Opinion
No. CV93-03-0412.
Decided December 21, 1994.
Bressler, Shanks Gelding Co., L.P.A., and H.J. Bressler, for plaintiffs.
Freund, Freeze Arnold and Steven V. Freeze, for appellees.
Plaintiff Mary Beth Beckman sustained injuries as a result of a collision between her vehicle and a vehicle operated by Arthur L. Riddle on October 28, 1992 in Hamilton, Ohio. Arthur L. Riddle had liability coverage with his insurance carrier in the amount of $25,000 per person, $50,000 per accident. Plaintiffs Jeffrey L. and Mary Beth Beckman ("the Beckmans") were at the time of the accident insured by the defendant, Prudential Insurance Company ("Prudential"). The policy covered four vehicles including the Astro van which Mary Beth Beckman was operating at the time of the accident and which was titled in her name. The insurance policy designated bodily injury liability limits of $100,000 per person, $300,000 per accident and uninsured motorist coverage for bodily injury of $15,000 each person and $30,000 each accident.
Part IV of the policy is entitled "Uninsured Motorist Coverage"; however, in the body of the document the policy describes coverage for both uninsured and underinsured motorist coverage. R.C. 3937.18(H) permits the inclusion of underinsured motorist coverage in any uninsured motorist coverage, provided it complies with this section. In this opinion, the court will specify to which coverage it is referring.
Plaintiffs seek a declaration of rights between the parties to the insurance contract. Specifically, plaintiffs contend that Prudential should be liable for underinsured motorist coverage up to the per-person limit of $100,000 for the bodily injuries allegedly suffered by Mary Beth Beckman and that the same per-person limit should be applied to Jeffrey Beckman's claim for loss of consortium. Plaintiffs alternatively seek damages from Prudential due to the negligence of its agent, David Henry, in recommending that the Beckmans elect uninsured/underinsured motorist coverage in amounts less than the liability coverage as required by Ohio law.
Prudential seeks a declaration that it is required to pay its insured under the underinsured motorist coverage only if the amount of insurance available from the tortfeasor (Riddle) is less than the amount of underinsured motorist coverage set forth in the declarations page of the Beckmans' policy. In this case, Riddle's policy calls for liability coverage of $25,000/$50,000 to injured third parties and the Beckmans' Prudential policy provides for uninsured/underinsured motorist coverage of $15,000/$30,000. Prudential claims that Jeffrey Beckman, the "named insured" on the declarations sheet of the policy, signed a document in which he elected to purchase uninsured/underinsured motorists bodily injury limits in the amount of $15,000/$30,000, which was less than his liability limits, and its liability under the contract is limited to the terms of the contract. In this case, Prudential contends it is not liable for any payment, since the amount available from the tortfeasor exceeds the limits of the underinsured motorist coverage. Additionally, Prudential denies any negligence on the part of its agent and asserts contributory negligence on the part of the Beckmans should any such negligence be imputed to it.
PART I DECLARATION OF RIGHTS UNDER THE CONTRACT
R.C. 3937.18 requires that insurance companies issuing auto policies in the state of Ohio provide uninsured and underinsured motorist coverage available to their insureds in the same amount as the liability coverage in the policy, unless it is rejected by the named insured or the named insured elects to take a lesser sum. Plaintiffs claim that Mary Beth Beckman is a "named insured" under the terms of the contract and, as such, her rejection or acceptance of a lesser amount of uninsured/underinsured coverage is necessary in order to comply with the "rejection procedure" outlined in R.C. 3937.18. Mary Beth did not sign the rejection/election form.
There is no question that under R.C. 3937.18, a "named insured" can reject underinsured motorist coverage or accept an amount which is less than the liability coverage. However, the statute differentiates between an "insured" and a "named insured." In referring to the persons protected under an insurance policy, the statute, R.C. 3937.18(A)(1) and (2), speaks of "insured(s)." However, the statute, in paragraph (C), states: "The named insured may only reject or accept both coverages offered under division (A) of this section." The named insured on the declaration page of this policy is Jeffrey Beckman. This same Jeffrey Beckman admitted that he signed the document electing to take uninsured/underinsured motorist coverage limits that were less than the liability limits. The court finds that although Mary Beth Beckman is an insured under the statute, she is not a "named insured" for purposes of R.C. 3937.18(C).
