Opinion
Case No. C2-01-633
September 3, 2002
OPINION AND ORDER
Most recently, this case came before the Court on cross Motions for Summary Judgment upon a joint stipulation of facts. The question presented by the motions was whether Plaintiffs (the Bauers) are covered by either or both of two policies of insurance issued by the Defendant Wausau Business Insurance Company (Wausau) to Licking Valley School District, Defendant Marie Bauer's employer. It was stipulated that the Bauers were injured in an automobile accident involving the Bauer's private automobile and that of a third party with whom the Bauers had already settled. The Bauers claimed coverage under the uninsured/under-insured motorist (UM/UIM) requirements of Ohio Revised Code Section 3937.18 and the law of Ohio as set out in various decisions of the Ohio Supreme Court, including in particular Scott-Pontzer v. Liberty Mut. Fire ins. Co., 85 Ohio St.3d 660 (1999) and Ezawa v. Yasuda Fire and Marine Ins. Co. of Am., 86 Ohio St.3d 557 (1999). Because it was clear that both the Bauers and the Licking County School District are citizens of the state of Ohio, the Court, sua sponte, raised the question whether it had diversity jurisdiction in view of the provisions of 28 U.S.C. § 1332 (c)(1), which, in certain diversity situations, deems an insurance company to share the citizenship of its insured. See Ford Motor Co. v. Ins. Co. of N. Am., 669 F.2d 421, 424 (6th Cir. 1982) (holding that under § 1332(c)(1), "by cloaking the non-resident insurer with the citizenship of its insured, Congress removed the basis for diversity jurisdiction" in a case involving Michigan no-fault insurance). The Court invited the parties to submit briefs on the jurisdictional question, and the Bauers and Wausau have now done so, taking opposing positions. Docs. 32 and 33. The Court has reviewed that briefing and again considered the Ford Motor case and the conflicting authority already noted from this and the Northern District concerning how Ford should be applied to a Scott-Pontzer claim case such as the one presented here. For the reasons discussed below, the Court now concludes that the provisions of § 1332(c)(1) do not deprive the Court of diversity jurisdiction in the circumstances of this case.
The question of coverage under a third policy of insurance allegedly issue by the Defendant Coregis Insurance Company (Coregis) to the Coshocton Metropolitan Housing Authority is no longer presented in this case, as a result of the voluntary dismissal of Defendant Coregis and all claims against it, signed by all parties and filed herein on April 9, 2002. Doc. 26.
According to the stipulated facts, the settlement was made with notice to, and a request for the consent of, Defendant Wausau. Doc. 20, ¶ 23.
The Court has also considered one further case from this district: Peterson v. TIG Specialty Insurance Company, ___ F. Supp.2d ___, 2002 WL 1756050 (S.D. Ohio, July 26, 2002), which is the Report and Recommendation of a Magistrate Judge adopted by the District Court containing essentially the same ruling on the jurisdictional point in question here as those contained in the same Magistrate Judge's earlier Orders in the Gilger and Moore cases referenced in this Court's previous Order in this case.
JURISDICTION
In its prior Order, the Court actually invited briefing on two questions related to the statute's specific language: (1) Whether a Scott-Pontzer uninsured/under-insured (UM/UIM) beneficiary's action against his employer's insurance company is a "direct action" within the meaning of 28 U.S.C. § 1332 (c)(1)? (2) Whether in such a case the claim for UM/UIM benefits is a claim against an "insurer of a policy or contract of liability insurance" within the meaning of that same section? The statutory proviso in § 1332 deeming the insurer "a citizen of the State of which the insured is a citizen" does not apply and diversity jurisdiction remains in this case if the answer to either of those questions is no. Based on the analysis and the authority cited in such cases as Redmon v. Sumitomo Marine Mgmt. (USA) Inc., 179 F. Supp.2d 787 (N.D. Ohio 2001), Tatar v. Liberty Mut. Fire Ins. Co., ___ F. Supp.2d ___, 2002 WL 1821379 (S.D. Ohio April 15, 2002), and Peterson v. TIG Specialty Insurance Company, supra, the Court concludes that the answer to the first of those questions, at least, is "no." Hence, Plaintiffs' action here for under-insured benefits provided them by the liability policy of Marie Bauer's employer with Wausau under the rule of Scott-Pontzer is not a "direct action" within the meaning of 28 U.S.C. § 1332 (c)(1), and the Court therefore is not deprived of diversity jurisdiction.
