[Cite as Linko v. Indemn. Ins. Co. of N. Am., 90 Ohio St.3d 445, 2000-Ohio-92.]
LINKO, EXR., v. INDEMNITY INSURANCE COMPANY OF NORTH AMERICA.
[Cite as Linko v. Indemn. Ins. Co. of N. Am. (2000), 90 Ohio St.3d 445.]
Insurance — Motor vehicles — Uninsured/underinsured motorist coverage —
What constitutes an express and knowing rejection of
uninsured/underinsured motorist coverage by a corporation on behalf of
related corporations and other insureds.
(No. 99-2293 — Submitted June 7, 2000 — Decided December 27, 2000.)
ON ORDER CERTIFYING A QUESTION OF STATE LAW from the United States
District Court for the Western District of New York, No. 98-CV-129S.
The underlying action for a declaration of rights involves the issue of what
constitutes an express and knowing rejection of uninsured/underinsured motorist
(“UM/UIM”) coverage by a corporation on behalf of related corporations and
other insureds.
On November 13, 1996, G. Michael Linko was killed in a three-fatality
automobile accident that occurred in Chautauqua County, New York. The alleged
tortfeasor, Shawn LaDue, was insured by Nationwide Insurance, which tendered
its policy limit of $100,000 to be divided among the beneficiaries of the three
people killed in the accident. Petitioner, Patricia S. Linko, executor of G. Michael
Linko’s estate, brought the present action seeking a declaration that she is entitled
to underinsured motorist (“UIM”) coverage under a business automobile policy
issued by respondent Indemnity Insurance Company of North America
(“Indemnity”) that included the decedent as an insured.
There is no dispute that Linko was driving a company-owned or leased car
in the course of his employment with Saint-Gobain Industrial Ceramics, Inc.
(“SGIC”) at the time of the accident, or that Linko was an insured under the
Indemnity policy. The general liability coverage under that Indemnity policy is
subject to limits of $3,000,000 per person/per occurrence. Petitioner seeks to
obtain UIM coverage under the Indemnity insurance policy, but Indemnity claims
that UIM coverage had been rejected on behalf of SGIC by a related corporate
entity.
SGIC is part of an extended family of related companies. French
corporation Compagnie de Saint-Gobain (“CSG”) owned a United States holding
company, Saint-Gobain Corporation (“SGC”). SGC owned the Norton Company
(“Norton”). Norton owned Saint-Gobain Advanced Materials Corporation
(“SGAMC”), among others entities, and SGAMC owned the decedent’s
employer, SGIC.
The policy at the heart of this case was issued to SGC, Norton, and certain
subsidiaries, all of which were named insureds. While all of the named insureds
were subsidiaries of SGC, they maintained separate corporate identities and
operations. SGIC was not a named insured, but Indemnity has never disputed that
SGIC and Linko qualified as additional insureds.
The policy was amended by “selection forms” used for the rejection of
UM/UIM coverage under the laws of particular states. The form used for
rejection of UM/UIM coverage under Ohio law lists the named insured simply as
“Norton Company.” The Norton Company is one of several named insureds
listed in the policy, but the Ohio selection form refers to none of the other named
insureds. The form was signed by Verne M. Hahn on behalf of the Norton
Company. Hahn was an employee of SGC.
Petitioner filed an action in the Summit County Court of Common Pleas,
claiming that the rejection form signed by Hahn did not properly reject UM/UIM
coverage for the decedent. The case was removed to the United States District
Court for the Northern District of Ohio on the basis of diversity of jurisdiction.
Venue was then transferred to the United States District Court for the Western
District of New York. On May 18, 1998, petitioner filed a motion for partial
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summary judgment in that court; respondent followed with its own motion for
summary judgment on July 6, 1998. Petitioner then filed an amended motion to
certify questions to this court, which the district court certified on December 21,
1999. This court determined that it would answer questions 1, 2, and 3, which
were set forth as follows:
“1. Whether an insured under an automobile liability policy may
challenge the authority of a signatory to an uninsured/underinsured motorist
coverage rejection form when such signatory’s authority is not disputed by the
named insureds or insurer.
“2. Whether the language of the uninsured/underinsured motorist
coverage rejection forms accompanying the subject automobile liability policy
satisf[ies] the offer requirements of R.C. 3837.18 [sic, 3937.18].
