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]
• E-mail bob_at_rwklaw.com

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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

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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 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

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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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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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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.

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

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LINKO HOLDINGS (CONT)

• 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 and
• c) A written statement of the
• coverage limits

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LINKO HOLDINGS (CONT)

• A valid offer of UM coverage must
• contain the name of each named insured under the
  policy
• A valid rejection of UM coverage must contain the
  signature of each named insured under the policy
  and

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LINKO HOLDINGS (CONT)

• 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.

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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!

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IMPLICATION OF LINKO 2

• DOES LINKO SURVIVE H.B. 261S 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

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IMPLICATION OF LINKO 3

• LOOK FOR THE OHIO GENERAL ASSEMBLY TO
  LEGISLATIVELY OVERRULE LINKO

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UM COVERAGE BY OPERATION OF LAW

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

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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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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.
• ORAL ARGUMENT 11/29/00

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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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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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APPLICATION OF AMENDMENTS TOR.C. 3937.18

• ARE THE UM FLOOD GATES OPENED OR CLOSED?
• S.B. 267 MAY BE APPLIED ONLY PROSPECTIVELY (AFTER
  9/21/00)

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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

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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

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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

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PENDING CASES

• Littrell v. Wigglesworth, Case Nos. 00-745 and
  00-801
• Issue Does a wrongful death beneficiary have
  UIM coverage when the tortfeasors 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

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PENDING CASES

• Holeton v. Crosse Cartage, Case No. 00-428
• Issue Is Ohios workers compensation
  subrogation statute constitutional?
• Oral Argument 10/10/00