OHIO SUPREME COURT - Agrees to Hear New Insurance Dispute

**NOTE: THE OHIO SUPREME COURT HAS RULED ON THIS MATTER - SEE BLOG UPDATE OF JANUARY 3, 2009

WHEN DOES THE TIME START RUNNING UNDER THE TWO-YEAR NOTICE LIMITATION IN AN INSURANCE POLICY?

THE ISSUE:
Does the two-year limitation period contained in a policy for Uninsured/Underinsured Motorist Coverage start on the day of the accident or does the "Discovery Rule" apply to delay starting the two-year period until after the insured receives notice of the fact that the other driver was uninsured?

The Ohio Supreme Court has agreed to hear an appeal of the case: Angel v. Reed (March 9, 2007), Geauga App. No. 2005-G-2669.

FACTS ON APPEAL:
On June 14, 2001, appellee Theresa Angel was injured while riding in a vehicle driven by Eric Reed. At the time, Mr. Reed indicated that he was insured by Nationwide. On May 16, 2003, appellee filed suit against Mr. Reed. She voluntarily dismissed the suit on March 4, and on May 2, Mr. Reed’s attorney informed appellee’s attorney that Mr. Reed’s policy had been canceled three months before the accident.

On July 30, 2004, appellee made a claim for uninsured/underinsured motorist (“UM/UIM”) coverage. When her claim was denied, she filed this suit against Mr. Reed and appellant Allstate Insurance Company.

The trial court granted summary judgment to Allstate, because appellee’s suit was filed beyond the two-year limitation period contained in the policy: “Any legal action against Allstate must be brought within two years of the date of the accident.” The court of appeals reversed, adopting a discovery rule for the contractual limitations period.

Here are the stated positions of the parties before the Ohio Supreme Court.

Appellant (Insurance Company)Position:
A cause of action for UM/UIM benefits accrues on the date of the accident when the tortfeasor has no liability insurance on that date. The court of appeals effectively rewrote the contract language by holding that a cause of action does not “accrue” until the policy-holder becomes aware that the tortfeasor lacked coverage at the time of the accident. All a claimant needs to do to “discover” whether the tortfeasor is covered when the tortfeasor claims coverage, is to call that insurance company.

Where the facts giving rise to a cause of action are readily ascertainable, a court may not apply a “discovery rule” to extend a valid, contractual limitations period. A discovery rule may be applied where the elements of a cause of action cannot reasonably be uncovered or the injury does not appear until later. Here, there are no hidden or unforeseeable facts. A simple phone call or letter would have revealed the true facts.

Appellee (Insured) Position:
Where a policyholder cannot discover the tortfeasor’s true insurance status until after the two-year period has elapsed, a UM/UIM claim does not “accrue” until such discovery. When the claimant later learns that coverage does not exist, whether because the tortfeasor misled her or the insurer’s insolvency, the cause of action does not accrue until that notice. Until receiving the notice, appellee had no cause of action against Allstate.

There is no evidence that Mr. Reed’s insurance status was “readily ascertainable.” The court of appeals held that it was “essentially impossible” for appellee to discover that status within the two-year period.

Note: I will post futher on this issue once the Ohio Supreme Court rules.

Court of Appeals - UM / UIM - "Other Owned Vehicle Exclusion" - Valid

Appellant was injured while driving a car insured by appellee. Appellee issued three policies to appellant’s family, only one of which listed the vehicle involved in the accident in this case. Appellee agreed that it owed coverage, but only under the policy that listed the vehicle. Appellant claimed that coverage was owed under all three policies. The trial court found for appellee.

On appeal, the court found no error. The policies contained “other owned auto” exclusions that excluded coverage for injuries that occurred while occupying a vehicle that the insured owned that was covered under another policy. “Other owned vehicle exclusions are permitted to be included in automobile insurance policies regarding uninsured motorist coverage. In this matter, the language of the Cherokee and Cavalier policies was not ambiguous. Instead, the other owned vehicle exclusions contained in those policies specifically excluded coverage in instances where an accident occurs while an insured is operating a vehicle that she or a relative owned. The undisputed evidence is that Tiffany is an insured under the Cherokee and Cavalier policies, that she was operating the Contour at the time of the accident, and the Contour was owned by Spelich. Thus, the valid other owned vehicle exclusions in the Cherokee and Cavalier policies preclude Spelich from being eligible for uninsured motorist coverage under those policies.” Affirmed.