“3. With regard to the scope and validity of the uninsured/underinsured
motorist coverage rejection forms:
“a. Whether each of several separately-incorporated named insureds must
be expressly listed in the rejection form in order to satisfy the requirement that
the waiver be made knowingly, expressly and in writing by each named
insured?
“b. When, on its face, a rejection form was signed by the employee of
only one of several separately-incorporated named insureds listed in the policy,
whether the four corners of the insurance agreement control in determining
whether the waiver was knowingly and expressly made by each of the named
insureds, or does the parties’ intent, established by extrinsic evidence, control?
“c. If extrinsic evidence of the parties’ intent is to be considered in
assessing the scope and validity of a rejection form, whether actual authority for
rejecting un/underinsured motorist coverage on behalf of a named insured under
an automobile liability policy can be established by means other than a signed
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document granting such authority executed prior to the rejection of such
coverage.
“d. Whether a parent corporation has implied authority to waive coverage
on behalf of its separately-incorporated subsidiary corporation when the
subsidiary corporation did not provide written authorization to waive
un/underinsured motor[ist] coverage benefits on its behalf prior to
commencement of the policy period?”
__________________
Becker & Mishkind Co., L.P.A., Michael F. Becker and David A. Kulwicki,
for petitioner.
Elk & Elk Co., L.P.A., and Todd Rosenberg, in support of petitioner for
amicus curiae, Ohio Academy of Trial Lawyers.
__________________
PFEIFER, J. Our responses to the questions of the federal court are as
follows: (1) Yes. An insured under an automobile liability policy may challenge
the authority of a signatory to a UM/UIM coverage rejection form when such
signatory’s authority is not disputed by the named insureds or insurer; (2) No. To
satisfy the offer requirement of R.C. 3937.18, the insurer must inform the insured
of the availability of UM/UIM coverage, set forth the premium for UM/UIM
coverage, include a brief description of the coverage, and expressly state the
UM/UIM coverage limits in its offer; (3)(a) Yes. Separately incorporated named
insureds must each be listed in a rejection form in order to satisfy the offer
requirement of R.C. 3937.18; (3)(b) The four corners of the insurance agreement
control in determining whether waiver was knowingly and expressly made by
each of the named insureds; (3)(c) The question is moot due to our response to
(3)(b); and (3)(d) No. Only with a subsidiary’s written authorization may a parent
corporation reject UM/UIM coverage on the subsidiary’s behalf.
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The federal court’s questions and this court’s complete responses are set
forth below.
Question 1
“Whether an insured under an automobile liability policy may challenge
the authority of a signatory to an uninsured/underinsured motorist coverage
rejection form when such signatory’s authority is not disputed by the named
insureds or insurer.”
Our response is in the affirmative. As was the case with the plaintiff in
Gyori v. Johnston Coca-Cola Bottling Group, Inc. (1996), 76 Ohio St.3d 565, 669
N.E.2d 824, the plaintiff here was not a named insured but seeks a declaration of
whether the employer expressly and knowingly rejected UM/UIM coverage for its
employees. The validity of the employer’s alleged rejection is at the heart of both
cases. The plaintiff in Gyori had standing to bring an action to resolve that issue,
as does the plaintiff in this case.
Question 2
“Whether the language of the uninsured/underinsured motorist coverage
rejection forms accompanying the subject automobile liability policy satisf[ies]
the offer requirements of R.C. 3837.18 [sic, 3937.18].”
We find that the rejection form in this case fails to satisfy the offer
requirements of former R.C. 3937.18(C) as it existed during the policy period.
See 145 Ohio Laws, Part I, 211. The pertinent portion of the Indemnity policy
reads:
“Ohio Revised Code Section 3937.18 requires us to offer you
Uninsured/Underinsured Motorists Insurance coverage in an amount equal to
the policy bodily injury liability limit(s) with respect to any motor vehicle
registered or principally garaged in the State of Ohio, unless you reject such
coverage.
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“Unless you have previously rejected this coverage, your policy has been
issued to include Uninsured/Underinsured Motorists Insurance coverage at
limit(s) equal to the policy bodily injury liability limit(s).”
In Gyori, this court held that “[t]here can be no rejection pursuant to R.C.
