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King v. Nationwide Ins. Co. (1988), 35 Ohio St. 3d 208. The named insured of the Nationwide policy was issued to a corporation. However, for purposes of UDM coverage, the policy defined "insured" to include "relatives living in your household." The Court held that the policy provision was ambiguous, and provided coverage for the employees of the corporation. Since this provision could be interpreted to mean all corporate employees or only designated employees, the phrase "relatives living in your household" was ambiguous and construed in favor of the insured.
Scott-Pontzer v Liberty Mutual (1999), 85 Ohio St. 3d 660: Liberty Mutual issued an automobile policy to the plaintiff's employer, a corporation. The policy defined insureds to include 1) you (the named insured corporation); and 2) if you are an individual, your relatives. The "if you are an individual" phrase was obviously intended to circumvent the outcome in King. Nevertheless, the Court held that the plaintiff was entitled to coverage because the word "you" was ambiguous when applied to a corporation. The Court reasoned that "you" could be construed to mean employees of the corporation sense it is nonsensical to provide bodily injury insurance to a corporation.
Scott-Pontzer does not apply when the employer is a political subdivision, such as a school board. The ability of political subdivisions to purchase insurance is subject to statutory restrictions. These statutes permit the purchase of insurance for negligent acts of employees, but only while the employee is in the scope of employment. Accordingly, a finding that the policy purchased by the political subdivision covers employees while they are not working runs counter to these statutory restrictions.
For the most part Courts have refused to accept the Defense Argument. Several of the cases rejecting this argument are as follows:
This defense arises in one of two situations. First, the plaintiff is an employee in an Ohio branch office of an out-of-state corporation. The named insured on the corporate policy is the out-of-state corporation, and the policy itself was negotiated and issued in the state of the home office.
In the second situation, the plaintiff is an employee of an Ohio corporation which is a wholly owned subsidiary of a larger out-of-state corporation. The parent corporation is the named insured on an insurance policy which covers, usually by endorsement, all of the subsidiary corporations.
In either case, the policy is often an extensive "national policies" with separate endorsements tailored to the unique insurance requirements of all 50 states. Somewhere in the pile of forms and endorsements is an Ohio Uninsured Motorist Coverage endorsement which contains the ambiguous Scott-Pontzer language.
When the named insured under the policy is an out-of-state corporation, the defense argument goes as follows:
Ohio insurance law, i.e. Scott-Pontzer, should not be used to interpret the coverage afforded under the policy. Instead, the Ohio Supreme Court's decision in Ohayon v Safeco Ins. (2001), 91 Ohio St.3d 474, demands application of the law of the state with the most significant contacts with the insurance contract, i.e., the state where the policy was negotiated, issued, etc. Since the policy was negotiated and issued outside Ohio, and the foreign state has not recognized any Scott-Pontzer ambiguity, no coverage is available to corporate employees while not working in the scope of employment.
Henderson v. Lincoln Natl. Specialty Ins. Co. (1994), 68 Ohio St.3d 303: R.C. 3937.18 applies to motor vehicle liability insurance policy covering vehicles registered and principally garaged in Ohio, even when policy was not delivered or issued for delivery in Ohio by insurer.
Devore v Richmond (July 27, 2001), Wood C.P. No. 99CV527, unreported: The named insured had Indiana address and insurance company was also located in Indiana. However, the insured's principle place of business was in Ohio, and the covered vehicles were principally garaged in Ohio. Therefore, Ohio law applies.
Cincinnati Ins v Simpson (March 23, 2001), Wood C.P. No. 99 CV 302, unreported: The employer was a Michigan corporation. The plaintiff was the minor child of an employee. The corporate auto policy was negotiated, purchased, and issued in Michigan. However, the policy included an Ohio uninsured motorist endorsement. Further, the accident that gave rise to the claim occurred in Ohio. Held: In applying the choice of law test for contracts, Ohio law applies.
Caylor v Pacific Employers (August 3, 2001), Miami C.P. No. 99-400, unreported, Entry on Motion for Summary Judgment with respect to CIGNA: Plaintiff worked in the Ohio office of an out-of-state corporation. The policy was a national policy intending to cover vehicles in Ohio. The insurer attempted to obtain a rejection of Ohio UDM coverage. Held: Ohio law applies. The insurer implicitly choose Ohio law by covering Ohio vehicles and attempting to get a rejection under Ohio law.
Probably in an effort to cut costs, corporations often request policies with Ohio UDM coverage either removed or substantially reduced. Of course, because the offering of UDM coverage is mandated by statute, Courts have defined certain requirements which must be met as a condition for removing or reducing UDM coverage from a policy. Those statutory requirements were greatly eased by the enactment of the H.B. 261 amendment to R.C. 3937.18, effective September 3, 1997. Accordingly, the plaintiff's ability to challenge a rejection or reduction of UDM coverage is greatly enhanced if the pre-H.B. 261 version of the statute applies to his or her particular claim.
