Opinion
No. 90-1660
Submitted October 8, 1991 —
Decided December 18, 1991.
APPEAL from the Court of Appeals for Franklin County, No. 89AP-288.
On January 21, 1986, appellant, Naomi R. Easley, was involved in an automobile accident with Ruth Jarvis. At the time, Easley was operating an automobile owned by, and with the permission of, Elmira Jackson.
Jackson had an automobile insurance policy with appellee, Hartford Casualty Insurance Company ("Hartford"), that provided underinsured motorist coverage of up to $100,000. Ruth Jarvis had an automobile insurance policy with the Motorists Insurance Companies ("Motorists").
Following the accident, Easley's attorney presented a claim to Motorists for injuries sustained by Easley. Motorists responded by letter dated May 19, 1987, and informed Easley that the policy provided liability coverage of up to $50,000.
By letter dated June 23, 1987, Easley's attorney informed Jackson of a possible settlement of the claim with Jarvis's insurance company. Counsel for Easley further mentioned that Jarvis's insurer might not have sufficient funds to fully compensate Easley and that Jackson should determine whether she carried underinsurance coverage.
Jackson informed her insurance agent of the June 23, 1987 letter. Jackson was told to bring the letter to the agency. Jackson stated she delivered the letter to her agent within a week to ten days after receiving it and, upon delivery, was told that "he would take care of it."
Thereafter, during a telephone conversation, counsel for Easley questioned Jackson as to the identity of her insurance agent. Jackson refused to divulge the information. Following this conversation, Jackson telephoned her agent and, once again, was assured that "they would take care of it."
On July 9, 1987, Motorists offered Easley the limits of the policy for a "full and final release" of all claims. By letter dated July 13, 1987, Motorists reaffirmed this offer. Motorists acknowledged that Easley might not be in a position to accept the offer given the possibility of an underinsurance claim.
Easley's counsel then sent Jackson a second letter. In this letter, dated July 24, 1987, counsel expressed his concern that he had not heard from Jackson's insurance carrier. Counsel further mentioned that he had no choice but to assume that Jackson's carrier was not interested in asserting any claims. Counsel then advised Jackson that this letter was "notice" of an underinsured motorist claim, and that Jackson should provide a copy of the letter to her insurance agent. Jackson stated that she gave this letter to her agent.
On August 4, 1987, Easley and Motorists orally agreed to settle the claim for the policy limits in exchange for a release. Easley signed the release on August 20, 1987.
Subsequently, counsel for Easley received a letter dated August 21, 1987 from Hartford. Hartford informed Easley of its policy limits and also requested that it be given all bills and reports pertaining to the accident.
On May 18, 1988, Hartford filed a complaint for declaratory judgment in the Court of Common Pleas of Franklin County naming Easley as defendant. Hartford sought a declaration that Easley failed to comply with or satisfy the contractual requirements for coverage under the policy and, as a consequence, Easley was not entitled to underinsurance motorist coverage.
Hartford filed a motion for summary judgment. Citing Bogan v. Progressive Cas. Ins. Co. (1988), 36 Ohio St.3d 22, 521 N.E.2d 447, the trial court granted Hartford's motion and held that Hartford was not obligated to provide Easley with underinsurance benefits. In reaching this conclusion, the trial court determined that Hartford was not given an opportunity to reject or acquiesce to the terms of the settlement between Easley and Motorists and, therefore, Hartford could not have unreasonably withheld consent to settle.
Easley appealed. The court of appeals affirmed the trial court's judgment.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Earl, Warburton, Adams Davis and Thomas L. Davis, for appellee.
Lancione Law Offices and Robert M. Lancione, for appellant.
In finding that the trial court properly granted Hartford's motion for summary judgment, the court of appeals held that Hartford did not receive notice from Easley which would have apprised Hartford of a contemplated settlement with Motorists, and that Easley prejudiced Hartford's subrogation rights by signing the release prior to Hartford's acknowledgment of the contemplated settlement. Therefore, the court of appeals concluded that Easley was not entitled to underinsurance benefits from Hartford. In reaching its decision, the court of appeals relied heavily on McDonald v. Republic-Franklin Ins. Co. (1989), 45 Ohio St.3d 27, 543 N.E.2d 456, and, in particular, paragraph two of the syllabus, wherein we held that:
"When an insured has given his underinsurance carrier notice of a tentative settlement prior to release, and the insurer has had a reasonable opportunity to protect its subrogation rights by paying the underinsured motorist benefits before the release but does not do so, the release will not preclude recovery of underinsurance benefits * * *." (Emphasis added.)
