798 N.E.2d 632 | Ohio Ct. App. | 2003
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{¶ 2} On July 3, 1996, Skylar suffered severe and permanent injuries when he was struck by a motor vehicle operated by Linda Vaughn ("Vaughn") as he attempted to cross South Marion Street in the Village of Bloomville, Ohio. At the time of the accident, Vaughn was insured under an automobile liability policy issued by Nationwide Insurance, with per-person liability limits of $50,000. In addition, Appellant had UIM coverage with Grange Mutual Casualty Co. ("Grange"). On January 14, 2002, Appellant filed a personal injury action against Vaughn and a declaratory judgment and bad faith action against Grange seeking UIM coverage for Skylar.
{¶ 3} As of the date of the accident, Skylar's mother was employed by the North Central Ohio Educational Service Center ("NCOESC"). NCOESC was the named insured on a policy issued by Indiana, which included UIM limits of $1,000,000 and auto medical payment limits of $10,000. *616
{¶ 4} Skylar's father was employed by Republic Roofing and Siding, Inc. ("Republic"). Republic was insured under a Cincinnati commercial auto policy with UIM limits of $300,000. Republic was also insured under a Cincinnati umbrella policy with coverage limits of $1,000,000.
{¶ 5} On June 11, 2002, Appellant filed an amended complaint joining Indiana and Cincinnati. Appellant subsequently settled the claims with Vaughn and Grange. Thereafter, Appellant, Indiana, and Cincinnati filed motions for summary judgment. The matter came on for hearing on February 4, 2003. The trial court granted summary judgment in favor of Indiana, concluding that R.C.
{¶ 6} Appellant appeals the entry of summary judgment in favor of Indiana and Cincinnati, presenting three assignments of error for review. Indiana cross-appeals, pursuant to R.C.
{¶ 7} Because this appeal arises from entries of summary judgment, we begin by setting forth the applicable standard of review.
{¶ 10} As mentioned above, the trial court found the Sixth Circuit's decision in Nationwide Agribusiness Insurance v. Roshong,5
to be persuasive. Relying thereon, the trial court concluded that R.C.
A. UIM Coverage — Who is an "Insured."
{¶ 12} Appellant argues that Skylar qualifies as an insured under the Indiana UIM coverage provisions on the basis of the Ohio Supreme Court's pronouncements in Scott-Pontzer v. Liberty Mutual Fire InsuranceCompany,12 and Ezawa v. Yasuda Fire Marine Ins. Co. ofAmerica.13
{¶ 13} In Scott-Pontzer, the Ohio Supreme Court held that a plaintiff's decedent, who had been killed in an automobile accident that was caused by an underinsured motorist, was entitled to UIM coverage under his employer's commercial automobile liability policy.14 The decedent's employer, a corporation, was the named insured under the policy, which defined an "insured" for purposes of UIM coverage as including "[y]ou," and "[i]f you are an individual, any family *619 member."15 The court determined that the policy language concerning who was an "insured," was ambiguous, because the word "you," while referring to the corporation, also could be interpreted to include the corporation's employees, "since a corporation can act only by and through real live persons."16 Citing the principle that ambiguous language in an insurance policy is to be construed liberally in favor of the insured and against the insurer, the court concluded that plaintiff's decedent was an insured under the policy for purposes of UIM coverage.17 The court also concluded that the decedent was entitled to UIM coverage even though he was not acting within the scope of his employment at the time the accident occurred, because the Liberty Fire policy did not so limit UIM coverage.18 In Ezawa, the court granted insured status to corporate employee family members where the ambiguous definition of "you" indicated that "if you are an individual, any `family member[s]'" are insureds.19
{¶ 14} Indiana argues in its first cross-assignment of error that because the boards which run education service centers are made up of individual persons who can occupy motor vehicles, there is no ambiguity as to who is an insured.20 However, our inquiry must necessarily focus upon the named insured, NCOESC, and whether an educational service center is an entity separate from that of its governing board.
{¶ 15} R.C.
The territory within the territorial limits of a county, or theterritory included in a district formed under section
{¶ 16} R.C.
