Dunson v. Home-Owners Ins. Co.

[Cite as Dunson v. Home-Owners Ins. Co., 2010-Ohio-1928.]

IN THE COURT OF APPEALS OF OHIO
THIRD APPELLATE DISTRICT
HANCOCK COUNTY

JEANETTE L. DUNSON, CASE NO. 5-09-37

PLAINTIFF-APPELLEE,
CROSS-APPELLANT,

v.

HOME-OWNERS INSURANCE COMPANY, OPINION

DEFENDANT-APPELLANT,
CROSS-APPELLEE.

Appeal from Hancock County Common Pleas Court
Trial Court No. 2006 CV 608

Judgment Reversed and Cause Remanded

Date of Decision: May 3, 2010

APPEARANCES:

Gordon D. Arnold, for Appellant

Dennis M. Fitzgerald, for Appellee
Case No. 5-09-37

WILLAMOWSKI, P.J.,

{¶1} The Defendant-Appellant, Home-Owners Insurance Company

(“HOIC”), appeals the judgment of the Hancock County Court of Common Pleas

granting Plaintiff-Appellee Jeanette L. Dunson’s motion for declaratory judgment

and denying HOIC’s motion for summary judgment. The trial court found that

Jeanette Dunson (“Dunson” or “Mrs. Dunson”) was entitled to uninsured motorist

coverage for an accident caused by her husband under an insurance policy issued

by HOIC. For the reasons set forth below, the judgment is reversed.

{¶2} On October 8, 2004, Dunson was severely injured in an automobile

accident while she was a passenger in a car driven by her husband, Larry Dunson,

which car left the road and overturned twice before coming to rest on its top.

Larry Dunson’s negligence was the proximate cause of the automobile accident.

{¶3} The parties agreed that the Dunsons had entered into a contract of

automobile liability insurance with HOIC on August 1, 2004, and that their policy

number 46-017-548-02 was in effect at the time of the accident. As a result of the

accident, Dunson made a claim against her husband for bodily injury and liability

coverage under the HOIC policy. HOIC paid the medical payments claim but

denied liability coverage because the policy had an exclusion which stated that it

did not provide liability coverage for bodily injury to family members. Because

HOIC denied coverage, Dunson concluded that her husband was driving an

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uninsured automobile and filed an uninsured motorist (or, “UM”) claim under the

section of the HOIC policy that provided UM coverage. HOIC denied the UM

claim stating that another policy provision also excluded uninsured motorist

coverage for family members.

{¶4} Based on these undisputed facts, both sides moved for declaratory

relief/summary judgment, asking the trial court to interpret the terms of the

insurance policy, apply Ohio law, and declare whether or not Dunson was entitled

to pursue an intra-family uninsured motorist claim.

{¶5} HOIC’s motion for summary judgment argued that the policy was

clear and unambiguous, and that it did not provide for intra-family UM coverage.

According to undisputed terms of the policy, family members were excluded from

liability coverage. The policy also excluded UM coverage for anyone who was

excluded from liability coverage. Therefore, HOIC reasoned, family members

were excluded from UM coverage. The relevant portions of the HOIC policy are:

Section II – Liability Coverage
1. COVERAGE
a. Liability Coverage – Bodily Injury and Property Damage
We will pay damages for bodily injury and property damage for
which you become legally responsible because of or arising out
of the ownership, maintenance or use of your automobile ***.

HOIC’s liability coverage was subject to several exclusions, including the

following intra-family exclusion that was included in the policy as

form/endorsement number 79550(6-92):

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EXCLUSION OF INJURY TO FAMILY MEMBERS

It is agreed:

Section II – Liability Coverage does not apply to bodily injury to you
or any relative.

{¶6} Based on the above, Larry Dunson was excluded from liability

coverage when he caused bodily injury to his wife and Mrs. Dunson does not

dispute this exclusion. The issue in this case involves the “Uninsured Motorists

Coverage,” form 79302(3-02), which contains the following exclusion (“UM

exclusion”):

EXCLUSIONS

Uninsured Motorist Coverage does not apply: ***

c. to bodily injury caused by an automobile operated by a person
excluded from coverage for bodily injury liability under the policy.

