Martin v. Midwestern Group Ins. Co.

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Martin, Appellant, v. Midwestern Group Insurance Company,

Appellee.

[Cite as Martin v. Midwestern Group Ins. Co. (1994), Ohio

St.3d .]

Automobile liability insurance -- Uninsured motorist coverage

designed to protect persons, not vehicles -- Validity of

insurance policy exclusion of uninsured motorist dependent

upon whether it conforms to R.C. 3937.18 -- Policy

provision which eliminates uninsured motorist coverage for

persons insured thereunder who are injured while occupying

a motor vehicle owned by an insured, but not specifically

listed in the policy, violates R.C. 3937.18 and is invalid.

1. Pursuant to R.C. 3937.18, uninsured motorist coverage was

designed by the General Assembly to protect persons, not

vehicles. (Abate v. Pioneer Mut. Cas. Co. [1970], 22 Ohio

St.2d 161, 51 O.O.2d 229, 258 N.E.2d 429, followed.)

2. The validity of an insurance policy exclusion of uninsured

motorist coverage depends on whether it conforms to R.C.

3937.18.

3. An automobile liability insurance policy provision which

eliminates uninsured motorist coverage for persons insured

thereunder who are injured while occupying a motor vehicle

owned by an insured, but not specifically listed in the

policy, violates R.C. 3937.18 and is therefore invalid.

(State Farm Auto. Ins. Co. v. Alexander [1992], 62 Ohio

St.3d 397, 583 N.E.2d 309, syllabus, approved and

followed; Hedrick v. Motorists Mut. Ins. Co. [1986], 22

Ohio St.3d 42, 22 OBR 63, 488 N.E.2d 840, overruled.)

(No. 93-1178 -- Submitted May 16, 1994 -- Decided October

5, 1994.)

Appeal from the Court of Appeals for Ashtabula County, No.

92-A-1722.

On June 17, 1990, plaintiff-appellant, Gerald C. Martin,

was seriously injured when an intoxicated, uninsured motorist

crossed the center line and struck appellant's motorcycle. At

the time of the collision, appellant was insured by appellee,

Midwestern Group Insurance Company ("Midwestern"). The policy

listed two vehicles owned by appellant: a 1979 Chevrolet wagon

and a 1984 Pontiac Fiero. Appellant's 1982 Yamaha motorcycle

was not an insured vehicle under the policy.

Appellant's claim for uninsured motorist benefits was

denied by appellee under a policy provision that excludes

coverage for bodily injury to a person occupying or struck by a

vehicle owned by the insured but not named in the policy.

After his claim was denied, appellant filed a complaint

for declaratory judgment. After an answer and counterclaim for

declaratory judgment were filed, both parties moved for summary

judgment.

The trial court granted appellant's motion for summary

judgment and denied appellee's motion. Based upon State Farm

Auto. Ins. Co. v. Alexander (1992), 62 Ohio St.3d 397, 583

N.E.2d 309, the trial court found appellee's policy exclusion

invalid and unenforceable. By distinguishing Alexander, the

court of appeals reversed the judgment of the trial court and

entered summary judgment in favor of appellee. In so doing,

the appellate court relied upon Hedrick v. Motorists Mut. Ins.

Co. (1986), 22 Ohio St.3d 42, 22 OBR 63, 488 N.E.2d 840.

The cause is now before this court pursuant to the

allowance of a motion to certify the record.

Tyler & Fire and Thomas S. Tyler, for appellant.

Weston, Hurd, Fallon, Paisley & Howley, Kathryn M. Murray

and Ronald A. Rispo, for appellee.

Francis E. Sweeney, Sr., J. The issue before us is

whether the "other owned vehicle" exclusion in the uninsured

motorist coverage of appellant's automobile insurance policy is

enforceable. For the following reasons, we hold that the

exclusion is not enforceable. Accordingly, we reverse the

judgment of the court of appeals.

