Insurer must cover driver who had accident in friend's car, Ohio court rules

The Ohio Supreme Court weighed in on an ongoing dispute between insurance companies, determining who was responsible for providing coverage after a man crashed his friend’s car.

Ashton Smith, who was insured by Acuity Insurance through his father, borrowed a friend’s car and got into an accident. Smith’s friend was insured by Progressive Specialty Insurance Company, creating the question of which insurer was on the hook for the accident.

The court determined in an Oct. 19 opinion that Acuity was responsible for coverage, as the company insured Smith via his father’s policy.

“Under the plain language of the Progressive policy, Smith was not an ‘insured person’ when he was driving his friend’s car. But he was covered under the plain language of the Acuity policy,” said the court. “Thus, we conclude that Acuity must provide coverage for the accident in question.”

Justice Pat DeWine authored the opinion, with Chief Justice Sharon L. Kennedy and Justices Pat Fischer, Melody J. Stewart, and Joseph T. Deters concurring, while Justice Jennifer Brunner dissented.

Progressive argued that as Smith was insured under his father’s Acuity policy, he wasn’t an “insured person” under Progressive’s policy and it wasn’t responsible for coverage.

The relevant provision in Progressive’s policy was under the definition of “insured person,” said the court, noting the definition excluded “any person who drives a car covered by the policy but who is insured by another liability policy.”

The court also highlighted that Progressive’s policy contained an “excess insurance” provision, which held that insurance for vehicles “other than a covered auto, will be excess over any other collectible insurance,” while Acuity’s policy defined “insured person” as including “[y]ou or a relative while using a car other than your insured car with a reasonable belief of having permission to do so.”

In concluding Acuity was responsible, the court reversed the Eleventh District Court of Appeals ruling, which had reversed the trial court’s holding that Acuity was responsible for providing liability coverage.

The 11th District held that the definition of “insured person” in Progressive’s policy was an “escape clause,” and was unenforceable under the court’s 1970 ruling in State Farm Mu. Auto. Ins. Co. v. Home Indemn. Ins. Co. It reasoned that upon the escape clause being negated, competing excess-insurance clauses remained, and held “that in such a situation, both insurers were responsible for providing coverage, with each insurer liable in proportion to the amount of insurance provided by its own policy.”

Progressive appealed this decision, asserting that the “insurers are permitted to contractually define who is covered under a liability insurance policy,” and “that when a permissive driver is not an insured under the ‘owner’s liability coverage because the permissive user is covered by his or her own liability coverage, then the owner’s liability coverage is not triggered for he permissive user.’”

In its review the court started with the plain language of the two policies, holding that Progressive prevailed under a plain-language reading and that State Farm was distinguishable.

The majority held that under the terms of Progressive’s policy, Smith wasn’t an “insured person,” as he was insured under his father’s Acuity policy, and Progressive’s only covers permissive users of a covered automobile only when a user “is not insured for liability coverage by any other insurance policy.”

Further, it held that Smith qualified under the Acuity policy, as it defines an “insured  person” as including “a relative of the policyholder, such as Smith, who is ‘using a car***other than [his] insured car’ with ‘permission to do so,’” with the “excess insurance” provision of the policy applying “[i]f here is other applicable auto liability insurance.”

This provision applied as there was no other applicable liability insurance, and therefore, the plain language of the contracts provided that Acuity was responsible for providing liability coverage to Smith, said the court.

Acuity argued that the case was controlled by the court’s decision in State Farm, which the appeals court had agreed with. The majority, however, found that the State Farm ruling was distinguishable.

“The policy language in our case is different from the language in State Farm. And unlike in State Farm, giving effect to the plain terms of the policy coverage does not create the anomalous circumstance in which an insured who could have obtained coverage under either policy (but for the other) has coverage available under neither,” DeWine wrote.

It determined that “applying the straightforward language of the policies at issue” lead to a “straight-forward result,” that Smith’s own insurance company, Acuity, was responsible for covering the loss, and the decision in State Farm didn’t control the outcome of the present dispute.

Further, the court held that it could apply a plain reading of the insurance policies at issue.

“Where two insurance policies exist, and where under the plain and natural reading of both policies, one policy provides coverage and the other does not, we must honor the parties’ agreement,” the majority wrote, holding that Acuity was responsible for providing coverage.

Justice Jennifer Brunner dissented from the majority, finding it shouldn’t have accepted the appeal and that it had done so “in the spirit of pure error correction.”

Brunner also argued that the majority’s “plain-language analysis” didn’t work, as “a closer reading of Acuity’s policy does not plainly establish that Smith is, in fact, insured under it,” and therefore, both insurers’ policies “appear to provide only ‘excess coverage for the losses caused by Smith’s accident.”

“This is error correction, void of any novel issue of law. The Eleventh District applied our precedent and made the required, careful analysis of the contract language at issue. Our review is unwarranted and unnecessary,” Brunner wrote. “Worse, error-correction analysis that ignores facts that are necessary for a full legal analysis creates bad law.”

Acuity’s attorney, Kenneth A. Calderone of Hanna, Campbell & Powell, in Akron, was not immediately reached.

Progressive’s attorney, David L. Lester of Collins, Roche, Utley & Garner, in Cleveland, declined to comment.

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