Sarmiento v. Grange Mut. Cas. Co., 2004-0193.

• Court: United States State Supreme Court of Ohio
• Citation: 835 NE 2d 692,106 Ohio St.3d 403
• Docket Number: No. 2004-0193.,2004-0193.
• Parties: Sarmiento et al., Appellants and Cross-Appellees, v. Grange Mutual Casualty Company, Appellee and Cross-Appellant, et al.
• Decision Date: 26 October 2005

106 Ohio St.3d 403
2005-Ohio-5410
835 NE 2d 692

2005-Ohio-5410

Sarmiento et al., Appellants and Cross-Appellees,
v.
Grange Mutual Casualty Company, Appellee and Cross-Appellant, et al.

No. 2004-0193.

Supreme Court of Ohio.

Submitted March 2, 2005.

Decided October 26, 2005.

LUNDBERG STRATTON, J.

{¶ 1} One issue before us is whether a two-year contractual limitation period for filing uninsured- and underinsured-motorist ("UM/UIM") claims is reasonable and enforceable when the underlying tort claim is governed by the laws of another state, whose statute of limitations for the claim is longer than two years. Appellants and cross-appellees, David Camacho, David Camacho III (a minor), Francisco Sarmiento, Rita Sarmiento, Braulio Sarmiento (a minor), Jesus Sarmiento, and Delores Sarmiento (collectively, "Sarmientos"), urge us to interpret former R.C. 3937.18 as requiring insurers to afford the same amount of time to bring a claim for UM/UIM coverage as the claimant is afforded under the applicable tort law to bring a suit against the tortfeasor.

{¶ 2} The second issue, which is raised in the cross-appeal of appellee and cross-appellant, Grange Mutual Casualty Company ("Grange"), is whether an insured who is a minor is bound by the terms and conditions of an insurance policy, including a two-year contractual limitation period for commencing a UM/UIM claim, or whether R.C. 2305.16 applies to toll the limitations provision during the period of minority.

{¶ 3} Appellant and cross-appellee David Camacho was driving a pickup truck owned by Maria Sarmiento when it was struck by a motor vehicle driven by an allegedly uninsured motorist in New Mexico on November 5, 1998. The six other appellants and cross-appellees were passengers in the truck.

{¶ 4} Grange had issued a policy of insurance on the truck to Maria Sarmiento that included UM/UIM coverage in effect on the date of the accident. On November 5, 2001, the Sarmientos filed a complaint in the Common Pleas Court of Cuyahoga County, seeking UM coverage under the Grange policy issued to Maria Sarmiento. The trial court granted summary judgment in favor of Grange. The court concluded that Grange was not obligated to provide UM coverage, because the plaintiffs had not filed suit within two years from the date of the accident as required by the insurance policy.

{¶ 5} On appeal, the Sarmientos argued that Grange's two-year limitation period was unreasonable and unenforceable because it was shorter than New Mexico's three-year statute of limitations for personal injuries, which was applicable in the underlying tort claim. They also argued that even if the two-year limitation period was enforceable, it was tolled as to the claims of the two minors.

{¶ 6} The court of appeals concluded that the rights and duties under the Grange policy should be determined by the laws of Ohio, not New Mexico. Applying Ohio law, the appellate court agreed that Grange's two-year limitation period was reasonable and enforceable, and the court affirmed the judgment of the trial court on that issue. However, the appellate court concluded that Ohio's tolling statute, R.C. 2305.16, applied to the UM claims of the two minors. Therefore, as to the minors, David Camacho III and Braulio Sarmiento, the court of appeals reversed the judgment of the trial court and remanded the cause for further proceedings.

{¶ 7} This cause is before this court upon our acceptance of a discretionary appeal and cross-appeal.

{¶ 8} An insurance policy is a contract, and the relationship and rights of the insurer and insured are contractual in nature; therefore, a claim for UM/UIM coverage sounds in contract, not in tort. Ohayon v. Safeco Ins. Co. of Illinois (2001), 91 Ohio St.3d 474, 480, 747 N.E.2d 206; Miller v. Progressive Cas. Ins. Co. (1994), 69 Ohio St.3d 619, 624, 635 N.E.2d 317. Although the underlying tort claims of the Sarmientos were subject to the laws of New Mexico, where the accident occurred, the appellate court properly concluded that Ohio contract law applied to their UM claims. The insurance contract was entered into in Ohio, it was issued to Maria Sarmiento, a resident of Ohio, and it covered vehicles principally garaged in Ohio.