This jurisdictional ruling thus does not require that the second of the two questions posed be answered. The Court notes, however, that it is not as persuaded as some of the authorities cited above that the claim is also not against the "insurer of a policy or contract of liability insurance." In view of the very specific language of the Ohio statute, which effectively required that the UM/UIM coverage be offered on every "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. . . ." O.R.C. § 3937.18(A) (Eff. 10-12-94 to 10-31-01) (emphasis supplied), this Court would find it very difficult to conclude that the action here was not against the insurer of a liability policy, no matter the particular clause of that policy providing the coverage in question. As Chief District Judge, later Circuit Judge, Kennedy said in McMurry v. Prudential Property and Casualty Ins. Co., 458 F. Supp. 209, 212 (E.D.Mich. 1978) (cited with approval in Ford Motor at 425), "[T]here is no reason to think that Congress intended to give the word `liability' an overly precise definition in this [§ 1332(c)(1)] context."
The Court does agree with the contrary conclusions of some Northern District courts (see e.g., Comella v. St. Paul Mercury Ins. Co., 177 F. Supp.2d at 704 (N.D. Ohio 2001); Stubbins v. Nationwide Agribusiness Ins. Co., 181 F. Supp.2d 805 (N.D. Ohio 2002); Butler v. Zurich American Ins. Co., 184 F. Supp.2d 695 (N.D. Ohio 2002)) that the language and reasoning of the Ford Motor opinion do appear broad enough to support the conclusion that a Scott-Pontzer action like this one is also a "direct action" within the meaning of § 1332. However, as pointed out in Redmond, Tatar, and Peterson, the posture of a Scott-Pontzer plaintiff is significantly different from that of the Michigan no-fault plaintiff in Ford Motor. "The no-fault insurer . . . stands in the place of the tortfeasor in a manner strikingly similar to that originally envisioned by Congress in addressing the direct action problem [in § 1332(c)(1)]." Redmond 179 F. Supp.2d at 791. "Scott-Pontzer cases are decidedly different. Plaintiff sues his own employer's insurer. The tortfeasor's insurer is, by this time, out of the picture." Peterson, 2002 WL 1756050 at *6. The Court concludes, therefore, that Ford Motor cannot be taken as a direct holding on application of § 1332(c)(1) to Scott-Pontzer cases. In the absence of such a binding precedent, this Court would be, and is, most reluctant to take a position different from that already taken by other branches of this court in published rulings. The proper application of § 1332(c)(1)'s proviso to Scott-Pontzer cases may not be entirely without doubt, but until the Sixth Circuit speaks further on the question, the proviso's application ought not to depend on which branch the district court draws the case.
SUMMARY JUDGMENT
Strictly speaking, the case is before the Court both on Plaintiffs' motion for partial summary judgment declaring that Defendant Wausau is liable to them pursuant to the UIM portion of coverage provided by each of the two designated insurance policies issued to Plaintiff Marie Bauer's employer, the Licking Valley Local School District, and also on Wausau's cross motion for summary judgment declaring that there is no such liability under either policy. Rule 56 of the Federal Rules of Civil Procedure provides for such motions and further provides that:
The judgment would necessarily be "partial" at this point, because even if the motion were granted as to both policies, Plaintiffs' claim for compensatory damages in an amount to be determined would still remain. Comp., Doc. 1,
The Complaint alleges (and Wausau's Answer admits) that Plaintiff's have "settled with, and [in Marie Bauer's case] exhausted the limits of, the automobile liability policy" of the other driver in the accident in which they were injured. Comp., Doc. 1, ¶¶ 14, 15; Ans., Doc. 4, ¶¶ 5, 6; see Stip., Doc. 21, ¶ 6.
The judgment sought shall be rendered forthwith if the pleadings, depositions, answers to interrogatories and admissions on file, together with the affidavits, if any, show that there is no genuine issue as to any material fact and that the moving party is entitled to judgment as a matter of law.
