The Supreme Court of Ohio ruled that the responsibility to provide auto coverage for the driver of a borrowed car rests solely on the driver's insurer and not the owner's insurer. The case is Acuity v. Progressive Specialty Ins. Co., 2023 Ohio LEXIS 2066 (Ohio 2023).
Ashton Smith borrowed a friend's car with permission and was involved in an auto accident. Smith was insured through his father's auto policy with Acuity because he was listed as a driver; he was also considered a "permissive user" through his friend's policy with Progressive for the vehicle involved in the accident. The policies had identical limits.
Acuity filed a judgment action claiming Progressive was responsible for coverage and Acuity only owed coverage in excess of the Progressive policy. Acuity's excess insurance clause said Acuity would pay its proportionate share of a loss if other insurance was available but would only owe excess coverage for a vehicle not owned by the insured if other auto coverage was available. Since the policy limits were the same, Acuity claimed it did not owe coverage to Smith. Progressive, on the other hand, argued that Smith was not an insured person under the auto owner's policy, thereby relieving Progressive of the coverage obligation.
At trial, the court pointed out that the Progressive policy definition of an "insured person" specifically excluded permissive users who were insured by another liability policy. Since Smith had coverage available through his father's Acuity policy, he was specifically excluded as an insured person under the Progressive policy. The trial court also noted that the excess insurance clause in the Acuity policy only applied if other coverage was available to the claimant. Since coverage was unavailable to Smith from Progressive, Acuity's excess insurance clause was not triggered. The judges ruled the coverage obligation rested with Acuity alone, and Acuity appealed.
The intermediate appellate court reversed, stating that Progressive's definition of an insured person was unenforceable under an earlier Ohio case, State Farm Mut. Auto. Ins. Co. v. Home Indem. Ins. Co., 261 N.E.2d 128 (Ohio 1970), where the Supreme Court of Ohio refused to enforce an insurer's "escape clause" because it relieved the insurer of any liability. The judges ordered Acuity and Progressive to pay their proportionate shares of coverage, and Progressive appealed.
The Supreme Court of Ohio disagreed with the intermediate appellate court. The justices emphasized that, under the plain language of the Progressive policy, Smith was not an insured person. The Progressive policy clearly stated that permissive users, like Smith, would only receive coverage from Progressive if they were not otherwise covered by another liability policy. Smith was otherwise covered through Acuity, so he was ineligible for benefits from Progressive. Though Acuity did not dispute this finding, the company argued their case was controlled by the State Farm decision cited by the intermediate appellate court.
In State Farm v. Home Indemnity, the permissive user of an auto was involved in a car wreck. There was a dispute over coverage from two insurers, and each insurer claimed it owed only excess coverage. However, if both policies were enforced, neither would actually cover the loss. The court found that Home Indemnity's "escape clause" was unenforceable because it essentially absolved the company of any liability.
The Supreme Court of Ohio was not convinced. The competing policies in Acuity did not present unusual circumstances like those in State Farm. The justices could give full force and effect to both the Acuity and the Progressive policies without compromising the availability of coverage. Since a straightforward reading of the policies showed that Smith was clearly ineligible for benefits under the Progressive policy but was still eligible to collect benefits from Acuity, the loss was to be covered in full by Acuity. The justices also opined that Acuity's argument to extend the State Farm ruling to preclude the enforceability of "escape clauses" in general would give meaning to the policies not agreed to by the parties. The decision of the intermediate appellate court was reversed.
Editor's Note: This case illustrates the importance of clear, precise policy language. While the common maxim "insurance follows the car" applies in most cases, it doesn't here. Though the Progressive policy included coverage for permissive users of autos insured with Progressive, the definition of an "insured person" definitively excluded permissive users who were insured through an auto policy with another insurer. There was no question that the permissive user in this case, Ashton Smith, had primary liability insurance through Acuity because he was listed as a driver on his father's Acuity policy. Smith's eligibility for benefits under the Acuity policy precluded the possibility of receiving benefits from Progressive, so the coverage obligation rested squarely on and solely with Acuity.
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