Waters v. George

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[Cite as Waters v. George, 2003-Ohio-2093.] IN THE COURT OF APPEALS OF OHIO FOURTH APPELLATE DISTRICT ATHENS COUNTY CARRIE J. WATERS, et al., : : Case No. 02CA36 Plaintiffs-Appellants, : : v. : : MELISSA FAITH GEORGE, : EXECUTRIX, et al., : DECISION AND JUDGMENT ENTRY : Defendants-Appellees. : Released 4/17/03 : ___________________________________________________________ APPEARANCES: Frank E. Todaro and Robert J. Wagoner, The Law Firm of Frank Todaro, Columbus, Ohio, for appellants. Andrew J. Kielkopf and James R. Gallagher, Gallagher Gams Pryor Tallan & Littrell LLP, Columbus, Ohio, for appellee State Farm Fire & Casualty Company. ___________________________________________________________ Harsha, J. Lawrence {¶1} County Common and Pleas Carrie Court s Waters appeal decision the granting Athens summary judgment to State Farm Fire and Casualty Company (State Farm). The concluding policy Waters that issued the by uninsured/underinsured law. contend the commercial State motorist trial general Farm court liability did coverage erred not by in (CGL) provide operation of We conclude that State Farm s CGL policy is a motor vehicle policy and thus, State Farm was required to offer uninsured/underinsured motorist coverage. Because State 2 Athens App. No. 02CA36 Farm did coverage, not it offer exists by uninsured/underinsured operation of law. motorist However, we conclude that the Waters are not entitled to underinsured motorist coverage because they are not insureds under the CGL policy. {¶2} In January 1998, Lawrence and Carrie Waters were involved in an automobile accident. The accident occurred when a vehicle driven by Thomas William George traveled left of center and struck the Waters vehicle head on. In January 2000, the Waters filed a complaint against Melissa Faith George, the executrix of Mr. George s estate. After receiving consent from State Farm, the Waters settled with Mr. George s insurance company for the policy limits of $100,000. In addition, the Waters received $400,000 through a federal tort claim. {¶3} At maintained Farm. the a time homeowners of the insurance accident, the Waters policy through State Carrie Waters also maintained a CGL policy through State Farm. In December 2001, the Waters filed an amended complaint, adding State Farm as a defendant. The complaint sought a declaratory judgment establishing that the Waters were entitled to underinsured their policies with State Farm. motorists benefits under The trial court ultimately granted summary judgment to State Farm. The Waters appeal 3 Athens App. No. 02CA36 from that error: entry, raising the following assignments of "ASSIGNMENT OF ERROR NO. 1 - The trial court erred in finding that plaintiffs/appellants' homeowners insurance policy did not provide uninsured/underinsured coverage by operation of law. The trial court insurance erred uninsured/underinsured ASSIGNMENT OF ERROR NO. 2 - in liability motorist finding policy motorist that their did coverage not by business provide operation of ASSIGNMENT OF ERROR NO. 3 - The trial court erred in law. failing to find that defendant/appellee is not entitled to a set off of any amounts paid to plaintiffs/appellants by the United States of America." {¶4} The Waters have withdrawn their first assignment of error based on the Supreme Court of Ohio's decision in Hillyer v. State Farm Fire & Cas. Co., 97 Ohio St.3d 411, 2002-Ohio-6662, 780 N.E.2d 262. Accordingly, we do not address it. {¶5} contend Farm s In their second assignment of error, the Waters the CGL trial policy court did erred not in provide concluding that State uninsured/underinsured motorist coverage by operation of law. They argue that the CGL policy is a motor vehicle policy because it contains a parking exception non-owned vehicles. and provides liability coverage for They contend that State Farm s failure 4 Athens App. No. 02CA36 to offer uninsured/underinsured motorist coverage when it issued the motor vehicle motorist uninsured/underinsured law. Moreover, policy coverage by argue that the Waters gives rise to operation the of CGL s definitional limitation on who is an insured applies only to liability coverage, not to uninsured/underinsured motorist coverage that arises by operation of law. State {¶6} Farm admits uninsured/underinsured that motorist it did coverage not with offer the CGL policy; however, State Farm contends it was not required to offer uninsured/underinsured motorist coverage because the CGL policy is not a motor vehicle policy. State Farm points out that the CGL policy generally excludes coverage for automobile claims with only a few limited exceptions. State Farm also argues that because the Waters were not insureds under the CGL policy at the time of the accident, they are not entitled to underinsured motorist coverage. {¶7} summary Edison We review judgment Co., N.E.2d 241. 77 on Ohio a trial a de St.3d court s novo 102, basis. 