Giant Eagle, Inc. v. Genesis Ins. Co.

• Decision Date: 20 March 2003
• Docket Number: No. C2-02-175.,C2-02-175.
• Citation: 252 F.Supp.2d 559
• Parties: GIANT EAGLE, INC., Plaintiff, v. GENESIS INSURANCE CO., et al., Defendants.
• Court: U.S. District Court — Southern District of Ohio

252 F.Supp.2d 559

GIANT EAGLE, INC., Plaintiff, v. GENESIS INSURANCE CO., et al., Defendants.

No. C2-02-175.

United States District Court, S.D. Ohio, Eastern Division.

March 20, 2003.

Scott D. Livingston, Marcus & Shapira, Pittsburgh, PA, Robert C. McClelland, Rademaker, Matty, McClelland & Greve, Cleveland, OH, For Plaintiff and Counter-Claimant.

Clement John DeMichelis, Ralph G. Winters, McCaslin, Imbus & McCaslin, Cincinnati, OH, for Genesis Ins. Co., defendant and counter-claimant.

Kenneth J. Knabe, Lakewood, OH, for Andrew and JoAnn Chafee, defendants.

Jeffrey W. Fodor, Warren, OH, for Brandon F. Fellows, Michelle Fellows, Michelle Fellows-Knox, defendants.

Perry R. Silverman, Columbus, OH, M. David Smith, Cleveland, OH, for Anisia Piciorea, Sorin Piciorea, Emmett Tolbert, Ramona Tolbert, defendants.

Brian Green, Erie, PA, Michael I. Shapero, Shapero, McGinnis, Green, Tater

& Michel, Beachwood, OH, for Jeff Uguccini, Georgina Uguccini.

AMENDED OPINION AND ORDER

GRAHAM, District Judge.

In this declaratory judgment action, Giant Eagle, Inc. ("Giant Eagle"), seeks a declaration regarding the existence of uninsured motorist/underinsured motorist ("UM/UIM") coverage in connection with business automobile liability insurance policies it purchased from defendant Genesis Insurance Company ("Genesis"), in the years 1995 through 2002.

In the aftermath of the Ohio Supreme Court's decision in Scott-Pontzer v. Liberty Mutual Fire Ins. Co., 85 Ohio St.3d 660, 710 N.E.2d 1116 (1999),¹ fourteen separate actions were filed against Giant Eagle and/or Genesis, asserting claims for UM/UIM benefits under the Genesis policies. All of the claimants in these actions have been joined as defendants herein. The Genesis policies provided business automobile liability insurance to Giant Eagle, subject to a $250,000 retention provision which required Giant Eagle to pay the first $250,000 of liability for each accident. The Genesis policies did not include UM/UIM coverage. The issues presented are whether UM/UIM coverage is implied as a matter of law pursuant to Scott-Pontzer and its progeny, and, if so, whether the $250,000 retention applies to the UM/UIM coverage.

Giant Eagle is a Pennsylvania corporation, having its principal place of business in Pittsburgh, Pennsylvania. Giant Eagle operates wholesale food distribution centers and retail supermarkets in Pennsylvania, Ohio, West Virginia and Maryland. Giant Eagle operates a fleet of tractortrailers, trucks, and other motor vehicles throughout its market area. Genesis is a Connecticut corporation having its principal place of business in Stamford, Connecticut. Genesis is in the business of issuing policies of commercial insurance, including automobile liability insurance, to businesses throughout much of the United States. The claimants are Ohio residents, who are either current or former Giant Eagle employees, or family members of current or former Giant Eagle employees. Each of them claims that the Genesis policies provide UM/UIM coverage which is implied as a matter of law and that they are entitled to recover UM/UIM benefits.

The Genesis policies commenced on July 1, 1995, and were renewed annually, or biennially, thereafter. The Genesis policies provided automobile liability coverage in the amount of $750,000, over and above the $250,000 retention, which is referred to in the policies as a $250,000 deductible. In consideration of the issuance of the policies, Giant Eagle and Genesis entered into a claim service agreement, wherein Giant Eagle agreed to investigate, adjust and settle or defend any claims against it that involved or related to the coverage afforded under the policy.

I. Summary Judgment Standard

This matter is now before the court on motions for summary judgment filed by Giant Eagle, Genesis and most or all of the defendants.

Under Fed.R.Civ.P. 56(c), summary judgment is proper "if the pleadings, depositions, answers to interrogatories, and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." See LaPointe v. United Autoworkers Local 600, 8 F.3d 376, 378 (6th Cir.1993); Osborn v. Ashland County Bd. of Alcohol, Drug Addiction and Mental Health Servs., 979 F.2d 1131, 1133 (6th Cir.1992)(per curiam).

