Case Title: Selander v. Erie Ins. Group

Citation: 1999-Ohio-287

Docket Number: 19980289

State: ohio

Court: Ohio Supreme Court

Date: 1999-06-02T00:00:00Z

Document:
[Cite as Selander v. Erie Ins. Group, 85 Ohio St.3d 541, 1999-Ohio-287.] 
 
 
 
 
SELANDER ET AL., APPELLEES, v. ERIE INSURANCE GROUP ET AL.; ERIE INSURANCE 
EXCHANGE, APPELLANT. 
[Cite as Selander v. Erie Ins. Group (1999), 85 Ohio St.3d 541.] 
Insurance — Underinsured motorist claim — Motor vehicles — Provisions of R.C. 
3937.18 apply to policy of primary insurance that provides coverage for 
claims of liability arising out of the use of hired or non-owned automobiles, 
but is not issued for delivery with respect to some particular motor vehicle. 
(Nos. 98-289 and 98-494 — Submitted January 13, 1999 — Decided June 2, 
1999.) 
APPEAL from and CERTIFIED by the Court of Appeals for Darke County, No. 
97CA1432. 
 
On November 14, 1992, Eugene Selander was killed, and his brother Glenn 
R. Selander seriously injured, when their pickup truck was involved in an accident 
with another car.  It was determined that the accident was caused by the negligence 
of the driver of the other car, David L. Clark.  Betty L. Selander, Eugene’s widow 
and the administrator of his estate, as well as Glenn Selander and his wife, each 
settled all claims against Clark’s liability insurer for $103,500. 
 
At the time of the collision, Glenn and Eugene Selander were electricians 
involved in a partnership known as Twin Electric and were working in the course 
and scope of their business activities.  The 1980 Ford pickup truck they occupied 
was listed as a covered automobile in a Pioneer Commercial Auto Policy issued to 
Twin 
Electric 
by 
Erie 
Insurance 
Company. 
 
The 
policy 
included 
uninsured/underinsured motorist coverage in the amount of $300,000 per accident.  
As a result, Betty received a $200,000 settlement, and Glenn and his wife received 
a $100,000 settlement.  Glenn Selander and his wife were also covered under a 
separate auto insurance policy issued by Erie Insurance Company that included 
 
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uninsured/underinsured coverage.  Under this policy, Glenn and his wife received 
$100,000. 
 
Thereafter, appellees filed a claim for underinsured motorist benefits under a 
Fivestar General Business Liability Policy issued by appellant Erie Insurance 
Exchange (“Erie”) to Twin Electric.  The policy contained protection limits of $1 
million per occurrence and $2 million policy aggregate.  Erie refused to pay, 
asserting that the Fivestar policy did not provide automobile liability coverage or 
uninsured/underinsured motorist coverage. 
 
Appellees filed a declaratory action seeking underinsured motorist benefits 
under the Fivestar policy.  The trial court granted summary judgment in the 
appellees’ favor, holding that they were entitled to underinsured motorist coverage 
under the Fivestar policy.  The court of appeals affirmed, holding that the Fivestar 
policy constituted an automobile or motor vehicle liability policy subject to R.C. 
3937.18.  Finding its judgment in conflict with the Tenth District Court of 
Appeals’ decision in Mauler v. Westfield Ins. Co. (Sept. 28, 1989), Franklin App. 
Nos. 88AP-914 and 88AP-915, unreported, 1989 WL 112342, the court of appeals 
entered an order certifying a conflict. 
 
The cause is now before this court upon our allowance of a discretionary 
appeal and upon our determination that a conflict exists. 
__________________ 
 
Dynes & Garbig Co., L.P.A., and Craig A. Dynes, for appellees Betty L. 
Selander and Twin Electric. 
 
Goubeaux & Goubeaux and Eric H. Brand, for appellees Glenn R. Selander 
and Twin Electric. 
 