In this case, the Court's rulings on both motions turn entirely on determination of the UIM coverage provided under two specific policies of insurance, both of which are before the Court under circumstances that are not in dispute, by virtue of admissions through the pleadings and joint stipulation of facts by the parties (Doc. 21). "Under Ohio law, the construction of an insurance contract is a matter of law for the court." United National Ins. Co. v. SST Fitness Corp., 182 F.3d 447, 449 (6th Cir. 1999). The parties both argue, and the Court agrees, that the undisputed facts are sufficient to decide the purely legal questions presented, that there is therefore no genuine issue as to any material fact, and that the Court is thus in a position to determine which of the parties is entitled to judgment on the questions of insurance coverage in this case.
In this diversity case, the Court applies the substantive law of the State of Ohio as interpreted by its highest court. See Northland Insurance Co. v. Guardsman Prods., Inc., 141 F.3d 612, 617 (6th Cir. 1998); Imperial Hotels Corp. v. Dore, 257 F.3d 615, 620 (6th Cir. 2001). At the time of the auto accident in which the Bauers were injured, Ohio Revised Code Section 3937.18(A)(1) and (A)(2) required that every motor vehicle liability insurance policy include provision for both uninsured and under-insured motorist coverages. Section 3937.18(C) further provided that "The named insured may only reject or accept both such coverages." In Scott-Pontzer v. Liberty Mut. Fire Ins. Co., 85 Ohio St.3d 660 (1999), the Ohio Supreme Court interpreted such coverage purchased by a corporation to cover losses incurred by employees of the corporation, even though acting outside the scope of employment at the time, unless there were also an express scope of employment limitation in the policy. Thereafter, in Ezawa v. Yasuda Fire and Marine Ins. Co. of Am., 86 Ohio St.3d 557 (1999), the court extended the scope of similar corporate "UIM coverage to an employee's minor son who was injured by a non-employee while riding in a non-covered vehicle and whose injuries had nothing to do with the corporation's business." Id. at 558-59 (Lundberg Stratton, J., dissenting).
At the time of the accident in this case, Plaintiffs were in a vehicle owned by Marie Bauer and driven by Donald Bauer. Stip., Doc. 21, ¶ 4. At the time of the accident, Marie Bauer was employed by the Licking Valley Local School district, but she was not then acting within the scope of her employment, and her vehicle was not hired by, or under the control of, her employer. Id, ¶¶ 1, 7, 9. At the time of the accident, Licking Valley School district was insured under two policies of insurance issued by defendant Wausau: a business auto policy, No. 0839-02-005546, which contained under-insured motorist coverage; and a educational liability policy, No. 0839-00-005546, which did not contain under-insured motorist coverage. Id, ¶¶ 10, 11, 12. The Bauers claim the benefit of coverage under the express UIM coverage of the auto policy as interpreted in Scott-Pontzer and Ezawa; and under UIM coverage required in the educational policy by the Ohio Supreme Court's opinion in Selander v. Erie Insurance Group, 85 Ohio St.3d 541 (1999).
"As a result of today's opinion, any commercial liability policy that also provides limited liability coverage for vehicles under certain circumstances will provide an extra source of UM/UIM coverage, regardless of any applicable policy exclusions." Selander at 548 (Lundberg Stratton, J., dissenting).
In support of its motion for summary judgment, Defendant Wausau first argues that the Bauers seek the benefit of coverage "that does not, and cannot exist," under Wausau's polices in question, because they were purchased by a board of education, which under Ohio law has only that authority granted by statute, "and no statute permits boards of education to purchase uninsured/underinsured motorist coverage for employees acting outside the scope of employment, or for family members of employees." Doc. 20, p. 3. As Wausau correctly notes, this Court has already considered, and rejected, that argument in Morganstern v. Nationwide Ins. Co., No. C200-1284, 2001 WL 1681114 (S.D. Ohio, Sept. 18, 2001) (presently pending on appeal, 6th Cir. No. 01-4139), but Wausau asks reconsideration of that position in light of the later Ohio lower court decision in Woolrich v. Federral Ins. Co., Green Cty. C.P. Case No. 2000-CV-0220, unreported (Dec. 7, 2001). Ibid.
