Summary
In Refiners Transport, the accident victim's employer Refiners sought to satisfy Ohio's financial responsibility requirements by purchasing a financial responsibility bond for the first $100,000.00 of loss and two excess insurance policies.
Summary of this case from MacDonald v. Pacific Employers Ins. Co.Opinion
No. 85-193
Decided January 2, 1986.
Insurance — Uninsured motorist provisions of R.C. 3937.18 not applicable, when — Self-insurers — Financial responsibility bond principals.
O.Jur 3d Automobiles §§ 125, 153. O.Jur 3d Insurance § 950.
The uninsured motorist provisions of R.C. 3937.18 do not apply to either self-insurers or financial responsibility bond principals.
APPEAL from the Court of Appeals for Cuyahoga County.
On December 13, 1979, Frank Damiano, a truck driver employed by Refiners Transport and Terminal Corporation ("Refiners"), was fatally injured by an uninsured motorist. The motor vehicle accident occurred while the decedent was driving a tanker truck, owned by Refiners, in the course of his employment.
At the time of the accident, Refiners met state financial responsibility requirements for its truck fleet by utilizing a hybrid program consisting of a financial responsibility bond for the first $100,000 of loss coupled with excess insurance coverage, none of which contained uninsured motorist coverage. However, Damiano's personal automobile insurance policies, issued by appellant, Grange Mutual Casualty Company ("Grange"), did contain uninsured motorist coverage. Consequently, Grange settled with Damiano's estate for $140,000.
Refiners' truck fleet was covered by the following policies:
(1) a financial responsibility bond for the first $100,000 of loss (issued by American Casualty Company of Reading, Pennsylvania);
(2) an excess liability insurance policy which covered losses from $100,000 to $350,000 with an aggregate yearly deductible of $250,000 (issued by Lloyd's of London); and
(3) a second excess liability insurance policy for losses in excess of the Lloyd's of London policy up to $1,000,000 (issued by California Union Insurance Company).
All three agreements were issued without uninsured motorist provisions.
Thereafter, Grange filed a declaratory judgment action against Refiners alleging that Refiners was required to provide uninsured motorist coverage on its trucks.
Grange asserted that, as a self-insurer, appellee is obligated under R.C. 3937.18 to provide uninsured motorist coverage for the protection of its drivers. Refiners countered that it is not such an insurer and that in any event Ohio law does not require that uninsured motorist coverage be provided either under a financial responsibility bond or by a self-insurer. Refiners also produced a rejection of uninsured motorist coverage signed by a company official.
The trial court denied declaratory relief to Grange and the court of appeals affirmed. The appellate court reasoned that a self-insurer does not issue motor vehicle insurance policies. The court noted that there is no unequal bargaining position between the insured and the self-insurer because a self-insurer is in fact "dealing with himself." The court observed that Grange's position defied logic since it would require one to write a rejection notice to himself declining the coverage.
The cause is now before this court pursuant to the allowance of a motion to certify the record.
Kitchen, Messner Deery and Paul S. Klug, for appellant.
Cronquist, Smith, Marshall Weaver and John A. Valenti, for appellee.
The issue raised by this appeal is whether an employer, who meets Ohio's financial responsibility laws other than by purchasing a contract of liability insurance, must comply with the requirements concerning uninsured motorist coverage contained in R.C. 3937.18 relative to employees injured in the course of employment while driving or occupying a vehicle owned by the employer. This precise question has not been considered by us before. However, past decisions of Ohio's appellate courts have embraced the issue, with conflicting outcomes.
For example, in Unigard Ins. Co. v. Green Cabs (1980), 67 Ohio App.2d 152 [21 O.O.3d 452], the Court of Appeals for Franklin County concluded that where a taxicab company has filed a certificate of self-insurance pursuant to R.C. 4509.45(D), but has failed to reject uninsured motorist coverage pursuant to former R.C. 3937.18(A), the company must provide uninsured motorist coverage to an injured customer-passenger riding in a company cab. The court relied principally on that portion of R.C. 4509.45(D) which equates "* * * a certificate of self-insurance to a motor vehicle liability policy by the following language: `* * * he will pay the same amounts that an insurer would have been obligated to pay under an owner's motor vehicle liability policy * * *.'" Id. at 155. The court reasoned that the intent of this proviso "* * * is to place a self-insurer in the same position as one who has purchased a motor vehicle liability policy." Id. at 156.
R.C. 3937.18(A) provided in pertinent part that "* * * [t]he named insured shall have the right to reject such [uninsured motorist vehicle] coverage * * *."
A contrary, and we believe better reasoned, result was reached by the Court of Appeals for Summit County in the more recent decision of Snyder v. Roadway Express, Inc. (1982), 7 Ohio App.3d 218. The Snyder court rejected the reasoning of Unigard, supra, concluding at 219 that "[w]e do not believe that R.C. 3937.18 was intended to apply to self-insurers." The court recognized, as did the appellate court in the case sub judice, that if the statute did apply to self-insurers, in addition to insurance carriers authorized to write motor vehicle liability insurance policies, it would result in the absurd "situation where one has the right to reject an offer of insurance to one's self * * *"; even if applicable, "we believe the insured's rejection must be presumed." Id.
