Opinion
Case No. 96 CV 001173
September 11, 2000
OPINION AND JOURNAL ENTRY
This matter is before the court to address defendant Reliance National Insurance's (Reliance) motions for summary judgment and for sanctions against plaintiff George Dewalt. Dewalt submitted a brief in opposition. Although granted two extensions of time, defendant State Farm Insurance Companies did not submit a reply brief.
Dewalt was injured in the course and scope of his employment with consolidated Rail Corporation (Conrail) while driving a truck. The other driver was at fault and his insurance company tendered the limits of his policy. At issue is whether Dewalt is entitled to underinsured motorist coverage under Conrail's policy. Conrail and Reliance claims there is no such coverage.
Conrail had a "matching deductible" policy with Reliance in which Conrail had insurance coverage for five million dollars with an accompanying five million dollar deductible. Reliance provided no insurance in excess of this amount. While Reliance would process and pay claims under this policy, Conrail was obligated to reimburse Reliance for any claims paid out within the five million dollar limit plus certain other expenses. In effect, the policy was a "fronting agreement" in which the deductible amount is the same as the policy limits and Conrail relied on Reliance to file proof of insurance as required by various Ohio governmental agencies. Although Conrail did not file a certificate of self-insurance under Ohio's Financial Responsibility Act (R.C. 4509.45(D)), Reliance contends Conrail was self insured in the practical rather than legal sense since it has retained the risk of loss rather than shifting it to an insurer. See, e.g., Physicians Ins. Co. v. Grandview Hosp. (1988), 44 Ohio App.3d 157, 158. Reliance asserts that Conrail, as a self-insured, is not subject to the requirements of R.C. 3937.18 concerning uninsured/underinsured motorist (UM/UIM) coverage. In addition, Reliance claims Conrail knowingly and expressly rejected UM/UIM coverage in writing in the prior policy year and that Reliance did not have to offer and obtain another express, written rejection in the following policy period in which the accident occurred. Dewalt claims Conrail is not self-insured and thus Reliance must fully comply with R.C. 3937.18 if there is to be a valid rejection of UM/UIM coverage. Dewalt maintains that Reliance has failed to meet its burden of proof that there was an express rejection and that under R.C. 3937.18(A), UM/UIM coverage is included in the policy by operation of law.
The court finds that because Conrail agreed to assume the risk of loss up to the policy limits, it is in fact self-insured in a practical sense although not self-insured in accordance with R.C. 4509.72 and R.C. 4509.45(D). The policy did not shift the risk of loss to the insurer and indeed, the policy required Conrail to even assume certain administrative costs of Reliance in processing the claims. Although there is apparently no case law on whether entities effectively self-insured are required to comply with R.C. 3937.18 concerning UM/UIM coverage, there is case law concerning statutory self-insurers and those who post financial responsibility bonds. In Snyder v. Roadway Express, Inc. (1982), 7 Ohio App.3d 218, 219, the court held that R.C. 3937.18 was not intended to apply to self-insurers. The court noted that nowhere in the statute does it mention self-insurers and that holding otherwise would mean the statute would be giving one the right to reject an offer of insurance to one's self. Id. The court concluded that it was not likely that the legislature intended such a result. This reasoning was adopted by the Ohio Supreme Court in Grange Mut. v. Refiners Transport Terminal (1986), 21 Ohio St.3d 47, 51, in which the court held that the UM/UIM provisions of R.C. 3937.18 do not apply to either self-insurers or financial responsibility bond principals. Applying this logic one step further, this court finds that a self-insurer in a practical sense is not required to comply with R.C. 3937.18.
Even if Conrail is not a self-insurer, Reliance has met its burden of showing that Conrail expressly made an knowing rejection of UM/UIM coverage. It is well settled that insurance companies must offer UM/UIM coverage whenever a motor vehicle liability policy is delivered or issued in this state. R.C. 3937.18(A); Gyori v. Johnston Coca-Cola Bottling Group, Inc. (1996), 76 Ohio St.3d 565, 567. Failure to do so results in the insured acquiring UM/UIM coverage by operation of law. Id., citing Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio St.2d 161, 163. Rejection of UM/UIM coverage must be made expressly and knowingly. Id.; R.C. 3937.18(C). The insurer bears the burden of demonstrating that the insured made a knowing rejection of the coverage. Id. citing Ady v. West Am. Ins. Co. (1982), 69 Ohio St.2d 593, 597. In order to make a rational decision to reject coverage, an insured has to be aware of the provision, understand its terms and agree to it. In addition, this rejection must be in writing. Id. at 568. However, once an insured has rejected UM/UIM coverage, the insurer is not required to reoffer such coverage when the same policy is renewed. R.C. 3927.18.
The evidence shows that Conrail had a policy of rejecting UM/UIM coverage whenever possible and obtaining the statutory minimum when rejection was prohibited by law. It rejected UM/UIM coverage in those states which permitted rejection of such coverage. The policy in question covers motor vehicle liability in all fifty states and was negotiated by persons with insurance backgrounds and in a commercial setting. The evidence shows that Conrail expressly rejected in writing UM/UIM coverage for Ohio for the policy period just before the accident. As such, Reliance was not required to reoffer such coverage in the following year. In the following year, Reliance provided Conrail an endorsement to its policy which provided the status of UM/UIM coverage for all fifty states. Among the states in which UM/UIM coverage was rejected was Ohio. It is clear that Conrail was well aware of the availability of UM/UIM coverage, that it understood it and that it made an informed and knowledgeable waiver of that coverage.
The motion of defendant Reliance National Insurance for summary judgment against plaintiff George Dewalt is granted. The motion of defendant Reliance National Insurance for sanctions against George Dewalt is denied. The court finds that the pleadings and motions of plaintiff George Dewalt were made in good faith and with sufficient grounds to support them.
IT IS SO ORDERED.