Wanda F. Kuhner v. Erie Ins. Co., 94-LW-0512
| Decision Date | 03 November 1994 |
| Docket Number | 94APE03-299,94-LW-0512 |
| Parties | Wanda F. Kuhner et al., Plaintiffs-Appellees, (Cross-Appellants) v. Erie Insurance Company, Defendant-Appellant, (Cross-Appellee) |
| Court | Ohio Court of Appeals |
APPEAL from the Franklin County Court of Common Pleas.
DeLibera Lyons & Bibbo, and Jeffrey R. Bibbo, for plaintiffs-appellees (cross-appellants).
John C. Nerneth & Associates, and David A. Caborn, for defendant-appellant (cross-appellee).
Defendant, Erie Insurance Company ("Erie"), appeals from a judgment of the Franklin County Court of Common Pleas and raises two assignments of error, as follows:
Plaintiffs, Wanda and Earl Kuhner, have also appealed from the judgment of the Franklin County Court of Common Pleas and raise two assignments of error, as follows:
Plaintiffs brought this action in the trial court seeking a declaratory judgment with respect to the underinsured motorist coverage of a policy of insurance issued to them by defendant, Erie Insurance Company. Defendant filed a counterclaim seeking a declaratory judgment that plaintiffs were not entitled to underinsured motorist coverages including a declaration that plaintiffs had failed to exhaust the liability limits of the tortfeasor's insurance policies.
The policy contained an uninsured/underinsured motorist coverage provision in the amount of $100,000 per person and $300,000 per accident. The tortfeasor who caused the accident maintained insurance with a $50,000 liability-coverage limit. Plaintiff Wanda Kuhner's injuries caused her condition to deteriorate over a period of time, with continuing medical expenses which totalled less than $1,500 by the end of 1987 but had grown to more than $7,500 by the end of 1990. Her condition continued to deteriorate, and she was diagnosed in 1991 as having a recurrent post-traumatic stress disorder which rendered her incapable of regular employment. Accordingly, on December 11, 1991, plaintiffs sought the consent of Erie Insurance Company to accept $48,500 offered by the tortfeasors' insurers in settlement of that claim but preserving the underinsured claim with defendant insurer.
Defendant responded by a letter dated December 13, 1991, including the statement that: "We regret that we can neither give you permission nor deny permission to accept the settlement offer." In the next paragraph, Erie asserted that the claim was barred by a provision of the policy requiring legal actions to recover under underinsured motorist coverage to be commenced within two years from thee date of accident and further stated: "This loss occurred in 1987 and this is the first notification that there was a potential for underinsured motorists claim." As a result of this letter, plaintiffs accepted the tortfeasors' offers and settled. However, plaintiffs' action sought recovery against two tortfeasors. The $48,500 accepted in settlement of the claims included $33,500 from the insurer of the driver of the other vehicle directly involved in the accident and $15,000 from the insurer of a person who, although not directly involved in the accident, allegedly caused the accident. Such person had a policy limit of $25,000 liability coverage, making the total liability limits of the two policies of the alleged tortfeasors $75,000. Thus, defendant Erie asserted two bases for denying any available coverage: (1) failure of plaintiffs to initiate an action against Erie within two years from the date of the accident; and (2) failure of plaintiffs to exhaust the limits of the liability policies issued to the two tortfeasors named defendants in the underlying suit.
The trial court found for plaintiffs upon these issues. Since the language of the Erie policy is ambiguous, the trial court construed it in favor of plaintiffs and concluded that the two-year limitation is a time in which an action must be commenced against the tortfeasor, rather than against the insurance company, citing Heil v. United Ohio Ins. Co. (1990), 66 Ohio App.3d 307 The trial court similarly rejected Erie's contention that arbitration should have commenced within two years from the date of the accident since any right of plaintiffs to recover under the underinsured motorist provision did not accrue until Erie denied coverage on December 13, 1991. The trial court also found that there had been sufficient exhaustion of the underlying policies but included a $75,000 setoff against the underinsured motorist benefits due plaintiffs from Erie, less reasonable cost of litigation.
The uninsured/underinsured motorist coverage of the policy provides in part:
There is a clear inconsistency in the policy provisions with respect to underinsured motorist coverage. One clause provides that the insurer (Erie) will not be required to pay any amount under underinsured motorist coverage until all other insurance applicable has been exhausted by payment of the policy limits. As the Supreme Court held in the second paragraph of the syllabus of Bogan v. Progressive Cas. Ins. Co. (1988), 36 Ohio St.3d 22:
"An injured insured satisfies the 'exhaustion' requirement in the underinsured motorist provision of his insurance policy when he receives from the underinsured tortfeasor's insurance carrier a commitment to pay an amount in settlement with the injured party retaining the right to proceed against his underinsured motorist insurance carriers only for those amounts in excess of the tortfeasor's policy limits."
In Bogan, the insureds settled the case against the tortfeasors for approximately eighty-four percent of the policy limits. Here, plaintiffs settled their claim against one tortfeasor for approximately sixty-seven percent of the policy limit and against the other tortfeasor (whose vehicle apparently was not involved in the accident), for sixty percent of policy limits.
Erie relies upon Motorists Mut. Ins. Cos. v. Grischkan (1993), 86 Ohio App.3d 148. In Motorists Mutual, the court of appeals refused to follow the holding in Bogan, but, instead, "distinguished" it because the settlement was for $25,000 less than was available, and, thus, much greater than the $4,000 differential involved in Bogan, even though the settlement figure represented seventy-five percent of the policy limits. The Motorists Mutual court also attempted to distinguish McDonald v. Republic-Franklin Ins. Co. (1989), 45 Ohio St.3d 27, the second paragraph of the syllabus of which holds:
In doing so, the Motorists Mutual court reasoned that the insurer in that case based its denial of underinsured motorist coverage at least in part upon the contention that the insured's injury was not worth an amount in excess of the tortfeasor's policy limits. That is not the case here. We cannot distinguish McDonald, supra, in similar fashion since notice of proposed settlement was timely given, and Erie chose not to protect its interest by paying the underinsured motorist benefits prior to release. Accordingly, under the rule of McDonald, failure to...
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