In McDonald, Kendra McDonald was injured in an accident while riding as a passenger in an automobile. Kendra was covered under her family's automobile insurance policy which provided underinsurance coverage of up to $300,000. The driver of the automobile was insured under a policy which contained a liability limit of $50,000. The driver's insurer offered Kendra the policy's limit conditioned upon a general release of all claims against the driver. Shortly thereafter, Kendra's stepfather notified Kendra's underinsurance carrier that the driver's policy limit would be insufficient to cover Kendra's expenses.
There exists a notable distinction between McDonald, supra, and the instant case. McDonald concerned an injured person who sought benefits from her underinsurance carrier. Receipt of such benefits was dependent on, in part, the injured person, Kendra, providing her underinsurance carrier with notification of the contemplated settlement with the tortfeasor's insurer prior to giving the tortfeasor a release. In the present case, we are confronted with an entirely different scenario. Here, Easley, as the borrower of Jackson's automobile, was not able to simply provide her underinsurance carrier with notification of a possible settlement with Motorists. The policy in question was not issued by Hartford to Easley but, rather, the policy was issued by Hartford to Jackson. Easley had not contracted with Hartford to provide her with underinsurance benefits. Any entitlement Easley may have had to available benefits was by virtue of Easley borrowing Jackson's car and the issuance of the contract of insurance by Hartford to Jackson. To further complicate matters, it appears from the record that Jackson, for whatever reason or reasons, impeded Easley's efforts to ascertain whether underinsurance benefits existed. Jackson was reluctant to divulge the name of her insurance agent and failed to provide Easley with information regarding available underinsurance coverage, although Jackson did, apparently, notify her insurance agent on at least three occasions of Easley's underinsurance claim. Indeed, Easley was confronted with a difficult, if not impossible, task of determining the existence of any underinsurance benefits that Easley may have been entitled to receive.
An action for discovery under R.C. 2317.48 may also not have provided Easley with any relief since Easley's "adverse party" was Jarvis — not Jackson (the insured). In fact, on April 5, 1988, Judge Reda dismissed Easley's amended complaint against Jackson. The reason given by the trial court for the dismissal was that Easley failed to state a "legally recognized cause of action against Defendant Elmira Jackson."
Notification of a contemplated settlement offer to an underinsurance carrier may, on the surface, appear to be a simple task. However, as noted, supra, notification to the underinsurance carrier can become a troublesome dilemma if the carrier cannot readily be discovered. Hence, it would not be correct to find that notification to the underinsurance carrier in McDonald, which involved an injured person providing notification of a settlement offer to her insurer, can be equated with notification in the case now before us. Thus, the court of appeals' reliance on McDonald was misplaced.
In the case at bar, a genuine issue of material fact exists as to whether Hartford received notice of Easley's underinsurance claim before the release of Jarvis was executed on August 20, 1987. Jackson's deposition, taken in connection with Easley's suit against Jackson in the common pleas court, and being part of the record before us, does reflect that Jackson gave both the June 23, 1987 and the July 24, 1987 letters to her insurance agent and that she reported to her agent the telephone call from Easley's attorney which occurred during the period between the two letters. Nevertheless, the efficacy of this testimony should be determined by the fact-finder at a trial rather than upon a motion for summary judgment.
Likewise, there is a material fact as to whether the notice received by Hartford (if it is found that notice was given and received) gave Hartford a "reasonable time" to respond to Easley. This was the exact issue upon which we remanded McDonald, supra, in order that a determination of "reasonable time" be made.
We held in paragraph three of the syllabus in McDonald that:
"The insurer's failure to respond, within a reasonable time, to notification by its insured of a settlement offer will operate to void a subrogration clause in the insurer's underinsured motorist provision."
Accordingly, we find that the summary judgment granted Hartford by the trial court and affirmed by the court of appeals was in error. We reverse the judgment of the court of appeals and remand this cause to the trial court for further proceedings consistent with this opinion.
Judgment reversed and cause remanded.
MOYER, C.J., SWEENEY, WRIGHT, H. BROWN and RESNICK, JJ., concur.
HOLMES, J., dissents.