Title: Gyori v. Johnston Coca-Cola Bottling Group, Inc.

State: ohio

Issuer: Ohio Supreme Court

Document:

Gyori, Appellant, v. Johnston Coca-Cola Bottling Group, Inc. et al., Appellees. 
[Cite as Gyori v. Johnston Coca-Cola Bottling Group, Inc. (1996), ______ 
Ohio St.3d ______.]  
Insurance -- Motor vehicles -- Uninsured motorist coverage -- For a 
rejection of uninsured motorist coverage to be expressly and 
knowingly made, such rejection must be in writing and must be 
received by the insurance company prior to the commencement 
of the policy year. 
1. 
There can be no rejection pursuant to R.C. 3937.18(C) absent a written 
offer of uninsured motorist coverage from the insurance provider. 
2. 
In order for a rejection of uninsured motorist coverage to be expressly 
and knowingly made, such rejection must be in writing and must be received by 
the insurance company prior to the commencement of the policy year. 
 
(No. 95-1139 -- Submitted May 21, 1996 -- Decided October 2, 1996.) 
 
APPEAL from the Court of Appeals for Lucas County, No. L-94-078. 
 
On December 12, 1990, Robert E. Gyori, Jr.,  appellant, was injured in 
an automobile accident caused by the negligence of an uninsured motorist.  At 
the time of the accident, Gyori was driving an automobile that was owned and 
 
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insured by his employer, Johnston Coca-Cola Bottling Group, Inc. 
(“Johnston”).  Gyori had been told by Johnston that it had full coverage 
through various business automobile insurance policies.   
 
Johnston had primary automobile liability insurance with appellee 
Lumbermens Mutual Casualty Company (“Lumbermens”), Policy No. 3ZL 462 
410-01, running from November 1, 1990 through November 1, 1991 in the 
amount of $1 million per accident.  Johnston also had additional liability 
coverage with appellee National Union Fire Insurance Company of Pittsburgh, 
Pennsylvania (“National Union”), Policy No. BE 205-79-18, running from 
November 1, 1990 through November 1, 1991 in the amount of $15 million per 
accident. 
 
Gyori filed timely claims seeking uninsured motorist (“UM”) benefits 
with both Lumbermens and National Union.  His claims were rejected based on 
each insurance company’s belief that its insured, Johnston, had expressly 
rejected, and therefore did not have, uninsured motorist coverage at the time of 
the accident.  See R.C. 3937.18. 
 
3
 
John Rains, Risk Manager for Johnston and the person primarily 
responsible for procuring the insurance with Lumbermens, had a policy of 
rejecting UM coverage when it was legally possible to do so.  The 
specifications sent to Lumbermens indicated that Johnston wanted to reject UM 
coverage wherever possible and to obtain the statutory minimum where 
rejection is prohibited by law.  Both Patricia Garry, a Senior Underwriter at 
Lumbermens, and Rains knew this to mean that Rains was seeking the 
minimum UM coverage allowed by law.     
 
The proposal received from Lumbermens was consistent with the 
specifications and therefore did not include UM coverage for Ohio.  A form to 
signify the acceptance or rejection of UM coverage was attached to the 
proposal.1  The proposal was accepted as presented and the policy went into 
effect without UM coverage in Ohio.     
 
Rains also represented Johnston during negotiations with National 
Union.  He submitted specifications to National Union indicating that Johnston 
did not want UM coverage in those states which permitted rejection of such 
 
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coverage.  A policy based on these specifications was prepared.  Johnston 
accepted the policy, which went into effect without UM coverage in Ohio.             
 
This action commenced when Gyori filed a declaratory judgment 
action seeking a declaration of his rights under the policies.2  Gyori, 
Lumbermens and National Union filed motions for summary judgment.  The 
trial court denied Gyori’s motion and granted those of Lumbermens and 
National Union upon finding that Johnston had expressly rejected UM 
coverage for both policies and therefore did not have such coverage at the time 
of Gyori’s accident.  See R.C. 3937.18.  The court of appeals affirmed this 
decision, stating that “[t]he undisputed facts *** amply demonstrate that 
Johnston was well aware of the availability of UM coverage, understood it and 
made an informed and knowledgeable waiver of that coverage.” 
 
The cause is now before this court pursuant to the allowance of a 
discretionary appeal. 
 
Brown, Schlageter, Craig & Shindler, Martin J. Holmes and Scott 
A. Winckowski, for appellant. 
 
5
 
Shumaker, Loop & Kendrick and Michael G. Sanderson, for 
appellee, Lumbermens Mutual Casualty Company. 
 
Janik & Dunn, Steven G. Janik and Richard J. Zielinski, for 
appellee, National Union Fire Insurance Company. 
 
