Supreme Court of Wyoming.

Century Surety Company, Appellant (Plaintiff),

v.

Jim Hipner, LLC; and Huey Brock, Appellees (Defendants).

S-15-0294

|

August 17, 2016

W.R.A.P. 11 Certification from the United States Court of Appeals for the Eighth Circuit, The Honorable Lavenski R. Smith, Judge

Attorneys and Law Firms

Representing Appellant: Christopher C. Voigt and Nicholas T. Haderlie of Crowley Fleck PLLP, Sheridan, Wyoming; Jeffrey C. Gerish of Plunkett Cooney, Bloomfield Hills, Michigan; Bradford S. Moyer of Plunkett Cooney, Kalamazoo, Michigan. Argument by Mr. Gerish.

Representing Appellees: Duane A. Lillehaug of Maring Williams Law Office, P.C., Fargo, North Dakota, representing Jim Hipner, LLC; Colleen M. Pratt and Michael D. Ainbinder of Ainbinder & Pratt, Long Beach, California, representing Huey Brock; Philip White Jr. of Karpan and White P.C., Cheyenne, Wyoming, representing Jim Hipner, LLC and Huey Brock. Argument by Mr. Ainbinder.

Before BURKE, C.J., and HILL, DAVIS, FOX, and KAUTZ, JJ.

Opinion

FOX, Justice.

 

*1 [¶1] The United States Court of Appeals for the Eighth Circuit certified a question to this Court concerning the enforceability of an insurance policy notice provision. Specifically, the Eighth Circuit asked:

[W]hether, under Wyoming law, an insurer must be prejudiced before being entitled to deny coverage when the insured has failed to give notice “as soon as practicable.” Many states have expressly adopted a notice-prejudice rule under which an insurer will only be able to disclaim coverage if it demonstrates it was actually prejudiced by late notice. See 46A C.J.S. Insurance § 1769. To date, Wyoming has not.

We answer in the affirmative.

 

 

FACTS

[¶2] Although the parties provided a record containing various documents, we find it unnecessary to refer to that record. Where a question of law is certified to this Court pursuant to W.R.A.P. 11, we rely upon the factual determinations of the certifying court. Wexpro Co. v. Brimhall, 7 P.3d 42, 43 (Wyo. 2000); Allhusen v. State By and Through Wyo. Mental Health Professions Licensing Bd., 898 P.2d 878, 881 (Wyo. 1995). The following facts were provided in the Eighth Circuit’s Order for Certification of Questions of State Law:

In 2010, [Jim Hipner, LLC (“Hipner”) ], a trucking company, obtained a $2 million umbrella policy (“Century Policy”) from Century [Surety Company (“Century”) ] in order to secure a contract with a customer. In paragraph 3, the Century Policy contains the following notice provision:

1. If you notify any “underlying insurer” of an “occurrence” or an offense involving “bodily injury” or “personal and advertising injury”, you must see to it that we are also notified in writing as soon as practicable.

Later, in the same paragraph, the Century Policy contains an exclusion provision that states:

Failure to notify us, as required per paragraphs 3.a. and 3.b. above, of an “occurrence” or offense as soon as practicable will result in exclusion of coverage whether we are prejudiced or not.

On March 31, 2011, one of Hipner’s drivers created a road obstruction that produced an injury-generating, multi-vehicle collision (“the accident”) in North Dakota. According to the North Dakota Motor Vehicle Crash Report, a passenger in a car that was rear-ended by another vehicle suffered injuries deemed minor at the time. The Motor Vehicle Crash Report indicates that the other persons involved in the accident had “non-incapacitating” injuries at the time of the accident. Jim Hipner (“Jim”), a co-owner of Hipner, learned of the accident the same day that it occurred.

Jim testified that, upon his arrival to the scene of the accident, the state patrol officer told him “there were no serious injuries.” Jim also testified that the officer told him that one of the passengers had “some numbness or tingling,” but that “it was nothing to worry about” and that this “happens quite often in these cases.” According to the medical records, one person, Huey Brock, arrived at Trinity Hospital on March 31 unable to move his arms or legs.

*2 On the day of the accident, Jim called and reported the accident to representatives at Willis of Wyoming and Great West Casualty Company (“Great West”), the underlying primary insurance companies for Hipner. But, no one at Hipner notified Century. In his deposition, Jim stated that he thought notifying Willis of Wyoming satisfied his obligations to notify all of the insurance companies. On March 31, Great West set up a claim and began investigating the accident.

Brock’s injuries rendered him quadriplegic. Jim testified that he did not know that Brock sustained significant injuries from the accident until May 2011. On September 20, 2011, Century was notified of the accident indirectly when Willis of Wyoming sent Century the policy renewal for Hipner. The next day, Century created an umbrella claim relating to the accident. On December 31, 2011, Great West sent its claim file, including the investigation materials, to Century. Century did not perform its own investigation of the accident because “[t]he duty to investigate the accident fell upon Great West Casualty. Century Surety relied upon Great West Casualty to perform a competent investigation.” Nevertheless, Century later found fault with Great West’s investigation, claiming it was not thorough enough. In November 2012, Century received Brock’s settlement demand but declined to participate in the settlement “based upon lack of coverage for Jim Hipner LLC under the Century Policy coupled with serious questions regarding liability and damages.”

Century then filed the instant action in federal court seeking a declaratory judgment that Century does not have an obligation to defend or indemnify Hipner in connection with any claims arising out of or relating to the accident. Both Hipner and Brock filed motions for summary judgment, or in the alternative a motion for partial summary judgment, requesting Century’s claims for declaratory relief be denied. Century, in response, filed a cross-motion for summary judgment seeking a declaration that it has no obligation to defend or indemnify Hipner in connection with the accident. Specifically, Century argued that it is not liable under Wyoming law because Hipner failed to provide written notice “as soon as practicable” as required by the Century Policy.

The district court determined that although the Century Policy clearly and unambiguously requires written notice of a claim, the “as soon as practicable” requirement is ambiguous. Citing to Pacheco v. Continental Cas. Co., 476 P.2d 166 (Wyo. 1970), the district court concluded that Wyoming courts have found similar language ambiguous. After a “balancing of the beneficiary’s right to have the policy liberally construed in his favor with the legitimate interest of the insurer in being protected from stale claims,” Pacheco, 476 P.2d at 169, the district court found that Century received timely notice under the Century Policy as a matter of Wyoming law.

 

[¶3] Century appealed to the United States Court of Appeals for the Eighth Circuit. On December 28, 2015, the Eighth Circuit filed the Order for Certification of Questions of State Law, stating the question quoted above, see supra ¶ 1. On January 20, 2016, this Court issued a Notice of Agreement to Answer Certified Question.

 

 

STANDARD OF REVIEW

[¶4]Pursuant to W.R.A.P. 11.01, we may answer a question of law that may be determinative of a cause pending in the certifying court for which there appears to be no controlling precedent from this Court. Preston v. Marathon Oil Co., 2012 WY 66, ¶ 4, 277 P.3d 81, 83 (Wyo. 2012). Certified questions are queries of law that are reviewed de novo. Id.; State v. Mares, 2014 WY 126, ¶ 10, 335 P.3d 487, 493 (Wyo. 2014).

*3 State v. Black Hills Power, Inc., 2015 WY 99, ¶ 4, 354 P.3d 83, 85 (Wyo. 2015).

 

 

DISCUSSION

[¶5] In North Fork Land & Cattle, LLLP v. First American Title Insurance Company, 2015 WY 150, ¶ 14, 362 P.2d 341, 346 (Wyo. 2015), we explained that Wyoming courts interpret insurance policies like other contracts; however, we give insurance policy language “the plain meaning a reasonable insured would understand it to mean,” and where terms are ambiguous, they are strictly construed against the insurer. We take this approach because insurance policies are contracts of adhesion where “the insured has little or no bargaining power to vary the terms ….” Id. (quoting Doctors’ Co. v. Ins. Corp. of America, 864 P.2d 1018, 1024 (Wyo. 1993) (internal citations omitted)).