105, decision Grafton to grant v. 1996-Ohio-336, Ohio 671 Accordingly, we conduct an independent review of the record and afford no deference to the trial court s determination. Brown v. Scioto Cty. Bd. Of Commrs. (1993), 5 Athens App. No. 02CA36 87 Ohio App.3d 704, 711, 622 N.E.2d 1153. under Civ.R. 56(C) is appropriate Summary judgment when: (1) no genuine issue as to any material fact remains to be litigated; (2) the moving party is entitled to judgment as a matter of law; and (3) it appears from the evidence, when viewed most strongly in favor of the non-moving party, that reasonable minds can come to a conclusion only in favor of the moving party. Grafton, supra. {¶8} We will first address the issue of whether State Farm s CGL policy provides uninsured/underinsured motorist coverage by operation of law, for if it does not, there is no need to address the other issues raised by the Waters. {¶9} effective Carrie Waters CGL policy with State Farm had an date of June The CGL policy provides: 26, 1997 through June 26, 1998. "We will pay those sums that the insured becomes legally obligated to pay as damages because of bodily injury, property damage, personal injury or advertising injury to which this insurance applies. * * * " (Emphasis in original.) specified exclusions to The CGL business policy liability also contains coverage. number of the exclusions are followed by exceptions. relevant policy portions state: A The "Under Coverage L, this insurance does not apply: * * * 7. to bodily injury or property damage arising out of the ownership, maintenance, 6 Athens App. No. 02CA36 use or entrustment to others of any aircraft, or auto watercraft owned or operated by or rented or loaned to any insured. Use includes operation and loading or unloading. This exclusion does not apply to: * * * c. parking an auto on, or on the ways next to, premises you own or rent provided the auto is not owned by or rented or loaned to you or any insured; e. bodily injury or property damage arising out of the use of any non-owned auto in your business by any person other than you...." (Emphasis in original.) The State Farm policy defines a non-owned auto as any auto you do not own, lease, hire or borrow which is used in connection original.) with your business. (Emphasis in Since the non-owned auto exception provides coverage for injury and damage arising from the business use of non-owned autos, it appears that the exception is designed to provide coverage for claims of vicarious liability. {¶10} At the time State Farm issued its CGL policy, R.C. 3937.18 required an insurance company to offer uninsured/underinsured motorist coverage any time it issued an automobile liability or motor vehicle liability policy of 1 insurance.1 An insurance company s failure to offer R.C. 3937.18 was amended effective September 3, 1997. The amended version defined "automobile liability or motor vehicle liability policy of insurance" as either "(1) Any policy of insurance that serves as 7 Athens App. No. 02CA36 uninsured/underinsured motorist coverage results in such coverage becoming part of the policy by operation of law. Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio St.2d 161, 163, 258 N.E.2d 429. Thus, we must determine whether State Farm s CGL policy is a motor vehicle liability policy. If it is a motor vehicle liability policy, then State Farm s failure to offer uninsured/underinsured motorist coverage results in its existence by operation of law. {¶11} In Selander v. Erie Ins. Group, 85 Ohio St.3d 541, 1999-Ohio-287, 709 N.E.2d 1161, the Supreme Court of Ohio considered whether a general business liability policy that provided vehicles coverage qualified as a for non-owned motor vehicle Finding that it did, the Court stated: and hired liability motor policy. [t]he fact that a policy provides liability coverage for non-owned and hired motor vehicles is sufficient to satisfy the requirement of R.C. 3937.18 that a motor vehicle policy be delivered in this state with respect to any motor vehicle registered or principally garaged in this state. Id. at 544-45. {¶12} State Farm argues that its policy differs from the policy considered in Selander, which contained a proof of financial responsibility is defined by division (K) of section 4509.01 of the Revised Code, for owners or operators of the motor vehicles specifically identified in the policy of insurance; (2) Any umbrella liability policy of insurance." R.C. 3937.18(L). However, this version of R.C. 3937.18 was not in effect at the time State Farm issued its CGL policy. 8 Athens App. No. 02CA36 specific endorsement coverage for Selander, 85 generally contains argues hired Ohio that and the at for State liability non-owned incidental liability automobiles. 