UNUNDERINSURED MOTORIST LAW UPDATE DECEMBER 4, 2002

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UN/UNDERINSURED MOTORIST LAW UPDATEDECEMBER 4,
2002

• Robert W. Kerpsack, Esq.
• ROBERT W. KERPSACK CO., L.P.A.
• 21 East State Street, Suite 300
• Columbus, OH 43215
• Telephone [phone]
• Facsimile [phone]
• Email bob_at_rwklaw.com

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UM/UIM LAW UPDATE TOPICS

• DOES OHIO LAW (PONTZER) APPLY?
• ARE EMPLOYEES/FAMILY MEMBERS INSUREDS?
• DEFENSES NOTICE, SUBROGATION, ETC.
• UM/UIM COVERAGE BY OPERATION OF LAW
• WHAT POLICIES ARE SUBJECT TO UM STATUTE?
• WHICH AMENDMENT TO UM STATUTE APPLIES?

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AMENDMENTS TO RC. 3937.18
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AMENDMENTS TO RC. 3937.18(CONT)
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DOES OHIO LAW (PONTZER) APPLY?

• Ohayon v. Safeco Ins. Co. (2001), 91 Ohio St.3d
  474
• Apply law of state selected by applying
  Restatement of the Law 2d, Conflict of Laws,
  Sections 187, 188
• But. . ., in Ohayon, there was no dispute whether
  claimant was an insured under the policy
• Henderson v. Lincoln Nat. Spec. Ins. Co. (1994),
  68 Ohio St.3d. 303
• Ohio law applies to out-of-state policy covering
  vehicles registered and principally garaged in
  Ohio

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DOES OHIO LAW (PONTZER) APPLY? (CONT)

• Most Ohio appellate courts are holding that the
  following factors are determinative as to whether
  out-of-state commercial policies are subject to
  Ohio UM law (Pontzer)
• An Ohio UM policy endorsement or
• Coverage of vehicles registered and principally
  garaged in Ohio

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DOES OHIO LAW (PONTZER) APPLY? (CONT)

• See Agudo De Uzhca, Admr. V. Derham (April 5,
  2002, Montgomery App. No. 19106, 2002-Ohio-1814
• Holding Henderson rulenot Ohayon rulegoverns
  the UM law to be applied to out-of-state policies
  insuring vehicles registered and principally
  garaged in Ohio
• discretionary appeal to OH SC allowed at
  2002-Ohio 4950

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SCOTT-PONTZER V. LIBERTY MUT. FIRE INS. CO.

• Insured defined as
• 1) You.
• 2) If you are an individual, any family member.
• Holding You is ambiguous when the named
  insured is a corporation
• a corporation can act only by and through real
  personsits employees therefore, the
  corporation and its employees are insureds

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CORPORATION NAMED INSUREDWHO IS INSURED?

• Query Who are the family members of you?
• See Ezawa v. Yasuda Fire Marine Ins. Co.
• The family members of employees of the
  corporation named insured are also insureds

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CORPORATION NAMED INSUREDWHO IS INSURED? (CONT)

• Query Are family members of employees insured
  under commercial policies that do not contain the
  if you are an individual, any family member
  language found in the Pontzer policy?
• No, according to a growing number of Ohio
  appellate courts, including Walton v. Continental
  Cas. Co. (July 25, 2002), Holmes App. No.
  02CA002, 2002-Ohio-3831, discretionary appeal not
  allowed at 2002-Ohio-6347.

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DOES PONTZER APPLY?OUTSIDE SCOPE OF EMPLOYMENT

• Employee insureds are subject to all valid
  restrictions on UM/UIM coverage provided on the
  face of commercial policies
• Therefore, an employee who is injured outside of
  his/here employment may be excluded from UM/UIM
  coverage, which limits coverage to occurrences
  within the course and scope of employment

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OUTSIDE SCOPE OF EMPLOYMENT(CONT)

• But see Bagnoli v. Northbrook Prop. Cas. Ins.
  Co.
• An employee does not have to be within the scope
  and course of employment or driving a company car
  in order to be an insured under UM/UIM coverage
  that is provided by operation of law

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POLITICAL SUBDIVISION NAMED INSURED WHO IS
INSURED?