 

[¶6] Century argues that the policy language at issue is unambiguous and even a strict construction of that language in favor of Hipner requires its enforcement. Century also claims that because the notice provision language is not unconscionable, it must be enforced. Finally, Century avers that Wyoming law requires the rejection of the notice-prejudice rule (which requires an insurance company to be prejudiced before it can deny coverage based upon the violation of a notice provision in an insurance policy), especially in this case where the notice provision contains language requiring notice whether Century was prejudiced or not. In response, Hipner asserts that, regardless of the policy language, prejudice should be required when an insurer denies coverage based upon a failure to provide timely notice of a claim or occurrence and urges this Court to adopt the notice-prejudice rule because it is consistent with Wyoming precedent and is warranted by a variety of public policy considerations.

 

 

The Traditional Rule and the Notice-Prejudice Rule

[¶7] Traditionally, courts held that in order to avoid liability or its duty to defend, an insurance carrier only needed to establish that an insured’s notice of an occurrence or claim was untimely; prejudice to the insurer was irrelevant to the inquiry. Charles C. Marvel, Annotation, Modern Status of Rules Requiring Liability Insurer to Show Prejudice to Escape Liability Because of Insured’s Failure or Delay in Giving Notice of Accident or Claim, or in Forwarding Suit Papers, 32 A.L.R.4th 141, § 2 (updated 2106). According to this view, “timely notice is not merely a technical requirement, but, rather, a valid prerequisite to coverage, and any prejudice resulting from a delay in giving notice becomes immaterial.” 13 Steven Plitt et al., Couch on Insurance § 193:32 (3d ed. updated 2016). This approach “is grounded upon a strict contractual interpretation of insurance policies under which delayed notice was viewed as constituting a breach of contract, making the issue of insurer prejudice immaterial.” Clementi v. Nationwide Mut. Fire Ins. Co., 16 P.3d 223, 227 (Colo. 2001) (citing Alcazar v. Hayes, 982 S.W.2d 845, 849 (Tenn. 1998); Aetna Cas. & Sur. Co. v. Murphy, 538 A.2d 219, 220 (Conn. 1988) (overruled in part on other grounds by Arrowood Indem. Co. v. King, 39 A.3d 712, 725 (Conn. 2012)); Ouellette v. Maine Bonding & Cas. Co., 495 A.2d 1232, 1234 (Me. 1985); Brakeman v. Potomac Ins. Co., 371 A.2d 193, 195 (Pa. 1977)). A handful of jurisdictions still follow the traditional rule. 13 Plitt, supra, § 193:32 (citing cases); 1 Barry. R. Ostrager and Thomas R. Newman, Handbook on Insurance Coverage Disputes § 4.05[a] (17th ed. 2015).

 

*4 [¶8]Many courts and commentators have acknowledged the public policy rationales justifying the inclusion of notice provisions in insurance policies. For example, the Tennessee Supreme Court noted:

The purpose of a policy provision requiring the insured to give the company prompt notice of an accident or claim is to give the insurer an opportunity to make a timely and adequate investigation of all the circumstances. An adequate investigation often cannot be made where notice is long delayed, because of the possible removal or lapse of memory on the part of witnesses, the loss of opportunity for examination of the physical surroundings and making photographs thereof for use at the trial, and the possible operation of fraud, collusion, or cupidity. Such a requirement tends to protect the insurer against fraudulent claims, and also against invalid claims made in good faith. If the insurer is given the opportunity for a timely investigation, reasonable compromises and settlements may be made, thereby avoiding prolonged and unnecessary litigation.

Alcazar v. Hayes, 982 S.W.2d 845, 849 (Tenn. 1998) (quoting 1 Eric Mills Holmes & Mark S. Rhodes, Appleman on Insurance § 4.30 (2d ed. 1996) and citing 13A George J. Couch, et al., Couch on Insurance § 49:50 (2d rev. ed. 1982); Richard L. Suter, Insurer Prejudice: An Analysis of an Expanding Doctrine in Insurance Coverage Law, 46 Me. L. Rev. 221, 223-24 (1994); F. Warren Jacoby, Comment, The Materiality of Prejudice to the Insurer as a Result of the Insured’s Failure to Give Timely Notice, 74 Dick. L. Rev. 260, 262-63 (1970); Comment, 68 Harv. L. Rev. 1436, 1436-38 (1955)); see also Pacheco v. Continental Cas. Co., 476 P.2d 166, 169 (Wyo. 1970). Further, the public can be harmed by untimely claims due to “increased premiums and inadequate insurance administration.” Alcazar, 982 S.W.2d at 849. Prompt notice also enables insurers to preserve adequate reserve funds. Utica Mut. Ins. Co. v. Fireman’s Fund Ins. Companies, 748 F.2d 118, 121 (2d Cir. 1984) (“Prompt notice permits the insurer to … adjust its books in order to maintain a proper reserve fund in light of the insured’s claim.”).

 

[¶9] Recognizing that this public policy is not harmed by requiring insurers to be prejudiced before denying coverage for late notice, many courts have adopted the notice-prejudice rule which requires proof of prejudice for an insurer to avoid liability in the event that a policyholder provides them with untimely notice of an occurrence. 13 Plitt, supra, § 193:49; 1 Jeffrey E. Thomas and Francis J. Mootz, III, New Appleman on Insurance Law § 4.04[4][d] [ii] (2015); Clementi, 16 P.3d at 229 (“Since the purpose of a policy’s notice requirement is to allow an insurer to adequately investigate and defend a claim, courts that have adopted the notice-prejudice rule have permitted an insurer to deny benefits only where its ability to investigate or defend the insured’s claim was compromised by the insured’s failure to provide timely notice.”) A “vast majority” of jurisdictions now follow the modern trend and have adopted the notice-prejudice rule. Alcazar, 982 S.W.2d at 850; Atlantic Cas. Ins. Co. v. Greytak, 350 P.3d 63, 66 (Mont. 2015); Prince George’s Cty. v. Local Gov’t Ins. Trust, 879 A.2d 81, 94 n.9 (Md. 2005) (listing thirty-eight states and two territories that have adopted the rule as a matter of common law); Ferrando v. Auto-Owners Mut. Ins. Co., 781 N.E.2d 927, 934 (Ohio 2002) (“Very few courts today follow the traditional approach in notice cases.”). These courts have countenanced three policy justifications for departing from the traditional approach: 1) “the adhesive nature of insurance contracts”; 2) “the public policy objective of compensating tort victims”; and 3) “the inequity of the insurer receiving a windfall due to a technicality.” Ferrando, 781 N.E.2d at 935; see also Friedland v. Travelers Indem. Co., 105 P.3d 639, 646 (Colo. 2005).

 

*5 [¶10] In Brakeman v. Potomac Insurance Company, 371 A.2d 193 (Pa. 1977), the Pennsylvania Supreme Court explained its departure from the traditional rule, remarking that the traditional approach fails to recognize the true nature of insurance contracts. The court stated:

The rationale underlying the strict contractual approach reflected in our past decisions is that courts should not presume to interfere with the freedom of private contracts and redraft insurance policy provisions where the intent of the parties is expressed by clear and unambiguous language. We are of the opinion, however, that this argument, based on the view that insurance policies are private contracts in the traditional sense, is no longer persuasive. Such a position fails to recognize the true nat[u]re of the relationship between insurance companies and their insureds. An insurance contract is not a negotiated agreement; rather its conditions are by and large dictated by the insurance company to the insured. The only aspect of the contract over which the insured can ‘bargain’ is the monetary amount of coverage. And, as we have recognized, notice of accident provisions, such as that with which we are concerned instantly, are uniformly found in liability insurance policies. Meierdierck v. Miller, 147 A.2d [406,] 408 [ (Pa. 1959) ]. Indeed, a review of the cases indicates that often the policies express the condition in identical language. In Cooper v. Government Employees Insurance Co., 51 N.J. 86, 237 A.2d 870 (1968), the Supreme Court of New Jersey stated:

‘… (W)e have recognized that the terms of an insurance policy are not talked out or bargained for as in the case of contracts generally, that the insured is chargeable with its terms because of a business utility rather than because he read or understood them, and hence an insurance contract should be read to accord with the reasonable expectation of the purchaser so far as its language will permit.’