The court finds that Prudential complied with the terms of the statute. Under the terms of the policy of insurance, Mary Beth Beckman is limited to underinsured motorist coverage in the amount of $15,000 each person and $30,000 each accident. Since only the named insured can reject or accept lesser amounts of uninsured motorist coverage, it is irrelevant whether Jeffrey had his wife's authorization to reject on her behalf. Unless she was a "named insured," she had no right under the statute to waive the limits of uninsured motorist coverage. Since she had no such right, she cannot claim that her husband waived her right without her authorization.
The plaintiff, Jeffrey Beckman, contends that even though he signed the waiver of limits of uninsured motorist coverage, he did not understand the ramifications of the waiver. He stated that he signed the document because the agent told him to sign it.
There was no evidence presented that the plaintiff was so impaired that he would have been otherwise unable to comprehend what he was signing if he had read the document. Plaintiff states that he relied on the statements of the agent and was not fully informed as to the consequences of executing the waiver. The fact that he did not read the waiver and election document is of little or no consequence as to its validity as a waiver of limits. The election document is clear and unambiguous and is effective as a waiver of underinsured motorist limits. See Johnson v. Great Am. Ins. Co. (1988), 44 Ohio App.3d 71, 541 N.E.2d 100. Whether Prudential's agent was negligent in the performance of a duty of full disclosure and explanation to the insured is another matter which will be discussed in Part II of this decision.
Having decided that the election of lower underinsured limits is effective as a part of the insurance contract between Prudential and the Beckmans, the court must next decide the issue of whether the Savoie case is controlling. Under Savoie, plaintiffs would be entitled to underinsurance coverage if their damages (as opposed to the limits of the underinsured motorist coverage) exceeded the tortfeasor's liability limits. This court finds the Supreme Court of Ohio's decision in Savoie to be controlling. The defendants attempt to distinguish this case by contending that Savoie dealt only with a wrongful death. However, the court later cleared up this issue when it decided a case involving only bodily injury and applied the ruling of Savoie in reversing and remanding. Clark v. Nationwide Ins. Co. (1994), 68 Ohio St.3d 365, 627 N.E.2d 529.
Savoie v. Grange Mut. Ins. Co. (1993), 67 Ohio St.3d 500, 620 N.E.2d 809.
Defendant further contends that the Supreme Court's interpretation of R.C. 3937.18 in Savoie was superseded by Am.Sub.S.B. No. 20, which became effective October 20, 1994.
Am.Sub.S.B. No. 20 repealed the existing R.C. 3937.18 and replaced it with amended R.C. 3937.18, which has the effect of providing a setoff of a tortfeasor's liability coverage from the limits of the underinsured coverage. The question presented is whether the provisions of the Senate Bill can be retroactively applied to underinsured coverage in insurance policies which were in effect at the time of the Savoie decision and prior to the effective date of Am.Sub.S.B. No. 20. The court finds that they cannot be applied retroactively. There is no language of retroactivity in the amended bill, and statutes are presumed to be prospective without such language. The amended bill, superseding Savoie, became effective well after this case was filed. It is only logical that the statute that was in effect at the time of the filing of the cause of action be given full force and effect in the absence of language of retroactivity. The court rejects the defendants' argument that the amended bill was simply the reaffirmation of public policy. In Savoie, the Supreme Court reviewed its prior decisions interpreting R.C. 3937.18 and attempted to clear up this very confused area of the law. It carefully analyzed the statute and interpreted the language in the light of the Ohio Constitution and prior decisions of the court. Under the doctrine of separation of powers, the court was performing its function. Obviously, the General Assembly did not like the interpretation, so the statute was repealed and another was passed which was more to its liking. That is the prerogative of the General Assembly. This is the way our system of checks and balances works. However, because the amended bill was not made retroactive, any case filed prior to the effective date of the amended bill must be decided under the statute and the case law interpreting the statute as it existed at the time of the filing of the case.
