Ohio Rides Rollercoaster On AutoLaw

The Kingston Trio prefaced their song about the Boston trainsystem: “Citizens of Boston, hear me out. This could happen toyou!” While we here in Ohio are not riding forever beneath thestreets of Boston, we have been riding on an endless rollercoasterof highs, lows, twists and turns.

Last autumn, it appeared the rollercoaster ride would abruptlyterminate with the decision of many insurers to stop writing newuninsured and underinsured motorist coverage in the state. What ledto this decision, a reconsideration, and what leaves Ohio residentswondering if the ride is truly at an end is the subject of thisFC&S column.

Many years ago, the Ohio legislature put Ohio Revised Code3937.18 in place. The intent was to provide Ohio motorists with away to protect themselves against uninsured or underinsuredmotorists.

Offering the coverages was mandatory. Both uninsured andunderinsured coverage had to equal the insureds bodily injuryliability coverage. A named insured could accept, reject, or selectlower limits of coverage than the auto liability limits selected.Rejection had to be signed by the named insured.

ORC 3937.18 stated, in effect, that no automobile policy or autoliability policy could be issued in the state without including anoffer of uninsured and underinsured motorist coverage.

Now, the intent may have been clear to most people, but thewording left the Ohio Supreme Court with much scope for somefar-reaching interpretation. Some even held that the court begandoing some legislating on its own.

For a start, “motor vehicle” was not defined. And while the caseof Delli Bovi v. Pacific Indemnity determined that ahelicopter was not a motor vehicle, three justices based a dissenton the fact that the Ohio Assembly, in an earlier attempt to reinin the court, had not made an exception for aircraft in the ORC,although it could have done so.

The failure to define a motor vehicle also led to the result inGoettenmoeller v. Meridian Mutual Ins. Co., where the OhioSupreme Court said that ORC 3937.18 does not contain any specificdefinition. The court ruled that the meaning of “motor vehicle” asused in ORC 3937.18 is defined in ORC 4501.01 (B) as any vehicle,including manufactured homes and recreational vehicles, propelledor drawn by power other than muscular power or power collected fromoverhead electric trolley wires.

An exception was made for farm machinery, as well as trailersused to transport agricultural produce or agricultural productionmaterials between a local place of storage or supply and the farm,when drawn or towed on a public road or highway at a speed of 25miles per hour or less, as well as machinery used in the productionof horticultural, agricultural and vegetable products.

Thus, “motor vehicle” for purposes of ORC 4501.01 (B) and3937.18 includes recreational vehicles, but does not include farmmachinery.

In other words, a homeowners or farmowners policy was now amotor vehicle policy, and thus insurers were forced to offeruninsured/underinsured motorist coverage. A 1984case–Cincinnati Insurance Co. v. Siemens–had alreadyforced umbrella insurers to offer the coverage.

Perhaps insurers could have lived with this, but more was tofollow. Along came Scott-Pontzer v. Liberty Mutual Fire Ins.Co.

Christopher Scott was driving an auto owned by his wife when hewas killed by another driver. His wife brought action against herhusbands employers auto insurer, alleging that because he was anemployee at the time of the accident (although he was not in thecourse of his employment) she was entitled to underinsured motoristbenefits.

The trial court disagreed. He was not a named insured, and wasnot driving a covered auto.

The appeals court said that as an employee, Mr. Scott was aninsured, but there was no coverage because he was not within thecourse of his employment.

The case went to the state Supreme Court, which said that ORC3937.18 was designed to protect persons, not vehicles. Acorporation can act only through persons, and it would be absurd tothink of a corporation itself occupying an auto.

Therefore, naming the corporation as a named insured wasmeaningless unless coverage extended to persons–the employees.Further, the policy language did not specify that an employee hadto be in the course of employment to receive coverage. Therefore,the wife was able to claim UM/UIM benefits.

Linko v. Insurance Company of North America tested whatconstituted a valid rejection of UM/UIM coverage. The court saidthat a valid rejection could only follow a valid offer of coverage,which had to include a premium quotation for the coverage, a briefdescription, and an express statement of the limits. (Nowhere didthe ORC require this.) Failing this, no rejection could bevalid.

Further, in the case of a corporation with other subsidiaries,the parent company did not have authority to reject or select alimit for the subsidiary unless written authorization was obtainedprior to the rejection.

Selander v. Erie Insurance Group found that abusinessowners policy endorsement providing hired and nonowned autocoverage was sufficient to force UM/UIM by operation of law. Wherecoverage was provided even in limited form, UM/UIM had to beoffered.

Davidson v. Motorists Mutual Insurance Co. looked atthe appellate courts reliance on Goettenmoeller andSelander, above, to find for the insurer.

The court said that Selander had specifically providedliability coverage for the use of autos, whereas the motoristspolicy in question was a homeowners policy, and “we never intendedSelander to be used to convert every homeowners policyinto a motor vehicle liability policy whenever any incidentalcoverage is afforded for some specified motorized vehicle.”

But by then, the plaintiffs bar was happily attempting justthat. For example, in Vohsing v. Auto Owners InsuranceCompany, the plaintiffs said that because the homeownerspolicy provided limited coverage for liability to a residenceemployee arising out of the use of a motor vehicle, that shouldtrigger UM/UIM coverage. The court held otherwise.

The Ohio Assembly attempted to take matters in hand (which ithad done before, but with unsatisfactory results from thelegislative point of view) when consumers were faced with insurerswithdrawing from the state.

Thus, Senate Bill 97 became effective Oct. 31, 2001, for newbusiness. For renewal business, it took effect the first renewalfollowing this date.

The bill (now ORC Ann. 3937.18) eliminates any requirement tooffer UM/UIM. “Motor vehicle” is defined and specifically does notinclude an aircraft.

The holdings of the state Supreme Court in Linko andScott-Pontzer (among others) were superseded. A three-yearstatute of limitations for filing UM/UIM claims wasestablished.

Insurers can now include terms and conditions that limit UM/UIMcoverage for employees, unless specifically provided in the policy.Rejection forms are no longer required.

Although insurers have breathed a sigh of relief and havere-entered the state, unanswered questions remain, such as whathappens if SB 97 is ruled invalid and there are no rejection formsin file?

The rollercoaster ride continues

Diane Richardson, CPCU, is associate editor of the FC&SBulletins, published by the National Underwriter Company inErlanger, Ky. The FC&S editors welcome comment and questions,and may be reached by fax at 859-692-2293 or via e-mail at[email protected].

Reproduced from National Underwriter Property &Casualty/Risk & Benefits Management Edition, August 12, 2002.Copyright 2002 by The National Underwriter Company in the serialpublication. All rights reserved.Copyright in this article as anindependent work may be held by the author.