51 N.J. at 93, 237 A.2d at 873. Thus, an insured is not able to choose among a variety of insurance policies materially different with respect to notice requirements, and a proper analysis requires this reality be taken into account.

Id. at 196 (emphasis added); see also Susan Randall, Freedom of Contract in Insurance, 14 Conn. Ins. L.J. 107, 107-08 (2007) (“There is no ‘bargain’ to be protected [in an insurance policy]; instead, there is an agreement on terms over which the consumer has no control and the insurance company has incomplete control.”).

 

[¶11] We have repeatedly recognized the unequal bargaining power between an insurance company and an insured, and in a number of cases, we have held that insurance policies are contracts of adhesion. See, e.g., Evans v. Farmers Ins. Exch., 2001 WY 110, ¶ 9, 34 P.3d 284, 286 (Wyo. 2001) (“Because insurance policies represent contracts of adhesion where the insured has little or no bargaining power to vary the terms, if the language is ambiguous, the policy is strictly construed against the insurer.” (citation omitted)); Harper v. Fidelity & Guar. Life Ins. Co., 2010 WY 89, ¶ 37, 234 P.3d 1211, 1222 (Wyo. 2010) (acknowledging “the usual disparity of bargaining power between an insurer and the fact that insurance contracts are generally contracts of adhesion”); Shaffer v. Winhealth Partners, 2011 WY 131, ¶ 24, 261 P.3d 708, 714 (Wyo. 2011) (Golden, J., dissenting) (“[R]egardless of the source of one’s health insurance, there is severely limited opportunity for negotiation as to the standard terms of the health insurance contract.” (citation omitted)); see also North Fork Land & Cattle, 2015 WY 150, ¶ 14, 362 P.3d at 346; T.M. ex rel. Cox v. Executive Risk Indem. Inc., 2002 WY 179, ¶ 8, 59 P.3d 721, 725 (Wyo. 2002); Gainsco Ins. Co. v. Amoco Prod. Co., 2002 WY 122, ¶ 7, 53 P.3d 1051, 1056 (Wyo. 2002); Doctors’ Co., 864 P.2d at 1024; St. Paul Fire & Marine Ins. Co. v. Albany Cty. Sch. Dist. No. 1, 763 P.2d 1255, 1258 (Wyo. 1988).

 

*6 [¶12] A second basis for adopting the notice-prejudice rule is the public interest in enforcing insurance contracts to further compensate accident victims, including innocent third parties. As one court explained, “adoption of the modern rule … promotes the social function of insurance coverage: providing compensation for injuries sustained by innocent members of the public.” Great American Ins. Co. v. C.G. Tate Constr. Co., 279 S.E.2d 769, 774 (N.C. 1981). “Insurance contracts are not purely private matters between insurance companies and their insureds; rather there is a public interest in automobile liability insurance contracts and that is the protection of innocent victims ….” Alcazar, 982 S.W.2d at 851 (quoting Brakeman, 371 A.2d at 198 n.8); see also Suter, 46 Me. L. Rev. at 235; David P. Leonard, The New Wigmore: A Treatise on Evidence: Selected Rules of Limited Admissibility § 6.4.3 (2016) (“Victim compensation is a well-recognized goal of the law, and broader insurance would help to assure that the compensation of accident victims does not depend on the fortuity of the wrongdoer’s financial status.”).

 

[¶13] Wyoming’s legislature recognized this public interest when it enacted the Motor Vehicle Safety Responsibility Act, Wyo. Stat. Ann. §§ 31-9-101 through 31-9-415. That statute requires motor vehicle owners and operators to provide proof (via insurance, a bond, or depositing money with the director of the department of transportation) that they are financially able to meet a minimum level of damages to third parties that might result from accidents arising out of the use of their motor vehicle. Wyo. Stat. Ann. §§ 31-9-102(a)(xi) and 31-9-402 (LexisNexis 2015). In upholding the constitutionality of that act, we acknowledged the need to protect innocent parties and that insurance serves such a purpose. We explained that “[a]ny appropriate means adopted by the states to insure competence and care on the part of its licensees and to protect others using the highway is consonant with due process. Some states require insurance or its equivalent as a condition of the issue of a license.” Thornley v. Wyoming Highway Dep’t, Motor Vehicle Div., 478 P.2d 600, 602 (Wyo. 1971) (citation omitted).

 

[¶14] A final justification given for adopting the notice-prejudice rule is that when prejudice to the insurer is required before it can deny coverage based upon late notice, “no undeserved windfalls will be reaped by the insurer.” Suter, 46 Me. L. Rev. at 235. For example, the court in Brakeman reasoned that “[a]llowing an insurance company, which has collected full premiums for coverage, to refuse compensation to an accident victim or insured on the ground of late notice, where it is not shown timely notice would have put the company in a more favorable position, is unduly severe and inequitable.” Brakeman, 371 A.2d at 198; see also Foundation Reserve Ins. Co. v. Esquibel, 607 P.2d 1150, 1152 (N.M. 1980) (“If we were to hold otherwise, a ‘windfall for the insurer at the expense of the public’ would result.”) (citation omitted)). The Restatement (Second) of Contracts allows a court to excuse a party’s failure to perform a condition in the contract if an inequitable forfeiture would occur and the condition is not a material part of the contract. Restatement (Second) of Contracts § 229 (updated 2016).

The insurer prejudice rule is essentially an application of this principle. By excusing non-performance of procedural requirements in cases where an insurer has not been prejudiced, the court is essentially excusing the nonoccurrence of an immaterial condition. If the insured’s failure to perform the condition did not result in prejudice to the insurer, the rule assumes that the condition was not a material part of the insurance contract.

Suter, 46 Me. L. Rev. at 235-36 (citing Restatement (Second) of Contracts § 229 (1979)). In Wyoming, we have expressed our disfavor of undeserved windfalls to insurance companies. See Aaron v. State Farm Mut. Auto. Ins. Co., 2001 WY 112, ¶ 12, 34 P.3d 929, 932-33 (Wyo. 2001) (citations omitted) (“We will presume the payment of additional premiums was not intended to result in a ‘windfall to the insurer’ ….”).

 

*7 [¶15] Based upon these policy rationales, a majority of courts have overturned precedent following the traditional approach in favor of the notice-prejudice rule. See, e.g., Clementi, 16 P.3d at 227; Alcazar, 982 S.W.2d at 853-54; Cooperative Fire Ins. Ass’n of Vermont v. White Caps, Inc., 694 A.2d 34, 36-38 (Vt. 1997); Great American Ins. Co., 279 S.E.2d at 774; see also Ouellette, 495 A.2d at 1235. We agree with these courts and hold that the better-reasoned approach is to require prejudice to the insurer before coverage may be denied based upon a violation of a notice provision contained in the policy. As the Alcazar court concluded:

Though we are hesitant to carve out an exception to the axiom proscribing judicial alteration of the terms of an unambiguous contract, we have determined, due to compelling public policy justifications, that it is … appropriate to depart from a rigid application [of contract interpretation]. We join the vast majority of jurisdictions which take into consideration the degree to which the insurer has been prejudiced by the delay in notice.

Alcazar, 982 S.W.2d at 853.

 

[¶16] We note that while we have never had the occasion to adopt the notice-prejudice rule before now, our precedent is consistent with such an approach. In Pacheco v. Continental Cas. Co., the insurer received notice of an accident three years after it occurred. We concluded that the untimely notice violated the policy requirement that the insured give notice “within 20 days after the alleged accident … or as soon thereafter as was ‘reasonably possible.’ ” Id., 476 P.2d at 168. In reaching this conclusion, we considered the prejudice to the insurance company caused by this late notice:

If a timely claim for accident benefits had been made, evidence pertaining to the happening of the accident and to the nature and extent of injuries, together with evidence of resulting complications, if any, could probably have been obtained at that time which cannot be obtained some three years later.

