Ross v. Farmers Ins. Group of Companies, s. 97-402

• Citation: 82 Ohio St.3d 281,695 N.E.2d 732
• Decision Date: 01 July 1998
• Docket Number: Nos. 97-402,97-551,97-2056 and 97-2301,s. 97-402
• Parties: ROSS, Appellant, et al., v. FARMERS INSURANCE GROUP OF COMPANIES, Appellee. DAVIS, Appellant, v. FARMERS INSURANCE GROUP OF COMPANIES, Appellee.
• Court: United States State Supreme Court of Ohio

Page 281

82 Ohio St.3d 281

695 N.E.2d 732

ROSS, Appellant, et al., v. FARMERS INSURANCE GROUP OF COMPANIES, Appellee.

DAVIS, Appellant, v. FARMERS INSURANCE GROUP OF COMPANIES, Appellee.

Nos. 97-402, 97-551, 97-2056 and 97-2301.

Supreme Court of Ohio.

Submitted Feb. 4, 1998.

Decided July 1, 1998.

On appeal, the court of appeals reversed the judgment of the trial court and remanded the cause to that court with instructions to enter final judgment in favor of appellee. Specifically, the court of appeals, citing Kraly v. Vannewkirk (1994), 69 Ohio St.3d 627, 635 N.E.2d 323, found that Ross's right to underinsured motorist coverage did not arise until March 1995, when she settled her claim with the tortfeasor's insurance company. Thus, the court of appeals held that the version of R.C. 3937.18 that was enacted as part of Am.Sub.S.B. No. 20 on October 20, 1994 controlled the determination of whether Ross was entitled to underinsured motorist coverage and that Ross was not entitled to such coverage under the terms of the statute. Thereafter, the court of appeals, finding its judgment to be in conflict with the judgments of the courts of appeals in Brocwell v. King (Oct. 24, 1995), Richland App. No. 95-25, unreported, 1995 WL 768520, and Heritage Mut. Ins. Co. v. McBee (Aug. 21, 1996), Summit App. No. 17440, unreported, 1996 WL 470652, entered an order certifying a conflict. The cause is now before this court upon our determination that a conflict exists (case No. 97-551), and pursuant to the allowance of a discretionary appeal (case No. 97-402).

Case Nos. 97-2056 and 97-2301

On May 14, 1993, appellant, David Davis, was injured when a motorcycle he was operating was struck by a vehicle driven by Catrina S. Cavey. The accident occurred as a result of Cavey's negligence.

At the time of the accident, Davis had an automobile liability insurance policy issued by Farmers Insurance of Columbus, Inc., appellee. The policy had an effective date of February 1, 1993, and an expiration date of August 1, 1993. Davis's policy of insurance with appellee included a provision for underinsured motorist coverage with limits of $25,000 per person and $50,000 per occurrence. Additionally, Cavey had an automobile liability insurance policy with liability limits of $100,000 per person. Following the accident, Davis made a claim with Cavey's liability insurance carrier seeking recovery for the injuries he sustained. On February 28, 1995, Davis sought permission from appellee to accept a proposed settlement of approximately $82,500 from Cavey's insurer. At that time, Davis also informed appellee of his intention to pursue an underinsured motorist claim under his policy with appellee. On March 15, 1995, prior to Davis's finalizing a settlement with Cavey's insurer, appellee rejected Davis's claim for underinsured motorist benefits. Cavey's insurance carrier ultimately paid $81,000 in settlement of Davis's claim against Cavey.

On June 26, 1995, Davis filed a complaint against appellee in the Court of Common Pleas of Montgomery County. In the complaint, Davis sought a determination that he was entitled to recover underinsured motorist benefits under his policy with appellee. On January 9, 1997, the trial court granted summary judgment in favor of Davis. The trial court's rationale for granting summary judgment was substantially similar to the rationale that had been advanced by the trial court in Ross.

On appeal, the court of appeals, relying on its prior holding in Ross, determined that Davis was not entitled to underinsured motorist coverage under his policy with appellee. Specifically, the court of appeals found that the law in effect at the time of Davis's settlement with the tortfeasor--not the law in effect at the time of the accident--controlled the determination whether Davis was entitled to underinsured motorist coverage. Therefore, the court of appeals found that the version of R.C. 3937.18 then in effect applied to the facts of the case and that the trial court erred in applying former R.C. 3937.18 and Savoie to grant summary judgment in favor of Davis. Accordingly, the court of appeals reversed the judgment of the trial court and remanded the cause to that court with instructions to enter judgment in favor of appellee. Thereafter, the court of appeals, finding its judgment on this issue to be in conflict with Brocwell and McBee, entered an order certifying a conflict. This cause is now before this court upon our determination that a conflict exists (case No. 97-2301) and pursuant to the allowance of a discretionary appeal (case No. 97-2056). Case Nos. 97-2056 and 97-2301 have been consolidated with case Nos. 97-402 and 97-551.