The General Assembly has determined that automobile

liability carriers must offer uninsured motorist coverage to

their customers. R.C. 3937.18 provides in part:

"(A) No automobile liability or motor vehicle liability

policy of insurance insuring against loss resulting from

liability imposed by law for bodily injury or death suffered by

any person arising out of the ownership, maintenance, or use of

a motor vehicle shall be delivered or issued for delivery in

this state with respect to any motor vehicle registered or

principally garaged in this state unless * * * the following

[is] provided:

"(1) Uninsured motorist coverage, which shall be in an

amount of coverage equivalent to the automobile liability or

motor vehicle liability coverage and shall provide protection

for bodily injury or death * * * for the protection of persons

insured thereunder who are legally entitled to recover damages

from owners or operators of uninsured motor vehicles because of

bodily injury, sickness, or disease, including death, resulting

therefrom[.]" (Emphasis added.)

This court has consistently held that the purpose of

uninsured motorist coverage is to protect persons from losses

which, because of the tortfeasor's lack of liability coverage,

would otherwise go uncompensated. Abate v. Pioneer Mut. Cas.

Co. (1970), 22 Ohio St.2d 161, 165, 51 O.O.2d 229, 231, 258

N.E.2d 429, 432; Stanton v. Nationwide Mut. Ins. Co. (1993), 68

Ohio St.3d 111, 113, 623 N.E.2d 1197, 1199, citing Watson v.

Grange Mut. Cas. Co. (1988), 40 Ohio St.3d 195, 532 N.E.2d 758.

In fact, R.C. 3937.18(A)(1) explicitly provides that

uninsured motorist coverage is "for the protection of

persons." We have held that R.C. 3937.18 is remedial

legislation. Stanton, supra, 68 Ohio St.3d at 113, 623 N.E.2d

at 1199. Thus, we must liberally construe this law in order to

effectuate the legislative purpose. Curran v. State Auto. Mut.

Ins. Co. (1971), 25 Ohio St.2d 33, 54 O.O.2d 166, 266 N.E.2d

566.

While R.C. 3937.18 does not displace ordinary principles

of contract law, a party cannot enter into contracts that are

contrary to law. See Hedrick v. Motorists Mut. Ins. Co.

(1986), 22 Ohio St.3d 42, 51, 22 OBR 63, 71, 488 N.E.2d 840,

847 (A.W. Sweeney, J., dissenting). Therefore, the validity of

an insurance policy exclusion of uninsured coverage depends on

whether it conforms to R.C. 3937.18.

The insurance policy issued by Midwestern to appellant

specifically names him as the insured. Midwestern relies upon

the following exclusionary language to deny coverage:

"We do not cover bodily injury to a person:

"1. Occupying, or struck by, a motor vehicle owned by you

or a relative for which insurance is not afforded under this

part."

This exclusion is commonly known as the "other owned

vehicle" exclusion and is found in virtually every automobile

insurance policy written in this state.

Appellant argues, and the trial court determined, that

State Farm Auto. Ins. Co. v. Alexander (1992), 62 Ohio St.3d

397, 583 N.E.2d 309, is dispositive of this case. Alexander

involved an insured who was injured while a passenger in his

own vehicle. The State Farm policy in that case excluded from

the definition of "uninsured motor vehicle" any vehicle

"insured under the liability coverage of this policy" as well

as one "furnished for the regular use" of the insured, his

spouse or any relative. In striking down this exclusion,

commonly known as "the household exclusion," we held that any

provision depriving an insured of uninsured motorist coverage

for tort claims against an uninsured motorist is invalid and

unenforceable. The syllabus in Alexander states:

"An automobile insurance policy may not eliminate or

reduce uninsured or underinsured motorist coverage, required by

R.C. 3937.18, to persons injured in a motor vehicle accident,

where the claim or claims of such persons arise from causes of

action that are recognized by Ohio tort law."

The rationale of Alexander is not limited to the analyzed

exclusion. Instead, this court made clear that R.C. 3937.18 is

the yardstick by which all exclusions of uninsured motorist

coverage must be measured. Under Alexander, the statute

mandates coverage if (1) the claimant is an insured under a

policy which provides uninsured motorist coverage; (2) the

claimant was injured by an uninsured motorist; and (3) the

claim is recognized by Ohio tort law.

Applying this test, it is clear that appellant has

satisfied the requirements of R.C. 3937.18: (1) appellant is

the named insured on the insurance policy; (2) the tortfeasor

did not have liability insurance; and (3) appellant has a cause

of action under Ohio tort law.

Relying on Alexander, we recently invalidated a "for fee"

exclusion in Stanton v. Nationwide Mut. Ins. Co., supra, 68

Ohio St.3d 111, 623 N.E.2d 1197, which would have eliminated

uninsured motorist coverage mandated by R.C. 3937.18.

