788 N.E.2d 662 | Ohio Ct. App. | 2003
{¶ 2} In October 2000, a complaint was filed on behalf of Christina Archer in the Franklin County Court of Common Pleas seeking, inter alia, declaratory relief; specifically, she sought a determination as to the availability of UIM coverage from any or all insurance companies named as defendants. The defendants were named in the following capacities. Speedway is a retail gasoline outlet owned by Marathon Ashland Petroleum, L.L.C. ("MAP"). MAP, in turn, is owned in part by Marathon Oil, a subsidiary of USX. Pacific Employers Insurance Company ("Pacific")1 issued a business auto policy to USX. American International Group, Inc. ("AIG") issued a general liability insurance policy to USX. Finally, American Alternative Insurance Company ("AAIC") issued a commercial comprehensive catastrophic liability policy to Ashland, Inc.
{¶ 3} The parties eventually filed cross-motions and memoranda seeking summary judgment. A motion to dismiss was also filed on behalf of AAIC. The trial court ultimately sustained the summary judgment motions filed on behalf of AIG and Pacific. The court granted AAIC's motion to dismiss it from the lawsuit and, as a result, held that its summary judgment motion was moot.
{¶ 4} Christina Archer ("appellant") has timely appealed, assigning two errors for our consideration:
{¶ 5} "I. The Trial Court Erred In Determining Appellees Aig And Pacific Are Not Subject To R.C.
{¶ 6} "II. The Trial Court Erred In Determining There Was No Justiciable Controversy As To Claims Against Appellee AAIC."
{¶ 7} Preliminarily, we set forth the well-established standards by which we are bound in reviewing Civ.R. 56 summary judgments. In considering a motion for summary judgment, the evidence must be construed in favor of the nonmoving *458
party. Summary judgment should be granted only if no genuine issue of fact exists; the moving party is entitled to judgment as a matter of law; and reasonable minds can come to but one conclusion, which conclusion is adverse to the nonmoving party. State ex rel. Grady v. State Emp. Relations Bd. (1997),
{¶ 8} By her first assignment of error, appellant argues that the trial court erred in concluding that AIG and Pacific are not subject to R.C.
{¶ 9} As an initial matter, we note that the version of R.C.
{¶ 10} Also critical to this case is R.C.
{¶ 11} "Proof of financial responsibility * * * may be given by filing any of the following:
{¶ 12} "(A) A financial responsibility identification card * * *;
{¶ 13} "(B) A certificate of insurance * * *;
{¶ 14} "(C) A [financial surety] bond * * *;
{¶ 15} "(D) A certificate of deposit or money or securities * * *;
{¶ 16} "(E) A certificate of self-insurance * * * supplemented by an agreement by the self-insurer that, with respect to accidents occurring while the certificate is in force, he will pay the same amounts that an insurer would have been obligated to pay under an owner's motor vehicle liability policy if it had issued such a policy to the self-insurer." (Emphasis added.)
{¶ 17} Appellant initially predicated her claim of entitlement to UIM coverage upon the Supreme Court of Ohio's decision in Scott-Pontzer v. Liberty Mut. Fire Ins. Co. (1999),
{¶ 18} In Scott-Pontzer, the Supreme Court of Ohio followed a fundamental principle in the application of contract law — interpreting ambiguous terms and language strictly against the drafter of the contract and liberally in favor of the "insured." In particular, the court examined the definitional provision of an insurance contract issued to a corporation, which defined "insured" as: "1. You; 2. If you are an individual, any family member." The court found that this definition of an insured as "you" created ambiguity; since a corporation can act only through real persons, one reasonable interpretation of "you" included the corporation's employees. Accordingly, the corporate employee was held to be an insured as a result of the ambiguous definition and, ultimately, UM/UIM coverage arose by operation of law.
{¶ 19} In the instant case, Pacific and AIG countered appellant's Scott-Pontzer claim with the contention that because they are "self-insurers" and thus not subject to R.C.
{¶ 20} The corporate structure and insurance design with respect to Pacific and AIG are particularly significant to the primary issue before us. The trial court, owing to the interpretations of the defendants, set forth the following summary:
{¶ 21} "Defendants Pacific and AIG explain * * * that they are `self-insured.' The Pacific policy * * * has a * * * five million per occurrence liability limit. * * * The policy also has a per occurrence [matching] deductible of $5 million dollars. * * * Further, the Director of Insurance for Marathon Oil Corp. * * * stated that USX, Marathon Oil, MAP and Speedway did not transfer any risk to Pacific through the policy. * * * Nor has Pacific paid any claims; Speedway has.