543. automobile exception automobile non-owned St.3d excludes an providing Farm s policy coverage but State Farm autos. coverage See provided by the exception is insufficient to render the CGL policy a motor vehicle liability policy. We disagree. {¶13} In Davidson v. Motorists Mut. Ins. Co., 91 Ohio St.3d 262, 2001-Ohio-36, 744 N.E.2d 713, the Supreme Court of Ohio provided considered whether liability a coverage homeowner s for policy recreational qualified as a motor vehicle liability policy. determined that it did not. the Court stated: that vehicles The Court In distinguishing Selander, "In contrast, the policy at issue in this case is a homeowner s policy that does not include coverage vehicles for liability generally. arising Instead, out the of the use of homeowner s motor policy provides incidental coverage to a narrow class of motorized vehicles that are not subject to motor vehicle registration and are designed for off-road use or are used around the insured s property." Davidson, 91 Ohio St.3d at 267. In Hillyer v. State Farm Fire & Cas. Co., 97 Ohio St.3d 411, 416, 2002-Ohio-6662, 780 N.E.2d 262, the Supreme Court of 9 Athens App. No. 02CA36 Ohio further clarified its decision in Davidson, stating: The coverage in Davidson was not incidental merely because it involved recreational vehicles. Instead, it was incidental primarily because coverage of those vehicles was remote from and insignificant to the type of overall coverage the policy provided. {¶14} In considered supra, Hillyer, whether the the Supreme residence-employee Court of provision Ohio in a homeowner s insurance policy rendered the policy a motor vehicle liability policy. employee clause in an The Court held: a residenceinsurance policy that provides coverage incidental to home ownership does not convert the policy into a motor vehicle policy * * *. Id. at 413. The Court noted that coverage under the residence-employee clause arose anytime an employee was injured while in the course of involved. employment, Id. at 416. not just when an automobile was The defining characteristic of coverage is the person injured * * * not the fact that a motor vehicle was involved. * * * [T]he fact that an automobile may be involved is incidental to coverage * * *. Id. at 416, quoting Panozzo v. Allstate Ins. Co. (Sept. 13, 2001), Cuyahoga App. No. 79083. {¶15} Recently, the Eighth District Court of Appeals addressed a non-owned auto exception similar to the one at 10 Athens App. No. 02CA36 issue here. In Mazzocki v. State Farm Fire & Cas. Co., Cuyahoga App. No. 81274, 2003-Ohio-745, the court concluded that a non-owned auto exception policy a motor vehicle policy. the court noted that the did not render the CGL In distinguishing Selander, Selander policy contained an express provision of coverage, whereas the Mazzocki policy provided coverage in an exception to a general exclusion. Id. at ¶20. The court went on to state: "Similar to the policies at issue in Davidson and Hillyer, that coverage is limited by class of vehicles and is available only under narrow owned circumstances; business use namely under exceptions. the parking and This narrow class nonof coverage supports that it is remote from and insignificant to the overall type of coverage afforded under the commercial general liability policy of insurance at issue in this case." Id. However, for the reasons that follow, we are not persuaded. {¶16} Unlike the coverage considered in Davidson and Hillyer, the coverage provided by this exception is not incidental policy. to the overall coverage provided by the CGL The very purpose of the non-owned auto exception is to provide coverage for claims of vicarious liability arising out of automobile accidents involving non-owned autos. Therefore, coverage under this exception will only 11 Athens App. No. 02CA36 arise when a non-owned auto is involved. The defining characteristic of coverage is the fact that it is designed to provide indemnification when an automobile causes the loss, while being used for business purposes. Accordingly, the coverage provided by the non-owned auto exception is not incidental to the overall coverage provided by the CGL policy. {¶17} Moreover, that the we liability find no coverage significance for in the non-owned fact autos is contained in an exception to an exclusion rather than in a specific endorsement. In determining whether a policy of insurance is a motor vehicle liability policy, we look at whether the policy provides motor vehicle liability coverage. If the policy provides motor vehicle liability coverage, it is a motor vehicle liability policy, regardless of how or where in the policy such coverage is provided. Selander, 85 Ohio St.3d at 544. {¶18} In support of its argument that the CGL policy is not a Lawler motor v. Fireman s F.Supp.2d 841. containing vehicle policy, Fund State Ins. Co. Farm also (N.D.Ohio relies 2001), on 163 In Lawler, the court examined a CGL policy non-owned coverage at issue here. auto coverage identical See Id. at 845. to the The Lawler court concluded that the non-owned auto coverage did not render 12 Athens App. No. 02CA36 the CGL policy a motor vehicle liability policy. at 853. See Id. In distinguishing Selander, the court focused on the fact that the claimants in Selander were injured while acting within the scope of their employment. Id. at 853. According to the Lawler court, the Supreme Court of Ohio relied on the scope of employment factor when it concluded that the coverage in Selander was a