• Query Are employees of political subdivisions
  insured under their employers policies?
• Yes, according to many Ohio Appellate Courts
• A political subdivision can act only by and
  through real personsits employees
• Political subdivisions are not statutorily
  prohibited from purchasing UM coverage, which
  covers employees acting outside of their
  employment

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POLITICAL SUBDIVISION (CONT)

• But see Personal Serv. Ins. Co. v. Bailey-Oney
  (Nov. 27, 2002), Marion App. No. 9-02-38,
  2002-Ohio-6486
• Only political subdivisions determined by
  geographical location (townships, municipalities,
  etc.) are akin to corporate entities, which act
  only through employees
• Political subdivisions comprised of real live
  persons (boards of county commissioners, boards
  of education, etc.) act through the board
  members, who are capable of operating vehicles
  and suffering injury
• Therefore, the definition of an insured under a
  boards policy ( i.e. you) is not ambiguous

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POLITICAL SUBDIVISION (CONT)

• Note The issue of whether employees of
  political subdivisions are insured under their
  employers commercial policies may be addressed
  by the OH SC in Allen v. Johnson (July 3, 2002),
  Wayne App. Nos. 01CA0046 and 01CA0047,
  2002-Ohio-3404, discretionary appeal allowed at
  2002-Ohio-4814

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PARTNERSHIPS/SOLE PROPRIETORSHIPSWHO IS INSURED?

• Query Are employees of partnerships or sole
  proprietorships insured under employers
  policies?
• No, according to many Ohio appellate courts
• You is not ambiguous
• Unlike corporations, partnerships and sole
  proprietorships act through the individual
  partners or proprietor, who are capable of
  operating vehicles and suffering injury

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PARTNERSHIPS/SOLE PROPRIETORSHIPS (CONT)

• Note The issue of whether employees of
  partnerships and/or sole proprietorships are
  insured under their employers commercial
  policies may be addressed by the OH SC in Geren
  v. Westfield Ins. Co. (March 8, 2002), Lucas App.
  No. L-01-1398, 2002-Ohio-1230, discretionary
  appeal allowed at 2002-Ohio-3624

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DOES PONTZER APPLY?

• Many commercial insurers argue that their policy
  language is distinguishable from the policy
  language in Pontzer
• Argument No ambiguous you

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DOES PONTZER APPLY?DRIVE OTHER CARBROADENED
COVERAGE ENDORSEMENT

• Query Is you still ambiguous in commercial
  policies containing a Drive Other CarBroadened
  Coverage endorsement (schedule of specifically
  named insured persons, in addition to the
  corporate named insured)?
• Ohio appellate courts are splitdiscretionary
  appeals/certified conflicts allowed by OH SC in
  Burkhart v. CNA, Westfield v. Galatis, and Geren
  v. Westfield

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DRIVE OTHER CARBROADENED COVERAGE ENDORSEMENT
(CONT)

• But see Shropshire v. EMC/Hamilton Mut. Ins. Co.
  (Oct. 5, 2001), Montgomery App. Nos. 18803 and
  18814, unreported
• Un/underinsured motorist coverage provided by
  operation of law is for the benefit of any named
  insured and any other person, who, by reason of
  his or her relationship to the named insured, is
  also an insured for purposes of liability
  coverage.

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DOES PONTZER APPLY?COVERED AUTO EXCLUSION

• Query Are employees injured outside their
  employment insured under commercial policies
  which limit coverage to you while occupying a
  covered auto (vehicles specifically identified
  by a symbol on the declarations of coverage
  page)?
• Ohio appellate courts are splitcertified
  conflicts and/or discretionary appeals allowed by
  OH SC in Agudo De Uzhca, Admr. V. Derham and
  Estate of Houser v. Motorists Mut. Ins. Co. (June
  4, 2002), Auglaize App. No. 2-02-02,
  2002-Ohio-2845, discretionary appeal and
  certified conflict allowed at 2002-Ohio-5099

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COVERED AUTO EXCLUSION(CONT)

• See, also, Collier v. Citizens Ins. Co. of
  America, (Nov. 27, 2002), Cuyahoga App. No.
  80852, 2002-Ohio-6499
• you includes employees of the corporate
  insured therefore, an auto owned by an employee
  is a covered auto

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DOES PONTZER APPLY?OTHER OWNED AUTO EXCLUSION

• Query Does an other owned auto exclusion
  preclude UM coverage to an employee injured while
  operating his/her own personal vehicle?
• No, according to Agudo De Uzhca, Admr. v. Derham
  (other owned auto exclusions are permissible
  only when the auto is owned by the named
  insured). See, also, Collier v. Citizens Ins.
  Co. of America, concurring opinion.