Chief Justice Moyer in his dissenting opinion in Savoie, with which Justice Wright concurred, stated that the majority overruled three recent decisions, limited another, and disrespected stare decisis. Justice Wright's dissenting opinion expressed dismay at the "majority's lack of deference to the clear will of the General Assembly and disregard for the doctrine of stare decisis." Savoie, 67 Ohio St.3d at 517, 620 N.E.2d 809. Chief Justice Moyer pointed out in his separate concurring opinion in Clark that the court must follow Savoie, as it is, "[n]evertheless, * * * the law on the issue in the above-styled case." Clark, 68 Ohio St.3d 365, 627 N.E.2d 529. Justice Wright dissented in the Clark case, finding that the holding in Savoie "lacks sound reasoning, reverses ten years of established case law and flouts the will of the General Assembly." Id. While this court agrees with the analysis of Justices Moyer and Wright, it too must follow Savoie.
Since the Savoie case is controlling, the underinsured motorists coverage is "excess" coverage. The per-person limit of underinsured motorist coverage listed on the declaration page is available to the insured, should the insured's damages exceed the tortfeasor's liability limits. In other words, there is no offset of the tortfeasor's liability limits when the insured's damages exceed the limits of the tortfeasor's liability coverage.
Plaintiffs contend that Jeffrey Beckman's derivative claim for loss of consortium is compensable under the underinsured motorist provisions of the policy. Whether such a derivative claim is covered depends on the language of the contract. Dues v. Hodge (1988), 36 Ohio St.3d 46, 521 N.E.2d 789; Erie Ins. Group v. Wolff (1994), 94 Ohio App.3d 216, 640 N.E.2d 583. Part 4 of this contract ("UNINSURED [AND UNDERINSURED] MOTORIST COVERAGE") contains a section entitled "LIMIT OF LIABILITY — BODILY INJURY; EACH PERSON." Under that heading, the following language appears:
"The limit stated under UNINSURED MOTORIST — EACH PERSON on the declarations is the limit of OUR liability for all damages, including damages for care or loss of services, arising out of BODILY INJURY to one person as a result of any one accident."
The limits under Uninsured Motorists Bodily Injury, on the declarations page, are $15,000 each person and $30,000 each accident. The language of the uninsured/underinsured part of the insurance policy clearly includes loss of consortium in the per-person limit as it appears on the declarations page. Therefore, under this insurance contract, there is no separate limit for the derivative claim of Jeffrey Beckman. His claim is included in the claim of Mary Beth Beckman.
PART II NEGLIGENCE
Plaintiffs, in count two of the complaint, allege that the defendants were negligent in performing a duty to the plaintiffs and that their negligence was a proximate cause of their damages. Plaintiffs claim that David Henry, while acting within the scope of his employment as an insurance agent for Prudential, breached a duty of care to the Beckmans when he recommended that they reduce the uninsured motorist limits on a new Prudential automobile insurance policy from the statutorily mandated liability limit in order to reduce the premium.
David Henry was employed by Prudential as an exclusive agent handling only Prudential insurance products. The Beckman family was an established client with the defendant, having purchased tenants' insurance, homeowners', life insurance, and a prior automobile insurance policy from Henry. Henry had in fact been Mary Beth Beckman's parents' insurance agent for many years before her marriage to Jeffrey. The evidence was clear that there was an established professional relationship between Henry and the Beckmans regarding their insurance needs. All the party witnesses testified that the Beckmans relied upon the advice of Henry in insurance matters and it was clear that the Beckmans felt justified in their reliance.