HOIC concluded that its policy clearly and simply stated that where liability

coverage was denied, uninsured motorist coverage was also denied.

{¶7} In response, Dunson argued that the language of the policy was

ambiguous, that the exclusion was susceptible to more than one interpretation, and

therefore, the policy must be construed in favor of providing coverage to the

insured. Dunson also argued that even if the UM exclusion barred intra-family

claims, she would still be entitled to coverage because: HOIC failed to cite the

exact exclusion in its denial letter; HOIC failed to raise the exclusion as an

affirmative defense in its pleadings; the policy language “caused by an

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automobile” was ambiguous; and, the statute allowing the exclusion of intra-

family UM claims was unconstitutional.1

{¶8} In order to demonstrate that there was ambiguity in the policy

language, Dunson outlined the detailed legislative and judicial history of the intra-

family UM exclusion in Ohio since 1992. Dunson presented a time-line showing

how the many modifications in the law through the years correlated with changes,

or lack of changes, in the language HOIC used in its exclusions during this time

period.

{¶9} Ohio traditionally recognized intra-family immunity prior to the

Ohio Supreme Court’s ruling in 1985 abolishing interspousal tort immunity.2

During the ensuing years, insurance companies responded to the resulting intra-

familial claims by inserting intra-family or household exclusions into the liability

and uninsured-underinsured motorists’ provisions of their policies. Various

decisions by the Ohio Supreme Court, and ensuing modifications to the insurance

statutes by the Ohio General Assembly, resulted in numerous modifications to

uninsured-underinsured motorist benefits and the statute governing UM coverage,

1
At the time Dunson set forth this argument, the Ohio Supreme Court’s decision in Burnett v. Motorists
Mut. Ins. Co., 118 Ohio St.3d 493, 2008-Ohio-2751, 890 N.E.2d 307, was still pending. Based upon that
decision, Dunson has abandoned this argument.
2
See Shearer v. Shearer (1985), 18 Ohio St.3d 94, 480 N.E.2d 388, at the syllabus (also allowing a child a
cause of action against a parent for injuries caused by parental negligence).

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R.C. 3937.18.3 At various times through the years intra-family insurance coverage

was mandated, and at other times, intra-family exclusions were permitted.

{¶10} The trial court reviewed the parties’ opposing motions, analyzed the

insurance contract, and made the following findings:

The Court’s review of the exclusion clearly indicates that it is
less than a model of clarity. The better practice would be to
state specifically that family members are excluded from UM
coverage as opposed to incorporating this provision by way of
reference to the liability policy. In fact, other insurance policies
have much more clearly defined intra-family exclusions. ***
However, consideration of the policy language solely in the
abstract establishes that it is not so ambiguous or misleading to
necessitate further interpretation.

(Sept. 3, 2008 Decision, pp. 9-10.) Then, after finding that the policy was “not so

ambiguous or misleading to necessitate further interpretation,” the trial court went

on to further analyze and interpret the contract. The trial court noted that Dunson

offered “an alternative theory” to support her position and that, “[c]onsidered in

proper historical context, [Dunson] contends that the clause in question is not an

intra-family exclusion, or at the very least, creates an ambiguity ***.” (Id, p.10.)

After considering Dunson’s “alternative theory” and reviewing her “demonstrative

exhibits” concerning the “history of family member exclusions,” the trial court

concluded that there were “four possible conclusions” as to why HOIC used the

particular language it did in its exclusions. As a result, the trial court felt it was

3
See Snyder v. Amer. Family Ins. Co., 114 Ohio St.3d 239, 2007-Ohio-4004, 871 N.E.2d 574, ¶¶ 13-28,
summarizing the evolution of Ohio’s UM law and regulations over the past two decades.

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“compelled to find that ambiguity exists.” Therefore, in interpreting the policy in

a light most favorable to the insured, the trial court determined that the exclusion

did not bar Dunson from pursuing uninsured motorist benefits against her policy.

