Ady v. West American Ins. Co., 80-1670

• Decision Date: 26 February 1982
• Docket Number: No. 80-1670,80-1670
• Citation: 433 N.E.2d 547,23 O.O.3d 495,69 Ohio St.2d 593
• Parties: , 23 O.O.3d 495 ADY et al., Appellees, v. WEST AMERICAN INSURANCE COMPANY, Appellant.
• Court: Ohio Supreme Court

Page 593

69 Ohio St.2d 593

433 N.E.2d 547, 23 O.O.3d 495

ADY et al., Appellees, v. WEST AMERICAN INSURANCE COMPANY, Appellant.

No. 80-1670.

Supreme Court of Ohio.

Feb. 26, 1982.

Syllabus by the Court

Any contractual restriction on the coverage mandated by R.C. 3937.18 must comply with the purpose of this statute. (Orris v. Claudio, 63 Ohio St.2d 140, 406 N.E.2d 1381, overruled.)

The facts upon which this appeal is based follow. Therry Ady was operating a motorcycle when he was struck by an uninsured motorist. As a result of the accident, he sustained injuries. He had insurance coverage, including uninsured motorist, with Midwest Mutual Insurance Co. In response to his claim, the company agreed to pay a pro-rata share of the damages up to $12,500 per person, the policy limit. Because the expenses involved as a result of the accident were more, he attempted to collect the additional amount under the uninsured motorist provision of his father's policy with West American Insurance Co., appellant here. However, appellant denied coverage based upon an exclusion contained in the policy.

Then, Terry R. Ady and others, appellees herein, filed a declaratory judgment action in the Court of Common Pleas of Lake County for an interpretation of the exclusion in the uninsured motorist provision in appellant's policy issued to Robert Ady, Terry's father. The exclusion at issue contains the following language:

'This insurance does not apply: * * * (b) to bodily injury to an insured while occupying a highway vehicle (other than an insured highway vehicle) owned by the named insured, any designated insured or any relative resident in the same household as the named or designated insured, * * *.' (Emphasis added.)

The trial court found that Terry Ady was an insured person under his father's policy and could collect benefits for expenses not compensated by his own policy. The court concluded that the exclusion would be against public policy and contrary to R.C. 3937.18.

The case was appealed to the Court of Appeals. The court concluded that:

'* * * There is no reason an insured should not recover on two policies for which the premium has been paid and coverage extended.'

The cause is now before this court pursuant to the allowance of a motion to certify the record.

Robert J. DiCello Co., L.P.A., and Robert J. DiCello, Mentor, for appellees.

Greene, Tulley & Jurjans and Joseph P. Tulley, Willoughby, for appellant.

FRANK D. CELEBREZZE, Chief Justice.

The issue presented for our determination is whether the exclusion contained in the uninsured motorist coverage of this insurance policy is valid. To be valid, the exclusion must not be contrary to the public policy reflected in R.C. 3937.18. The statute states in relevant part:

'(A) No automobile liability or motor vehicle liability policy of insurance insuring against loss resulting from liability imposed by law for bodily injury or death suffered by any person arising out of the ownership, maintenance, or use of a motor vehicle shall be delivered or issued for delivery in this state with respect to any motor vehicle registered or principally garaged in this state unless an equivalent amount of coverage for bodily injury or death is provided therein or supplemental thereto under provisions approved by the superintendent of insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom. The named insured shall have the right to reject such coverage, or may require the issuance of coverage for bodily injury or death in accordance with a schedule of optional lesser amounts approved by the superintendent, that shall be no less than the limits set forth in section 4509.20 of the Revised Code for bodily injury or death * * *.'

We must consider this exclusion in light of the purpose of the statute and the coverage mandated. Because we have had several opportunities previously to consider the statute, only a brief review is necessary at this time.

In Abate v. Pioneer Mutl. Cas. Co. (1970), 22 Ohio St.2d 161, 165, 258 N.E.2d 429, we stated that uninsured motorist coverage 'is designed to protect persons injured in automobile accidents from losses which, because of the tort-feasor's lack of liability coverage, would otherwise go uncompensated.' The same conclusion, and indeed the same language, was repeated in Curran v. State Automobile Mutl. Inc. Co. (1971), 25 Ohio St.2d 33, 38, 266 N.E.2d 566, and subsequently, in Bartlett v. Nationwide Mutl. Ins. Co. (1973), 33 Ohio St.2d 50, 52, 294 N.E.2d 665. We also concluded in Bartlett, supra, that '* * * the legislative purpose in creating compulsory uninsured motorist coverage was to place the injured policyholder in the same position, with regard to the recover of damages, that he would have been in if the tortfeasor had possessed liability insurance.' This statement of the legislative purposes was repeated in Shearer v. Motorists Mutl. Ins. Co. (1978), 53 Ohio St.2d 1, 7, 371 N.E.2d 210.