motor vehicle policy. Id. at 852. Because the Lawler claimant was injured while operating his personal car for personal business, the court concluded that the policy vehicle liability policy. did not qualify as a motor Id. at 843,853. {¶19} Recently, our colleagues in the Eighth District Court of Appeals had an opportunity to address Lawler. Workman v. Carlisle Engineered Products, Inc., In Cuyahoga App. Nos. 81179, 81211, 2003-Ohio-293, at ¶21, the court stated: "The confuses the reasoning in Lawler limitations on is flawed coverage because with classification of the policy as a motor vehicle policy. it the As we read Selander and Davidson, a policy either qualifies as an automobile policy or it does not based upon the express policy terms. If R.C. a policy 3937.18 qualifies require an as such, offering of the provisions of UIM coverage. Yet, if we accept the reasoning employed by the court in Lawler, a policy could be both a motor vehicle 13 Athens App. No. 02CA36 policy and not depending on what circumstances give rise to the claim for coverage, that is whether the claimant suffered injury in the course and scope of employment. that reason, omitted.) we We decline agree to with District in this regard. follow our Lawler." colleagues For (Footnotes in the Eighth Under Lawler, determining whether an insurance policy qualifies as a motor vehicle policy depends upon the circumstances giving rise to the motorist coverage. an insurance claim surrounding for the incident uninsured/underinsured However, former R.C. 3937.18 required company to offer uninsured/underinsured motorist coverage when it issued a motor vehicle liability policy. In order to comply with the statute, an insurance company must be able to determine, at the time it issues the policy, whether its insurance policy is a motor vehicle policy. Therefore, insurance policy is the a determination motor vehicle of policy whether an cannot be dependant upon the circumstances surrounding the incident giving rise to motorist coverage. the claim for uninsured/underinsured Thus, we find the reasoning in Lawler unpersuasive on this issue. {¶20} Like policy the provides automobiles. policy in Selander, State liability coverage for Farm s CGL non-owned Based on Selander, we conclude that State 14 Athens App. No. 02CA36 Farm s CGL policy is a motor vehicle policy. State Farm was required to offer Therefore, uninsured/underinsured motorist coverage when it issued the CGL policy. Because State Farm failed to offer such coverage, it becomes part of the CGL policy by operation of law. {¶21} Because we conclude that the non-owned auto coverage provided in State Farm s CGL policy renders the policy address a motor what vehicle effect the liability policy, we parking exception need has on not the policy. {¶22} While provides we have concluded uninsured/underinsured that the motorist CGL policy coverage by operation of law, it does not necessarily follow that the Waters are entitled to coverage. The declarations page in State Farm s CGL policy identifies the named insured as Carrie J. Waters dba Christmas at Carrie s. The declarations page also indicates that the named insured is an individual. policy, the Insured shown The words in policy you the and states: [t]hroughout your Declarations refer * * *. to the The this Named policy contains a section entitled SECTION II DESIGNATION OF AN INSURED. If you This section provides: are designated in the "WHO IS AN INSURED Declarations as: 1. an individual, you and your spouse are insureds but only with 15 Athens App. No. 02CA36 respect to the conduct of a business of which you are the sole owner; * * *" (Emphasis in original.) {¶23} To determine whether the Waters are entitled to underinsured motorist coverage, we must determine whether they are insureds under the policy issued by State Farm. See Scott-Pontzer v. Liberty Mut. Fire Ins. Co., 85 Ohio St.3d 660, 662, 1999-Ohio-292, 710 N.E.2d 1116. argue that the limitation on the The Waters definition of insured applies only to liability coverage and not to underinsured motorist coverage Presumably, Court of the that Waters' Ohio s arises by argument statement in operation relies on of the Scott-Pontzer law. Supreme that any language in the Liberty Mutual umbrella policy restricting insurance coverage was intended to apply solely to excess liability coverage and not for purposes of underinsured motorist coverage. (Emphasis in original.) Id. at 666. {¶24} State Farm s CGL policy differs from the policies at issue in Scott-Pontzer. In Scott-Pontzer, the Supreme Court of Ohio considered the significance of an automobile liability policy and umbrella policy in which the named insured liability was a corporation. policy, the court Analyzing determined the that automobile having a corporation as the named insured created ambiguity since a corporation can only act through natural persons. Id. at 16 Athens App. No. 02CA36 664. Thus, the court found that Pontzer, an employee of the corporation, was uninsured/underinsured an insured motorist for purposes coverage Id. at 665. found