Id. at 168. We remarked that “a beneficiary’s demand must be made within a reasonable time for the insurer to investigate the claim, i.e., before its staleness poses a substantial obstacle to ascertaining the facts surrounding the occurrence.” Id. at 169.

 

[¶17] In Brown v. Life Insurance Company of North America, 8 P.3d 333 (Wyo. 2000), we considered prejudice to the insurer in our determination of whether timely notice had been provided. In the course of our discussion, we found the lack of prejudice to the insurer significant. We stated that “based on the record before us, [the insurer] does not have a viable defense based on prejudice because of an inability to investigate the claim.” Id. at 337.

 

[¶18] Consistent with this precedent and the public policy rationales discussed in the preceding paragraphs, we find that a two-step approach to an insurer’s claim of late notice is appropriate. This approach requires a preliminary determination that an insured’s notice was untimely, in violation of the notice requirement contained in the insurance policy. The question of the timeliness of the insured’s delay in providing notice will depend upon a number of factors, including, but not limited to, the language of the notice requirement in the policy, the timing of the notice, the insured’s knowledge of the underlying facts and ability to provide notice, the sophistication of the parties, the type of insurance at issue, and the reasonableness of any delay. See, e.g., Northbrook Prop. & Cas. Ins. Co. v. Applied Sys., Inc., 729 N.E.2d 915, 922 (Ill. App. Ct. 2000). Once it is determined that notice was untimely, a court should then turn to the question of whether the insurer was prejudiced by that delay. If the insurer was prejudiced, then the insurer will be relieved of its obligation to provide coverage.

 

 

The Century Policy

*8 [¶19] The Eighth Circuit’s Order for Certification of Questions of State Law also requests this Court to answer the question of whether, under Wyoming law, an insurance clause is enforceable where it excludes coverage unless the insured notifies the insurer “as soon as practicable … whether [the insurer] [is] prejudiced or not.” Century argues that this language is enforceable, regardless of whether we adopt the notice-prejudice rule. Hipner contends that once the notice-prejudice rule is adopted, this language is void as against public policy.

 

[¶20] “Contracts against public policy are considered illegal and void. Consequently, the parties to an insurance contract are free to agree to coverage terms as they desire so long as the policy terms do not violate public policy.” 7 Steven Plitt et al., Couch on Insurance § 101:11 (3d ed. updated June 2016). Public policy may affect coverage through statutes and regulations, as we recognized in Allstate Insurance Company v. Wyoming Insurance Department, 672 P.2d 810, 820-21 (Wyo. 1983), where we explained that a policy provision is void as against public policy if it is contrary to statute. See also 7 Plitt, supra, § 101:12. Public policy may also affect coverage via the “jurisdiction’s application of public policy to the construction of the insurance contract.” 7 Plitt, supra, § 101:12. The types of public policy concerns that may require or exclude coverage are “arguably unlimited” but include the prevention of “illusory coverage when the insured purchases ineffective insurance protection” and the compensation of injuries to innocent third parties. 7 Plitt, supra, §§ 101:18, 101:20.

 

[¶21] Only two courts have considered policy language intending to override the notice-prejudice rule. In Steadfast Insurance Company v. Casden Properties, Inc., 837 N.Y.S.2d 116, 117 (N.Y. App. Div. 1st Dep’t 2007), the court applied California law and held that because California had adopted the notice-prejudice rule, an endorsement that waived the prejudice requirement for untimely notice was void as against public policy. Similarly, in Service Management Systems, Inc. v. Steadfast Insurance Company, 216 Fed. Appx. 662 (9th Cir. 2007), the court considered whether a clause stating that the insurer “shall not be required to establish prejudice resulting from noncompliance” with the notice provision would render the notice-prejudice rule inapplicable in that case. Id. at 664. The court held such language was “insufficient to defeat California’s strong public policy behind the notice-prejudice rule.” Id.

 

[¶22] Likewise, in this instance, the notice-prejudice rule is supported by sound public policy, as discussed above, see supra ¶¶ 9-15. Century cannot circumvent that rule by simply adding language to its policy stating that insufficient notice “will result in exclusion of coverage whether [Century is] prejudiced or not.” We therefore hold that this language is void as against public policy.

 

 

CONCLUSION

[¶23] We hereby adopt the notice-prejudice rule. Before being entitled to deny coverage based upon untimely notice of an occurrence that triggers coverage, an insurer must be prejudiced, regardless of the express language of the policy.

 

Court of Appeals of Ohio,

Second District, Darke County.

Shane D. WETZEL, Plaintiff–Appellant

v.

AUTO–OWNERS INSURANCE COMPANY, et al., Defendant–Appellees.

No. 2015–CA–25.

|

Decided Aug. 12, 2016.

(Civil appeal from Darke County Common Pleas Court).

Attorneys and Law Firms

Craig A. Dynes, and Ryan C. Dynes, Dynes & Dynes, LLC, Arcanum, OH, for plaintiff-appellant.

Gordon D. Arnold, and Patrick J. Janis, Freund, Freeze & Arnold, Dayton, OH, for defendant-appellees.

Opinion

HALL, J.

 

*1 { ¶ 1}  Shane D. Wetzel appeals from the trial court’s entry of summary judgment against him on his complaint seeking underinsured-motorist coverage from appellee Auto–Owners Insurance Company.

 

{ ¶ 2}  In his sole assignment of error, Wetzel contends the trial court erred in sustaining Auto–Owners’ summary-judgment motion. He argues that the inclusion of a “scheduled drivers” list in the subject insurance policy created an ambiguity that resulted in those named on the list becoming “you” for purposes of extended underinsured-motorist coverage.

 

{ ¶ 3}  The present appeal stems from a July 2011 automobile accident. On that date Shane Wetzel owned his own vehicle but he was driving a Chrysler 300 owned by his girlfriend, Jane Hammaker. As Wetzel approached an intersection, another driver, Michael Short, negligently ran a stop sign and struck the Chrysler 300. The accident killed Hammaker and seriously injured Wetzel, whose damages exceeded the tortfeasor’s liability-policy limits. Wetzel subsequently sought underinsured-motorist coverage through an Auto–Owners policy issued for his father’s trucking company, “Wayne D. Wetzel dba Wayne Wetzel Trucking.” Wayne Wetzel was the first and only “named insured” in the Auto–Owners policy. The policy contained a list of “scheduled drivers” that included Shane Wetzel. It also listed five commercial trucks as insured vehicles.

 

{ ¶ 4}  Auto–Owners denied Shane Wetzel’s claim for underinsured-motorist coverage under his father’s insurance policy. Wetzel responded by filing the present lawsuit. As relevant here, he sought a declaratory judgment regarding his right to underinsured-motorist coverage under the Auto–Owners policy.1 (See Amended Complaint, Doc. # 32). Auto–Owners later moved for summary judgment. (Doc. # 67). The trial court sustained Auto–Owners’ motion in an October 7, 2015 judgment entry. (Doc. # 86). It held that Wetzel did not qualify for underinsured-motorist coverage under the terms of the policy. (Id. at 5–7). This appeal followed.

 

{ ¶ 5}  The essence of Wetzel’s argument is that his inclusion on a “scheduled drivers” list in the Auto–Owners policy created an ambiguity. Wetzel notes that a “scheduled driver” was not defined. Nor did the policy assign any particular coverage to “scheduled drivers.” Given this purported ambiguity regarding the purpose and effect of being a scheduled driver, Wetzel argues that the policy must be construed to mean he qualified as an insured who was entitled to underinsured-motorist protection. (Appellant’s brief at 7).