In keeping with precedent, and finding no reason for

holding otherwise, we now invalidate the "other owned vehicle"

exclusion.

In striking down this exclusionary provision, it is

necessary to revisit our decision in Hedrick, supra, which

appellee asserts directly supports its position.

Hedrick involved an automobile accident with an uninsured

motorist in which the plaintiff was riding a motorcycle owned

by his father. The motorcycle was not insured under the policy

issued by the defendant insurance company. The insurance

company denied coverage on the basis of an exclusion

essentially identical to the one at issue here. This court

upheld the exclusion. The Hedrick syllabus provides:

"An insurance policy provision which denies uninsured

motorist coverage, when bodily injury is sustained by any

person while occupying a motor vehicle owned by an insured but

which vehicle is not specifically insured under the policy, is

a valid exclusion." (Emphasis sic.)

Because we do not believe Hedrick is in accord with the

law of our state, which is that uninsured motorist coverage was

designed by the General Assembly to protect persons, not

vehicles, we now expressly overrule it. If an insured is

negligently injured by an uninsured motorist, he cannot be

denied uninsured motorist coverage by a policy exclusion

requiring that he be occupying an insured automobile under the

policy.

Accordingly, we hold that an automobile liability

insurance policy provision which eliminates uninsured motorist

coverage for persons insured thereunder who are injured while

occupying a motor vehicle owned by an insured, but not

specifically listed in the policy, violates R.C. 3937.18 and is

therefore invalid.

In so holding, we are not unmindful of Midwestern's

argument that a premium was not paid on the vehicle appellant

was riding when injured. But the amount of the premium

received by Midwestern is irrelevant. The fact is that

appellant accepted and paid for uninsured motorist coverage.

Pursuant to R.C. 3937.18(A)(1), such insurance must provide

coverage "for bodily injury * * * for the protection of persons

insured thereunder who are legally entitled to recover damages

from owners or operators of uninsured motor vehicles * * *."

The statute does not permit insurers to eliminate this required

coverage on the basis that the injury was incurred in a vehicle

not listed in the policy.

Appellant paid a premium for uninsured motorist insurance

which covered him, not his vehicles. It certainly cannot be

argued that appellant would not be covered if he had been

injured by this same tortfeasor while standing on a sidewalk,

or riding or driving a vehicle owned by another. Indeed,

Midwestern's counsel admitted as much during oral argument. To

deny it in this instance would contravene Ohio law.

It is state law (R.C. 3937.18) which determines the scope

of uninsured motorist coverage, not the insurance policy or the

amount of the premium paid. It is the responsibility of the

insurance company to set a premium in accordance with the risks

involved.

For the foregoing reasons, the judgment of the court of

appeals is reversed and the judgment of the trial court is

reinstated.

Judgment reversed.

A.W. Sweeney, Resnick and Pfeifer, JJ., concur.

Douglas, J., concurs separately.

Moyer, C.J., and Wright, J., dissent.

Douglas, J., concurring. I authored the court's

opinion in Hedrick v. Motorists Mut. Ins. Co. (1986), 22 Ohio

St.3d 42, 22 OBR 63, 488 N.E.2d 840. Today, the court

overrules Hedrick and I am concurring in that judgment. In

doing so, I am persuaded by language contained in two opinions

written for the court by Justice Wright, both of which were

decided after our decision in Hedrick.

In Watson v. Grange Mut. Cas. Co. (1988), 40 Ohio St.3d

195, 197, 532 N.E.2d 758, 760, Justice Wright, in discussing

uninsured motorist coverage, said: "The coverage's clear focus

is on the operator, not the vehicle. It is axiomatic that

drivers cause accidents, not inanimate vehicles. The purpose

of the uninsured motorist statute is not to provide coverage

for an uninsured vehicle but rather to afford the insured

additional protection in the event of an accident. This form

of coverage protects against losses caused by a limited group

of tortfeasors." (Emphasis added.)

In Stanton v. Nationwide Mut. Ins. Co. (1993), 68 Ohio

St.3d 111, 113-114, 623 N.E.2d 1197, 1199-1200, Justice Wright,

writing for the court, said:

"I

"The General Assembly determined by enacting R.C. 3937.18

that automobile liability carriers must offer uninsured

motorist coverage to their customers. Watson v. Grange Mut.