3937.18(C) absent a written offer of uninsured motorist coverage from the
insurance provider.” Id., 76 Ohio St.3d 565, 669 N.E.2d 824, paragraph one of
the syllabus. Gyori stands for the proposition that we cannot know whether an
insured has made an express, knowing rejection of UIM coverage unless there
is a written offer and written rejection. It only follows that a valid rejection
requires a meaningful offer, i.e., an offer that is an offer in substance and not
just in name.
The above paragraph in the Indemnity contract that purports to be an
offer states the law, but does not contain the information necessary to make it a
meaningful offer. Since Gyori, Ohio’s appellate courts have developed a useful
body of law regarding what constitutes a valid offer of UM/UIM coverage. We
agree with the following required elements for written offers imposed by Ohio
appellate courts: a brief description of the coverage, the premium for that
coverage, and an express statement of the UM/UIM coverage limits. See
Murray v. Woodard (1997), 120 Ohio App.3d 180, 697 N.E.2d 265
(interpreting the offer requirement of R.C. 3937.181); Gibson v. Westfield Natl.
Ins. Co. (July 14, 1998), Monroe App. No. 788, unreported, 1998 WL 404201;
Weddle v. Hayes (Sept. 5, 1997), Belmont App. No. 96-BA-44, unreported,
1997 WL 567964.
Indemnity’s alleged offer is complete only in its incompleteness. It does
not describe the coverage, does not list the premium costs of UM/UIM
coverage, and does not expressly state the coverage limits. We find that an
offer must include those three elements. The Indemnity rejection form, lacking
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in that required information, thus could not be termed a written offer that would
allow an insured to make an express, knowing rejection of the coverage.
Question 3(a)
“With regard to the scope and validity of the uninsured/underinsured
motorist coverage rejection forms:
“a. Whether each of several separately-incorporated named insureds must
be expressly listed in the rejection form in order to satisfy the requirement that
the waiver be made knowingly, expressly, and in writing by each named
insured.”
According to long-established Ohio law, UM/UIM coverage can be
removed from an insurance policy “only by the express rejection of that
provision by the insured.” Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio
St.2d 161, 51 O.O.2d 229, 258 N.E.2d 429, paragraph one of the syllabus. That
fits with the language of R.C. 3937.18(C), which gives the power to the “named
insured” to accept or reject UM/UIM coverage. Here, we find by necessary
implication that an incorporated entity that is a named insured must be
specifically offered the insurance itself before its authorized representative can
refuse coverage.
While a parent corporation may have a close relationship with its
subsidiary, the two remain separate and distinct legal entities. North v. Higbee
Co. (1936), 131 Ohio St. 507, 6 O.O. 166, 3 N.E.2d 391. An offer to the parent
does not per se constitute an offer to the subsidiary. Without the name of the
entity on the selection form, no offer of UM/UIM coverage has been made to
that entity.
Question 3(b)
“When, on its face, a rejection form was signed by the employee of only
one of several separately-incorporated named insureds listed in the policy,
whether the four corners of the insurance agreement control in determining
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whether the waiver was knowingly and expressly made by each of the named
insureds, or does the parties’ intent, established by extrinsic evidence, control?”
We conclude that the four corners of the insurance agreement control in
determining whether the waiver was knowingly and expressly made by each of
the named insureds. Again, we cite Gyori, which requires a written offer and a
written rejection of UM/UIM coverage. In Gyori this court made it clear that
the issue of whether coverage was offered and rejected should be apparent from
the contract itself. This court stated that the requirement of written offers “will
prevent needless litigation about whether the insurance company offered UM
coverage.” Id., 76 Ohio St.3d at 568, 669 N.E.2d at 827. By requiring an offer
and rejection to be in writing, this court impliedly held in Gyori that if the
rejection is not within the contract, it is not valid. In doing so, this court greatly
simplified the issue of proof in these types of cases—the offer and rejection are
either there or they are not. Extrinsic evidence is not admissible to prove that a
waiver was knowingly and expressly made by each of the named insureds.
Question 3(c)
Our response to Question 3(b) makes it unnecessary to answer Question
3(c).
Question 3(d)
“d. Whether a parent corporation has implied authority to waive coverage
on behalf of its separately-incorporated subsidiary corporation when the
subsidiary corporation did not provide written authorization to waive
un/underinsured motor[ist] coverage benefits on its behalf prior to
commencement of the policy?”
Gyori addresses how unwritten representations evade R.C. 3937.18’s
mandate that rejections of UM/UIM coverage must be express and knowing.