B. UIM Coverage — Covered Autos.
{¶ 17} Having concluded that Skylar was an insured for purposes of UIM coverage, we must now determine whether the circumstances of this accident fall within other applicable coverage provisions.23 Indiana argues that the policy only provides UIM coverage for insureds while occupying a covered auto. Indiana contends that because Skylar was struck as a pedestrian, he does not qualify for UIM coverage. Appellant maintains that the policy does not require insureds to be occupying a covered auto for purposes of UIM coverage. We agree.
{¶ 18} We have already found that Skylar qualified because his mother fell within the definition of "you" in paragraph 1 of the definition of "who is an insured," and paragraph 2 included family members of individual insureds. Although paragraph 3 of the definition additionally requires anyone else to be occupying a "covered auto" to qualify as an insured for purposes of UIM coverage, neither paragraph 1 nor paragraph 2 contain this further limitation. Examination of the remaining UIM provisions reveals no other language requiring insureds to be occupying a "covered auto." Thus, we find Skylar qualifies as an insured and is not required to be occupying a "covered auto" for purposes of UIM coverage.24 C. Auto Medical Payments Coverage
{¶ 19} Turning to the Indiana auto medical payments coverage, Appellant argues that the medical payments definition of who is an insured suffers from the same ambiguity as the UIM definition. Appellant maintains that Scott-Pontzer *621 requires that we find that Skylar qualifies for coverage under said provisions. We disagree.
{¶ 20} As an initial matter, the Ohio Supreme Court has held that, as opposed to UIM coverage, "[m]edical payments coverage in insurance contracts is neither mandated nor governed by statute. It is thus simply a matter of contract between the insurer and the insured."25 "[I]nsurance contracts must be construed in accordance with the same rules as other written contracts."26 "[T]he overwhelming concern of any court when construing a contract is to ascertain and effectuate the intent of the parties."27 Thus, a contract should be construed in a manner to give effect to the intentions of the parties.28 In this regard, insurance coverage should be determined by reasonably construing the insurance contract "in conformity with the intention of the parties as gathered from the ordinary and commonly understood meaning of the language employed."29
{¶ 21} As mentioned above, Scott-Pontzer involved a commercial insurance coverage policy issued to a corporation, Superior Dairy, Inc., by Liberty Mutual Fire Insurance Company("Liberty Fire").30 In addition to the liability policy provided by Liberty Fire, Superior Dairy also had in effect at the time of Pontzer's death an "umbrella/excess" insurance policy with Liberty Mutual Insurance Company ("Liberty Mutual"). The Liberty Fire policy contained an Ohio UIM coverage form which specifically defined who is an insured for UIM coverage as follows:
1. You. 2. If you are an individual, any `family member.' 3. Anyone else `occupying' a covered `auto' or a temporary substitutefor a covered `auto.' The covered `auto' must be out of service becauseof its breakdown, repair, servicing, loss or destruction. *622 4. Anyone for damages he or she is entitled to recover because of`bodily injury' sustained by another `insured.'
{¶ 22} Relying on the fact that the named insured was a corporation, the Ohio Supreme Court found the use of the term "you" in the definition to be ambiguous.31 Noting that UIM coverage was designed to protect persons, not vehicles, the court reasoned that:
[I]t would be reasonable to conclude that `you,' while referring toSuperior Dairy, also includes Superior's employees, since a corporationcan act only by and through real live persons. It would be nonsensical tolimit protection solely to the corporate entity, since a corporation,itself, cannot occupy an automobile, suffer bodily injury or death, oroperate a motor vehicle. Here, naming the corporation as the insured ismeaningless unless the coverage extends to some person or persons
{¶ 23} Confronted with what was perceived to be ambiguous policy language, the court "construed the language most favorably to the insured" and found that the plaintiff's husband was an insured under his employer's policy.33
{¶ 24} In contrast, the Liberty Mutual umbrella/excess policy failed to offer UIM coverage. Thus, unlike the Liberty Fire policy, the Liberty Mutual umbrella policy did not contain a UIM coverage form that specifically defined insureds for purposes of UIM coverage. Instead the Supreme Court applied the policy's liability coverage definition, which expressly included employees as insureds, for purposes of UIM coverage. Although the Liberty Mutual policy did restrict coverage to employees acting within the scope of their employment, the Supreme Court manipulated the definition for purposes of UIM coverage, concluding:
However, we have already found that Liberty Mutual had failed to offerunderinsured motorist coverage through the umbrella policy issued toSuperior Dairy. Thus, any language in the Liberty Mutual umbrella policyrestricting insurance coverage was intended to apply solely to excessliability coverage and not for purposes of underinsured motoristcoverage.34 *623
{¶ 25} Although inexorably confined to this precedent with respect to mandated UIM coverage, we do not find this authority to be controlling with respect to auto medical payments coverage.