insured Pontzer was an the by provided automobile liability policy. that of the The court also under the umbrella policy, stating we conclude that Pontzer, as an employee of Superior Dairy, was also an insured under Superior Dairy s umbrella/excess insurance policy * * *. Id. In determining that Pontzer was an insured for purposes of the umbrella policy, it appears that the court again relied on the ambiguity created by having a corporation as the named insured. {¶25} Unlike the named the insured corporation. policies in Rather at State Farm s the named issue in CGL insured Scott-Pontzer, policy in is State not a Farm s policy is a sole proprietor, Carrie J. Waters dba Christmas at Carrie s. As the Supreme Court of Ohio recognized in Patterson v. V & M Auto Body (1992), 63 Ohio St.3d 573, 574-75, 589 N.E.2d 1306, [a] sole proprietorship has no legal identity separate from that of the individual who owns it. Because State Farm s policy names an individual as the insured, there is no ambiguity. {¶26} Moreover, State Farm s CGL policy contains a specific section that defines who is an insured and under 17 Athens App. No. 02CA36 what circumstances. According to that section, the Waters are only insureds with respect to the conduct of Carrie Waters business. {¶27} The Waters argue that this definitional section does not apply to underinsured arises by operation of law. motorist coverage that In Lawler, 163 F.Supp.2d 841, the court addressed a similar argument. Discussing Scott- Pontzer, the "The argument derives Lawler from court stated: its interpretation plaintiff s of the Supreme Court s decision in Scott-Pontzer * * *. case, the court held that policy language Ohio In that excluding coverage for employees acting outside the scope of their employment did not apply to implied underinsured motorist coverage. The plaintiff says this holding means any limiting language in an insurance policy s definition of an insured is ineffective for purposes of implied underinsured motorist coverage. held as much. Indeed, the court s analysis belies any such interpretation. the But the court in Scott-Pontzer never effect The court stated that it would consider of coverage limitations on uninsured/underinsured motorist coverage only after first deciding whether the plaintiff was an insured for purposes of the underlying policy. Id. at 662, 710 N.E.2d at 1118. The court never suggested it would ignore any limiting 18 Athens App. No. 02CA36 language in the definition of an insured." agree with Lawler in this regard. Id. at 854. We Under Scott-Pontzer, we must first determine whether the Waters are insureds for purposes of underinsured motorist coverage. 85 Ohio St.3d at 662. somewhere for the Scott-Pontzer, In order to do so, we must look definition of an insured. Here, the policy provides a specific section defining an insured. {¶28} It is apparent that the parties only intended State Farm s CGL policy to insure the Waters with respect to the conduct parties could include of have Christmas imagined at Carries. that uninsured/underinsured the Even CGL motorist if the policy would coverage, they could not have dreamed that a business liability policy would provide underinsured motorist coverage to the Waters when they were engaged in personal activities. {¶29} State Farm s CGL policy specifically states that the Waters are insureds with respect to the conduct of Christmas at Carries. At the time of the incident giving rise to the claim for underinsured motorist coverage, the Waters were not engaged in an activity related to Christmas at Carries. State Thus, Farm s CGL the Waters policy. are Because not the insureds Waters under are not insureds they are not entitled to underinsured motorist coverage. Accordingly, the Waters second assignment of 19 Athens App. No. 02CA36 error is overruled, albeit for reasons that differ from the trial court's decision. {¶30} In their third assignment of error, the Waters argue that $400,000 Because State Farm settlement we find is with that not the the entitled United Waters to States are not set of off the America. entitled to underinsured motorist coverage under State Farm s policy, we need not address this issue. JUDGMENT AFFIRMED. 20 Athens App. No. 02CA36 JUDGMENT ENTRY It is ordered that the JUDGMENT BE AFFIRMED and that Appellee recover of Appellants costs herein taxed. The Court finds there were reasonable grounds for this appeal. It is ordered that a special mandate issue out of this Court directing the Athens County Common Pleas Court to carry this judgment into execution. Any stay previously granted by this Court is hereby terminated as of the date of this entry. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. Abele, J. & Kline, J.: Concur in Judgment and Opinion. For the Court BY: _______________________ William H. Harsha, Judge NOTICE TO COUNSEL Pursuant to Local Rule No. 14, this document constitutes a final judgment entry and the time period for further appeal commences from the date of filing with the clerk.

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