Shay v. Shay

Decision Date11 April 2007
Docket NumberNo. 2005-2277.,2005-2277.
Citation2007 Ohio 1384,113 Ohio St.3d 172,863 N.E.2d 591
PartiesSHAY, Appellee, v. SHAY et al.: Ohio Mutual Insurance Group, Appellant.
CourtOhio Supreme Court

E.J. Leizerman & Associates, L.L.C., Ronald F. Leonhardt, and Michael J. Leizerman, Toledo, for appellee.

Manahan, Pietrykowski, DeLaney & Wasielewski, Glenn E. Wasielewski, Toledo, and Stephen E. House, for appellant.

Paul W. Flowers Co., L.P.A., and Paul Flowers, Cleveland; and A. Mark Segreti Jr., Dayton, urging affirmance for amicus curiae, Ohio Academy of Trial Lawyers.

O'CONNOR, J.

{¶ 1} In this matter, we address whether the General Assembly's response to our decision in Wolfe v. Wolfe (2000), 88 Ohio St.3d 246, 725 N.E.2d 261, which was contained in Sub.S.B. No. 267, 148 Ohio Laws, Part V, 11380, 11384-11385, effective Sept. 21, 2000 ("S.B. 267"), requires an insurer to amend the coverage in a policy at a six-month renewal point within a two-year statutorily guaranteed period, if that two-year period commenced before S.B. 267 took effect.1 We hold that although an insurer and its insured may agree to amend the terms of a policy at the time of the six-month renewal, and thereby increase the scope of uninsured- and underinsured-motorist ("UM/UIM") coverage in accordance with S.B. 267, the insurer was not required to do so until a two-year statutorily guaranteed period commenced after the effective date of S.B. 267.

RELEVANT BACKGROUND

{¶ 2} Appellee, Debra Shay, was injured seriously in a single-vehicle accident on March 16, 2001. At the time of the accident, Shay was a passenger in a minivan operated by her husband.

{¶ 3} Appellant, Ohio Mutual Insurance Group ("Ohio Mutual"), insured the vehicle through a personal auto policy. Shay and her husband were the named insureds on the policy, which was first issued to them on July 6, 1998. The Shays' first two-year guarantee period thus ran from July 6, 1998, to July 6, 2000. At the conclusion of that period, they entered a second two-year guarantee period, which ran from July 6, 2000, to July 6, 2002.

{¶ 4} The policy provided liability coverage as well as UM/UIM coverage. Two exclusions in the policy are relevant here: an exclusion from liability coverage for injuries sustained by a family member who resides in the insured driver's household, and a "household exclusion," which excludes from the definition of an uninsured motor vehicle any vehicle owned by a named insured or a family member residing in the insured's household. The latter exclusion mirrored the version of R.C. 3937.18(K)(2) in effect at the time the policy was issued and at the onset of the second two-year guarantee period.2

{¶ 5} In September 2000, however, S.B. 267 changed the UM/UIM terrain. It removed the provision in R.C. 3937.18(K)(2) allowing insurers to bar a vehicle owned by a named insured from the definition of an uninsured vehicle.

{¶ 6} Shay relied extensively on S.B. 267 in seeking UM/UIM coverage pursuant to the Ohio Mutual policy. She argued that because the policy excluded liability coverage for injuries sustained by a household member (her) of an insured driver (her husband), the liability exclusion effectively rendered her husband an uninsured motorist for purposes of her claims. She further argued that the policy's UM/UIM household exclusion was eviscerated by S.B. 267, and that S.B. 267 was incorporated into the policy on January 6, 2001, the date the Shays first renewed the policy after S.B. 267 became effective. She conceded that UM/UIM coverage would not have been available to her absent S.B. 267, but concluded that in S.B. 267's wake, she was entitled to the UM/UIM benefits in the policy.

{¶ 7} Ohio Mutual denied her claim. Citing Wolfe, which held that every automobile liability insurance policy issued in Ohio has a guaranteed two-year period during which the policy cannot be altered without the parties' agreement, Ohio Mutual asserted that the original terms of its policy, including the UM/UIM exclusion, remained extant through the period from July 2000 until July 2002. Ohio Mutual argued that the Shays' policy could be modified by the passage of S.B. 267 only at the conclusion of the guarantee period in 2002, not at the interim renewals within that two-year period. Because the guarantee period did not expire until after the accident, Ohio Mutual maintained that the UM/UIM household exclusion remained in force and precluded coverage for Shay's injuries.

{¶ 8} On cross-motions for summary judgment in the ensuing declaratory-judgment action, the trial court found in favor of Shay. Its cryptic judgment entry simply noted that Shay "asserts the policy language and recent Court decisions make [her] an `insured.' The Court concurs in [Shay's] argument, and it denies [Ohio Mutual's] Motion."