The Beckmans had originally placed their automobile insurance with Nationwide. In 1984, they purchased a Prudential policy through Henry with $100,000/300,000 limits for liability and uninsured/underinsured coverage. In 1987, the Beckmans, for economic reasons, switched to State Farm with the same coverages. In 1989, when Henry was selling the Beckmans on a change to their life insurance policy, he suggested that Jeffrey give him an opportunity to sell him on using Prudential for his auto coverage, since there was a discount for holders of multiple policies. In 1990, when his State Farm coverage was about to expire, Jeffrey brought his policy to Henry to review. Henry advised that he could save the Beckmans approximately $90 on their auto insurance premium by going with Prudential. Approximately $28 of this reduction was attributable to the reduction in premium for uninsured/underinsured motorist coverage. The Beckmans testified that they thought they were getting the same coverage they had had with State Farm. Jeffrey Beckman testified that he signed the rejection/election form for uninsured motorist waiver because Henry put the forms in front of him to sign and he relied on Henry to have him sign the proper forms. Henry testified that he did fill out the waiver/election form and placed a "X" where plaintiff was to sign. Henry indicated that he told the Beckmans that this would reduce their uninsured motorist coverage. This, however, is denied by the insureds. Henry testified as to the manner in which he explained uninsured motorist coverage and medical payments coverage to the insureds. In this court's opinion, the explanation was totally inadequate if not inaccurate. Henry testified that he did not explain to the Beckmans that he was reducing their underinsured motorist coverage. In fact, Henry did not know that Prudential sold underinsured motorist protection in Ohio, nor did he realize that it was included in the uninsured motorist coverage. In short, this court concludes from the evidence that Henry did not know the insurance product that he was manipulating to reduce the Beckmans' premium to make Prudential's price more competitive.
Both the State Farm and the prior Prudential policies had underinsured motorist coverage in the same amounts as liability coverage.
Plaintiffs offered expert testimony from Don Barton, a principal with an auto insurance agency. Barton testified that there are standards of care in the insurance industry and further testified that it is a deviation from the standard of care for an agent in the business of selling automobile casualty insurance not to be fully knowledgeable of underinsured motorist coverage and to be unable to explain it to the potential insureds. He further testified that it is a deviation from the standard of care to recommend a reduction in underinsured motorist coverage without a full and complete explanation to the insureds of the coverage and the risk associated with either reducing or rejecting the coverage.
This court finds from the evidence presented that an agent selling automobile insurance has a duty to explain underinsured motorist coverage to the insured and to explain the consequences of not having a sufficient amount of such coverage. The court finds, from the evidence presented, that David Henry, acting within the scope of his employment with the Prudential Insurance Company, recommended that the Beckmans reduce the amount of uninsured motorist coverage below the coverage mandated by R.C. 3937.18 without giving a full and complete explanation of the consequences of such reduction and, in doing so, violated a duty to his insureds. The court finds that the defendants Prudential Insurance Company and David Henry were negligent toward Jeffrey Beckman and Mary Beth Beckman.
As stated elsewhere in this decision, Henry did not know that underinsured motorist coverage was included in Part 4 of the Prudential policy under uninsured motorist coverage.
The court further finds, from the evidence, that had it not been for the negligence of the defendants, the plaintiffs would have purchased uninsured/underinsured coverage in the same amount as their liability coverage, viz., $100,000 each person and $300,000 each accident.
The defendants have alleged that the plaintiffs were negligent and that their negligence proximately caused all or part of their damage. The court agrees. Both plaintiffs were present when defendant David Henry made his sales presentation. Had either or both of the plaintiffs read the election or rejection form presented to Jeffrey for signature, they could have been alerted to the fact that they were giving up some substantial coverage. However, neither chose to read the document and relied upon the representations of Henry to their detriment. The court, however, finds that the negligence of either or both of the Beckmans was not a proximate cause of their damage. From the inadequate explanation given by defendant Henry in court and the fact that the agent did not even know that underinsured motorist coverage was offered by his principal, the court finds, from the evidence, that the Beckmans would have followed the agent's recommendation regardless. Since the court has found that the negligence of the plaintiffs was not a proximate cause of their damage, the court will not compare the fault of the parties, and attributes one hundred percent of the negligence to the defendants.
Henry indicated this is the same explanation he gives all his customers, including the Beckmans.
The plaintiffs' damages in this case cannot be calculated until a judgment in excess of $25,000 is rendered in favor of the plaintiffs and against the tortfeasor Arthur L. Riddle in case No. CV94-02-0199, pending in the Butler County Common Pleas Court. Damages, if any, will be measured as though the plaintiffs had purchased uninsured/underinsured motorist coverage in the amount of their limits of liability coverage with a deduction for the additional premium that would have been charged for the additional coverage. With the exception of the amount of underinsured/underinsured motorist to be applied, the declaration of rights under the insurance contract between the parties decided herein shall be given full force and effect.
The matter of damages will held in abeyance pending further order of the court.
So ordered.