 

{ ¶ 6}  Upon review, we find Wetzel’s argument to be unpersuasive. “The interpretation of an automobile liability insurance policy presents a question of law that an appellate court reviews without deference to the trial court.” Jackson v. Pub. Entities Pool of Ohio, 2d Dist. Montgomery No. 23049, 2009–Ohio–1772, ¶ 13, citing Nationwide Mut. Fire Ins. Co. v. Guman Bros. Farm, 73 Ohio St.3d 107, 108, 652 N.E.2d 684 (1995). In construing the terms of an insurance policy, we are guided by the rules of contract interpretation. “Where provisions of a contract of insurance are reasonably susceptible of more than one interpretation, they will be construed strictly against the insurer and liberally in favor of the insured.” King v. Nationwide Ins. Co., 35 Ohio St.3d 208, 519 N.E.2d 1380 (1988), syllabus. This rule cannot be used to create ambiguity where none exists. Hacker v. Dickman, 75 Ohio St.3d 118, 119–20, 661 N.E.2d 1005 (1996). Ambiguity exists only when a provision is susceptible of more than one reasonable interpretation. Id. at 120. “Also, ‘[t]he fundamental goal in insurance policy interpretation is to ascertain the intent of the parties from a reading of the contract in its entirety and to settle upon a reasonable interpretation of any disputed terms in a manner calculated to give the agreement its intended effect.’ “ Selective Ins. Co. of Am. v. Arrowood Indemn. Co., 2d Dist. Montgomery No. 23400, 2010–Ohio–557, ¶ 11, quoting 57 Ohio Jurisprudence 3d (2005) 394, Insurance, Section 315.

 

*2 { ¶ 7}  As relevant here, the Auto–Owners policy provided liability coverage, underinsured-motorist coverage, and extended underinsured-motorist coverage. The liability insurance portion of the policy stated:

We will pay damages for bodily injury and property damage for which you become legally responsible because of or arising out of the ownership, maintenance or use of your automobile (that is not a trailer) as an automobile. We will pay such damages:

(1) on your behalf;

(2) on behalf of any relative using your automobile (that is not a trailer);

(3) on behalf of any person using your automobile (that is not a trailer) with your permission or that of a relative; and

(4) on behalf of any person or organization legally responsible for the use of your automobile (that is not a trailer) when used by you, a relative, or with your permission or that of a relative.

(Doc. # 1 at Auto–Owners policy pg. 2).

 

{ ¶ 8}  The policy included the following definitions:

9. Relative means a person who resides with you and who is related to you by blood, marriage, or adoption. Relative includes a ward or foster child who resides with you. * * *
10. You or your means the first named insured shown in the Declarations and if an individual, your spouse who resides in the same household.
11. Your automobile means the automobile described in the Declarations.

(Id. at 1–2).

 

{ ¶ 9}  In light of the foregoing provisions, Shane Wetzel did not have liability coverage at the time of the accident.2 The only named insured in the Declarations was his father, Wayne Wetzel.3 Shane Wetzel did not live with his father and, therefore, did not qualify as a resident relative. Shane Wetzel also was not using one of the five trucks identified in the policy at the time of the accident. Nor was he a person or organization legally responsible for the use of one of the trucks.

 

{ ¶ 10}  With regard to underinsured-motorist coverage, the Auto–Owners policy stated:

1. We will pay compensatory damages, including but not limited to loss of consortium, any person is legally entitled to recover from the owner or operator of an underinsured automobile because of bodily injury sustained by an injured person while occupying an automobile that is covered by SECTION II—LIABILITY COVERAGE of the policy.

(Id. at Form 79303 (12–090)).

 

{ ¶ 11}  Shane Wetzel was not injured while occupying an automobile that was covered by the liability-coverage portion of the Auto–Owners policy. As set forth above, the automobiles covered by liability insurance included the five trucks specifically identified in the Declarations. Shane was driving his girlfriend’s Chrysler 300, which was not covered by liability insurance under the Auto–Owners policy.

 

{ ¶ 12}  Finally, the Auto–Owners policy provided extended underinsured-motorist coverage. It stated:

*3 b. If the first named insured in the Declarations is an individual, this coverage is extended as follows:

(1) we will pay compensatory damages, including but not limited to loss of consortium, you are legally entitled to recover from the owner or operator of any underinsured automobile because of bodily injury you sustain:

(a) when you are occupying an automobile that is not covered by SECTION II—LIABILITY COVERAGE of the policy; or

(b) when you are not occupying any automobile that is covered by SECTION II—LIABIILTY COVERAGE of the policy.

(2) The coverage extended in 2.b.(1) immediately above is also extended to a relative who does not own an automobile.

(Id.).

 

{ ¶ 13}  Here the first (and only) named insured in the Declarations was Wayne Wetzel. Therefore, the extended underinsured-motorist coverage applied to Wayne Wetzel, and to a spouse living with him, regardless of what vehicle they were in. This is so because the word “you” in the policy means the first named insured and a spouse who resides in the same household. Underinsured-motorist extended coverage also applies to a relative, defined as a related person residing with the named insured, provided the relative does not own an automobile. The record reflects Shane Wetzel did not live with Wayne Wetzel and Shane did own his own vehicle. Consequently, the policy unambiguously did not provide Shane Wetzel with extended underinsured-motorist coverage when a tortfeasor struck his girlfriend’s Chrysler 300 that he was driving.

 

{ ¶ 14}  On appeal, Wetzel’s sole argument in opposition to our conclusion is that the word “you” in the Auto–Owners policy included him. If Wetzel were correct, he would qualify for extended underinsured-motorist coverage under the language set forth above. But we conclude he is not. Wetzel argues that his inclusion on the list of “scheduled drivers” in the policy Declarations is ambiguous because the purpose and effect of being on the list are unclear. Wetzel asserts that a “scheduled driver” is not defined in the policy and that no specific coverage is assigned to a “scheduled driver.” He reasons that if any of the scheduled drivers were operating any of the covered commercial trucks in the course and scope of their employment, the liability provision of the policy would provide coverage. (Appellant’s brief at 8). This is so, he asserts, because they would qualify as “you” for purposes of liability coverage. (Id. at 10). Based on that premise, he reasons that “[i]f the ‘scheduled drivers’ are ‘you’ or ‘your’ for liability coverage then they are ‘you’ or ‘your’ for the Extended UIM coverage.” (Id.).

 

{ ¶ 15}  We agree with Wetzel that if any of the five scheduled drivers were involved in an accident while driving a covered truck in the course and scope of employment, liability coverage would exist. It would not exist, however, because the scheduled drivers all would qualify as “you” for purposes of liability insurance. As set forth above, the word “you” in the policy explicitly refers to the first named insured, Wayne Wetzel, not to all five scheduled drivers. Rather, the scheduled drivers all would have liability coverage under the hypothetical in Shane Wetzel’s brief because they were driving a covered vehicle with Wayne Wetzel’s permission.

 

*4 { ¶ 16}  Although the Auto–Owners policy does not expressly state that individuals on the “scheduled drivers” list have the named insured’s permission to drive one of the work trucks, that conclusion is unavoidable and self-evident. At the top of the list, instructions advised Wayne Wetzel, the named insured, that “[l]isted below are drivers currently scheduled on this policy.” He was told to “compare the list with [his] current records and contact [his] agent with any changes that need to be made.” Thus, it is apparent that Wayne Wetzel controlled the names on the list of people “scheduled” to drive his work trucks. By placing a driver’s name on the schedule, Wayne Wetzel necessarily gave that driver express permission. We see no other reason for placing a driver’s name on the list.4 And the liability portion of the policy extended coverage to anyone driving one of the trucks with Wayne Wetzel’s permission. Therefore, the scheduled drivers had liability coverage because they were driving the work trucks with Wayne Wetzel’s permission, not because they all qualified as “you” under the policy. By definition, “you” in the Auto–Owners policy did not refer to all “scheduled drivers” but only to the “first named insured.” The fact that a list of “scheduled drivers” appeared on the Declarations page did not make ambiguous the clear reference to Wayne Wetzel as the named insured.

