary appeal and a certified conflict with Overton v. Western Reserve Group (Dec. 8, 1999), Wayne App. No. 99CA0007, unreported.

• ORAL ARGUMENT: 11/29/00

36


• Davidson policy provides bodily injury liability coverage for a “residence employee” operating a motor vehicle in the scope of employment by an insured.

– Overton policy does not provide such coverage.

37


• Myers v. Safeco Ins. Co. (Feb. 18, 2000), Licking App. No. 99CA00083, unreported

– Held: Plaintiff entitled to UIM coverage under homeowners policy even after releasing the tortfeasor without the consent of the insurer

– UIM coverage provided by operation of R.C. 3937.18, which contains no subrogation clause

38


• Myers v. Safeco Ins. Co.:

– Accepted 7/19/00 by Ohio Supreme Court on discretionary appeal and certified conflict

– Briefing stayed pending decision in Davidson

39


• R.C. 3937.18 (A)(2) provides only for a reduction of UIM coverage by the amounts of bodily injury liability insurance coverage available to persons “liable” to the insured.

• R.C. 3937.18(A)(2) does not include any subrogation clauses, anti-stacking clauses, or “other insurance” clauses.

40

APPLICATION OF AMENDMENTS TO

R.C. 3937.18

• ARE THE UM “FLOOD GATES” OPENED OR CLOSED?

• S.B. 267 MAY BE APPLIED ONLY PROSPECTIVELY (AFTER 9/21/00)

41

TWO-YEAR UM/UIM COVERAGE GUARANTEE

• CHANGES TO POLICIES PURCHASED OR RENEWED PRIOR TO 9/21/00 (EFFECTIVE DATE OF S.B. 267) ARE PROBABLY INVALID FOR TWO YEARS (UP TO 9/20/02)

• IMPLICATION: MOORE, SELANDER MAY BE STILL BE ALIVE PER WOLFE

42

PENDING CASES IN THE OHIO SUPREME COURT

• Clark v. Scarpelli, Case No. 00-374

– Issue: Whether the Mid-Century policy language at issue is sufficient to limit recovery in a wrongful death claim to the “per person” limits of UM coverage

• Is coverage for “injury to relationship” ambiguous?

• Oral Argument: 11/29/00

43

PENDING CASES

• Michael v. Reliance National Ins. Co., Case No. 00-1323– Issues:

• Is S.B. 20 Constitutional• May insurers limit the amount of

liability coverage in wrongful death claims to a single “per person” limit

• Accepted Oct. 2000

44

PENDING CASES• Littrell v. Wigglesworth, Case Nos. 00-745 and

00-801– Issue: Does a wrongful death beneficiary have

UIM coverage when the tortfeasor’s coverage equals or exceeds the UIM policy limit and the amount “available for payment” to the insured is less than the policy limits because of multiple claimants

– Oral Argument: 1/30/01

45

PENDING CASES

• Holeton v. Crosse Cartage, Case No. 00-428

– Issue: Is Ohio’s workers’ compensation subrogation statute constitutional?

– Oral Argument: 10/10/00

Documents

UN/UNDERINSURED MOTORISTS COVERAGE UPDATE