{¶11} Based on the trial court’s decision, the parties reached an agreement

on damages, and the trial court filed a final judgment on October 16, 2009,

entering judgment in favor of Dunson in the amount of five hundred thousand

dollars (the policy maximum), conditioned upon a final determination of the

coverage issues through the appeals process. HOIC filed a timely appeal. Dunson

filed a cross-appeal concerning a discovery ruling that we shall address after we

review the following two assignments of error raised by HOIC:

First Assignment of Error

The trial court erred in sustaining [Dunson’s] Motion for
Declaratory Judgment and overruling [HOIC’s] Motion for
Summary Judgment.

Second Assignment of Error

The trial court erred in looking for the intent of the parties by
considering extrinsic evidence when the language of the written
contract is clear.

{¶12} The parties agree that there are no relevant issues of material fact

and the decision granting and denying the parties’ motions for declaratory

judgment and summary judgment depends upon the interpretation of the insurance

contract. Insurance policies are contracts and their interpretation is a matter of law

for the court. City of Sharonville v. Am. Employers Ins. Co., 109 Ohio St.3d 186,

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187, 2006-Ohio-2180, 846 N.E.2d 833, ¶6, citing Alexander v. Buckeye Pipe Line

Co. (1978), 53 Ohio St.2d 241, 374 N.E.2d 146, at paragraph one of the syllabus.

Summary judgment is appropriate when there are no genuine issues of material

fact and the moving party is entitled to judgment as a matter of law. Civ.R. 56(c);

Horton v. Harwick Chemical Corp., 73 Ohio St.3d 679, 686-87, 1995-Ohio-286,

653 N.E.2d 1196. An appellate court reviews a summary judgment order de novo.

Hillyer v. State Farm Mut. Auto. Ins. Co. (1999), 131 Ohio App.3d 172, 175, 722

N.E.2d 108. This review of a trial court’s summary judgment decision is done

independently and without any deference to the trial court. Ohio Govt. Risk Mgt.

Plan v. Harrison, 115 Ohio St.3d 241, 2007-Ohio-4948, 874 N.E.2d 1155, ¶5

{¶13} Insurance coverage is determined by reasonably construing the

contract “in conformity with the intention of the parties as gathered from the

ordinary and commonly understood meaning of the language employed.” King v.

Nationwide Ins. Co. (1988), 35 Ohio St.3d 208, 211, 519 N.E.2d 1380. Contract

terms are to be given their plain and ordinary meaning. Gomolka v. State Auto.

Mut. Ins. Co. (1982), 70 Ohio St.2d 166, 167-68, 436 N.E.2d 1347. “Where

provisions of a contract of insurance are reasonably susceptible to more than one

interpretation, they will be construed strictly against the insurer and liberally in

favor of the insured.” King v. Nationwide Ins. Co., supra, at the syllabus (citations

omitted).

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{¶14} However, where the intent of the parties to a contract is evident from

the clear and unambiguous language used, a court must not read into the contract a

meaning not contemplated or placed there by an act of the parties to the contract.

Gomolka, 70 Ohio St.2d at 168. “Although, as a rule, a policy of insurance that is

reasonably open to different interpretations will be construed most favorably for

the insured, that rule will not be applied so as to provide an unreasonable

interpretation of the words of the policy.” Westfield Ins. Co. v. Galatis, 100 Ohio

St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶14, quoting Morfoot v. Stake

(1963), 174 Ohio St. 506, 23 O.O.2d 144, 190 N.E.2d 573, paragraph one of the

syllabus.

{¶15} Because both of HOIC’s assignments of error are related, we will

address the issues together. HOIC claims that its policy clearly and

unambiguously excludes Larry Dunson from both intra-family liability coverage

and UM coverage. HOIC maintains that the language of the exclusion is

consistent with Ohio law and its intent is evident within the four corners of the

policy as a whole. Therefore, the trial court is not permitted to look beyond the

writing itself and consider extrinsic evidence in order to create an ambiguity that is

not present in the terms and conditions of the contract.