Thus, we required in Gyori that both offers and rejections of UM/UIM coverage
be in writing. Id. at paragraphs one and two of the syllabus. We would
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contradict Gyori were we to allow a corporate parent to claim a rejection of
UM/UIM coverage by its subsidiary through the subsidiary’s implied, unwritten
assent thereto. We thus require that a subsidiary’s authorization to a parent
corporation to waive UM/UIM coverage benefits on its behalf must be in
writing and must be incorporated into the contract.
Judgment accordingly.
DOUGLAS, RESNICK and F.E. SWEENEY, JJ., concur.
MOYER, C.J., COOK and LUNDBERG STRATTON, JJ., concur in part and
dissent in part.
__________________
COOK, J., concurring in part and dissenting in part. I agree with the
majority’s answer to the first certified question. The parties do not dispute that
Linko was an insured under the Indemnity insurance policy. As an insured, Linko
has standing to enforce any existing provisions concerning UM/UIM coverage.
See Schumacher v. Kreiner (2000), 88 Ohio St.3d 358, 363, 725 N.E.2d 1138,
1143 (Lundberg Stratton, J., dissenting). This includes standing to challenge
whether there has been a knowing rejection of UM/UIM coverage. See Travelers
Ins. Co. v. Quirk (Fla.1991), 583 So.2d 1026, 1028; Atwood v. Internatl. Ins. Co.
(Dec. 10, 1991), Franklin App. No. 91AP-521, unreported, 1991 WL 268346. I
respectfully dissent, however, from the majority’s answers to the remaining
questions because we should decline to answer them.
The second question asks whether the UM/UIM coverage rejection form
that Hahn signed satisfies the written offer requirement crafted in Gyori v.
Johnston Coca-Cola Bottling Group, Inc. (1996), 76 Ohio St.3d 565, 669 N.E.2d
824. The majority answers this question in the negative by expanding upon Gyori
and requiring the written offer to contain specific terms. But neither the rule
announced in Gyori nor the rule announced today has statutory support. See
Gyori, 76 Ohio St.3d at 569, 669 N.E.2d at 827 (Cook, J., dissenting).
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Under former R.C. 3937.18, UM/UIM coverage exists by operation of law
unless the insured has rejected such coverage. We have required that the insured
expressly reject UM/UIM coverage in order for the rejection to be effective. See
Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio St.2d 161, 51 O.O.2d 229, 258
N.E.2d 429, paragraph one of the syllabus. We have also allocated to insurance
companies the burden of proving that a customer knowingly rejected UM/UIM
coverage. Ady v. W. Am. Ins. Co. (1982), 69 Ohio St.2d 593, 597, 23 O.O.3d 495,
498, 433 N.E.2d 547, 549. This court “need not judicially impose further
extrastatutory requirements upon insurers in order to effectuate the spirit of R.C.
3937.18.” Gyori, 76 Ohio St.3d at 570, 669 N.E.2d at 828 (Cook, J., dissenting).
If the insurance company can demonstrate that its customer had the knowledge
necessary to make an informed rejection of UM/UIM coverage, the “failure to
formalize an offer in the face of specifications that plainly decline that coverage
should not dictate coverage by default.” Id.
Former R.C. 3937.18 does not require a written offer of UM/UIM
coverage and certainly does not require a written offer containing the specific
terms insisted upon by the majority today. The focus of the trial court’s inquiry
should be on whether UM/UIM coverage was properly rejected rather than
whether Indemnity included specific details in a written offer of coverage. Cf.
Hansberry v. Westfield Ins. Co. (June 27, 2000), Ross App. Nos. 99CA2504 and
99CA2505, unreported, 2000 WL 897991 (insurer’s failure to include certain
details about UM/UIM coverage in a written offer “may prevent a finding of a
valid rejection [but] will not prevent a court from finding a valid offer in the first
instance”). I would therefore decline to answer the second certified question and
instead allow the district court to decide whether Hahn knowingly and expressly
rejected UM/UIM coverage.
This court should also decline to answer all of the inquiries included in
question three. Each relates to issues concerning “named insureds” on a policy
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issued to a parent corporation. Though Linko and his employer were insureds
under the Indemnity policy, neither is alleged to be a named insured. I therefore
believe that answering these questions is inappropriate.
MOYER, C.J., and LUNDBERG STRATTON, J., concur in the foregoing
opinion.
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