*

The Honorable David L. Bunning, United States District Judge for the Eastern District of Kentucky, sitting

by designation.

RECOMMENDED FOR FULL-TEXT PUBLICATION

Pursuant to Sixth Circuit Rule 206

File Name: 05a0190p.06

UNITED STATES COURT OF APPEALS

FOR THE SIXTH CIRCUIT _________________

TERRY WHITE, et al.,

Plaintiffs-Appellants,

v.

THE INSURANCE COMPANY OF THE STATE OF

PENNSYLVANIA,

Defendant-Appellee.

X

-

-

-

-

>

,

-

-

-

-

N

No. 03-4164

Appeal from the United States District Court

for the Northern District of Ohio at Cleveland.

No. 02-00999—David D. Dowd, Jr., District Judge.

Argued: December 7, 2004

Decided and Filed: April 26, 2005 

Before: MARTIN and MOORE, Circuit Judges; BUNNING, District Judge.*

_________________

COUNSEL

ARGUED: Robert E. Kerper, Akron, Ohio, for Appellants. Dale D. Cook, WILES, BOYLE,

BURKHOLDER & BRINDARDNER, Columbus, Ohio, for Appellee. ON BRIEF: Robert E.

Kerper, Akron, Ohio, for Appellants. Dale D. Cook, Michael L. Close, WILES, BOYLE,

BURKHOLDER & BRINDARDNER, Columbus, Ohio, Steven G. Janik, Devin J. Oddo, JANIK

& DORMAN, Cleveland, Ohio, for Appellee.

_________________

OPINION _________________

BOYCE F. MARTIN, JR., Circuit Judge. Terry White, who was injured during the scope

of his employment with Preston Trucking Company, filed this action seeking a declaration that he

is entitled to uninsured/underinsured motorist coverage under two insurance policies issued to

Preston by The Insurance Company of The State of Pennsylvania. White’s wife and their children

have filed separate claims for loss of consortium. The district court granted the Insurance

Company’s motion for summary judgment on all claims, holding that no coverage was available

under either insurance policy. In light of the Supreme Court of Ohio’s recent decision in Gilchrist

1
No. 03-4164 White, et al. v. The Ins. Co. of Pennsylvania Page 2

1

The concept of self-insurance has been described as follows: Self-insurance is “the practice of setting aside a fund to meet losses instead of insuring against such

through insurance.” Black’s Law Dictionary (6 Ed.1990) 1360. Self-insurance is the antithesis of

insurance. Physicians Ins. Co. of Ohio v. Grandview Hosp. & Med. Ctr., [542 N.E.2d 706, 707 (Ohio

App. 1988)]. Insurance shifts the risk of loss from the insured to the insurer. A self-insurer retains

the risk of loss imposed by law or contract. Id.

McCollum v. Cont’l Ins. Co., No. L-92-141, 1993 WL 382455, at *4 (Ohio Ct. App. Apr. 9, 1993).

v. Gonsor, 821 N.E.2d 154 (Ohio 2004), we VACATE the district court’s judgment and REMAND

for further proceedings. 

On approximately August 6, 1997, while operating a tow motor in the course and scope of

his employment with Preston Trucking Company, Terry White was involved in an accident with

another Preston employee who was operating a tractor-trailer in the course and scope of his

employment. White suffered what the district court described as “severe, disabling, and permanent

physical injuries.” He also has incurred significant expenses. According to his principal appellate

brief, White’s medical expenses to date total approximately $55,000.00 and are increasing. He also

alleges that he has suffered lost wages and a reduction of future earning capacity. 

White filed this lawsuit seeking uninsured/underinsured motorist coverage under two

insurance policies issued by the Insurance Company to Preston: an automobile liability policy

(#TP2713829RA) and an excess indemnity policy (#TXT2712212). Each policy has a liability limit

of three million dollars and each is subject to a Self-Insured Retention Agreement requiring Preston

to reimburse the Insurance Company for up to two million dollars for any losses paid. In effect, the

Self-Insured Retention Agreement rendered this insurance arrangement what may be called a partial

fronting arrangement. The term “fronting” refers to situations in which “the business pays a greatly

discounted premium to an insurance company with insurance licensing and filing capabilities in

particular states” in exchange for “an insurance policy that complies with the financial-responsibility

laws of each state in which the business is required to maintain proof of financial responsibility.”

Gilchrist, 821 N.E.2d at 603 (Stratton, J., dissenting). Practically speaking, the business “is renting

an insurance company’s licensing and filing capabilities,” which is often economically advantageous

for the business. Id. In typical fronting policies, the deductible matches the limit of liability, such

that the business bears the entire risk of loss. In this case, however, Preston retained the risk of loss

for only the first two million dollars of the policies’ respective three million dollar liability limits,

thereby rendering the insurance arrangement in this case only a “partial” fronting arrangement. 

Although uninsured/underinsured motorist coverage was expressly included in the

automobile liability policy in the amount of $50,000, Preston purported to reject that coverage in

Ohio. As it turns out, however, Preston’s purported rejection was invalid because the offer and

acceptance requirements set forth in Linko v. Indemnity Insurance Co. of North America, 739 N.E.2d

338 (Ohio 2000), were not satisfied. Pursuant to then-existing Ohio law, Ohio Rev. Code § 3937.18

(1994), where—as here—the limits of such coverage are not offered and rejected according to law,

express uninsured/underinsured motorist coverage that is for less than an automobile liability

policy’s liability limit is invalidated in toto and such coverage arises by operation of law with

coverage equal to the full policy limit. White argues that this is precisely what happened in this

case. 