Pre-HB 261: Two pre-H.B. 261 Ohio Supreme Court cases invalidated nearly every attempt to reject or reduce UDM coverage in Ohio: Gyori v. Johnston Coca-Cola Bottling Group (1996), 76 Ohio St.3d 565, and Linko v. Indemn. Ins. Co. of N. Am. (2000), 90 Ohio St.3d 445. Linko and Gyori imposed the following requirements for rejecting/reducing UDM coverage:
Practically no insurer followed all of these rules.
Post H.B. 261: In summary, HB 261 changed the requirements for rejecting or reducing uninsured motorist coverage by 1) allowing an applicant, in addition to the named insured, to sign the rejection; 2) making the rejection by one named insured or applicant effective as to all other insureds under the policy; and 3) creating a presumption that uninsured motorist coverage was validly offered if the coverage was properly rejected. Relying upon Hindall v Winterhur (March 29, 2001), 2001 WL 339459 (N.D.Ohio), the defense argues that H.B. 261 completely overruled Linko and Gyori. The defense especially emphasizes that H.B. 261 creates a presumption that a written rejection of coverage creates a presumption that UDM coverage was validly offered.
Certainly, many of the holdings of H.B. 261 were superceded by the H.B. 261 amendment. Regrettably, little law exists about whether the amendment overruled the Linko holding that the insured must be told the premium and the coverage limit for UDM. Attached as Appendix A is a portion of a memorandum arguing that certain portions of Linko/Gyori survive H.B. 261.
In many commercial policies, the insured is given the option to insure certain categories of vehicles. These categories are usually designated on the declarations page as a numeric code. The code is usual defined in the main coverage form. For example "1" may mean coverage for "any auto" and "6" may mean "owned autos only". This defense most often arises when the corporate policy provides UDM coverage for "owned autos only". The defense argues that UDM coverage does not apply unless the accident involves an auto owned by the named insured corporation.
Generally, there is not much substance to this argument. The typical Scott-Pontzer policy defines insured to include 1) You; 2) if you are an individual, relatives living in you household; 3) anyone else while occupying a "covered auto". Therefore, only paragraph 3) definition of "insured" requires the use of a "covered auto". Employees, on the other hand, qualify as insureds under paragraph 1) in which there is no requirement that a "covered auto" be involved in the accident.
Dukeshire v Dick (Nov 22, 2000), Sandusky C.P. No. 99CV686, unreported. The court rejected the insurance companies' argument that no coverage was available because the employee, at the time of the accident, was not occupying a "covered auto". UDM coverage is to protect persons, not vehicles.
Entities that are "self-insured" or "practically self-insured", pursuant to Grange Mut. Ins. Co. v. Refiners Transport (1986), 21 Ohio St.3d 47, are not required to comply with R.C. 3937.18. Therefore, corporations which carry policies with substantial self-insured retentions, or which have separate reimbursement agreements with their insurer, are not required to comply with the technical requirements of offering and rejecting UDM coverage. See Lafferty v. Reliance Ins. 109 F.Supp.2d 837 (SD Ohio ED, 7-17-2000).
Brief and decision in Pope v. National Union Fire Ins. Co., Summit C.P. No. 1999 11 4676, unreported, (1-10-2001 Magistrate decision; 3-13-2001 Magistrate decision; and 6-18-2001 Order Adopting Both Decisions): 1-10-01 Decision: If a self-insured offers UDM coverage, even though it may not be required to do so, it is obligated to comply with the statutory requirements for doing so. Additionally, an improper rejection when signed (pre-H.B. 261) is not transformed into a valid rejection in subsequent, post H.B. 261 policies.
Roberts v State Farm (June 7, 2001) Montgomery C.P. No. 00-CV-0886, unreported: The plaintiff was employed by Emery. Emery is the named insured on a policy issued by National Union. Emery's rejection of coverage failed to satisfy the Linko requirements. (No premium stated). Emery set up Emery Insurance Co Ltd to reimburse National Union for the first $500,000 of loss via a "facultative reinsurance agreement" between Emery and National Union. Under these facts, the court held that Emery is not self-insured "in the practical sense". Held: "[T]hese 'devices' [are] to provide Emery the use of National Union's filings and claims service, but they do not paralyze or mute the walking and quacking duck of insurance coverage". p. 11. (This holding is somewhat limited in that it emphasizes that Emery bears no risk. The risk is assumed by Emery Insurance or National Union. But the court does note that Emery does not qualify under R.C. 4509.45(E) or 4509.72 as self-insured. p. 9).
Caylor v Pacific Employers (August 3, 2001), Miami C.P. No. 99-400, unreported: Held that a corporate policy with a deductible equal to the limit of liability is not a self-insured fronting agreement.
In Scott-Pontzer, the policy was found to be ambiguous because the named insured was a corporation, and uninsured motorist coverage does not make sense unless it applies to people. Many corporate policies do, however, incorporate individuals as insureds, either directly or indirectly. In some cases, the named insureds on the declarations page include corporations and individuals. In other cases, individuals are included as insureds by endorsement. Some policies provide "Broadened Coverage" for groups of individuals such as "executive officers". In any event, if the policy includes one or more individuals as "insureds", the it does not suffer from the Scott-Pontzer ambiguity.