Cas. Co. (1988), 40 Ohio St.3d 195, 532 N.E.2d 758. This court

has described the purpose behind R.C. 3937.18 in various ways

over the years, all of which may be summarized by stating that

the uninsured motorist statute is meant to ensure that innocent

persons who are injured by negligent uninsured motorists are

not left without compensation simply because the tortfeasor

lacked liability coverage. State Farm Auto. Ins. Co. v.

Alexander (1992), 62 Ohio St.3d 397, 583 N.E.2d 309. The

statute protects persons who purchase insurance by providing a

remedy to them in the event they are injured by uninsured

motorists who cannot pay for the damages they cause. By

allowing victims of automobile accidents to seek compensation

from their own insurance carriers, the statute attempts to

place those victims in the same position they would have been

[in] had the tortfeasors possessed liability coverage.

Bartlett v. Nationwide Mut. Ins. Co. (1973), 33 Ohio St.2d 50,

62 O.O.2d 406, 294 N.E.2d 665. In short, the statute is

remedial in nature, and is meant to provide a means of

compensation to those injured by uninsured motorists.

"The General Assembly has determined, however, that

automobile liability carriers must only offer uninsured

motorist coverage to their customers; it has not made the

purchase of uninsured motorist coverage mandatory. Orris v.

Claudio (1980), 63 Ohio St.2d 140, 17 O.O.3d 85, 406 N.E.2d

1381. We have previously stated that R.C. 3937.18 does not

displace ordinary principles of contract law and that, as a

result, reasonable exclusions in the uninsured motorist

coverage of automobile insurance policies do not necessarily

conflict with the policy behind R.C. 3937.18 and are sometimes

enforceable.1 However, this court has since changed its view

on this matter.

"II

"In 1992, this court stated in State Farm, supra, that

automobile insurance policies may not eliminate or reduce

uninsured motorist coverage. Specifically, the court held:

"'An automobile insurance policy may not eliminate or

reduce uninsured or underinsured motorist coverage, required by

R.C. 3937.18, to persons injured in a motor vehicle accident,

where the claim or claims of such persons arise from causes of

action that are recognized by Ohio tort law.' Id. at

syllabus.2

"When the syllabus law in State Farm is applied to the

facts in this case, it is clear that appellant's 'for fee'

exclusion is unenforceable. Notwithstanding appellees'

argument that the exclusion is ambiguous, the exclusion plainly

eliminates coverage to at least those persons, like appellee,

who are injured while driving vehicles that are being used for

commercial purposes. In addition, appellant does not dispute

that appellee has a cause of action in tort against the

uninsured motorist whose car caused the accident. Thus the

facts of this case fit squarely within the syllabus law in

State Farm. Appellant argues, however, that this court should

still enforce the 'for fee' exclusion in appellee's insurance

policy.

"* * *

"Despite the cogency of appellant's arguments, we decline

to carve out a commercial-context exception from the syllabus

law set forth in State Farm. This is a matter of public policy

best left to the General Assembly. We believe that enforcing

appellant's 'for fee' exclusion at this time would only

frustrate the policies of predictability and stability found in

the doctrine of stare decisis." (Emphasis added.)

Footnotes 1 and 2 in the opinion read:

"1. See, e.g., Dairyland Ins. Co. v. Finch (1987), 32

Ohio St.3d 360, 513 N.E.2d 1324, paragraph two of the syllabus,

overruled by State Farm Auto. Ins. Co. v. Alexander (1992), 62

Ohio St.3d 397, 583 N.E.2d 309.

"2. State Farm gave a different interpretation to R.C.

3937.18. The writer authored Dairyland and dissented in State

Farm. However, the General Assembly has not reacted to State

Farm. Given a time frame of well over one year, State Farm

must be regarded as settled law and the doctrine of stare

decisis must apply." (Emphasis added.)

Given the foregoing, Justice Francis E. Sweeney's opinion

herein is clearly correct. Accordingly, I concur in the

syllabus, reasoning and judgment.

Moyer, C.J., dissenting. Being unable to agree with the

reasoning of the majority, I respectfully dissent.

The issue presented in this case could easily be disposed

of if we were to follow the law announced by this court on

precisely the same issue as recently as 1986 in Hedrick v.