Nemeth, Caborn & Butauski, John C. Nemeth and David A. Caborn, for 
appellant. 
 
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Buckingham, Doolittle & Burroughs, L.L.P., and Christopher C. Esker, 
urging reversal for amicus curiae, Ohio Insurance Institute. 
__________________ 
 
FRANCIS E. SWEENEY, SR., J.  The court of appeals certified the following 
issue for our determination:  “Do the provisions of R.C. 3937.18 apply to a policy 
of primary insurance which provides coverage for claims of liability arising out of 
the use of hired or non-owned automobiles, but is not issued for delivery with 
respect to some particular motor vehicle?”  For the reasons that follow, we answer 
“Yes” to the foregoing issue. 
 
R.C. 3937.18(A) provides in part, “No automobile liability or motor vehicle 
liability policy of insurance insuring against loss resulting from liability imposed 
by law for bodily injury or death suffered by any person arising out of the 
ownership, maintenance, or use of a motor vehicle shall be delivered or issued for 
delivery in this state with respect to any motor vehicle registered or principally 
garaged in this state,” unless both uninsured and underinsured motorist coverage 
are provided. 
 
The Fivestar policy cover reads “Fivestar General Liability Policy 
(excluding automobile).” A portion of the policy also provides liability coverage 
for accidents involving “hired” or “non-owned” automobiles.  The relevant 
language, found in the “Extension of Coverage” section of the policy, states: 
 
“X  Non-Owned Automobile and Hired Automobile Liability Insurance 
 
“Hired Automobile Liability 
 
“We will pay all sums which anyone we protect becomes legally obligated 
to pay as damages because of personal injury or property damage arising out of the 
maintenance or use of hired automobiles by you or your employees in the course of 
your business. 
 
“Non-Owned Automobile Liability 
 
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“We will pay all sums which anyone we protect becomes legally obligated 
to pay as damages because of personal injury or property damage arising out of the 
use of any non-owned automobile in your business by any person other than you. 
 
“ * * * 
 
“ ‘Hired automobile’ means any automobile you lease, hire or borrow.  This 
does not include any automobile you lease, hire, or borrow from any of your 
employees or members of their households, or from any partner or executive 
officer of yours. 
 
“ ‘Non-owned automobile’ means any automobile you do not own, lease, 
hire or borrow which is used in connection with your business.  However, if you 
are a partnership, a non-owned automobile does include any automobile owned by 
or registered in the name of a partner, but only while such automobile is being used 
in your business.” 
 
This portion of the policy was marked by an “X,” indicating that by the 
policy’s own terms it was an “XTRA PROTECTION FEATURE.”  According to 
the policy, “[w]herever an ‘X’ appears in the margin of this policy, you receive 
XTRA PROTECTION, either as additional coverage or as a coverage that is not in 
most commercial general liability policies.” 
 
Erie makes several arguments.  First, Erie contends that R.C. 3937.18(A) 
cannot apply to the Fivestar policy because the policy was not “issued for delivery 
in this state with respect to any motor vehicle registered or principally garaged in 
this state.”  Rather, Erie argues that the policy provided coverage only for claims 
of vicarious liability arising out of the use of unspecified “hired” or “non-owned” 
automobiles.  Erie relies on Mauler v. Westfield Ins. Co. (Sept. 28, 1989), Franklin 
App. Nos. 88AP-914 and 88AP-915, unreported, 1989 WL 112342, where the 
Tenth District Court of Appeals held that a policy that insured an employer’s “non-
ownership vehicle and hired auto liability insurance coverage” did not provide 
 
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uninsured/underinsured coverage because the policy was not issued for delivery 
with respect to any motor vehicle registered or principally garaged in Ohio under 
R.C. 3937.18.  The court held that “the policy must be issued with respect to some 
particular motor vehicle.” 
 