{¶ 9} We begin our analysis by examining the language used in the insurance contract, giving the words used their plain and ordinary meaning. Gomolka v. State Auto Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 167-168, 24 O.O.3d 274, 436 N.E.2d 1347. The Grange policy issued to Maria Sarmiento included an endorsement for UM/UIM coverage that provided:

{¶ 10} "Any arbitration or suit against us will be barred unless commenced within 2 years (TWO YEARS) from the date of the accident or 1 year (ONE YEAR) after the date that you were aware, or should have been aware, of a claim for which coverage would apply whichever is later." (Emphasis sic.)

{¶ 11} In Ohio, the statutory limitation period for a written contract is 15 years. R.C. 2305.06. However, the parties to a contract may validly limit the time for bringing an action on a contract to a period that is shorter than the general statute of limitations for a written contract, as long as the shorter period is a reasonable one. Miller v. Progressive, 69 Ohio St.3d 619, 624, 635 N.E.2d 317; Colvin v. Globe Am. Cas. Co. (1982), 69 Ohio St.2d 293, 295, 23 O.O.3d 281, 432 N.E.2d 167, overruled on other grounds by Miller v. Progressive. A contract provision that reduces the time provided in the statute of limitations must be in words that are clear and unambiguous to the policyholder. Id. at 296, 23 O.O.3d 281, 432 N.E.2d 167.

{¶ 12} There is no dispute that Sarmiento's policy clearly and unambiguously limits to two years the time in which an insured may sue Grange for UM/UIM benefits. Under a pure contract analysis, we need go no further. The Sarmientos' complaint would fail as a matter of law because it was filed more than two years after the accident occurred.

{¶ 13} Nevertheless, the Sarmientos contend that the policy's two-year limitation should not bar their lawsuit for UM coverage that was filed within three years of the accident, because their claims against the tortfeasor are subject to a three-year statute of limitations under New Mexico law. They argue that pursuant to Miller v. Progressive, a contract provision that provides less time in which to pursue UM/UIM benefits than to pursue the underlying tort claim is unenforceable because it violates the public policy behind former R.C. 3937.18.

{¶ 14} We do not read Miller v. Progressive, 69 Ohio St.3d 619, 635 N.E.2d 317, as broadly as the Sarmientos suggest we should. Instead, we find that Lane v. Grange Mut. Cos. (1989), 45 Ohio St.3d 63, 543 N.E.2d 488, read in conjunction with Miller v. Progressive, is dispositive of this matter.

{¶ 15} In Lane v. Grange Mut. Cos., we construed language in a Grange policy that prohibited the filing of UM/UIM claims "unless * * * commenced within the time period allowed by the applicable statute of limitations for bodily injury or death actions in the state where the accident occurred." Id. at 63, 543 N.E.2d 488. Lane concluded that the provision was unclear and ambiguous because it failed to tell policyholders the amount of time available for commencing an action and when the limitation period began to run. Id. at 64, 543 N.E.2d 488. The court also reasoned that the provision created ambiguity with regard to claims for damages other than for bodily injury, such as loss-of-consortium claims and claims for which the insured was subject to a legal disability. Id. at 65, 543 N.E.2d 488. The court refused to enforce the provision. Id.

{¶ 16} In Miller v. Progressive, 69 Ohio St.3d 619, 635 N.E.2d 317, this court decided that a contractual one-year limitation period for filing UM/UIM claims, when Ohio's statute of limitations for bodily injury in R.C. 2305.10 was two years, was unreasonable and void as against the public policy behind former R.C. 3937.18. Id. at 623-624, 635 N.E.2d 317. The court noted, however, that a two-year limitation period would be a "reasonable and appropriate period of time" in which to require an insured to commence an action under the UM/UIM provisions of an insurance policy. Id. at 624-625, 635 N.E.2d 317.

{¶ 17} Grange argues that Miller serves as authority for the proposition that a two-year contractual limitation period for filing UM/UIM claims is reasonable and enforceable. According to Grange, the interpretation of Miller advocated by the Sarmientos would require insurers to amend their policies to include the language that was rejected as ambiguous in Lane.

{¶ 18} The Sarmientos disagree, claiming that the Lane court rejected only the specific contract language that it found to be ambiguous, but did not prohibit an insurer from drafting provisions to address the public-policy consideration raised in this case. The Sarmientos contend that Miller's conclusion that a two-year limitation period would be reasonable was based strictly upon the fact that that case involved Ohio's two-year statute of limitations for bodily injury.

{¶ 19} Lane rejected as ambiguous the language that attempted to define the contractual limitation period in terms of the statute of limitations for the underlying tort claim, which the Sarmientos...