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UN/UNDERINSURED MOTORIST LAW UPDATE DECEMBER 4, 2002

UN/UNDERINSURED MOTORIST LAW UPDATE DECEMBER 4, 2002. 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) 242-4180 Email: bob@rwklaw.com. UM/UIM LAW UPDATE TOPICS:.

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UN/UNDERINSURED MOTORIST LAW UPDATE DECEMBER 4, 2002

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  1. 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: (614) 242-1000 Facsimile: (614) 242-4180 Email: bob@rwklaw.com

  2. 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?

  3. AMENDMENTS TO RC. 3937.18

  4. AMENDMENTS TO RC. 3937.18(CON’T)

  5. 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

  6. DOES OHIO LAW (PONTZER) APPLY? (CON’T) • 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

  7. DOES OHIO LAW (PONTZER) APPLY? (CON’T) • See Agudo De Uzhca, Admr. V. Derham (April 5, 2002, Montgomery App. No. 19106, 2002-Ohio-1814: • Holding: Henderson rule—not Ohayon rule—governs 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

  8. 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 persons—its employees; therefore, the corporation and its employees are insureds

  9. CORPORATION NAMED INSURED:WHO 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

  10. CORPORATION NAMED INSURED:WHO IS INSURED? (CON’T) • 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.

  11. 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

  12. OUTSIDE SCOPE OF EMPLOYMENT(CON’T) • 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

  13. 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 persons—its employees • Political subdivisions are not statutorily prohibited from purchasing UM coverage, which covers employees acting outside of their employment

  14. POLITICAL SUBDIVISION (CON’T) • 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 board’s policy ( i.e. “you”) is not ambiguous

  15. POLITICAL SUBDIVISION (CON’T) • 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

  16. PARTNERSHIPS/SOLE PROPRIETORSHIPS:WHO 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

  17. PARTNERSHIPS/SOLE PROPRIETORSHIPS (CON’T) • 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

  18. DOES PONTZER APPLY? • Many commercial insurers argue that their policy language is distinguishable from the policy language in Pontzer • Argument: No ambiguous “you”

  19. DOES PONTZER APPLY?“DRIVE OTHER CAR—BROADENED COVERAGE” ENDORSEMENT • Query: Is “you” still ambiguous in commercial policies containing a “Drive Other Car—Broadened Coverage” endorsement (schedule of specifically named insured persons, in addition to the corporate named insured)? • Ohio appellate courts are split—discretionary appeals/certified conflicts allowed by OH SC in Burkhart v. CNA, Westfield v. Galatis, and Geren v. Westfield

  20. “DRIVE OTHER CAR—BROADENED COVERAGE” ENDORSEMENT (CON’T) • 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.

  21. 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 split—certified 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

  22. “COVERED AUTO” EXCLUSION(CON’T) • 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”

  23. 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.

  24. “OTHER OWNED AUTO” EXCLUSION(CON’T) • 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.

  25. 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 employer’s commercial policies. • Policies issued or last renewed after Oct. 31, 2001, are not subject to Pontzer

  26. 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 insurer’s subrogation/rights of reimbursement • Self-Insureds (“fronting policies”) are not subject to the UM statute

  27. 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 split—discretionary 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

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

  29. SUBROGATION (CON’T) • Query: Is an employee excused from complying with policy conditions requiring the insurer’s consent to settle with the tortfeasor and/or protection of subrogation prior to the Pontzer decision? • Ohio appellate courts are split—discretionary appeal allowed in Ferrando • Certified State Law Question in National Indemnity Co. v. Ryerson

  30. 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)

  31. 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

  32. LINKO (CON’T) • 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 split—discretionary 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

  33. 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

  34. CGL/UMBRELLA POLICIES (CON’T) 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.

  35. 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 isnot excluded

  36. HOMEOWNERS-TYPE POLICIES(CON’T) • 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.

  37. HOMEOWNERS-TYPE POLICIES (CON’T) • UNDISPUTED: --UM/UIM coverage was notoffered and expressly rejected by insured. • Therefore, the policy provides UM/UIM coverage by operation of R.C. 3937.18

  38. HOMEOWNERS-TYPE POLICIES(CON’T) • Davidson v. Motorists Mut. Ins. Co. (released April 16, 2001): • Syllabus: • “A homeowner’s 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.”

  39. HOMEOWNERS-TYPE POLICIES(CON’T) • 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.”

  40. HOMEOWNERS-TYPE POLICIES(CON’T) • 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.”

  41. 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 homeowner’s insurance policy provides express liability for damages arising from a motor vehicle accident when the injured party is the homeowner’s 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?”

  42. 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).

  43. 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.

  44. 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

  45. 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

  46. WOLFE v. WOLFE (CON’T) • 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

  47. 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)

  48. 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.

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