Motorists Mut. Ins. Co. (1986), 22 Ohio St.3d 42, 22 OBR 63,

488 N.E.2d 840.

We could begin by applying the law of the case that holds:

"An insurance policy provision which denies uninsured motorist

coverage, when bodily injury is sustained by any person while

occupying a motor vehicle owned by an insured but which vehicle

is not specifically insured under the policy, is a valid

exclusion." (Emphasis sic.) Id. at syllabus. We could also

apply the rationale of Hedrick that is as relevant today as it

was when announced only eight years ago: "Some may argue that

uninsured motorist coverage is applicable to persons, not

vehicles, and thus an exclusion to coverage as to any vehicle

owned by an insured is without effect. To find the exclusion

clause ineffective because uninsured motorist coverage is only

personal coverage, and thereby exclude vehicle coverage, would

permit recovery when the opposite was intended by the precise

language in the policy. This interpretation *** also unduly

restricts the parties' right to freely contract." (Emphasis

added.) Hedrick, 22 Ohio St.3d at 45, 22 OBR at 65-66, 488

N.E.2d at 843.

The general purpose of mandatory uninsured motorist

coverage is to put an injured policyholder in the same position

he would have been in if the tortfeasor had carried liability

insurance. Sexton v. State Farm Mut. Auto. Ins. Co. (1982), 69

Ohio St.3d 431, 436, 23 O.O.3d 385, 388, 433 N.E.2d 555, 559.

R.C. 3937.18 mandates uninsured coverage in an amount equal to

the policyholder's liability coverage if none is offered. As

such, parity of position for Martin is defined by his liability

limits. In this case Martin carried no liability insurance, so

by granting him coverage the majority places him in a position

superior to what he would have been in, contrary to this

court's statement of the statute's purpose.

Both the above law and rationale apply to the facts of

this case. Martin owned three motor vehicles. He insured two

of them and chose not to insure the third, the motorcycle,

which he rode only several months a year and which he

unfortunately chose to ride at the time of the collision that

produced this case.

The message delivered by the majority opinion is that a

person who owns more than one motor vehicle may choose not to

insure one vehicle and bear no financial risk for the decision

because he will be deemed to have in effect purchased liability

coverage for the vehicle he decided not to insure if he is

struck by another uninsured motorist. Since the responsibility

of payment for injuries resulting from an accident involving

such uninsured vehicles has now been shifted to the entity

deemed to have provided the insurance, it is predictable that

all other owners of motor vehicles who conscientiously purchase

liability insurance for their vehicles will share the

responsibility of paying for those who choose to insure some

but not all of their owned vehicles. The General Assembly has

provided for, and this court should permit to exist, a system

of liability insurance that enables each person to purchase the

insurance coverage that she or he chooses to purchase and to

bear the responsibility for that decision. I would apply the

law of Hedrick to this case and affirm the judgment of the

court of appeals. Such a judicial decision did, under Hedrick,

and would continue to place the responsibility for one's acts

precisely where the parties here, and the law, intended it to

be.

Wright, J., concurs in the foregoing dissenting opinion.

Wright, J., dissenting. I concur in the Chief Justice's

dissent and feel that a brief response to Justice Douglas's

concurring opinion is in order. Justice Douglas accurately

summarizes the purpose and scope of uninsured motorist

coverage, quoting this writer in Watson v. Grange Mut. Cas. Co.

(1988), 40 Ohio St.3d 195, 532 N.E.2d 758, and Stanton v.

Nationwide Mut. Ins. Co. (1993), 68 Ohio St.3d 111, 623 N.E.2d

1197. However, it would appear that the concurrence loses

sight of what this case is about. This matter is not about

whether uninsured motorist coverage covers persons or motor

vehicles. To the contrary, at bottom, this case involves

whether appellant should get something for nothing.

As the Chief Justice points out, appellant was offered and

specifically rejected any coverage arising out of the use of

his motorcycle. We learned in our first year in law school

that parties have the constitutional right to enter into

contracts and that courts will generally enforce same. That,

of course, is what Hedrick v. Motorists Mut. Ins. Co. (1986),

22 Ohio St.3d 42, 22 OBR 63, 488 N.E.2d 840, was all about.

That is what this case is all about. I think it an unfortunate

state of affairs that we depart from these principles and

discard yet another solid precedent, and, thus, I respectfully

dissent.