{¶ 26} The Indiana policy defines who is an insured for auto medical payments coverage as follows:
B. WHO IS AN INSURED 1. You while `occupying' or, while a pedestrian, when struck by any`auto.' 2. If you are an individual, any `family member' while `occupying' or,while a pedestrian, when struck by any `auto.' 3. Anyone else `occupying' a covered `auto' or a temporary substitutefor a covered `auto.' The covered `auto' must be out of service becauseof its breakdown, repair, servicing, loss or destruction.
{¶ 27} While the majority in Scott-Pontzer appears to have stopped at "you" in the first paragraph of the definition to produce the ambiguity upon which it relied for its pronouncement, we commit ourselves and are bound by overriding principles of contractual interpretation to read and consider the entirety of the definition in the context of the overall agreement. Furthermore, while we construe the term "you" consistently within UIM coverage form and for purposes of other provisions related thereto,35 we are not bound to apply the manipulated UIM definition of "you" for purposes of other coverage contained within the policy.36
{¶ 28} Despite the corporation's inability to sustain bodily injury, we do not find the fact that the definition confirms that the named insured qualifies as an insured creates an inherent ambiguity. As an initial matter, the definition is multi-faceted and clearly indicates that the extent of coverage provided is conditional upon the nature of the named insured. There is no ambiguity and no reason to resort to conjecture that "you" must include employees because an educational service center acts by and through its employees. The definition clearly includes more than just the educational service center as insureds. As inScott-Pontzer, paragraph 3 extends coverage to "[a]nyone else `occupying' a covered `auto' or a temporary substitute for a covered `auto.'" Therefore, the inclusion of NCOESC as an insured is not meaningless because the definition *624 expressly provides "coverage extend[ing] to someperson or persons"37 who are capable of sustaining bodily injury, including NCOESC employees. The policy definition of insured states that "if" you are an individual, then your family members are also insureds. "The ordinary and commonly understood meaning of individual is a single human being. This language is not susceptible of more than one interpretation. In this case, `you' is an entity, not an individual."38 Therefore, this subsection is inapplicable in this case. The corporation was certainly free to contract for coverage limited to individuals occupying company-owned vehicles. Accordingly, we are not willing to further erode the contractual nature of the relationship between an insurer and insured.39
{¶ 28} Even if we were to find this language to be ambiguous, we find no reasonable rationale supporting the extension of coverage to off-duty employees or their family members. As outlined by Justice Cook in her dissent to Scott-Pontzer:
[P]ublic policy would prevent Superior Dairy from validly insuring itsbusiness against damages to Scott-Pontzer's personal automobile, orinsuring against Scott-Pontzer's liability arising outside the scope ofSuperior Dairy's business. As a matter of public policy, the validity ofan insurance contract is dependent upon the insured having an insurableinterest in the subject of the insurance. 1 Holmes, Appleman on Insurance2d (1996) 555-557, Section 4.32. See, also, id. at 11-15, Section 1.3;Phillips v. Cincinnati Ins. Co. (1979),
{¶ 30} Furthermore, words and phrases used in insurance policies "`must be given their natural and commonly accepted meaning, where they in fact possess such meaning, to the end that a reasonable interpretation of the insurance contract consistent with the apparent object and plain intent of the parties may be determined.'"41 "Common words appearing in a written instrument will be given their ordinary meaning unless manifest absurdity results, or unless some other meaning is clearly evidenced from the face or overall contents of the instrument."42
Where contractual terms are undefined, uncertain or ambiguous and are reasonably susceptible of more than one interpretation, parole evidence is admissible and should be examined in an effort to give effect to the parties' intentions.43 See Bowman v. Tax Commr. (1939),
Extrinsic parole evidence is always admissible to give effect to awritten instrument by applying it to its proper subject-matter by provingthe circumstances under which it was made, thereby enabling the court toput itself in the place of the parties, with all the information possessedby them, the better to understand the terms employed in the contract, andto arrive at their intention.