 

{ ¶ 17}  In resolving the issue before us, we find persuasive the Connecticut appellate court’s reasoning in Kitmirides v. Middlesex Mut. Assurance Co., 65 Conn.App. 729, 783 A.2d 1079 (Conn.App.2001). In Kitmirides, the plaintiff was a listed driver on the declarations page of an insurance policy issued to her father in law. After she was injured by an underinsured driver, she sought underinsured-motorist benefits under the policy. She argued that the policy was ambiguous because the purpose and effect of being a listed driver were not explained. In light of that purported ambiguity, she argued that she qualified as “you” for purposes of underinsured-motorist coverage. As in the present case, such coverage was provided to “you,” which the policy defined as the “named insured,” the plaintiff’s father in law. The Connecticut appellate court rejected her argument, reasoning in part:

After a searching review of the record, the parties’ briefs, the cases cited therein and the oral argument, we are persuaded that, although the plaintiff’s arguments are not implausible, the defendant’s reading of the policy is more convincing. The declarations page in this case, even though it lists the plaintiff as an additional driver without defining the rights attaching to that designation, does not, per se, create an ambiguity in the policy’s definition of a “Covered person” for a particular coverage. [footnote omitted]. In our view, the policy is not reasonably susceptible to more than one reading with regard to a listed driver’s right to underinsured motorist coverage. For underinsured motorist coverage, the policy clearly and unambiguously defines “you,” the person covered in the underinsured portion of the policy, as the “ ‘Named insured’ shown in the Declarations….” Because these terms are unambiguous, the coverage provisions as a whole are unambiguous. On the present record, the only person who fits the definition of the “Named Insured” is the plaintiff’s father-in-law. He is the only person who is identified as the insured on the declarations page. That identification is not on the same page as the listing of named drivers. He alone requested the policy change that made her an additional driver. * * *

*5 * * * [W]e agree with the defendant’s construction of the policy that it issued to the plaintiff’s father-in-law. Specifically, we conclude that a person who is a listed driver on the declarations page of an automobile insurance policy, and who is nowhere else listed as an insured, is not entitled to underinsured motorist coverage. The policy’s definition of who is an insured for such coverage is unambiguous. Under the circumstances of this case, the plaintiff cannot require the defendant to compensate her for the injuries that she received as a result of the tortious conduct of an underinsured motorist.

Id. at 1083–1084.

 

{ ¶ 18}  A Missouri appellate court reached the same conclusion in Eldridge v. Columbia Mut. Ins. Co., 270 S.W.3d 423 (Mo.App.2008). Citing Kitmirides and case law from Indiana and Kentucky, the Eldridge court reasoned:

Victoria Savage was not a resident of John Earnest’s household at the time of the accident. Additionally, she is not listed as a “Named Insured” on the Declarations page of the policy. She is listed in the policy only as a “Driver.” More specifically, she is listed as a driver for the 2000 Chevrolet Malibu, which is a covered vehicle under the policy but was not involved in the subject accident. Based on the plain language of the insurance agreement, Victoria Savage was a covered driver with regard to the 2000 Chevrolet Malibu, but she was not an insured for any other purposes under the policy.

We disagree with Eldridge’s argument that the term “driver” is unclear because it was not defined in the policy. The mere lack of definition does not create an ambiguity. * * * Nothing in the policy suggests that its use of the term has any meaning beyond the plain and ordinary meaning of “driver.” Merriam Webster’s Collegiate Dictionary, 353 (10th ed.2000) defines “driver” as “one that drives: as a: coachman b: the operator of a motor vehicle[.]” These definitions are consistent with the everyday use of the word with respect to automobiles and do not create confusion or uncertainty. Further, the double listing of John Earnest in the policy, once as the “named insured” and again in another section of the policy set off with horizontal lines and headed by the bolded words “DRIVER(S) SUMMARY,” prevents an understanding that “driver” could have the same meaning as “named insured” under the policy.

Although Missouri has not directly addressed this issue, other jurisdictions have recognized that the designation of “driver” on the declarations page of an insurance policy is not without effect. In Kitmirides v. Middlesex Mutual Assurance Co., 65 Conn.App. 729, 783 A.2d 1079, 1084 (2001), under similar circumstances to those before us, the court held that the policy’s definition of an insured is unambiguous when one party is listed as a named insured on the declarations page and another is listed as a driver, a term undefined by the policy. The court concluded that the driver designation serves as dispositive evidence of permission to use a covered vehicle. Id. at 1083 n. 7.

*6 Indiana and Kentucky have also rejected the notion that an ambiguity arises when an automobile insurance policy fails to define the term “driver.” Millspaugh v. Ross, 645 N.E.2d 14 (Ind.Ct.App.1994); True v. Raines, 99 S.W.3d 439, 444 (Ky.2003). The Indiana court found that while the designation of driver was significant for some purposes, including the amount of the premium due under the policy, it did not create a right to coverage under all provisions of the policy. Millspaugh, 645 N.E.2d at 1617. Likewise, North Carolina has held that the term “named insured” unambiguously excludes persons listed only as drivers in policies similar to the one at issue here. Nationwide Mut. Ins. Co. v. Williams, 123 N.C.App. 103, 472 S.E.2d 220, 222 (1996). This view is in keeping with Couch on Insurance, which explains that “one listed on the policy, but only in the status of a driver of a vehicle, is not a named insured despite the fact that such person’s name was physically on the policy.” 7A Lee R. Russ & Thomas F. Segalla, Couch on Insurance 3d § 110:1 (2005).

Eldridge at 427–428; see also Ex parte United Servs. Auto. Ass’n, 365 S.C. 50, 56, 614 S.E.2d 652 (S.C.App.2005) (“We therefore adopt the majority view and hold that listing an individual as an operator on the declarations page of an insurance policy does not make that individual a named insured.”).

 

{ ¶ 19}  We agree with the foregoing case law, which is equally applicable here. But even if we were to accept Shane Wetzel’s argument regarding ambiguity as to the purpose and effect of being a “scheduled driver,” we believe the most natural and reasonable interpretation is that the list provides prima facie evidence that a driver whose name appears there has permission to drive one of the work trucks. In any event, no reasonable interpretation of the policy would transform all of the scheduled drivers into “you” (which the policy explicitly defines elsewhere as Wayne Wetzel, the first named insured) for purposes of underinsured-motorist coverage. Compare Georgia Farm Bureau Mut. Ins. Co. v. Wilkerson, 250 Ga.App. 100, 102, 549 S.E.2d 740 (Ga.App.2001) (“Although the designation ‘driver’ may be used to show permission to use the insured automobile, this meaning is not stated in the policy. But this case does not involve the meaning of listing a driver on the policy. And just because identifying one as a ‘driver’ may be ambiguous does not make ambiguous the otherwise plain and clear reference to McDowell as the only ‘named insured’ shown in the Declarations.”). In other words, assuming arguendo that the meaning of “scheduled driver” is ambiguous, we know that it does not mean “you” because “you” is clearly defined elsewhere in the policy. We also know that all of the “scheduled drivers” do not qualify as the “first named insured” because the policy specifically identifies Wayne Wetzel, alone, as the first and only named insured.

 

*7 { ¶ 20}  On appeal, Shane Wetzel notes that some courts from other states have accepted an argument that the undefined term “driver” is ambiguous and that the ambiguity results in such a “driver” becoming a “named insured.” Perhaps more pertinently, he maintains that the Kitmirides decision discussed above is at odds with two Ohio cases, Jensen v. State Automobile Mutual Ins. Co., 10th Dist. Franklin No. 04AP–837, 2005–Ohio–4354, and Roelle v. Coffman, 3d Dist. Seneca No. 13–97–17, 1997 WL 722775 (Nov. 17, 1997).5

 

{ ¶ 21}  In Roelle, Jeanette Bowlin shared a residence with Marc Edward Coffman. They obtained a joint car insurance policy through Motorists Mutual Insurance Company. Bowlin was the named insured, Marc Edward Coffman was listed as a driver, and the policy included their respective cars. The policy provided liability coverage to an “insured,” which it defined to include (1) the named insured, (2) a resident spouse of the named insured, (3) anyone using a covered auto of the named insured or the named insured’s resident spouse, and (4) a family member of the named insured or the named insured’s resident spouse. Roelle at *1–2. The issue in the case was whether Marc Edward Coffman’s son, Marc Anthony Coffman, was an insured under the policy based on his status as a family member of Marc Edward Coffman.