Dyer, Garofalo, Mann & Schultz, Carmine Garofalo and Ronald J. Maurer, Dayton, for appellants.

Freund, Freeze & Arnold, Christopher W. Carrigg and Stephen V. Freeze, Dayton, for appellee in case Nos. 97-2056 and 97-2301.

Elk & Elk Co., L.P.A., and Todd O. Rosenberg, Mayfield Heights, urging reversal for amicus curiae, Ohio Academy of Trial Lawyers, in case No. 97-551.

Vogelgesand, Howes, Lindamood & Brunn, P.L.L., and James P. Hanratty, Canton, urging affirmance for amicus curiae, Ohio Association of Civil Trial Attorneys, in case No. 97-2056.

DOUGLAS, Justice.

The question that has been certified for our consideration is as follows: "When does a cause of action for underinsured motorist coverage accrue so as to determine the law applicable to such a claim?" In the cases that are presently before us, the Montgomery County Court of Appeals held that Ross's and Davis's (hereinafter collectively "appellants") rights to underinsured motorist coverage did not accrue until appellants had exhausted the tortfeasors' available liability coverage. Because this condition precedent, i.e., settlement with the tortfeasor, occurred after the effective date of Am.Sub.S.B. No. 20, the court of appeals held that the version of R.C. 3937.18 that was enacted as part of Am.Sub. S.B. No. 20 controlled the determination whether appellants were entitled to underinsured motorist coverage. In reaching this conclusion, the Montgomery County Court of Appeals found its holdings in Ross and Davis to be in conflict with the judgment of the Court of Appeals for the Fifth Appellate District in Brocwell and the judgment of the Court of Appeals for the Ninth Appellate District in McBee. In Brocwell and McBee, the appellate courts determined that the law in effect on the date of the accident controls the determination whether the insured is entitled to underinsured motorist coverage.

Considering the foregoing, and, further, that the date of the contract of insurance has also been presented by the parties for our consideration, we construe the issue before us to be a choice among date of contract, date of accident, and date of exhaustion in considering what, if any, effect subsequent legislation might have on the relationship between an insurer and its insured. For the reasons that follow, we find that the Montgomery County Court of Appeals erred in determining that the version of R.C. 3937.18 that was enacted as part of Am.Sub.S.B. No. 20 was the applicable law governing appellants' claims for underinsured motorist coverage.

I

Appellee argues, and the Montgomery County Court of Appeals agreed, that an insured's right to underinsured motorist benefits accrues when certain contractual preconditions to such coverage are met. According to appellee, the contractual preconditions of appellants' automobile insurance policies required appellants to exhaust all applicable liability coverage before appellants could access their underinsured motorist coverage. Thus, appellee contends that appellants' claims for underinsured motorist coverage did not accrue until they had settled with the tortfeasor, thereby exhausting the tortfeasor's available liability coverage. Since that exhaustion did not occur until after Am.Sub.S.B. No. 20 went into effect, appellee asserts that, pursuant to the statutory law in effect, appellants were not entitled to underinsured motorist benefits. In support of its argument appellee relies on Kraly v. Vannewkirk (1994), 69 Ohio St.3d 627, 635 N.E.2d 323.

In Kraly, the Kralys entered into a contract of insurance with State Farm Mutual Automobile Insurance Company ("State Farm"). The State Farm policy provided automobile liability insurance as well as uninsured/underinsured motorist coverage. The terms of the policy required that a claim for uninsured motorist coverage must be brought within two years of the date of an accident. The Kralys were injured in an automobile collision between their vehicle and a vehicle operated by an insured tortfeasor. However, shortly before the end of the contractual two-year period of limitations, the Kralys were notified that the tortfeasor's automobile liability insurance carrier had become insolvent. The Kralys sought to amend their cause of action against the tortfeasor to include a claim against State Farm for uninsured motorist coverage. Summary judgment was granted in favor of State Farm because the Kralys' claim for uninsured motorist benefits was not commenced within two years of the date of the accident.

We held in Kraly that a contractual period of limitations is per se unreasonable if it expires before or shortly after the accrual of a right of action for uninsured motorist coverage. Id. at 635, 635 N.E.2d at 329. The court reasoned that the Kralys' claim for uninsured motorist benefits did not accrue until they had been notified that the tortfeasor's insurance company was insolvent. Since only three and one-half months remained before the end the contractual limitations period, the court determined that the period of time left for the Kralys to bring a claim for uninsured motorist coverage was unreasonable. Id. at 634, 635 N.E.2d at 328.

Kraly is clearly distinguishable from the case at bar. First, Kraly involved a claim for uninsured motorist coverage, while...