{¶ 9} The court of appeals affirmed in a more thorough decision. Its opinion properly acknowledged that our decision in Wolfe applied, correctly described its holding, and noted the appellate courts' application of the Wolfe rule of law in subsequent cases:

{¶ 10} "In [Wolfe], the Ohio Supreme Court considered the effect of R.C. 3937.31(A) * * * [on] an automobile policy [that] was issued in 1983. The insured was injured on April 2, 1995, and sought UM coverage under her policy. The insured sought to have Savoie v. Grange Mut. Ins. Co. (1993), 67 Ohio St.3d 500 620 N.E.2d 809, be applied to the terms of her policy, which would have afforded her UM coverage. The insurer, however, sought to have Am.Sub.S.B. No. 20, 145 Ohio Laws, Part 1, 204 (`S.B. 20'), effective October 20, 1994, apply to the policy, which would have precluded the insured from receiving UM coverage. The court in Wolfe had to determine whether the law of Savoie or the provisions of S.B. 20 applied to the policy at issue.

{¶ 11} "Because the policy in Wolfe had been renewed on December 12, 1994, after the effective date of S.B. 20, the insurer argued that the provisions of S.B. 20 were incorporated into the policy at that time. The court, however, held, `Pursuant to R.C. 3937.31(A), every automobile liability insurance policy issued in this state must have, at a minimum, a guaranteed two-year policy period during which the policy cannot be altered except by agreement of the parties and in accordance with R.C. 3937.30 to 3937.39.' Wolfe at paragraph one of the syllabus. The court further held that the guarantee period mandated by R.C. 3937.31(A) is not limited solely to the first two years following the initial institution of coverage, and that the commencement of each policy period mandated by R.C. 3937.31(A) brings into existence a new contract of insurance. Id. at paragraphs two and three of the syllabus.

{¶ 12} "By counting successive two-year policy periods from the inception of the policy, the court in Wolfe determined that the last guaranteed policy period prior to the accident would have begun on December 12, 1993. Therefore, even though S.B. 20 became effective on October 20, 1994, and the policy was renewed on December 12, 1994, the terms of the policy could not have been amended by the insurer to lessen the insured's coverage until the expiration of the two-year guarantee period, i.e., December 12, 1995. Because Savoie, 67 Ohio St.3d 500, 620 N.E.2d 809, was the law in effect at the time of the December 12, 1993 renewal, the court held that the insured was entitled to UM coverage pursuant to Savoie. Wolfe, 88 Ohio St.3d at 250, 725 N.E.2d 261, citing Ross v. Farmers Ins. Group. of Cos. (1998), 82 Ohio St.3d 281, 695 N.E.2d 732 (`The statutory law in effect on the date of issue of each new policy is the law to be applied').

{¶ 13} "Relying in part on Wolfe, other courts have held that a policy cannot be amended to reflect the changes made by S.B. 267 until the expiration of the two-year guarantee period. See, e.g., Young v. Cincinnati Ins. Co., 8th Dist. No. 82395, 2004-Ohio-54, 2004 WL 35770; and Slone v. Allstate Ins. Co., 5th Dist. No. 2004CA0021, 2004-Ohio-3990, 2004 WL 1699899.

{¶ 14} "In Young and Slone, the insurance companies sought to incorporate S.B. 267 into their policies upon a renewal date that occurred after the effective date of S.B. 267, but during the two-year guarantee period provided by R.C. 3937.31(A). In each case, application of S.B. 267 would have precluded the insured from receiving UM coverage, whereas without the application of S.B. 267, the insured would have received UM coverage. The courts held that the terms of coverage, which would have allowed the insured to receive UM coverage, were guaranteed for two-year periods of time pursuant to R.C. 3937.31(A). Therefore, in each case, the insurance company was prohibited from applying S.B. 267 retroactively to its policy in order to bar the insured's right to receive UM coverage." Shay v. Shay, 164 Ohio App.3d 518, 2005-Ohio-5874, 843 N.E.2d 194, ¶ 13-17.

{¶ 15} Although the court of appeals correctly characterized Wolfe and its progeny, it nevertheless departed from them. It concluded that the Ohio Mutual policy was amended to incorporate the provisions of S.B. 267 at the point of renewal on January 6, 2001, rather than at the beginning of the next two-year guarantee period. In so doing, the appellate court attempted to distinguish the instant case from previous cases:

{¶ 16} "In Wolfe, Young, and Slone, the insurance company sought to lessen an insured's UM coverage by amending its policy at a time when it was statutorily prohibited from doing so, i.e., during the two-year guarantee period set forth in R.C. 3937.31(A). Obviously, an insurance company is barred from amending its policy language during the two-year guarantee period in a way that would lessen an insured's coverage, unless agreed to by the insured. See R.C. 3937.31(A) (`Where renewal is mandatory, "cancellation" * * * includes refusal to renew a policy with at least the coverages, included insureds, and policy limits provided at the end...

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