Spelich v. State Farm Ins. Co. (Slaby) Appeal from the court of common pleas for Summit County. 2007-Ohio-7128 (12/28/07)

Read the Case: Spelich v. State Farm Ins. Co.

Court of Appeals - Life and Disability - Proof of Claim - Statute of Limitations

Appellant purchased a car from a dealership that was financed through Bank One. Bank One issued a life insurance and disability policy to appellant through appellee to cover the payments. When appellant became disabled, he notified appellee. Appellee denied coverage, stating that it had not been initiated because his loan terms did not meet their requirements. The trial court determined that no coverage existed.

On appeal, the court found error. Appellee did not provide notice that the coverage would not be afforded until after the disability arose. Further, appellant sent notice of the claim with in the limitations period of the insurance agreement. “UULIC improperly denied coverage in both 1999 and 2001. The record reflects that Fazenbaker provided notice of his disability ‘within 30 days after the disability [began] or as soon after that as [was] reasonably possible.’ However, because UULIC maintained that it had properly denied coverage, it did not send Fazenbaker claim forms within 15 days as set forth in the Rules. The Rules provide that if claim forms are not sent to the insured within 15 days after UULIC receives notice of the disability, there is no minimum time period for filing proof of the disability.” Reversed and remanded.

Midland Funding NCC-2 Corp. v. Fazenbaker (Moore) Appeal from the court of common pleas for Summit County. 2007-Ohio-7041 (12/28/07)

Read the Case: Midland Funding NCC-2 Corp. v. Fazenbaker

Court of Appeals - Intentional Act - Homeowner Policy - Severability Clause

Supervising and Controlling Other Insureds

Severability Clause Creates Coverage Ambiguity for Negligent Supervision and Control by "other" insureds.

Insured's son stabbed a teen girl while she was jogging. His parents were sued for negligent supervision and tendered coverage to their homeowner’s policy. The policy excluded coverage for injuries caused by the intentional conduct of an insured. The policy also contained a severability of insurance clause, which stated that “this insurance applies separately to each insured.” The trial court concluded that the severability clause rendered the exclusion ambiguous.

The court of appeals agreed. In so finding, the appellate court recognized that Ohio public policy did not preclude coverage for the negligent claims. The court then held that the injury was an occurrence under the policy. While occurrence was defined as an accident, the conduct of the parents was alleged to have been negligent, even though the actual injurious conduct was intentional.

The court concluded that the intentional act exclusion was rendered ambiguous by the severability of insurance clause. “When reading the severability condition in conjunction with the exclusions in the Safeco policies, we hold that the exclusions are ambiguous. Construing that ambiguity in favor of the insureds, in light of the policyholder expectation recognized in Doe, we hold that the exclusions for intentional conduct do not apply to insureds who have been merely negligent, when the policies contain language indicating that coverage applies ‘separately to each insured.’”

Safeco Ins. Co. v. Federal Ins. Co. (Dinkelacker) Appeal from the court of common pleas for Hamilton County. 2007-Ohio-7068 (12/28/07)

Read the Case: Safeco Ins. Co. v. Federal Ins. Co.

Court of Appeals - UM/UIM Employer Policy

Drive Other Car Coverage - Named Individuals (Endorsement)

The court of appeals (dealing with the pre-H.B. No. 261 version of R.C. 3937.18(A))concluded that the insurer in this case owed coverage for the adult son of an employee who was injured in a accident involving a car that was not a company car. The insurance policy contained a DOCC endorsement that included as insured “An individual named in the Schedule and his or her ‘family members’ are ‘insured’ while ‘occupying’ or while a pedestrian when being struck by any ‘auto’ you don’t own.” The employee was named in the schedule.

Hans v. Hartford Fire Ins. Co. (Hildebrandt) Appeal from the court of common pleas for Hamilton County. 2007-Ohio-7064 (12/28/07)

Read the Case: Hans v. Hartford Fire Ins. Co.