Martin v. Chubb (ND Ohio ED undated): The corporate policy, issued by Chubb, included a "Drive Other Car Coverage - Broadened Coverage for Named Individuals" endorsement which had a schedule of individual insureds. The court held that the endorsement did not make "you" unambiguous as to the corporate named insured.
Kasson v. Goodman (9-25-2001), Lucas C.P. No. CI-00 1682, unreported: The declarations sheet listed as named insureds two corporations and two individuals. The court held that the 2 individual named insureds does not make the term "you" unambiguous.
Rimel v Chubb Group (Oct. 31, 2000), Stark C.P. No. 1999CV02413, unreported: The named insured on the declarations page included three corporations and two individuals. The court held that the presence of the two individual named insureds did not make the policy less ambiguous.
Miller v. The Hartford (6-14-01), Lake C.P. 00CV0011234, unreported. An individual named insured does not make unambiguous "you" in the context of the corporate named insureds.
H.B. 261, effective September 3, 1997, in many respects eased the requirements for providing UDM coverage. Insurers will argue that H.B. 261 applies with respect to any policy issued after the effective date of the amendment. Ross v. Farmers Ins. Group of Cos. (1998), 82 Ohio St.3d 281. Insurers have also introduced policy endorsements in an effort to clarify the ambiguity identified in the Scott-Pontzer decision.
Plaintiffs, on the other hand, argue that the rights and obligations under an automobile insurance policy may not be altered by statutory amendment during the policy's two year guarantee period pursuant to Wolfe v. Wolfe (2000), 88 Ohio St. 3d 246. Accordingly, if the H.B. 261 amendment became effective during the policy's guarantee period, then the rights of the parties are still governed by the pre-H.B. 261 amendment. By the same token, any anti-Scott-Pontzer endorsement introduced during the guarantee period will also not be effective.
The insurance company response is that Wolfe v. Wolfe does not apply to commercial policies because the statute which prescribes the guarantee period, R.C. 3937.31, applies only to personal policies. See, R.C. 3937.30.
The following common pleas court decisions have found that the two year guarantee period applies to commercial policies: Devore v Richmond (July 27, 2001), Wood C.P. 99 CV 527, unreported; Lescher v. State Auto (September 19, 2000), Erie C.P. No. 97 CV 024, unreported.
Usually, the plaintiff seeking UDM coverage under his or her employer's policy is occupying their own automobile at the time of the accident. Accordingly, insurers argue that UDM coverage is excluded by the policy's "other owned auto" exclusion, an example of which is as follows:
This insurance does not apply to:
Bodily injury sustained by an insured while the insured is operating or occupying a motor vehicle owned by, furnished to, or available for the regular use of a named insured, a spouse, or a resident relative of a named insured if the motor vehicle is not specifically identified in the policy under which the claim is made. . .
Kasson v. Goodman (9-25-2001), Lucas C.P. No. CI00-1682, unreported: The "other owned auto" exclusion did not apply because it applied only to vehicles owned by the named insured, i.e. plaintiff was an insured, but not a named insured. See p. 10.
Headley v Grange Guardian Ins. Co. (June 18, 2001), Mahoning CP No. 00-CV-1153, unreported: The policy's "other owned auto exclusion" provided as follows:
The insurance does not apply to:
4) Bodily Injury sustained by
a. You while 'occupying' a vehicle owned by you that is not a covered auto. The term you refers to the named insured throughout.
Holding: the employee is an insured, but not the named insured. Therefore, the other owned auto exclusion does not apply.
The Plaintiff settled with the tortfeasor, and thus destroyed the UDM carrier's subrogation rights, without obtaining consent of the Scott-Pontzer carrier. Therefore, no coverage is available.
Howard v State Auto (March 14, 2000), Franklin App. No. 99AP-577, unreported: Held that the following consent to settle clause was void because it was too confusing:
A. We do not provide Uninsured/Underinsured Motorists Coverage for bodily injury sustained by any person:
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2. If that person or the legal representative settles the bodily injury claim without our consent. This exclusion (A.2.) does not apply to a settlement made with the insurer of a vehicle described in Section 2. of the definition of uninsured/underinsured vehicle.
An uninsured/underinsured vehicle is defined in Section 2 as a land motor vehicle or trailer of any type:
2. To which a bodily injury liability bond or policy applies at the time of accident. In this case its limit for bodily injury liability must be:
a. less than the limit of liability for this coverage; or
b. reduced by payments to others injured in an accident to less than the limit of liability for this coverage.
Burkhart v CNA Ins. (July 31, 2001), Stark C.P. No. 2001 CV 00470, 2001 WL 1152821 (Ohio Com.Pl.) Without any helpful explanation, held that the UDM consent provision was ambiguous. See p. *3.
Glen R. Pritchard, Esq.
Updated 11/30/01