 

{ ¶ 22}  Because Marc Edward was listed as a “driver” but was not the named insured or a resident spouse of the named insured, a literal reading of the policy meant that he was not covered at all and, by extension, that his son was not covered as his family member. The Third District rejected this interpretation, reasoning:

Appellants contend that Marc Edward is an insured under the policy even though he was not Jeanette’s spouse nor a named insured listed on the Declarations page of the policy. While Marc Edward was a listed driver and had paid an additional premium to be included on the policy, the policy language does not expressly provide any insurance coverage for named drivers who do not otherwise qualify as named insureds or as family members of the named insured. Appellants argue that to read the policy as providing no coverage to Marc Edward is unreasonable and contrary to the intentions of the contracting parties. As the depositions of Jeanette, Marc Edward, and Randall Mick, Motorists Mutual’s own agent, demonstrate, all parties believed Marc Edward would receive insurance coverage as a result of being named on the policy and an additional premium being charged. Since insurance coverage was clearly intended to include Marc Edward, Appellants believe he should receive the same benefits as a named insured. According to Appellants, it follows then that Marc Anthony, as Marc Edward’s son, would qualify as [an] insured family member for liability purposes under the Motorists Mutual policy.

On the other hand, while Motorists Mutual concedes that Marc Edward was insured under their policy as a named driver, the company does not agree that he qualifies for the same coverage as a named insured. As a result, Motorists Mutual maintains that Marc Anthony would not be entitled to liability coverage since he is not a family member of Jeanette Bowlin, the only named insured. * * *

*8 * * * We find the automobile insurance policy issued to Jeanette Bowlin and Marc Edward Coffman ambiguous since a “named driver” other than a “named insured” is not defined nor is a “named driver” assigned any coverage limits in the body of the contract. A literal reading of the contract reveals that named drivers who are not also the named insured or a family member of a named insured are not covered under the policy. However, such a reading would be unreasonable given that a premium was charged by Motorists Mutual for the sale of insurance protection and paid by Marc Edward, as a purchaser of that coverage. Nor would such a reading conform to the intentions of the parties, all of whom agree that Marc Edward was entitled to insurance coverage as a named driver.

Although Motorists Mutual suggests a named driver is entitled to a more limited form of coverage than a named insured, as the drafter of the policy, Motorists Mutual had the opportunity to define the coverage available to named drivers listed on their policies. Its failure to do so results in an ambiguity which must be construed against the insurer. * * * Viewing the contract terms in a light consistent with the intentions of the parties, we find Marc Edward Coffman was an insured, as that term is used in Motorists Mutual’s policy, for purposes of liability coverage. As a result, Marc Anthony Coffman is also eligible for liability coverage under Motorists Mutual’s policy as a family member of an insured. * * *.

Id. at *2–3.

 

{ ¶ 23}  In Jensen, the plaintiff-appellee, Mark Jensen, was struck in a crosswalk by a negligent driver. Jensen lived in an apartment in Columbus, Ohio, but also considered himself a resident of his parents’ home in Oregon, Ohio. Jensen’s parents had automobile insurance with State Auto. The parents were “named insureds,” and plaintiff Jensen was listed as an “additional driver” on the policy. His parents paid a premium to include him on their policy, and he resided with them periodically. As a result of his accident, Jensen sought underinsured-motorist coverage under his parents’ policy. The trial court found him entitled to coverage as a resident of his parents’ household.

 

{ ¶ 24}  On review, the Tenth District affirmed on alternative grounds. Jensen at ¶ 16. Relying on Roelle, it found that Jensen’s status as an “additional driver” entitled him to underinsured-motorist coverage, reasoning:

In appellee’s request for admissions in this case, State Auto acknowledged appellee is entitled to underinsured motorist coverage and general automobile insurance coverage as a rated driver. Although appellee is listed on the declarations page as an additional driver, an “additional driver” other than a named insured is neither defined, nor assigned any coverage limits in the policy. Thus, we find the policy is ambiguous, as it does not define what coverage is available to additional drivers listed on their policies. Construing the policy in favor of appellee, we find appellee, as an “additional driver,” qualified as an “insured” under the State Auto policy. To find otherwise would contravene the intention of the parties, as State Auto charged a premium for insurance coverage, and Mr. Jensen paid a premium to ensure appellee was insured under the State Auto policy.

*9 * * * State Auto improperly argues that the definition of a “named insured” is inapplicable, contrary to its admission that appellee is insured under the policy. Nonetheless, State Auto admitted underinsured motorist coverage was not limited to an insured’s use of a particular automobile when he is a pedestrian. Thus, we find appellant’s argument is without merit, and the trial court properly granted appellee’s motion for summary judgment.

Id. at ¶ 23–24.

 

{ ¶ 25}  Upon review, we are unpersuaded by Wetzel’s reliance on Roelle and Jensen. In both cases, the policyholder specifically paid a premium to have the disputed person covered. In Roelle, the insurance company also agreed that Marc Edward was an insured under the policy as a named driver even though the literal policy terms did not provide him any coverage. Moreover, the Third District found that the insurance company had failed to define the particular coverage available to named drivers such as Marc Edward and, by extension, his son. Likewise in Jensen, the insurance company agreed that Jensen was an insured under the policy, but the Tenth District found that the policy did not define what coverage was available to him.

 

{ ¶ 26}  Here the Auto–Owners policy at issue did identify the coverage available to Wetzel. As set forth more fully above, the liability portion of the policy extended coverage to anyone driving one of the work trucks with Wayne Wetzel’s permission. Therefore, the scheduled drivers, including Wetzel, had liability coverage when they were driving the work trucks. The policy unambiguously did not provide Wetzel with underinsured-motorist coverage, however, because he was not driving a covered work truck at the time of his accident, and he was not the named insured, a spouse of the named insured, or a resident relative of the named insured. If Wetzel had been driving a work truck at the time of his accident, he would have been covered. Because he was driving his girlfriend’s personal car, the Auto–Owners trucking policy issued to his father provided no coverage.

 

{ ¶ 27}  To the extent that Roelle and Jensen might suggest a different result based on a perceived ambiguity in the Auto–Owners policy, we find them unpersuasive and respectfully decline to follow them. Both opinions expressed concern about paying premiums but not having coverage for a particular claim. As Auto–Owners notes, however, “lack of coverage in a particular circumstance is not a total lack of coverage, if coverage applies in other circumstances.” (Appellee’s brief at 16). Auto–Owners also correctly notes that unlike Roelle and Jensen, where a specific premium apparently was paid to add a particular driver to the policy, the policy at issue here covered work vehicles without any apparent additional premium regardless of how many scheduled drivers there were. Indeed, the policy allowed Wayne Wetzel to change the scheduled drivers at will, which is consistent with our conclusion that being a scheduled driver merely signified that the driver had permission to operate the trucks.

 

*10 { ¶ 28}  We note also that two Sixth District cases, Moccabee v. Progressive Ins. Co., 6th Dist. Huron No. L–98–1069, 1998 WL 700670 (Oct. 9, 1998), and Vanvlerah v. Doughty, 6th Dist. Huron No. H–04–044, 2005–Ohio–3601, are consistent with our analysis herein. In Moccabee, the Sixth District upheld a finding that the plaintiff, Samuel Moccabee, was not an insured under an insurance policy issued to Raymond Nowak, his step-father. Although Moccabee was identified in the policy as an undefined additional “driver,” that fact did not make him an insured. In rejecting his argument on that issue, the Sixth District reasoned:

The policy declarations page is addressed to only Raymond Nowak, and clearly states that it is a “policy declaration” for Raymond Nowak. It is undisputed that Raymond Nowak was the party responsible for choosing the levels of available coverage and for paying the policy premiums Thus, it is clear and unambiguous that Raymond Nowak was the “named insured” on the policy, and that Norma Nowak was an “insured” under the policy by virtue of being Raymond Nowak’s spouse and living in the same household as Raymond Nowak. It is undisputed that appellant was not in the Nowak’s vehicle when the accident occurred, and appellant is not otherwise a “spouse” or a “relative” as defined by the policy.