However, the court below, quoting Speelman v. Motorists Mut. Ins. Co. 
(Dec. 22, 1995), Montgomery App. No. 15362, unreported, 1995 WL 765979, held 
that an insurance company’s “ ‘attempt to distinguish non-owned or hired vehicles 
from owned or specifically described vehicles “runs counter to well-established 
Ohio law.” ’ ”  Speelman was the owner of a sole proprietorship who had 
purchased business insurance containing “business auto coverage” from Motorists 
Mutual Insurance Company.  Testimony revealed that the purpose of the policy 
was “ ‘to protect the insured against its vicarious liability or liability imputed to it 
because of negligent use of a hired or nonowned automobile.’ ”  The court 
concluded that “R.C. 3937.18 does not distinguish between commercial and 
consumer automobile or motor vehicle liability policies” and that the Motorists 
Mutual policy extended liability coverage to Speelman.  Therefore, Motorists was 
obligated to offer uninsured and underinsured coverage under R.C. 3937.18.  We 
agree with the rationale set forth in Speelman.  Erie admits that the Fivestar policy 
provides automobile liability coverage, albeit in the limited circumstance of 
providing coverage for claims of vicarious liability arising out of the use of a hired 
vehicle or non-owned vehicle.  Where motor vehicle liability coverage is provided, 
even in limited form, uninsured/underinsured coverage must be provided.  See, 
e.g., Goettenmoeller v. Meridian Mut. Ins. Co. (June 25, 1996), Franklin App. No. 
95APE11-1553, unreported, 1996 WL 362089; House v. State Auto. Mut. Ins. Co. 
(1988), 44 Ohio App.3d 12, 540 N.E.2d 738.  Under R.C. 3937.18, 
uninsured/underinsured coverage arises even though a liability policy refers only to 
“hired” or “non-owned” automobiles and fails to identify specific vehicles.  
 
6
Speelman.  In this case, the contract expressly provided liability coverage for “non-
owned” vehicles.  Under the specific language of the policy, “if you are a 
partnership a non-owned automobile does include any automobile owned by or 
registered in the name of a partner, but only while such automobile is being used in 
your business.”  There is no question that the 1980 Ford pickup truck occupied by 
the Selanders was an automobile owned by a partner and was being used in the 
partnership’s business.  The fact that a policy provides liability coverage for non-
owned and hired motor vehicles is sufficient to satisfy the requirement of R.C. 
3937.18 that a motor vehicle liability policy be delivered in this state with respect 
to any motor vehicle registered or principally garaged in this state.  Thus, we find 
R.C. 3937.18 applicable to the Fivestar policy in this case. 
 
Next, Erie argues that R.C. 3937.18 has no application to the Fivestar policy 
because the policy would not have been approved for issuance or delivery under 
Ohio’s financial responsibility law, R.C. Chapter 4509.  Erie points out that 
Eugene Selander would not have been entitled to liability coverage at the time of 
the accident had he caused the accident.  This is because the policy provided “non-
owned” liability protection only when an insured becomes legally obligated to pay 
damages “arising out of the use of any non-owned automobile in your business by 
any person other than you.”  (Emphasis added.)  The policy defined “You” in part 
as the “named insured[s]” under the policy, identified as Twin Electric, Glenn 
Selander, and Gene Selander. 
 
However, Speelman held that the fact that an insurance policy did not 
comply with Ohio’s financial responsibility law, R.C. Chapter 4509, was not 
indicative of its status as an “automobile liability” or “motor vehicle liability” 
policy.  The Speelman court based its rationale on the Arizona Supreme Court 
decision in St. Paul Fire & Marine Ins. Co. v. Gilmore (1991), 168 Ariz. 159, 812 
P.2d 977.  In that case, Sharon Gilmore’s car was hit by another driver,  while 
 