The Supreme Court of Ohio has held, however, that the provisions of former section 3937.18

do not apply to self-insurers. Grange Mut. Cas. Co. v. Refiners Transp. & Terminal Corp., 487

N.E.2d 310, 311 (Ohio 1986).1

 In an attempt to escape the requirements of former section 3937.18,

the Insurance Company argues that Preston qualifies as a “self-insurer.” The district court agreed,

holding that Preston’s partial fronting arrangement did, in fact, render it a self-insurer “in the
No. 03-4164 White, et al. v. The Ins. Co. of Pennsylvania Page 3

practical sense.” Accordingly, the court concluded that the provisions of former section 3937.18

did not apply and that no uninsured/underinsured motorist coverage was available to White. White

now appeals the district court’s summary judgment for the Insurance Company. 

During the pendency of this appeal, the Supreme Court of Ohio decided the case of Gilchrist

v. Gonsor, in which the question presented was “whether insurance policies with a deductible that

matches the limit of liability, known as fronting policies, are subject to the provisions of former R.C.

3937.18.” 821 N.E.2d at 599. The court held that, where the employer does not otherwise “prove

financial responsibility” pursuant to section 4509.45(A)(1)-(5) of the Ohio Revised Code—i.e., by

obtaining “a financial-responsibility identification card, a certificate of insurance, a bond, a

certificate of deposit of money or securities, or a certificate of self-insurance,” id. at 600 (discussing

Ohio Rev. Code § 4509.45(A)(1)-(5))—an employer with such a fronting policy is not a self-insurer

and, thus, the requirements of former section 3937.18 are fully applicable, id. at 600-01. To permit

the employer to use the fronting policy as a substitute for a certificate of self-insurance, the court

reasoned, would subvert section 4509.72(B),which provides that only those with “sufficient financial

ability to pay judgments against [them]” are able to obtain a certificate of self-insurance. Id.

Therefore, the court held that uninsured/underinsured motorist coverage was available under the

automobile liability policy in question. 

In light of Gilchrist, it is clear that the provisions of former section 3937.18 do apply to the

automobile liability policy in this case, and the district court erred in concluding otherwise. It is

undisputed that Preston, like the employer in Gilchrist, has not proven financial responsibility

pursuant to section 4509.45(A)(1)-(5). And if the complete fronting arrangement in

Gilchrist—wherein the deductible matched the limit of liability—was insufficient to render the

employer self-insured, the same must be true of the partial fronting arrangement in this case.

Therefore, we hold that Preston’s partial fronting arrangement does not render Preston a self-insurer,

which means that the provisions of former section 3937.18 are in full effect as to the automobile

liability policy. Id. at 601 (explaining that because the employer “met its statutory duty to provide

proof of financial responsibility by purchasing a contract of insurance[,] . . . its insurer[] is subject

to the provisions of former R.C. 3937.18”). 

No uninsured/underinsured motorist coverage is available to White, however, under the

excess indemnity policy. The parties agree that former section 3937.18 applies only to automobile

or motor vehicle liability policies and does not apply to indemnity policies. The excess indemnity

policy in this case provides that “this policy is a contract of indemnity against loss and is not a

contract of indemnity against liability or a policy of liability insurance.” (Emphasis added). This

language plainly reveals that the excess indemnity policy is not an automobile or motor vehicle

liability policy. 

White argues, however, that an “MCS-90 Endorsement” converts the excess indemnity

policy into an automobile liability policy for purposes of former section 3937.18. We disagree. The

MCS-90 Endorsement explicitly provides that any payment that it requires is afforded for “public

liability” and “does not apply to injury to . . . the insured’s employees while engaged in the course

of their employment.” Moreover, the Ohio Court of Appeals has held that the MCS-90 Endorsement

“is not insurance” and, accordingly, “need not provide underinsured motorist coverage.” Tope v.

Pamco, Inc., No. 93AP-11, 1993 WL 308436, at *6 (Ohio Ct. App. July 27, 1993). Contrary to

White’s assertions, we simply cannot read the MCS-90 Endorsement as somehow transforming the

excess indemnity policy into an automobile liability policy.

Finally, we note that White’s family members are not entitled to uninsured/underinsured

motorist coverage under any insurance policy at issue in this case. In Westfield Insurance Co. v.

Galatis, which was decided after the district court issued its opinion in this case, the Supreme Court

of Ohio held that “[w]here a policy of insurance designates a corporation as a named insured, the
No. 03-4164 White, et al. v. The Ins. Co. of Pennsylvania Page 4

designation of ‘family members’ of the named insured as other insureds does not extend insurance

coverage to a family member of an employee of the corporation, unless that employee is also a

named insured.” 797 N.E.2d 1256, 1259 (Ohio 2003) (overruling Ezawa v. Yasuda Fire & Marine

Ins. Co. of Am., 715 N.E.2d 1142 (Ohio 1999)); see also Masco Corp. v. Zurich Am. Ins. Co., 382

F.3d 624, 626 n.1 (6th Cir. 2004) (recognizing Westfield’s limitation on the availability of

uninsured/underinsured motorist coverage). It is undisputed that none of White’s family members

is a named insured under the automobile liability policy or the excess indemnity policy; as such, they

are not entitled to uninsured/underinsured motorist coverage under either policy.

For the aforementioned reasons, the district court’s judgment is VACATED and the case is

REMANDED for further proceedings consistent with this opinion.