{¶ 22} "AIG issued a policy with ten million per occurrence liability limits. * * * However, no risk transferred under the policy. * * * AIG has retained the risk and Marathon Oil and its subsidiaries pay them; they do not submit claims to AIG. * * * In addition, Marathon Oil's wholly owned subsidiary, Old Main, has reinsured the AIG policy and has assumed the risk through a Facultative Reinsurance Agreement. * * * Further, a bank-issued letter of credit has been provided to AIG * * * which guarantees Old Main's performance up to the sum of $13,000,000. * * *" (Summary Judgment Decision at 3-4.)
{¶ 23} In its decision, the trial court relied exclusively upon language contained in Grange Mut. Cas. Co. v. Refiners Transport
Terminal Corp. (1986),
{¶ 24} The Grange court narrowly framed the issue before it as being:
{¶ 25} "* * * whether an employer, who meets Ohio's financial responsibility laws other than by purchasing a contract of liability insurance, must comply with the requirements concerning uninsured motorist coverage contained in R.C.
{¶ 26} Significantly, the Grange court emphasized that the defendant-employer involved in the case before it:
{¶ 27} "* * * sought to meet its financial responsibility requirements and to protect itself from claims, in part by purchasing a financial responsibility surety *461
bond * * *. As such, it was not a `self-insurer' in the legal sense contemplated by R.C.
{¶ 28} The Grange court, quoting Snyder v. Roadway Express, Inc. (1982),
{¶ 29} "* * * The [Snyder] court recognized * * * that if the statute did apply to self-insurers, in addition to insurance carriers authorized to write motor vehicle liability insurance policies, it would result in the absurd `situation where one has the right to reject an offer of insurance to one's self * * *'; even if applicable, `we believe the insured's rejection must be presumed.'" Grange, supra, at 48-49.
{¶ 30} Notwithstanding the narrow positing of the issue presented, the Grange court's syllabus broadly holds that the "uninsured motorist provisions of R.C.
{¶ 31} In the instant case, the trial court seized upon the foregoing emphasized language, summarily agreeing with the defendants' contention that they were self-insurers "in the practical sense." The court deemed dispositive of the "self-insured" analysis the matching deductible/fronting agreement terms of the insurance contracts. As a result, the trial court concluded that these self-insurers are not required to comply with R.C.
{¶ 32} Appellant argues that the trial court's reliance upon Grange was misplaced, as the bond situation in that case is readily distinguishable from the insurance scenario at issue here. Appellant also emphasizes the fact that neither AIG nor Pacific complied with R.C.
{¶ 33} Appellant relies upon this court's decision in Dalton v. Wilson, Franklin App. No. 01AP-1014, 2002-Ohio-4015,3 in which we addressed nearly identical issues. The defendants, on the other hand, urge us instead to reconsider Dalton However, as recently as March 31, 2003, this court continues to follow Dalton. See Stout v. Travelers Property Cas. Ins. Co., Franklin App. No. 02AP-628, 2003-Ohio-1643.
{¶ 34} In Dalton, this court examined an analogous situation involving insurance carriers which underwrote and issued various policies to plaintiff's employer and claimed that such policies were nothing more than "self-insurance" based upon "matching deductible" or "fronting" agreements. A "matching deductible" or "fronting" agreement is, in short, an arrangement whereby a corporate entity essentially rents an insurance company's licensing and filing capabilities in a particular state or states in order to comply with state financial responsibility laws. Id. at ¶ 26. In both Dalton and the instant case, premiums are paid by corporate entities to insurers which, in turn, file the proof of insurance required by Ohio's various governmental agencies. The insurer named in the governmental filings provides liability coverage on a "first dollar" basis; the liability limits "match" the deductible. In other words, the insurer files proof that the corporation is insured up to its matching or self-retained limit. In the event the insurer is required to satisfy a claim, the corporation, pursuant to an indemnity agreement, automatically reimburses the insurer in an amount up to the self-retained limit.
{¶ 35} The Dalton decision ultimately draws a distinction between insurers such as those present in the instant case, and bond principals or certificated self-insurers as contemplated by Grange, supra. Dalton comprehensively explains the distinction between insurance and "self-insurance":
{¶ 36} "In determining whether an entity is self-insured, courts look at who bears the risk of loss. `Self-insurance is not insurance; it is the antithesis of insurance.' Physicians Ins. Co. of Ohio v. Grandview Hosp. Med. Ctr. (1988),
{¶ 37} "`While insurance shifts the risk of loss from the insured to the insurer, self-insurance involves no risk-shifting. Rather, in the self-insurance context, the risk is borne by the one whom the law imposes it. The defining characteristic of insurance, the assumption of specific risks from customers in consideration for payment, is entirely absent where an entity self-insures. * * *' *463
{¶ 38} "* * * [T]herefore, * * * `self-insurance' is the legal equivalent of no insurance for purposes of the distribution of UM/UIM benefits in accordance with R.C.
{¶ 39} Dalton distinguishes the facts present in both that and the instant case and that of a Grange-type situation involving a bond principal, which by virtue of statute complies with Ohio's financial responsibility laws; moreover, Dalton unequivocally refused to extend Grange "well beyond its holding." R.C.