Upon consideration of the foregoing, we find that the term “insured,” while not defined in the policy, unambiguously refers to only Raymond and Norma Nowak. Accordingly, the trial court did not err by finding that, although appellant is listed as a “driver” under the policy, appellant is not an “insured” under the policy, and appellant’s first assignment of error is not well-taken.

Moccabee at *3–4.

 

{ ¶ 29}  In Vanvlerah, an underinsured motorcyclist struck and injured a minor who was riding a bicycle. The minor’s father, Timothy McGinn, was named as an additional driver on the declarations page of a policy issued to the minor’s grandfather, James McGinn. Much like the Rolle case discussed above, Timothy McGinn argued that his status as an additional driver made him an insured entitled to underinsured-motorist coverage under James McGinn’s policy. Based on the premise that he was an insured, Timothy argued that his minor child also was entitled to underinsured-motorist coverage as a family member. The Sixth District rejected this argument, reasoning:

This court has reviewed the disputed policy language. The sole named insured is James McGinn. His son, Timothy McGinn, is listed as an authorized driver of the insured vehicle. In the definitions portion of the policy, the language expressly states that a resident spouse of the name[d] insured is also covered by the policy. The policy also extends coverage to family members of the named insured.

Family members are defined as those related by blood, marriage, or adoption who reside in the same household as the named insured. Timothy and [D.] McGinn did not reside with the named insured. No resident spouse was involved in the accident. The covered vehicle was not involved in the accident. The express language of the policy makes clear it does not encompass Timothy or [D.] McGinn. It provides no underinsured coverage for this accident.

*11 Part C of the policy, the underinsured coverage provisions, specifically establishes that an “insured” is the named insured, a family member of the named insured, or anyone occupying the covered automobile. Thus, the plain language of the agreement unequivocally excludes coverage in this case.

Appellants’ attempt to distinguish and redefine this court’s ruling in Moccabee v. Progressive Ins. Co. (Oct. 9, 1998), 6th Dist. No. L–98–1069, is misleading and misplaced. Appellants proclaim that by affirming, this court would, in effect, be holding that Moccabee enables an insurance company to charge an additional premium to list an additional named driver while wholly denying coverage to that named driver. There is absolutely no evidence that an additional premium was charged in this case based upon the listing of Timothy McGinn as a driver.

The Moccabee ruling held that whether or not one is an “insured” under a policy is governed by the language of the policy itself and is not controlled by whether or not that person is listed as an additional driver. That is precisely what the court is reaffirming in this case. The policy language in this case is not ambiguous. Pursuant to the language, there is no coverage. * * *.

Vanvlerah at ¶ 14–18; see also Dea v. Johnson, 8th Dist. Cuyahoga No. 90178, 2008–Ohio–3147, ¶ 12 (“In the instant case, plaintiff is not a named insured, nor is she an insured by virtue of being a ‘relative’ as defined by the policy. Furthermore, plaintiff is not an insured merely by being listed as an additional driver on the policy.”).

 

{ ¶ 30}  Finally, in his reply brief, Wetzel questions whom the extended underinsured-motorist coverage in the Auto–Owners policy was intended to protect. He reasons: “When a policy is issued for five large trucks and five scheduled drivers, who does Auto Owners think the Extended UIM coverage is for? If Auto Owners’ intent was that it was only for Wayne D. Wetzel then Auto Owners should have said the Extended UIM coverage was only for Wayne D. Wetzel.” (Appellant’s reply brief at 2). Later in his reply brief, Wetzel questions: “If Auto Owners is insuring a trucking company with five large commercial trucks and five scheduled drivers, then who else would the Extended UIM coverage benefit?” (Id. at 5).

 

{ ¶ 31}  But the Auto–Owners policy did identify the recipient of underinsured-motorist coverage. As explained above, the answer to Wetzel’s inquiries resides in what we believe is the unambiguous language of the policy. It explicitly provided underinsured-motorist coverage to anyone occupying one of the covered trucks. It also provided extended underinsured-motorist coverage to the named insured (Wayne Wetzel), a resident spouse of the named insured, and a relative of the named insured not owning an automobile. Shane Wetzel was not occupying one of the covered trucks. He was not the named insured, a resident spouse of the named insured, or a relative of the named insured who did not own an automobile. Therefore, he was not entitled to underinsured-motorist coverage under the terms of the Auto–Owners policy.

 

*12 { ¶ 32}  Based on the reasoning set forth above, we overrule Wetzel’s assignment of error and affirm the judgment of the Darke County Common Pleas Court.

 

FROELICH, J., and WELBAUM, J., concur.

All Citations

Slip Copy, 2016 WL 4262814, 2016 -Ohio- 5355

 

 

Footnotes

1

Wetzel’s amended complaint also included claims against other defendants and an “implied-in-fact” coverage claim against Auto–Owners. The other defendants eventually were dismissed, however, and Wetzel’s assignment of error addresses only his claim for underinsured-motorist coverage as an insured under the terms of the Auto–Owners policy. The record also reveals the presence of cross claims and counterclaims. In an April 2016 decision and entry, however, we determined that those claims were moot, and did not preclude the existence of an appealable order, because they were derivative subrogation claims.

2

We include the liability portion of the policy for context and because the underinsured-motorist portion of the policy refers to it.

3

In its appellee’s brief, Auto–Owners points out that Wayne Wetzel died in November 2010, which was before Shane Wetzel’s July 2011 automobile accident. Auto–Owners argues that it had no knowledge of Wayne Wetzel’s death and continued to issue policy renewals to “Wayne Wetzel dba Wayne Wetzel Trucking” long after Wayne Wetzel’s death and Shane Wetzel’s accident. Auto–Owners also argues that Wayne Wetzel’s death had no effect on the coverage provided by the policy and did not result in Shane Wetzel automatically becoming the named insured. (See Appellee’s brief at 20–23). For present purposes, however, we need not consider the impact, if any, of Wayne Wetzel’s death. In his sole assignment of error, Shane Wetzel does not argue that Wayne Wetzel’s death affected his entitlement to underinsured-motorist coverage. In fact, Shane Wetzel’s opening appellate brief does not mention the fact that Wayne Wetzel died prior to the accident. As set forth above, Shane Wetzel’s sole argument on appeal is that he qualifies as “you” for purposes of extended underinsured-motorist coverage under the terms of the policy based on his status as a “scheduled driver.” Given that Wayne Wetzel’s death is not raised as an issue, or even mentioned, in Shane Wetzel’s appellate argument, we need not consider it.

4

This does not mean, of course, that Wayne Wetzel could not give other people permission to drive a work truck. Nothing in the policy precluded him from doing so. Having a particular driver’s name on the list simply removed any doubt regarding the existence of permission for that person.

5

Wetzel also addresses the cases of Scott–Pontzer v. Liberty Mut. Fire Ins. Co., 85 Ohio St.3d 660, 710 N.E.2d 1116 (1999), and Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003–Ohio–5849, 797 N.E.2d 1256, which limited Scott–Pontzer. He argues that they do not apply here because they involved insurance policies that designated a corporation as the named insured whereas the Auto–Owners policy identified an individual, Wayne Wetzel, as the named insured. (Appellant’s brief at 19). Wetzel specifically asserts that “[t]he within case is not governed by the Supreme Court of Ohio’s holding in Galatis.” (Id.). We agree. In his reply brief, however, Wetzel then suggests that Scott–Pontzer and Galatis do apply. In fact, he asserts that “[t]his case is controlled by” Scott–Pontzer and Galatis. (Appellant’s reply brief at 6). We are more persuaded by Wetzel’s initial position on the issue. Scott–Pontzer and Galatis involved an allegedly-ambiguous “you” when the named insured was a corporation. Here the named insured was an individual, and we find no ambiguity with regard to the word “you,” which the policy clearly defined. Wetzel’s argument is different. He contends that the phrase “scheduled driver” is ambiguous and, therefore, that all “scheduled drivers” should be grafted onto the unambiguous definition of “you.”