PFEIFER, J.  The issues in this case are straightforward.  Did 
Lumbermens offer UM coverage to Johnston?  If so, did Johnston reject the 
coverage?  Did National Union offer UM coverage to Johnston?  If so, did 
Johnston reject the coverage?  For the reasons that follow, we find that 
National Union did not offer UM coverage and that therefore Johnston could 
not reject the coverage.  We also find that Lumbermens offered UM coverage 
and that Johnston did not expressly reject the offer.  
 
It is well settled that insurance companies must offer UM coverage 
with every automobile liability or motor vehicle liability policy delivered or 
issued in this state.  R.C. 3937.18(A).  Failure to do so results in the insured 
acquiring UM coverage by operation of law.  Abate v. Pioneer Mut. Cas. Co. 
(1970), 22 Ohio St.2d 161, 163, 51 O.O.2d 229, 230, 258 N.E.2d 429, 431.    
 
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The purpose of the requirement is “to protect persons injured in automobile 
accidents from losses which, because of the tort-feasor’s lack of liability 
coverage, would otherwise go uncompensated.” Id. at 165, 51 O.O.2d at 231, 
258 N.E.2d at 432.  See, also, Martin v. Midwestern Group Ins. Co. (1994), 70 
Ohio St.3d 478, 480, 639 N.E.2d 438, 446.  “Given this express statutory 
purpose, *** the uninsured motorist statute should be construed liberally in 
order to effectuate the legislative purpose that coverage be provided to persons 
injured through the acts of uninsured motorists.”  Curran v. State Auto. Mut. 
Ins. Co. (1971), 25 Ohio St.2d 33, 38, 54 O.O.2d 166, 169, 266 N.E.2d 566, 
569.  See, also, Martin, 70 Ohio St.3d at 480, 639 N.E.2d at 440.  Against this 
background, we have long held that rejection of UM coverage must be made 
expressly and knowingly.  R.C. 3937.18(C); Abate, 22 Ohio St.2d 161, 51 
O.O.2d 229, 258 N.E.2d 429, paragraph one of the syllabus; 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-
550.  Further, insurance companies bear “the burden of showing that any 
 
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rejection was knowingly made by the customer.”  Id. at 597, 23 O.O.3d at 498, 
433 N.E.2d at 549. 
 
We look first at the policy Johnston had with its excess liability 
provider, National Union.  The mandates of R.C. 3937.18 apply to providers of 
excess coverage as well as providers of primary liability coverage.  Duriak v. 
Globe Am. Cas. Co. (1986), 28 Ohio St.3d 70, 72, 28 OBR 168, 170, 502 
N.E.2d 620, 622.  The trial court and court of appeals found that National 
Union did not offer UM coverage to Johnston; we affirm that finding.    
 
According to R.C. 3937.18 and the case law of this state, there is 
only one way to avoid the requirement that UM coverage be provided -- an 
express, knowing rejection of UM coverage by the customer.  Abate, 22 Ohio 
St.2d 161, 51 O.O.2d 229, 258 N.E.2d 429, paragraph one of the syllabus; Ady, 
69 Ohio St.2d at 597, 23 O.O.3d at 498, 433 N.E.2d at 549.  In this case, 
however express and knowing Johnston’s actions were, they could not 
constitute a rejection because there was no offer made which Johnston could 
reject.3 
 
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R.C. 3937.18 does not specifically require the offer of UM coverage 
to be in writing.  We believe that the spirit of R.C. 3937.18 is best served by 
requiring the offer to be in writing.  Such a requirement will prevent needless 
litigation about whether the insurance company offered UM coverage and will 
in the long run benefit insurance companies.  After all, they bear the burden of 
proof with respect to rejection.  Ady at 597, 23 O.O3d at 498, 433 N.E.2d at 
549.   They also bear the cost of a misunderstanding that results in the 
provision of UM coverage by operation of law.   
 
Accordingly, we hold that there can be no rejection pursuant to R.C. 
3937.18(C) absent a written offer of UM coverage from the insurance provider.  
See Scelza v. Employers Mut. Liab. Ins. (1994), 68 Ohio St.3d 1208, 1209, 624 
N.E.2d 1059, 1060 (F.E. Sweeney, J., dissenting).   As there was no written 
offer in this case, we find that Johnston acquired UM coverage from National 
Union by operation of law at the commencement of the policy year in question.  
We reverse the judgment of the court of appeals and remand the cause to the 
trial court for further proceedings consistent with this opinion. 
 
9
 
We turn now to the policy Johnston had with its primary liability 
insurance provider, Lumbermens.  We find that Lumbermens offered UM 
coverage to Johnston because it had discussed UM coverage with Johnston and  
attached to its proposal a form that allowed Johnston to accept or reject UM 
coverage.   Johnston rejected UM coverage on this form.  However, the form 
was not returned to Lumbermens until January 11, 1991, more than two months 
after the effective date of the policy and one month after Gyori’s accident.  To 
allow Johnston to reject UM coverage after an accident would invite fraud and 
misrepresentation by corporate officers seeking low insurance rates.  While 
there is no suggestion of such conduct in this case, it is a danger that must not 
be encouraged.   
 