{¶ 40} "* * * The Grange court ultimately determined that [the employer] Refiners' status as a bond principal made it a self-insurer `in a practical sense,' even though Refiners had not obtained a certificate of self-insurance. The court recognized that proof of financial responsibility may be satisfied by filing a surety bond without having to obtain a certificate of self-insurance.
{¶ 41} "In contrast, the * * * instant case do[es] not involve either bond principals or certificated self-insurer, rather, * * * [it] involve[s] entities who entered into `fronting/matching deductible agreements' with insurance companies in an apparent effort to avoid meeting the statutory requirements to qualify as a self-insurer. The issue of whether `fronting/matching deductible agreements' constitute self-insurance was not addressed, or even contemplated, in Grange. Thus, we find it improper to extend Grange to include as self-insurers entities who enter into `fronting/matching deductible agreements.'
{¶ 42} "Further, we do not believe that the `fronting/matching deductible agreement' * * * constitutes a self-insured scheme. We reiterate that [the employer] admits that it did not file a certificate of self-insurance in accordance with R.C.
{¶ 43} Specifically addressing the policy language at issue in that case, Dalton is factually indistinguishable for our purposes. This court stated:
{¶ 44} "Upon review of the policy language, including that contained in the `Claims Services Contract' and the `Deductible Agreement,' we conclude that the agreement between [the insurer and employer] constitutes an insurance policy. Both the `Claims Services Contract' and the `Deductible Agreement' refer to the policy as a `policy of insurance.' Moreover, when a liability claim arises against *464 [the employer], [the insurer] is required to pay the entire loss and is then reimbursed by [the employer]. However, the ultimate risk for the loss remains with [the insurer], if [the employer] either refuses or is financially unable to reimburse [the insurer] for the loss." Id. at 42.
{¶ 45} Finally, Dalton concluded, as must we:
{¶ 46} "* * * [T]his type of reimbursement arrangement is [not] enough to make [the employer] `self-insured in the practical sense.' Because [the employer] neither obtained a certificate of self-insurance certifying that it is of sufficient financial ability to pay judgments against it (as contemplated * * * [by Grange]), [the employer] may not be considered a self-insurer. * * *
{¶ 47} "`It may be well and good and entirely lawful for a `fronting agreement' * * * to spare [an entity] the expense and potential administrative quagmires of formal registration in every state, territory and country where it does business and for these `devices' to provide [an entity] the use of [an insurer's] filings and claims service, but they do not paralyze or mute the walking and quacking duck of insurance coverage.'" Id. at ¶ 42. (Citation omitted.)
{¶ 48} In summary, as ultimately decided by this court in Dalton, while fronting, matching deductible and other reimbursement arrangements may well provide for ease of administration, such arrangements do not alleviate an entity's obligation to register formally as a self-insurer in states in which it chooses to conduct business. An insurance company may not avoid compliance with R.C.
{¶ 49} AIG alternatively contends that it qualifies as a "self-insurer" because a letter of credit issued by a reinsurer is tantamount to a bond and, therefore, satisfies the financial responsibility requirement of R.C.
{¶ 50} Finally, counsel for AIG next directs our attention to the December 13, 2002 case decided by the Ohio Supreme Court in Hillyer v. State Farm Fire Cas. Co. (2002),
{¶ 51} Based upon the record before us, the trial court erred as a matter of law in finding that AIG and Pacific are "self-insurers in the practical sense," thereby precluding appellant's right to assert a claim for UM/UIM benefits under their respective policies. Accordingly, the first assignment of error is sustained.
{¶ 52} By her second and final assignment of error, appellant argues that the trial court erred in finding that there was no justiciable controversy as to AAIC based upon appellant's failure to show damages exceeding the monetary level necessary to trigger coverage under the AAIC policy.
{¶ 53} The trial court apparently granted AAIC's motion to dismiss based solely upon appellant's purported failure to prove that her damages would exceed $10,000,000, thereby triggering coverage under the AAIC policy in the event she were deemed to qualify as an insured. However, appellant directs our attention to an earlier entry journalized by the trial court by which it expressly prohibited the parties from addressing damage issues until such time as the coverage issue had been decided. Given the posture of this case upon remand, in our view dismissal of AAIC was, at best, premature based solely upon the reason provided by the trial court. Assuming arguendo that appellant is ultimately deemed entitled to damages on remand, the trial court's outright dismissal of AAIC directly contravened its earlier order and, therefore, appellant should not be precluded from presenting evidence on damages.
{¶ 54} The second assignment of error is also sustained.
{¶ 55} Having sustained both assignments of error, the judgment of the trial court is reversed, and this cause is remanded to that court to conduct further proceedings consistent with this opinion.
Judgment reversed and cause remanded.
BOWMAN and BRYANT, JJ., concur.
