UNUNDERINSURED MOTORISTS COVERAGE UPDATE

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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 [phone]
• Facsimile [phone]

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UM/UIM UPDATE TOPICS

• RECENT AMENDMENTS TO R.C. 3937.18
• CREATING UM/UIM COVERAGE
• BY OPERATION OF LAW
• APPLICATION OF AMENDMENTS TO
• R.C. 3937.18
• CIRCUMVENTING UM LEGISLATION

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RECENT AMENDMENTS TO RC. 3937.18
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RECENT AMENDMENTS TO RC. 3937.18

• S.B. 267 (EFFECTIVE 9/21/00)
• INSURED WD BENEFICIARY MUST SUSTAIN BODILY INJURY
• POLICY CHANGES RE STATUTE AMEND OKAY DURING 2-YR
  GUAR PD
• NO NEED TO RE-OFFER UM/UIM COVERAGE AT RENEWAL OF
  POLICY
• OTHER-OWNED AUTO EXCLUSION VOID

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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/UIMCOVERAGE GUARANTEE

• R.C. 3937.31
• 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.

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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 issued
• 1/25/95 Endorsement added (S.B. 20)
• 8/23/95 DOL

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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.

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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

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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

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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?

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Implication of Wolfe v. Wolfe 2

• 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

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Implication of Wolfe v. Wolfe 3

• Wolfe dicta
• Were we to adopt the appellees (insurers)
  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!

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Implication of Wolfe v. Wolfe 4

• 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?

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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

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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

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UM COVERAGE BY OPERATION OF LAW

• Homeowners, Renters, Farmowners Policies
• General Commercial Liability Policies
• Employers Auto/Commercial Policies

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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.

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HOMEOWNERS-TYPE POLICIES

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

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HOMEOWNERS-TYPE POLICIES

• 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.

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HOMEOWNERS-TYPE POLICIES

• 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

• 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.

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HOMEOWNERS-TYPE POLICIES

• 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.

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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 insureds
  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.

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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.

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EMPLOYERS AUTO/COMMERCIAL 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.

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EMPLOYERS AUTO/COMMERCIAL 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 employees
  household are covered under employers UM policy).

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APPLICATION OF AMENDMENTS TOR.C. 3937.18

• Are the UM flood gates opened or closed?

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UM COVERAGE BY OPERATION OF LAW

• 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

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UM COVERAGE BY OPERATION OF LAW

• 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

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UM COVERAGE BY OPERATION OF LAW

• 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.

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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), 88
  Ohio 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.

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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

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AUTO INSURERS AT WORK

• RUMOR
• Effective 5/15/00, some State Farm automobile
  insurance policies will provide bodily injury
  liability coverage of only 12.5K/25K for
  permissive users of its insured vehicles,
  regardless of the amount of BI coverage on the
  named insureds

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LIMITING WD CLAIMS TO PER PERSON LIMITS

• CURRENTLY BEFORE OH SUP CT
• Clark v. Scarpelli, S. Ct. No. 00-374.
• Issue Whether an automobile insurer may limit
  recovery in a wrongful death claim to the per
  person limits of UM coverage?
• ORAL ARGUMENT 11/29/00

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AVAILABLE FOR PAYMENT

• Decedent survived by wife and 2 children
• Tortfeasor has liab. coverage of 100K
• Decedent has UIM coverage of 300K
• QUERY
• How much UIM coverage is available to each
  next-of-kin?

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AVAILABLE FOR PAYMENT

• Insurers position (after S.B. 20)
• 300K - 100K 200K of UIM for all claims
• Derr v. Westfield Cos. (1992), 63 Ohio St.3d 537
• If one next-of-kin receives only 33K from the
• tortfeasor, then entitled to UIM of 266K
• Set off the 33K received from the tortfeasor,
  not
• the 100K of liab. cov. available to all
  claimants

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AVAILABLE FOR PAYMENT

• Derr v. Westfield Cos. and Motorists Mut. Ins.
  Co. v. Andrews (1992), 65 Ohio St.3d 362
• Were Derr/Andrews legislatively overruled by
  S.B. 20?
• Issue is currently pending before the OH Supreme
  Courtmaybe.

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AVAILABLE FOR PAYMENT

• AUGUST 2, 2000
• Littrell v. Wigglesworth (March 13, 2000), Butler
  App. Nos. CA99-05-092, CA99-08-141, unreported
• Accepted 8/2/00 by OH Supreme Court on
  discretionary appeal and certified conflict

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IS S.B. 20 CONSTITUTIONAL?

• ALL OHIO SUPREME COURT CASES WITH THIS ISSUE HAVE
  EITHER BEEN RESOLVED ON OTHER GROUNDS OR ORDERED
  STAYED PENDING A DECISION IN LITTRELL
• S.B. 20 IS PROBABLY HERE TO STAY!