As in the above cases, the instant appellant alleged in its complaint that Refiners was a self-insurer under R.C. 4509.45, which provides in relevant part:
"Proof of financial responsibility * * * may be given by filing any of the following:
"(A) A certificate of insurance * * *;
"(B) A bond as provided in section 4509.59 of the Revised Code;
"* * *
"(D) A certificate of self-insurance, as provided in section 4509.72 of the Revised Code, supplemented by an agreement by the self-insurer that, with respect to accidents occurring while the certificate is in force, he will pay the same amounts that an insurer would have been obligated to pay under an owner's motor vehicle liability policy if it had issued such a policy to the self-insurer."
However, Refiners sought to meet its financial responsibility requirements and to protect itself from claims, in part by purchasing a financial responsibility surety bond and in part by purchasing two excess insurance policies for larger claims. As such, it was not a "self-insurer" in the legal sense contemplated by R.C. 4509.45(D) and 4509.72, but rather in the practical sense in that Refiners was ultimately responsible under the term of its bond either to a claimant or the bonding company in the event the bond company paid any judgment claim.
As pertaining to our consideration of this action, appellee's excess insurance (over the first $100,000 of loss) is not relevant. In this regard, the parties agree that the first $100,000 of mandated coverage was secured by a bond. Further, the two companies that issued the excess insurance are not part of this action and appellant claims no proceeds from them in this suit.
The parties stipulated that appellee did not file a certificate of self-insurance. Solely at issue in this cause is the extent of financial responsibility for the first $100,000 of loss which appellee personally undertook to perform, secured by a financial responsibility bond.
Since we find that appellee's status was actually that of a bond principal and not a self-insurer, a conclusion that the requirements of R.C. 3937.18 are not applicable is even more compelling.
In Republic-Franklin Ins. Co. v. Progressive Cas. Ins. Co. (1976), 45 Ohio St.2d 93 [74 O.O.2d 202], this court held that a financial responsibility bond is not liability insurance under Ohio's financial responsibility laws. The court reasoned:
"Throughout R.C. Chapter 4509 the dissimilarity of a financial responsibility bond and liability insurance is apparent.
"A liability insurance policy is written for the protection of the insured. However, a financial responsibility bond does not protect the principal by insuring him against liability. A financial responsibility bond is written for the protection of the motoring public, who may be injured by the principal. If the surety is compelled to make payment for damages caused by the principal, it has the right to seek reimbursement from the principal. * * * This fundamental difference between insurance and a financial responsibility bond compels this court to find that a financial responsibility bond is not insurance, as that term is used in the Republic-Franklin pro-rata provisions. See, also, Kerr v. Personal Service Ins. Co. (1975), 44 Ohio App.2d 1 [73 O.O.2d 3], 335 N.E.2d 741." In accord, Suver v. Personal Service Ins. Co. (1984), 11 Ohio St.3d 6, 7.
The appellate court decision in Kerr, supra, concerned the uninsured motorist/bond principal issue presented in the instant case. The court in Kerr at 4 first concluded "* * * that there exist sound definitional and policy reasons to distinguish a bond from a policy of liability insurance." The court then turned to Ohio's uninsured motorist statute and held "* * * that R.C. 3937.18 does not require that uninsured motorist coverage be included in financial responsibility bonds." Id. See, also, Thornton v. Personal Service Ins. Co. (1976), 48 Ohio St.2d 306 [2 O.O.3d 447]. (Absent terms contra, a bond does not insure the principal against liability nor does it agree to indemnify him against loss. Rather, "* * * the purpose of a financial responsibility bond is not to benefit the principal * * *," but to protect the public. Id. at 309.)
The appellate court decision in Unigard, supra, also recognized "* * * the distinction between financial responsibility bonds and certificates of self-insurance set forth in R.C. 4509.45(B) and (D), respectively. The latter corresponds with the requirements of automotive liability insurance, while the former merely provides bond coverage." Id. at 155.
In any event, we conclude that whether appellee is considered a bond principal, self-insurer, or both, the lower courts correctly found that uninsured motorist recovery is solely provided for by Grange's insurance policy.
Additionally, we note that Refiners did produce a signed rejection of uninsured motorist coverage (albeit not dated), which does reference the bond agreement by name and policy number as well as the two excess insurance policies. While we do not find that such a self-serving rejection is necessary for either bond principals or self-insurers, it is needed for fleet liability insurance policies (such as the excess insurance policies in this case) which seek to exclude coverage otherwise required by R.C. 3937.18.
Although public policy may well favor mandatory uninsured motorist protection for employees of self-insured employees, such a declaration must emanate from Ohio's General Assembly. The current statutes of Ohio simply do not require such protection.
Based on the foregoing, we hold that the uninsured motorist provisions of R.C. 3937.18 do not apply to either self-insurers or financial responsibility bond principals.
Accordingly, the judgment of the court of appeals is affirmed.
Judgment affirmed.
SWEENEY, WISE, HOLMES, C. BROWN, DOUGLAS and WRIGHT, JJ., concur.
WISE, J., of the Fifth Appellate District, sitting for LOCHER, J.