{¶16} Dunson, however, argues that HOIC’s UM exclusionary clause is

ambiguous, especially when examined in conjunction with the legislative history

of the UM statute and the drafting history of HOIC’s exclusionary clauses. The

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parties agree that the current UM law applicable to this case is governed by R.C.

3937.18 as revised in October 2001 by SB 97. The revisions to R.C. 3937.18 that

were enacted by SB 97 again permit insurance companies to include exclusionary

and limiting provisions in UM policies for inter-family claims.4

{¶17} After reviewing the insurance policy and the record, we find that the

language of HOIC’s UM exclusionary clause is clear and unambiguous and its

intent is evident within the four corners of the policy. The HOIC policy excludes

family members from liability coverage utilizing form 79550, an exclusion that

Dunson did not find ambiguous. Then, HOIC simply incorporates that exclusion

by reference into its UM exclusion by stating that UM coverage does not apply to

injuries caused by a person excluded from liability coverage under the policy.

This exclusion is broadly worded to include all of the liability exclusions. Family

members are excluded from UM coverage because they are excluded from liability

coverage. Although the wording in the UM exclusion is general, that does not

make it ambiguous.

{¶18} The First District Court of Appeals arrived at the same conclusion

when called upon to interpret the identical UM exclusionary language in a similar

4
Some of the reasons given in 2001 S 97, § 3, eff. 10-30-01, to express the intent of the General Assembly
in enacting this legislation, were to accomplish the following concerning uninsured motorist coverage,
underinsured motorist coverage, or both: eliminate any requirement of the mandatory offer of such
coverage; eliminate the possibility of such coverage being implied as a matter of law; provide statutory
authority for the inclusion of exclusionary or limiting provisions in such coverage; and to supersede the
holdings of the Ohio Supreme Court in several prior insurance coverage cases, along with several previous
enactments of the General Assembly.

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case, Kelly v. Auto-Owners Ins. Co., 1st Dist. No. C-050450, 2006-Ohio-3599.

Auto-Owners Insurance denied UM coverage based upon the policy’s intra-family

exclusion when the husband was struck by an automobile driven by his wife.5 Id.

Auto-Owners Insurance is affiliated with the Appellant Home-Owners Insurance,

and both companies use the same policy forms with the same language. The First

District Court of Appeals found that “the UM exclusion specifically adopted the

bodily-injury liability coverage exclusions. Admittedly section (3)(c) did not

cross-reference by number the exclusions in the bodily-injury liability portion of

the policy. But the reference to the exclusions was clear and did not create an

ambiguity in this case.” Id., at ¶18.

{¶19} Like Dunson, the plaintiff in Kelly also argued that the UM

exclusion in section (3)(c) should apply only to injuries caused by a named person

who was specifically excluded from coverage. The Court disagreed.

We recognize that this “specifically named person” provision
does exist in some UM insurance policies and that the legislature
used this exclusion as one example of an acceptable exclusion in
a UM policy. But the current UM coverage statute
unequivocally states that the specified exclusions are not the only
acceptable exclusions.

Id., at ¶19.

5
Dunson attempts to distinguish Kelly from the case before us now because the injured spouse in Kelly was
a pedestrian at the time he was hit by the automobile driven by his wife, whereas in this case, Dunson was a
passenger. We do not find this to be a material difference that would affect the coverage or the application
of this case law to the interpretation of the insurance policy.

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{¶20} When called upon to interpret a contract, the court’s essential

function is to effectuate the intent of the parties. Generally, such intent is

presumed to reside in the language used to employ the agreement. Kelly v.

Medical Insurance Co. (1987), 31 Ohio St.3d 130, 509 N.E.2d 411, at the

syllabus. Dunson, however, argued that it was necessary to go outside of the

policy to determine HOIC’s intent when it drafted the UM exclusion.