Thus, we have consistently determined that the public policy of the uninsured motorist statute is to protect persons injured in motor vehicle accidents from losses because of the tort-feasor's lack of liability insurance coverage. Applied to these facts, Terry Ady was insured, physically injured and sustained financial loss as the result of the tort-feasor's lack of liability insurance coverage. Thus, his financial loss should be covered to effectuate the purpose of the statute.

Similarly, on several previous occasions we have specifically stated that the statute is designed to protect persons, not vehicles. One of the first cases based on this statute was Motorists Mutl. Ins. Co. v. Tomanski (1971), 27 Ohio St.2d 222, 224, 271 N.E.2d 924, in which we quoted Horne v. Superior Life Ins. Co. (1962), 203 Va. 282, 123 S.E.2d 401, 404: "[i]t is not the purpose of the uninsured motorist law to provide coverage for the uninsured vehicle, but its object is to afford the insured additional protection in the event of an accident." In Curran, supra, 25 Ohio St.2d at page 38, 266 N.E.2d 566, a unanimous court stated that the legislative purpose is that 'coverage be provided to persons injured through the acts of uninsured motorists.' More recently, in Orris v. Claudio (1980), 63 Ohio St.2d 140, 406 N.E.2d 1381, the majority recognized the merit of the view that the coverage is personal in nature. This interpretation of the statute was clearly enunciated in the dissent (Celebrezze, C. J.):

'The risk protected against by uninsured motorist coverage is not based on the vehicle driven or the negligence of the insured. The coverage protects against loss due to bodily injuries or death caused by another who is at fault. It should ordinarily attach to an insured, not to a vehicle.' Id., at page 145. The rationale of these cases indicates that the focus of the statute is the protection of personal losses, such as Terry Ady's.

Furthermore, we have previously concluded that the statute requires mandatory offering of uninsured motorist coverage. In Abate, supra, 22 Ohio St.2d at page 165, 258 N.E.2d 429, we stated that 'R.C. 3937.18 makes mandatory offering of uninsured motorist coverage * * *.' Just last term we reiterated this in Kish v. Central Nat. Ins. Group (1981), 67 Ohio St.2d 41, 44, 424 N.E.2d 288, citing Tomanski, supra. Moreover, this statutorily mandated coverage can not be whittled away by private parties. In Bartlett, supra, 33 Ohio St.2d at page 53, 294 N.E.2d 665, we stated that '[p]rivate parties are without power to insert enforceable provisions in their contracts of insurance which would restrict coverage in a manner contrary to the intent of the statute.' Therefore, any restriction on full coverage should emanate from the General Assembly ¹; otherwise a contractual limitation in the insurance policy should comply with the statutory purpose.

In evaluating the validity of a contractual limitation, it is important to consider the nature of the parties involved. The General Assembly, realizing that insurance companies are in a much stronger bargaining position vis a vis their customers when insurance is sold, decided that uninsured motorist coverage is desirable and mandated that it be offered. Orris, supra, 63 Ohio St.2d at 146, 406 N.E.2d 1381. (Celebrezze, C. J., dissenting). Thus, the stronger position of an insurance company must be remembered when assessing the validity of an exclusion which reduces the mandated coverage.

Insurance companies write the policies and present the pre-printed forms to customers, most of whom are unfamiliar with terminology found in the multi-page policies. Most customers accept the policies in toto and do not question, let alone actively negotiate to change or omit, any of the provisions in the pre-printed forms. Therefore, an insurance company has the burden of showing that any rejection was knowingly made by the customer. A customer has the option of rejecting coverage. However, to make a rational decision to reject coverage, a customer has to be aware of a contractual provision, understand its terms and agree to it. Thus, any rejection or exclusion should be conspicuous so that a customer is aware of its existence. ² Furthermore, the language should be clear and easily understood by a lay person. Also there should be evidence that the customer agreed to the restriction on coverage.

Applying these principles to the facts in this case, the execlusion in this pre-printed insurance policy was in small print and complex terminology. The relevant definition interpreting the exclusion is on the reverse side of the page on which the exclusion is printed. To be covered, a vehicle must be described in a schedule which is also in yet another location in the policy. There is no cross reference to help a customer tie together these...