7
Sharon was driving her own vehicle in the course of her employment.  She sought 
underinsured motorist coverage under her employer’s comprehensive general 
liability policy, which included language covering non-owned automobiles.  The 
policy did not offer underinsured motorist coverage.  The court held that a 
comprehensive liability insurance policy that includes automobile liability 
coverage is an “automobile liability” or “motor vehicle liability” policy.  
Construing a statute similar to Ohio’s, the Arizona court found the insurer was 
obligated to offer underinsured motorist coverage.  The court reached this 
conclusion despite the policy’s failure to meet the requirements of Arizona’s 
financial responsibility law.  The Gilmore court explained:  “[T]he type of policy is 
determined by the type of coverage provided, not by the label affixed by the 
insurer.  Otherwise, it would be a simple matter for insurers to evade the 
requirements of Arizona law by changing the title of the policy. * * * Therefore, 
the fact that [the] policy is labeled as a comprehensive general liability policy does 
not mean it is not also an automobile liability policy under the [Uninsured Motorist 
Act].”  Id. at 165, 812 P.2d at 983. 
 
Furthermore, in Demetry v. Kim (1991), 72 Ohio App.3d 692, 595 N.E.2d 
997, the Tenth District Court of Appeals rejected the argument that to qualify for 
“implied underinsured coverage[,] appellant’s decedent must first fit within the 
liability coverage afforded by the policy.”  The court held that “there is nothing, 
absent 
clear 
language 
evidencing 
an 
intent 
to 
do 
so, 
to 
prevent 
uninsured/underinsured coverage from being broader than liability coverage.”  Id. 
at 698, 595 N.E.2d at 1001.  Therefore, the fact that the Fivestar policy would not 
comply with the mandates of R.C. Chapter 4509 does not conclusively demonstrate 
that the policy was never intended to provide uninsured/underinsured motorist 
coverage.1 
 
8
 
Erie claims that the policy’s title of “Fivestar General Liability Policy 
(excluding automobile)” indicates that it was never intended to provide automobile 
coverage.  However, as recognized in Gilmore, “the type of policy is determined 
by the type of coverage provided, not by the label affixed by the insurer.”  Gilmore 
at 165, 812 P.2d at 983.  Regardless, Erie itself admits that automobile liability 
coverage was intended in limited circumstances, which is sufficient to give rise to 
uninsured/underinsured coverage. 
 
Finally, Erie asserts that the Fivestar policy was never intended to provide 
uninsured/underinsured motorist coverage as demonstrated by the fact that the 
Selanders obtained uninsured/underinsured motorist coverage through Erie’s 
Pioneer Commercial Automobile policy.  However, contrary to appellant’s 
argument, the fact that the Selanders had obtained uninsured/underinsured 
coverage through a separate policy in no way indicates that they did not intend to 
obtain additional coverage under the Fivestar policy.  See Speelman. 
 
Under the policy’s language, the pickup truck occupied by the Selanders at 
the time of the collision qualified as a “non-owned” vehicle.  Given the 
determination that the Fivestar policy qualifies as an “automobile liability or motor 
vehicle policy” under R.C. 3937.18, the policy was required to offer 
uninsured/underinsured coverage.  Abate v. Pioneer Mut. Cas. Co. (1970), 22 Ohio 
St.2d 161, 51 O.O.2d 229, 258 N.E.2d 429.  Since it did not, coverage arose by 
operation of law in the amount equal to the liability coverage of the policy, and 
appellees are entitled to compensation under the Fivestar policy. 
 
Accordingly, the judgment of the court of appeals is affirmed. 
Judgment affirmed. 
 
DOUGLAS, RESNICK and PFEIFER, JJ., concur. 
 
MOYER, C.J., and COOK, J., dissent. 
 
LUNDBERG STRATTON, J., dissents. 
 