The reasoning that led to our holding above (requiring offers of UM 
coverage to be in writing) necessitates the same requirement for rejections.  
Such a requirement will lessen the difficulty of proving rejection in a case such 
as this. We are persuaded that requiring rejection of UM coverage to be in 
writing comports with the spirit of R.C. 3937.18 and with public policy.     
 
10
 
Accordingly, we hold that in order for a rejection of UM coverage 
to be expressly and knowingly made, such rejection must be in writing and 
must be received by the insurance company prior to the commencement of the 
policy year.  Thus, in the case before us, we hold that Johnston had UM 
coverage by operation of law pursuant to R.C. 3937.18.  We reverse the 
judgment of the court of appeals and remand the cause to the trial court for 
further proceedings consistent with this opinion. 
 
 
Judgment reversed 
 
 
and cause remanded. 
 
DOUGLAS, RESNICK AND F.E. SWEENEY, JJ., concur. 
 
MOYER, C.J., COOK AND STRATTON, JJ., dissents. 
 
COOK, J., dissenting.  I respectfully dissent.  Nowhere in the language of 
R.C. 3937.18 is there a requirement that the insured receive a written offer of 
UM coverage before an express rejection of  UM coverage becomes effective.  
Further, that statute does not require a written express rejection of UM 
 
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coverage.  That the rejection evidence may be controverted is not a reason to 
impose requirements that are not statutorily supported. 
 
This is a case where a sophisticated commercial buyer actively sought to 
minimize its insurance costs by making a knowing and express anticipatory 
rejection of UM coverage.  Consistent with company policy, Johnston’s Risk 
Manager, John Rains, enlisted its insurance broker, Rollins Burdick Hunter of 
Illinois, Inc., to create bid specifications for insurance rejecting UM coverage 
where lawful and otherwise opting for the minimum UM coverage permitted.  
In creating the specifications, Rollins discussed with Rains the coverages 
available, including UM coverage.  Rollins then shopped these specifications to 
find the best price.  Both Lumbermens and National Union issued proposals 
consistent with the bid specifications. 
 
In order for a rejection of UM coverage to be effective, we have required 
that it be made expressly and knowingly.  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;  Ady v. W. Am. Ins. Co. (1982), 69 Ohio St.2d 593, 597, 23 
 
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O.O.3d 495, 498, 433 N.E.2d 547, 549-550; R.C. 3937.18(C).  While in 
relation to the average household consumer this more often than not will 
require an insurance carrier to tender a formal offer explaining the statutory 
offering requirements and other available options, the same does not hold true 
for the sophisticated insurance purchaser who solicits bid proposals excluding 
UM coverage.   
 
With respect to R.C. 3937.18, insurance companies bear “the burden of 
showing that any rejection was knowingly made by the customer.” Ady at 597, 
23 O.O.3d at 498, 433 N.E.2d at 549.  In satisfying this burden, the insurance 
company must show that the customer was aware of the mandatory UM 
offering, understood the terms to be provided under that offering and expressly 
rejected UM coverage.  See id.  Where the insurance company can demonstrate 
that a formal offering was not required to impart to its customer the requisite 
knowledge concerning UM coverage, failure to formalize an offer in the face of 
specifications that plainly decline that coverage should not dictate coverage by 
default.  That is exactly the result in the case sub judice where the majority 
 
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states that “however express and knowing Johnston’s actions were, they could 
not constitute a rejection because there was no offer made which Johnston 
could reject.”  
 
This court need not judicially impose further extrastatutory requirements 
upon insurers in order to effectuate the spirit of R.C. 3937.18.  We have already 
construed that statute to require a knowing and express waiver in order for an 
insurance company to avoid UM coverage.  Moreover, whether the waiver is 
made knowingly and expressly is an issue of fact that the insurance company 
bears the burden of proving.  See Abate, 22 Ohio St.2d 161, 51 O.O.2d 229, 
258 N.E.2d 429.  Where, as here, the facts are undisputed that a customer is 
aware of UM coverage, understands it and makes an informed and 
knowledgeable waiver of that coverage, there is no reason to judicially mandate 
that the waiver be preceded by a written offer of UM coverage and a written 
rejection. Accordingly, I would affirm the appellate court’s judgment. 
 
MOYER, C.J., and STRATTON, J., concur in the foregoing dissenting 
opinion. 
 
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FOOTNOTES 
 
1  This form was not returned to Lumbermens until January 1991. 
 
2  Johnston and certain insurance companies that provided excess 
liability coverage were defendants in the original action.  The other carriers of 
excess coverage were dismissed upon the completion of discovery.  Gyori 
reached a settlement with Johnston.  Thus, only Lumbermens and National 
Union are party to this appeal. 
 
3  It is axiomatic that an offer must precede a “rejection”; otherwise 
the “rejection” has no legal significance.