{¶21} Considering the policy as whole, we find HOIC’s intent to exclude

intra-family UM claims is evident from its exclusion of intra-family liability

claims. There would be no logical purpose to exclude intra-family claims under

the liability portion of the policy if it then allowed them under the UM portion of

the policy. The Court in Kelly also discussed this.

Importantly, this interpretation renders the UM coverage
consistent with the bodily-injury liability coverage with regard
to the intrafamilial-tort exclusion. If this injury were not also
excluded under the UM coverage, the exclusion would be
meaningless because family members could plot to recover UM
benefits in lieu of bodily-injury damages.

Kelly, at ¶20. See, also, Robson v. Allstate, 5th Dist. No. 01CAE03007, 2001 WL

1096212 (holding that insurance policy’s “family tort immunity language”

logically applied to the UM portion of the policy because “[i]f the policy excluded

coverage [for a family tort], why would the policy give it back via the uninsured

motorist portion of the policy?”).

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{¶22} Contractual language is ambiguous only if its meaning cannot be

determined from the four corners of the agreement, or if the language is

susceptible of two or more reasonable interpretations. Covington v. Lucia, 151

Ohio App.3d 409, 2003-Ohio-346, 784 N.E.2d 186, ¶18 (citations omitted.);

Tuohy v. Taylor, 3d Dist. No. 4-06-23, 2007-Ohio-3597, ¶13. The UM exclusion

in the case before us was not ambiguous, and the intent behind the exclusion was

evident within the clear language of the policy. Courts may not use extrinsic

evidence to create an ambiguity. Covington v. Lucia, supra; Hacker v. Dickman

(1996), 75 Ohio St.3d 118, 119, 2006-Ohio-98, 661 N.E.2d 1005. The trial court

in the case before us also concluded that HOIC’s exclusionary clause was not

necessarily ambiguous or misleading, but then it erroneously proceeded to

consider Dunson’s “alternate theories” which were used to create an ambiguity.

There was no reason to utilize extrinsic evidence to interpret this policy.

{¶23} Furthermore, we do not find that Dunson’s “historical analysis” led

to an accurate conclusion. Although the language in HOIC’s UM exclusion did

not change through various modifications of Ohio’s UM law, Dunson failed to

consider that the scope of the UM exclusion was dependent upon the entire policy

and whatever was excluded from liability coverage at any particular point in time.

In this case, the UM exclusion did not allow intra-family claims because form

79550 excluded liability coverage for family members. If this form, or some other

intra-family liability exclusion, was not in the policy, then the UM exclusion

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would not necessarily bar intra-family UM claims. Dunson’s analysis did not take

this into consideration nor did it mention whether or not form 79550 was included

in the previous versions of HOIC’s policies that were analyzed.

{¶24} Therefore, we find that the trial court erred when it utilized extrinsic

evidence in order to create ambiguity in the policy’s intra-family UM exclusion.

{¶25} Dunson also argues that even if the insurance policy excluded intra-

family UM coverage, she should prevail because of the other issues raised in her

motion. Those issues were all addressed in the trial court’s decision and found to

be without merit. We agree with the trial court’s conclusion.

{¶26} First, Dunson contends that she was entitled to summary judgment

because HOIC’s agents failed to cite the exact exclusion denying coverage in its

denial letter.6 However, as the trial court noted, the reservation of rights in the

correspondence from HOIC’s representative, together with the sequence of letters

between counsel, clearly demonstrated that Dunson was aware of the factual basis

upon which HOIC denied coverage.

{¶27} Next, Dunson maintains that HOIC waived its right to enforce the

UM exclusion because HOIC failed to assert it as an affirmative defense in its

answer. Civ.R. 8(C) provides a non-exclusive list of affirmative defenses that

must be raised in the pleadings, for example, res judicata, statute of limitations,

6
As noted by the trial court, Dunson did not cite any Ohio case law to support her argument.

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discharge in bankruptcy, assumption of risk, duress, fraud and “any other matter

constituting an avoidance or affirmative defense.” Insurance policies’

exclusionary clauses are not listed among these affirmative defenses. While we

recognize that this is a non-exhaustive listing, we fail to see how HOIC’s intra-

family UM exclusion would qualify as an affirmative defense under the facts of

this case.