{¶ 31} As reiterated by Justice Lundberg Stratton in her dissent to Scott-Pontzer: "Insurance coverage is determined by reasonably construing the contract `in conformity with the intention of the parties as gathered from the ordinary and commonly understood meaning of the language employed.'"44 A commercial policy cannot be reasonably construed to provide uninsuredor underinsured motorist coverage in the case of the personal,nonemployment-related activities of an employee. Neither party to thecontract intended to provide free uninsured motorist coverage foremployees' personal, nonemployment-related activities, regardless ofindividual risk factors such as driving records, other applicablepersonal insurance coverage, or evidence of insurability. The insurancepremium for such a policy would have to be adjusted to account for theseadditional risk factors. The company that provides, as a *626 benefit ofemployment, automobile insurance for its employees' personal lives israre. The majority reasons that the policy contains no language requiringthat employees be acting within the scope of their employment in order toreceive underinsured motorist coverage. However, it is inherent that acommercial policy, purchased by and written for a corporation, applies tothe corporate entity and those acting within the scope of employment forthat entity. There is no language in the policy that would create apresumption that it applies in situations other than events relating toSuperior Dairy and its operation. Here, the decedent was engaged in apersonal, nonemployment-related activity in a noncovered vehicle. Coverageunder a commercial liability policy cannot be extended in thesecircumstances. Common sense alone dictates that this was an extension ofcoverage that the parties did not contemplate, bargain for, rate, orpurchase. Is the extension of liability coverage next?45
{¶ 32} Even abiding by the axiom that ambiguous policy language be construed strictly against the insurer, the insured's intent should serve to define the outermost limits to which coverage may be extended. It is apparent from the overall policy that the NCOESC's general intent was to purchase an automobile liability insurance policy to insure the NCOESC as a legal entity against liability arising from the use of vehicles owned or hired by NCOESC. The fact that the educational service center is the only named insured indicates the parties' intention to insure NCOESC, not the private lives and activities of its employees. Likewise, Indiana did not contemplate providing insurance coverage in circumstances unrelated to NCOESC. Neither party to the contract intended nor can the policy be reasonably construed to provide auto medical payments coverage in the case of the personal, non-employment related activities of an employee's family member.
{¶ 33} Based on foregoing analysis, Appellant's first assignment of error is sustained with regard to UIM coverage and overruled with regard to auto medical payments coverage. In addition, Indiana's first cross-assignment of error is overruled.
{¶ 34} In its second cross-assignment of error, Indiana argues that the trial court erred when it failed to find that Indiana was prejudiced by the delayed notice of Appellant's claim or that Appellant breached applicable subrogation provisions. Noting that the trial court declined to address these issues, Appellant avers that questions of material fact preclude entry of summary judgment as the Indiana notice and subrogation provisions. We agree.
{¶ 35} In Ferrando v. Auto-Owners Mutual Ins. Co.,46 the Ohio Supreme Court stated as follows with respect to notice and subrogation provisions in UIM policies:
1. When an insurer's denial of underinsured motorist coverage ispremised on the insured's breach of a prompt-notice provision in a policyof insurance, the insurer is relieved of the obligation to providecoverage if it is prejudiced by the insured's unreasonable delay ingiving notice. An insured's unreasonable delay in giving notice ispresumed prejudicial to the insurer absent evidence to the contrary.