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FOOTNOTE: 
1. 
Pursuant to Am.Sub.H.B. No. 261, enacted effective September 3, 1997, 
R.C. 3937.18(L) now defines “automobile liability or motor vehicle liability policy 
of insurance” as either “(1) Any policy of insurance that serves as proof of 
financial responsibility, as proof of financial responsibility is defined by division 
(K) of section 4509.01 of the Revised Code, for owners or operators of the motor 
vehicles specifically identified in the policy of insurance; (2) Any umbrella 
liability policy of insurance.”  However, this version of R.C. 3937.18 was not in 
effect at the time of the Selanders’ accident and thus is inapplicable. 
__________________ 
 
COOK, J., dissenting.  I respectfully dissent.  I subscribe to the analysis of 
the issue as found in the case that presents the conflict, Mauler v. Westfield Ins. Co. 
(Sept. 28, 1989), Franklin App. Nos. 88AP-914 and 88AP-915, unreported, 1989 
WL 112342. 
 
MOYER, C.J., concurs in the foregoing dissenting opinion. 
__________________ 
 
LUNDBERG STRATTON, J., dissenting.  Once again, the majority of this 
court expands the scope of uninsured/underinsured (“UM/UIM”) motorist 
coverage as mandated by R.C. 3937.18 and further erodes the contractual nature of 
the relationship between an insurer and insured.  The majority now finds a business 
liability policy the basis for UM/UIM coverage for company vehicles despite the 
fact that the policy expressly excludes this type of automobile coverage. 
 
Twin Electric, a business belonging to two brothers who work as 
electricians, purchased the Fivestar General Business Liability Policy to provide 
liability coverage for its business operations.  Twin Electric also had a  Pioneer 
Commercial Automobile Policy to provide liability coverage, including UM/UIM 
coverage, for company vehicles.  Although the Fivestar policy specifically 
 
10
excluded liability coverage for company vehicles, a portion of the policy did cover 
“hired” or “non-owned” vehicles that may be used during the operation of the 
business.  With respect to the “hired” or “non-owned” vehicles,  the Fivestar policy 
agreed to pay “all sums which anyone we protect becomes legally obligated to pay 
as damages because of personal injury or property damage arising out of” the use 
of these vehicles, i.e., vicarious liability.  When vicarious liability is at issue, the 
insured is not seeking compensation for damages.  Instead, the insured is legally 
liable for damages for injuries to another.  Because the very premise of vicarious 
liability involves injury to one other than those protected by the insurance policy at 
issue, UM/UIM coverage does not apply in this situation and makes no sense. 
 
The basic premise of UM/UIM coverage is “ ‘to protect persons from losses 
that, because of the tortfeasor’s lack of liability coverage, would otherwise go 
uncompensated.’ ”  Schaefer v. Allstate Ins. Co. (1996), 76 Ohio St.3d 553, 555, 
668 N.E.2d 913, 915, quoting Martin v. Midwestern Group Ins. Co. (1994), 70 
Ohio St.3d 478, 480, 639 N.E.2d 438, 440.  The majority concedes that Twin 
Electric had an automobile liability policy with matching UM/UIM coverage of 
$300,000 per accident.  Glenn Selander also had personal automobile insurance 
coverage.  These plaintiffs received compensation from at least three sources:  the 
tortfeasor’s policy, the Twin Electric automobile liability policy, and Glenn 
Selander’s personal policy.  It cannot be argued that the purpose of R.C. 3937.18 
was not met and these plaintiffs were uncompensated for their losses. 
 
As a result of today’s opinion, any commercial liability policy that also 
provides limited liability coverage for vehicles under certain circumstances will 
provide an extra source of UM/UIM coverage, regardless of any applicable policy 
exclusions. The majority has opened a Pandora’s box.  This opinion will 
overwhelmingly reach every existing company policy. 
 
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Therefore, I would adhere to the sound reasoning and common sense of the 
court in Mauler v. Westfield Ins. Co. (Sept. 28, 1989), Franklin App. Nos. 88AP-
914 and 88AP-915, unreported, 1989 WL 112342.  Because I would answer “No” 
to the certified question before us, I respectfully dissent.