{¶28} “An affirmative defense is a new matter which, assuming the

complaint to be true, constitutes a defense to it. (Citations omitted.) ‘An

affirmative defense is any defensive matter in the nature of a confession and

avoidance. It admits that the plaintiff has a claim (the ‘confession’) but asserts

some legal reason why the plaintiff cannot have any recovery on that claim (the

‘avoidance’).’ (Citations omitted.).” State ex rel. The Plain Dealer Publishing Co.

v. Cleveland (1996), 75 Ohio St.3d 31, 33, 661 N.E.2d 187. See, also, Red Head

Brass, Inc. v. Buckeye Union Ins. Co. (1999), 135 Ohio App.3d 616, 623-624, 735

N.E.2d 48, 53 (Insurance company’s failure to raise its policy-based defenses as

an affirmative defense did not constitute waiver; they were not an admission

coupled with a theory of avoidance, and the company’s denials in its answer were

sufficient to put the insured on notice that its extent of duty under the policy would

be an issue in the case); BLACK’S LAW DICTIONARY (9th Ed. Rev. 2009), p. 482

(An affirmative defense is a defendant’s assertion of facts and arguments that, if

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true, will defeat the plaintiff’s claim, even if all the allegations in the complaint are

true.)

{¶29} HOIC did not seek to “avoid” the coverage for some reason outside

the confines of the policy, but instead sought to enforce the very language of the

insurance contract that Dunson put at issue in her amended complaint.

Furthermore, the UM exclusion was not a new fact or set of facts, and HOIC did

not acknowledge that Dunson’s assertions concerning policy coverages were true.

Whether or not coverage existed under the insurance policy, based upon the

interpretation of the UM exclusion, constituted the very heart of the controversy

between the parties. Dunson set forth her claims in the complaint and HOIC

asserted its denials in its answer. This was not a matter that required HOIC to

assert an affirmative defense.

{¶30} Lastly, Dunson attempts to create an ambiguity by claiming that the

UM policy language excluding “bodily injury caused by an automobile operated

by a person ***” was ambiguous because “caused by an automobile” was

susceptible to more than one meaning. Dunson contends that the exclusion is only

applicable when a pedestrian is “directly struck” by an automobile. While

Dunson’s attempts to find ambiguity in the policy are creative, her contrived

reading is not a reasonable interpretation of the exclusion when the policy is

viewed as a whole, including the explanation of coverages and the applicable

definitions. As stated above, courts are not required to construe a policy in such a

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way that would represent an unreasonable interpretation of the words. See

Westfield Ins. Co. v. Galatis, supra.

{¶31} For all of the above reasons, HOIC’s assignments of error are

sustained. We will now address Dunson’s cross-appeal.

Cross Assignment of Error

The trial court erred in granting HOIC’s Motion for a
Protective Order and Limiting Discovery on the policy drafting
history.

{¶32} During discovery, Dunson sought to depose the HOIC company

representative to obtain additional information concerning the meaning and

interpretation of the contested policy language. HOIC moved for a protective

order, contending that the deposition would not lead to admissible evidence

because the interpretation of an insurance policy was a matter of law, and

extrinsic evidence would not be admissible because the policy was clear and

unambiguous on its face. The trial court granted HOIC’s motion because Dunson

failed to point out what specific ambiguities existed in the insurance policy at

issue which would permit the development of extrinsic evidence.

{¶33} Our decision above renders this assignment of error moot. The

policy was not ambiguous and, therefore, the court had no need to resort to

extrinsic evidence. Dunson’s cross-assignment of error is overruled.

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{¶34} Having found error prejudicial to the appellant herein, in the

particulars assigned and argued, we reverse the judgment of the trial court and

remand for further proceedings consistent with this opinion.

Judgment Reversed and Cause Remanded

ROGERS and SHAW, J.J., concur.

/jnc

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