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OTHER OWNED AUTO EXCLUSION(CONT)

• H.B. 261 (effective 9-3-97) enacted Section (J)
  of R.C. 3937.18, permitting the exclusion of UM
  coverage while the insured is operating or
  occupying a motor vehicle owned by, furnished to,
  or available for the regular use of a named
  insured if the motor vehicle is not
  specifically identified in the policy under which
  a claim is made .
• The ambiguous you makes an employee an
  insured, but not a named insured, who is
  subject to the other owned auto exclusion.

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DOES PONTZER APPLY?

• But . . .,
• S.B. 97 (effective Oct. 31, 2001), supercedes
  Pontzer, requiring that an employee must be
  within the scope and course of employment or
  driving a company auto in order to receive UM
  coverage under the employers commercial
  policies.
• Policies issued or last renewed after Oct. 31,
  2001, are not subject to Pontzer

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OTHER RECURRING PONTZER DEFENSES

• Failure to comply with a policy provision
  requiring prompt notice of a claim
• Release of the tortfeasor without the consent of
  the insurer, and failing to protect the insurers
  subrogation/rights of reimbursement
• Self-Insureds (fronting policies) are not
  subject to the UM statute

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NOTICE

• Query Is an employee excused from complying
  with policy conditions requiring prompt notice of
  an accident prior to the Pontzer decision on June
  23, 1999?
• Ohio appellate courts are splitdiscretionary
  appeal allowed in Ferrando v. Auto Owners Ins.
  Co. (oral argument 10/15/02)
• This question of law has also been certified to
  the OH SC by the U.S. District Court for the So.
  District of OH in National Indemnity Co. v.
  Ryerson, Certified State Law Question No.
  C2-01-0223

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SUBROGATION

• Query Is an employee excused from complying
  with policy conditions requiring the insurers
  consent to settle with the tortfeasor and/or
  protection of subrogation prior to the Pontzer
  decision?
• Ohio appellate courts are splitdiscretionary
  appeal allowed in Ferrando
• Certified State Law Question in National
  Indemnity Co. v. Ryerson

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SUBROGATION (CONT)

• Query Is an employee excused from complying
  with policy conditions requiring the insurers
  consent to settle with the tortfeasor and/or
  protection of subrogation prior to the Pontzer
  decision?
• Ohio appellate courts are splitdiscretionary
  appeal allowed in Ferrando
• Certified State Law Question in National
  Indemnity Co. v. Ryerson

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FRONTING POLICIES

• Query Are self-insurers and/or policies with
  matching liability coverage limits and deductible
  amounts (fronting policies) subject to the UM
  statute?
• Ohio appellate courts are split
• Dalton v. Wilson (an employer that neither
  obtains a certificate of self-insurance nor posts
  a financial responsibility bond is not a
  self-insurer and its insurer is subject to the
  UM statute)
• Rupple v. Moore (the insurer of an employer that
  is self-insured in a practical sense is not
  subject to the UM statute)

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LINKO V. INDEMN. INS. CO. OF N.AM.

• Implication of Linko (released 12/27/00)
• All standard ISO UM offers and rejections are
  probably invalid
• But . . .,
• S.B. 97 (effective 10/31/01) supercedes Linko,
  and abolishes the mandatory offering of UM
  coverage

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LINKO (CONT)

• Query Do the UM rejection requirements of Linko
  apply to policies issued after the enactment of
  H.B. 261 (effective 9/3/97), which included a
  statutory presumption that a rejection of UM
  coverage is valid?
• Ohio appellate courts are splitdiscretionary
  appeals and/or certified conflict in Pillo v.
  Stricklin and Purvis v. Cincinnati Ins. Co.
• Certified State Law Questions in Kemper v.
  Michigan Millers Mut. Ins. Co. and in National
  Indemnity Co. v. Ryerson

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CGL/UMBRELLA POLICIES

• Query Are CGL and commercial umbrella policies
  providing coverage for parking an auto and for
  transportation of mobile equipment by an auto
  motor vehicle liability policies that are subject
  to the UM statute?
• Yes (pre-H.B. 261 policies), according to
  Burkhart v. CNA and German v. Therm-O-Disc,
  certified conflicts and discretionary appeals to
  OH SC allowed

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CGL/UMBRELLA POLICIES (CONT)

• BUT . . .
• H.B. 261 (effective 9/3/97) provides that a
  motor vehicle liability insurance policy that
  is subject to R.C. 3937.18 is any policy that
  serves as proof of financial responsibility per
  R.C. 4509.01
• Query Do CGL and umbrella policies issued after
  H.B. 261 provide UM coverage by operation of law?
• No, according to all Ohio appellate courts that
  have considered the issue to date.