In Morganstern and relying in part on the opinion from another branch of this court in Wausau Bus. Ins. Co. v. Childchester, No. C2-00-297, 2001 WL 506520 (S.D. Ohio, May 11, 2001), this Court concluded: "There is no doubt that [the school board] was authorized to purchase uninsured motorist coverage under OR. C. § 3313.201, and that the policy it purchased has the identical language interpreted by the Scott-Pontzer doctrine." Morganstern, 2001 WL 1681114, at *3 (footnote omitted). The Court therefore concluded that the full scope of Scott-Pontzer's doctrine applied as much to auto insurance policies purchased by school boards as it did to those purchased by corporations. Id. at *4
At the time Morganstern was decided, there was no relevant Sixth Circuit authority on the critical question again presented here. As Wausau's recent submission of supplemental authority (Doc. 34) points out, that is no longer the case. In Nationwide Agribusiness Ins. Co. v. Roshong, No. 01-4009, unpublished, 2002 WL 1478572 (6th Cir. July 9, 2002), our circuit has now filed a majority opinion containing the following analysis of Ohio law respecting the authority of school boards in an essentially indistinguishable Scott-Pontzer/school board auto insurance case:
. . . Section 3313.201(A) provides in pertinent part as follows:
The board of education of each school district shall procure a policy or policies of insurance insuring . . . employees . . . of the school district against liability on account of damage or injury to persons or property, . . . including liability on account of death or accident by wrongful act, occasioned by the operation of a motor vehicle . . . owned or operated by the school district. Each board of education may supplement the policy or policies of insurance with . . . uninsured motorist insurance. . . .
. . . First, the statute authorizes the purchase of only UM coverage, which is dis-tinct from UIM coverage. Ohio Rev. Code § 3937.18 (separately defining UM and UIM coverage). No Ohio statute permits a board of education to obtain UIM coverage. The [school districts involved], therefore, could not lawfully provide UIM coverage to [either of their plaintiff employees] under any circumstances, much less provide such coverage when the employees were acting beyond the scope of their employment.
Second. only if read in isolation does the sentence relied on by [the plaintiff employees] give a board of education unlimited discretion to obtain UM coverage. We believe that, read as a whole, the most reasonable interpretation of the statute set forth above allows boards of education to purchase UM coverage only as additional insurance protection for employees while driving "a motor vehicle owned or operated by the school district. Ohio Rev. Code § 3313.201(A).
* * * * * * * * *
Based on all of the above, we do not believe that the Ohio Supreme Court would apply its holding in Scott-Pontzer to the present case, because to do so would be contrary to the unbroken line of Ohio cases holding that actions taken by school boards in excess of their authority are void. In our view, the court would instead construe the disputed provision as providing UM coverage to employees while they drive a vehicle owned or operated by the school district, an interpretation that would not invalidate the entire provision.Roshong, 2002 WL 1478572 at *5-6 (abridgment of the statute by the court).
On the question of state law interpretation presented in this case, the above, unpublished majority opinion of a panel may not be binding authority for further cases in the Sixth Circuit (See Salamalekis v. Comm. of Social Security, 221 F.3d 828, 833 (6th Cir. 2000); In re Van Dresser Corp. 128 F.3d 945, 948 (6th Cir, 1997); 6th Cir.R. 206(c)); nevertheless, its holding must surely be considered persuasive by this Court in the absence of published circuit authority otherwise or unmistakable contrary authority from the Supreme Court of Ohio. At this time, it appears that neither of those exists. It is therefore the ruling of this Court, based on the above-cited opinion in Roshong, that under Ohio law, neither of the Wausau insurance policies in question here provide UIM insurance coverage to either of the Plaintiffs in this case. Accordingly, Defendant Wausau is entitled to summary judgment declaring that it is not liable on either of Plaintiffs' claims in this case, and Plaintiffs' cross motion for partial summary judgment must be denied.
Or, at the very least, other unpublished and contrary circuit authority.
Consistent with the foregoing, Defendant Wausau's motion for summary judgment on its counterclaim for a declaration that Wausau is not liable to Plaintiffs upon their claims in this case under either of Wausau's policies of insurance (Nos. 0839-02-005546 and 0839-00-005546) with the Licking County School District (Doc.20) is GRANTED, and Plaintiff's motion for partial summary judgment (Doc. 18) is DENIED.
Whereupon, the Clerk shall enter JUDGMENT for Defendant Wausau Business Insurance Companies terminating this case.
IT IS SO ORDERED.