2. When an insurer's denial of underinsured motorist coverage ispremised on the insured's breach of a consent-to-settle or othersubrogation-related provision in a policy of insurance, the insurer isrelieved of the obligation to provide coverage if it is prejudiced by thefailure to protect its subrogation rights. An insured's breach of such aprovision is presumed prejudicial to the insurer absent evidence to thecontrary. (Bogan v. Progressive Cas. Ins. Co. [1988],
{¶ 36} Ferrando established a two-part test for evaluating whether prompt-notice and consent-to-settle (or other subrogation-related) provisions were breached:
The two-step approach in late-notice cases requires that the courtfirst determine whether the insured's notice was timely. Thisdetermination is based on asking whether the UIM insurer received notice`within a reasonable time in light of all the surroundingcircumstances.' Ruby, syllabus. If the insurer did receive notice withina reasonable time, the notice inquiry is at an end, the notice provisionwas not breached, and UIM coverage is not precluded. If the insurer didnot receive reasonable notice, the next step is to inquire whether theinsurer was prejudiced. Unreasonable notice gives rise to a *628 presumptionof prejudice to the insurer, which the insured bears the burden ofpresenting evidence to rebut. In cases involving the alleged breach of a consent-to-settle or othersubrogation-related clause, the first step is to determine whether theprovision actually was breached. If it was not, the inquiry is at an end,and UIM coverage must be provided. * * * If the consent-to-settle orother subrogation-related clause was breached, the second step is todetermine whether the UIM insurer was prejudiced. If a breach occurred, apresumption of prejudice to the insurer arises, which the insured partybears the burden of presenting evidence to rebut.47
{¶ 37} As indicated in Ferrando, questions as to reasonableness of the notice provided, whether the consent-to-settle provisions were violated, and, if so, whether Indiana was prejudiced thereby, are issues of fact to be determined by the trial court. In light of our disposition of Appellant's first assignment of error, we remand this cause to the trial court for further proceedings as to the parties' respective compliance with subject notice and subrogation provisions.
{¶ 38} The declarations page of Cincinnati's umbrella policy expressly states that UIM coverage is provided in the amount of $1,000,000. The policy incorporates by reference the terms and conditions provided by the UIM provisions contained within the Cincinnati automobile liability policy. A general change endorsement issued May 23, 1996, attempts to delete excess UIM coverage from the umbrella policy and decrease the semi-annual premium by $164 effective April 1, 1996.
{¶ 39} Appellant challenges the validity of the rejection, arguing: 1) that the rejection must be received prior to commencement of the policy period; 2) that the endorsement did not contain the elements defined in Linko for a valid rejection; and, 3) that the endorsement had not been properly executed because the policy *629 expressly required all changes to be signed by a duly authorized representative of Cincinnati. Cincinnati responds that: (1) Linko was "inapplicable" because the record supports that Republic had previously accepted a valid offer at the inception of the policy; and, (2) that the parties were free to modify the terms of the agreement under general contract principles. As support, Cincinnati submitted affidavits attesting that Republic sought and obtained a deletion of excess UIM coverage from the umbrella policy when the semi-annual premium came due on March 30, 1996. Appellant maintains that Gyori required the rejection to be in writing and thatLinko precluded the introduction of extrinsic evidence to prove a knowing rejection.
{¶ 40} The statutory law in effect on the date of each new policy period governs the interpretation and application of the policy's terms.48 The umbrella policy herein was issued on September 30, 1995. Accordingly, the S.B. 20 version of R.C.
{¶ 41} In Gyori v. Johnston Coca-Cola Bottling Group, Inc.,49
the Ohio Supreme Court held as follows with regard to the S.B. 20 version of R.C.
1. There can be no rejection pursuant to R.C.
{¶ 42} Gyori further concluded that "[t]he mandates of R.C.
{¶ 43} Unfortunately, because the umbrella policy was issued on September 30, 1995, we are bound by authority interpreting the S.B. 20 version of R.C.
{¶ 44} As a final matter, the record indicates that the trial court reviewed the notice and subrogation provisions with respect to the Cincinnati automobile liability policy's UIM provisions. However, it appears that notice and subrogation issues with respect to the Cincinnati umbrella policy remain unresolved and must be addressed upon remand.
{¶ 45} Having found error prejudicial to the appellant herein, in the particulars assigned and argued, the judgment of the Seneca County Common Pleas Court is hereby reversed and the cause is remanded for further proceedings in accordance with this opinion.
Judgment reversed and cause remanded.
SHAW and CUPP, JJ., concur.
