Ohio Rides Rollercoaster On Auto Law

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

Last autumn, it appeared the rollercoaster ride would abruptly terminate with the decision of many insurers to stop writing new uninsured and underinsured motorist coverage in the state. What led to this decision, a reconsideration, and what leaves Ohio residents wondering if the ride is truly at an end is the subject of this FC&S column.

Many years ago, the Ohio legislature put Ohio Revised Code 3937.18 in place. The intent was to provide Ohio motorists with a way to protect themselves against uninsured or underinsured motorists.

Offering the coverages was mandatory. Both uninsured and underinsured coverage had to equal the insureds bodily injury liability coverage. A named insured could accept, reject, or select lower 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 auto liability policy could be issued in the state without including an offer of uninsured and underinsured motorist coverage.

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

For a start, “motor vehicle” was not defined. And while the case of Delli Bovi v. Pacific Indemnity determined that a helicopter was not a motor vehicle, three justices based a dissent on the fact that the Ohio Assembly, in an earlier attempt to rein in 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 in Goettenmoeller v. Meridian Mutual Ins. Co., where the Ohio Supreme Court said that ORC 3937.18 does not contain any specific definition. The court ruled that the meaning of “motor vehicle” as used in ORC 3937.18 is defined in ORC 4501.01 (B) as any vehicle, including manufactured homes and recreational vehicles, propelled or drawn by power other than muscular power or power collected from overhead electric trolley wires.

An exception was made for farm machinery, as well as trailers used to transport agricultural produce or agricultural production materials 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 25 miles per hour or less, as well as machinery used in the production of horticultural, agricultural and vegetable products.

Thus, “motor vehicle” for purposes of ORC 4501.01 (B) and 3937.18 includes recreational vehicles, but does not include farm machinery.

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

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

Christopher Scott was driving an auto owned by his wife when he was killed by another driver. His wife brought action against her husbands employers auto insurer, alleging that because he was an employee at the time of the accident (although he was not in the course of his employment) she was entitled to underinsured motorist benefits.

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

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

The case went to the state Supreme Court, which said that ORC 3937.18 was designed to protect persons, not vehicles. A corporation can act only through persons, and it would be absurd to think of a corporation itself occupying an auto.

Therefore, naming the corporation as a named insured was meaningless unless coverage extended to persons–the employees. Further, the policy language did not specify that an employee had to 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 what constituted a valid rejection of UM/UIM coverage. The court said that a valid rejection could only follow a valid offer of coverage, which had to include a premium quotation for the coverage, a brief description, and an express statement of the limits. (Nowhere did the ORC require this.) Failing this, no rejection could be valid.

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

Selander v. Erie Insurance Group found that a businessowners policy endorsement providing hired and nonowned auto coverage was sufficient to force UM/UIM by operation of law. Where coverage was provided even in limited form, UM/UIM had to be offered.

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

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

But by then, the plaintiffs bar was happily attempting just that. For example, in Vohsing v. Auto Owners Insurance Company, the plaintiffs said that because the homeowners policy provided limited coverage for liability to a residence employee arising out of the use of a motor vehicle, that should trigger UM/UIM coverage. The court held otherwise.

The Ohio Assembly attempted to take matters in hand (which it had done before, but with unsatisfactory results from the legislative point of view) when consumers were faced with insurers withdrawing from the state.

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

The bill (now ORC Ann. 3937.18) eliminates any requirement to offer UM/UIM. “Motor vehicle” is defined and specifically does not include an aircraft.

The holdings of the state Supreme Court in Linko and Scott-Pontzer (among others) were superseded. A three-year statute of limitations for filing UM/UIM claims was established.

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

Although insurers have breathed a sigh of relief and have re-entered the state, unanswered questions remain, such as what happens if SB 97 is ruled invalid and there are no rejection forms in file?

The rollercoaster ride continues

Diane Richardson, CPCU, is associate editor of the FC&S Bulletins, published by the National Underwriter Company in Erlanger, Ky. The FC&S editors welcome comment and questions, and may be reached by fax at 859-692-2293 or via e-mail at FCS@NUCO.COM.

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

Special Reports /

Ohio Rides Rollercoaster On Auto Law

Related Stories

Recommended For You