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HOMEOWNERS-TYPE POLICIES

• BODILY INJURY LIAB. COVERAGE FOR MOTOR VEHICLES
  IS EXCLUDED
• Policies then undefine Motor Vehicle
• Non-owned recreational vehicles used on an
  insured location are not excluded
• Bodily injury to residence employee while
  operating a motor vehicle in the scope of
  employment by an insured is not excluded

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HOMEOWNERS-TYPE POLICIES(CONT)

• 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. Selander.

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HOMEOWNERS-TYPE POLICIES (CONT)

• 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

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HOMEOWNERS-TYPE POLICIES(CONT)

• Davidson v. Motorists Mut. Ins. Co. (released
  April 16, 2001)
• Syllabus
• A homeowners insurance policy that provides
  limited liability coverage for vehicles that are
  not subject to motor vehicle registration and
  that are not intended to be used on a public
  highway is not a motor vehicle liability policy
  and is not subject to the requirement of former
  R.C. 3937.18 to offer uninsured and underinsured
  motorist coverage.

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HOMEOWNERS-TYPE POLICIES(CONT)

• Davidson, at 268 Selander clarified and
  distinguished
• Selander stands only for the proposition that
  UM/UIM coverage is to be offered where a
  liability policy of insurance expressly provides
  for coverage for motor vehicles without
  qualification as to design or necessity for motor
  vehicle registration.

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HOMEOWNERS-TYPE POLICIES(CONT)

• What about the argument that the Davidson policy
  provides liability coverage for injury to a
  residence employee while operating a motor
  vehicle in the scope of employment?
• Davidson, at footnote 2
• Because this argument was not raised in either
  the trial court or the court of appeals, we
  decline to address it.

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HOMEOWNERS-TYPE POLICIES

• BUT, . . .Lemm v. The Hartford (October 4,
  2001), Franklin App. No. 01AP-251, unreported
  pre-H.B. 261 policy conflict certified by Ohio
  Supreme Court at 93 Ohio St.3d 1474 (oral arg
  10/15/02) on the following issue
• When a homeowners insurance policy provides
  express liability for damages arising from a
  motor vehicle accident when the injured party is
  the homeowners residence employee and the injury
  occurred in the course of that employment, is the
  policy deemed an automobile liability or motor
  vehicle policy subject to the requirement of
  former R.C. 3937.18 to offer UM/UIM coverage?

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HOMEOWNERS-TYPE POLICIES

• QUERY Are homeowners policies providing motor
  vehicle coverage for residence employees and
  issued after the effective date of H.B. 261
  (9/3/97) motor vehicle liability insurance
  policies that are subject to R.C. 3937.18?
• No, according all Ohio appellate courts.
• See Jones v. Nationwide Ins. Co. (July 23, 2001),
  Stark App. No. 2000CA0329, discretionary appeal
  to OH Sup. Ct. allowed at 93 Ohio St.3d 1496
  (stayed pending Lemm, a pre-HB 261 policy).

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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.

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TWO-YEAR UM/UIM COVERAGE GUARANTEE

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

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WOLFE v. WOLFE

• Query
• Does Wolfe apply equally to commercial policies
  and personal/consumer policies?
• Yes, according to Shropshire v. Hamilton Mut.
  Ins. Co. (October 5, 2001), Montgomery App. Nos.
  18803 and 18814 and Carper v. Valley Forge Ins.
  Co. (March 20, 2002), U.S. Dist. Court (S. D. OH)
  No. C-1-01-281
• Not to policies insuring more than 4 vehicles,
  according to Zurcher v. National Surety Corp.
  (February 25, 2002), Stark App. No. 2001CA00197

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WOLFE v. WOLFE (CONT)

• But . . .,
• S.B. 267 (effective 9/21/00) added R.C.
  3937.18(E)
• Insurers are permitted to change policies during
  the two-year guarantee period so long as those
  changes are in accordance with subsequent
  statutory changes
• S.B. 267 also changes R.C. 3937.18(C)
• Eliminates requirement of an additional mandatory
  offering/express rejection (or reduction) of
  UM/UIM coverage

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TWO-YEAR UM/UIM COVERAGE GUARANTEE

• Potential implication of Wolfe
• 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)

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CONCLUSION

• Virtually every UM issue addressed herein is
  squarely before the current Ohio Supreme Court,
  and ripe for decision.
• Look for the current OH SC to issue decisions on
  these issues by the end of December 2002.