II. Choice of Law

A federal court sitting in diversity must apply the substantive law of the state in which it sits, including that state's choice of law rules. Klaxon Co. v. Stentor Electric Mfg. Co., 313 U.S. 487, 496, 61 S.Ct. 1020, 85 L.Ed. 1477 (1941); Hisrich v. Volvo Cars of N. Am., Inc., 226 F.3d 445, 449 (6th Cir.2000).

Giant Eagle and Genesis assert that Pennsylvania law applies to the Genesis policies, and that, because Pennsylvania rejects the Scott-Pontzer doctrine, the Genesis policies did not include UM/UIM coverage. Giant Eagle and Genesis argue that Pennsylvania law applies by virtue of a choice of law provision which was part of the insurance agreement. In the alternative, Giant Eagle and Genesis argue that Pennsylvania law would apply to their relationship under the principles embodied in Section 188 of the Restatement of the Law 2d, Conflict of Laws (1971) ("Restatement") because Pennsylvania has the most significant relationship to the transaction and the parties. Section 188 of the Restatement was adopted by the Ohio Supreme Court in Gries Sports Ent, Inc. v. Modell, 15 Ohio St.3d 284, 473 N.E.2d 807 (1984). See also Schulke Radio Prods., Ltd. v. Midwestern Broadcasting Co., 6 Ohio St.3d 436, 453 N.E.2d 683 (1983).

The Genesis policies do not contain a choice of law provision. The choice of law provision cited by Giant Eagle and Genesis appears in the claim service agreement, Section 12, which states:

This Agreement shall be construed and enforced in accordance with and governed by the laws of the state of Pennsylvania.

This choice of law provision refers to the Claims Services Agreement, not the insurance policies. It is the insurance policies which control the coverage afforded by the policies. Thus, the choice of law provision does not apply to the issues presented in this case.

In Ohayon v. Safeco Ins. Co. of Illinois, 91 Ohio St.3d 474, 747 N.E.2d 206, Syllabus Para. 2, 91 Ohio St.3d 474, 747 N.E.2d 206 (2001), the Ohio Supreme Court held that questions involving the nature and extent of the parties' rights and duties under an insurance contract's uninsured motorist provisions shall be determined by the law of the state selected by applying the rules in §§ 187 and 188 of the Restatement. The court further held that under § 188 of the Restatement, the law of the state which has the most significant relationship to the transaction and the parties controls their relationship. Id. at 477, 747 N.E.2d 206.

Section 188(2)(a)-(d) of the Restatement provides that in determining which state has the most significant relationship to a transaction, courts should consider the place of contracting, the place of negotiation, the place of performance, the location of the subject matter, and the domicile, residence, nationality, place of incorporation, and place of business of the parties. According to § 188 of the Restatement: "[t]hese contracts are to be evaluated according to their relative importance with respect to the particular issue." Restatement § 188(1) at 575. Each of the § 188 elements does not merit equal weight. Section 193 of the Restatement provides that rights created by an insurance contract should be determined "by the local law of the state which the parties understood was to be the principal location of the insured risk during the term of the policy, unless with respect to the particular issues, some other state has a more significant relationship ... to the transaction and the parties." Restatement § 193 at 610. Section 193, Comment B, explains that the principal location of the insured risk corresponds with one of the enumerated factors—the location of the subject matter of the contract—in § 188.

The policies were negotiated in Pennsylvania. Genesis has its principal place of business in Connecticut. Giant Eagle's principal place of business is in Pennsylvania, but it also does a substantial amount of business in the state of Ohio. The place of performance of the insurance policies includes both Pennsylvania and Ohio. The policies insured a substantial number of vehicles licensed, operated and garaged in Ohio. Giant Eagle and Genesis note that during most of the policy years, a majority of vehicles were licensed and garaged in Pennsylvania. However, Giant Eagle concedes that during some policy years, the number of vehicles licensed and garaged in Ohio was equal to those licensed and garaged in Pennsylvania. The record includes a document produced by National Union Insurance Company, the umbrella insurer for the Genesis Business Auto Policy, which indicates that during the year 2000, Giant Eagle and its subsidiary and affiliated corporations operated 145 tractors, 302 trailers, 46 trucks/vans, and 146 private passenger vehicles in Ohio. See Chaffees' Memorandum in Opposition to Giant Eagle's Motion For Summary Judgment, Exh. 7.

The policies are written with reference to the laws of each of the states in which Giant Eagle operates motor vehicles. For example, the policies include a form indicating that Genesis filed certificates of insurance with state commissions in both Ohio and Pennsylvania in order to comply with the Motor Carrier Act of 1980. The policy issued on April 1, 1999, includes an endorsement entitled "Ohio Changes", which modified the policy in order to conform with the requirements of Ohio law. The record also includes documents produced by Giant Eagle in state court litigation, specifically, forms rejecting uninsured motorist coverage which specifically reference Ohio law and its requirement of mandatory offering of uninsured motorist coverage. These rejection...