Court Opinion

ID: 6757581
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:28:27.411482+00
Date Added: 2024-06-11T16:02:29.667581
License: Public Domain

Celebrezze, C. J.
The issue presented for our determination is whether the exclusion contained in the uninsured motorist coverage of this insurance policy is valid. To be valid, the exclusion must not be contrary to the public policy reflected in R. C. 3937.18. The statute states in relevant part:
“(A) 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 *595state with respect to any motor vehicle registered or principally garaged in this state unless an equivalent amount of coverage for bodily injury or death is provided therein or supplemental thereto under provisions approved by the superintendent of insurance, for the protection of persons insured thereunder who are legally entitled to recover damages from owners or operators of uninsured motor vehicles because of bodily injury, sickness, or disease, including death, resulting therefrom. The named insured shall have the right to reject such coverage, or may require the issuance of coverage for bodily injury or death in accordance with a schedule of optional lesser amounts approved by the superintendent, that shall be no less than the limits set forth in section 4509.20 of the Revised Code for bodily injury or death * * * .”
We must consider this exclusion in light of the purpose of the statute and the coverage mandated. Because we have had several opportunities previously to consider the statute, only a brief review is necessary at this time.
In Abate v. Pioneer Mutl. Cas. Co. (1970), 22 Ohio St. 2d 161, 165, we stated that uninsured motorist coverage “is designed to protect persons injured in automobile accidents from losses which, because of the tort-feasor’s lack of liability coverage, would otherwise go uncompensated.” The same conclusion, and indeed the same language, was repeated in Curran v. State Automobile Mutl. Ins. Co. (1971), 25 Ohio St. 2d 33, 38, and subsequently, in Bartlett v. Nationwide Mutl. Ins. Co. (1973), 33 Ohio St. 2d 50, 52. We also concluded in Bartlett, supra, that “ * * * the legislative purpose in creating compulsory uninsured motorist coverage was to place the injured policyholder in the same position, with regard to the recovery of damages, that he would have been in if the tortfeasor had possessed liability insurance.” This statement of the legislative purpose was repeated in Shearer v. Motorists Mutl. Ins. Co. (1978), 53 Ohio St. 2d 1, 7.
Thus, we have consistently determined that the public policy of the uninsured motorist statute is to protect persons injured in motor vehicle accidents from losses because of the tort-feasor’s lack of liability insurance coverage. Applied to these facts, Terry Ady was insured, physically injured and sustained financial loss as the result of the tort-feasor’s lack of *596liability insurance coverage. Thus, his financial loss should be covered to effectuate the purpose of the statute.
Similarily, on several previous occasions we have specifically stated that the statute is designed to protect persons, not vehicles. One of the first cases based on this statute was Motorists Mutl. Ins. Co. v. Tomanski (1971), 27 Ohio St. 2d 222, 224, in which we quoted Home v. Superior Life Ins. Co. (1962), 203 Va. 292, 123 S.E. 2d 401, 404: “ ‘[i]t is not the purpose of the uninsured motorist law to provide coverage for the uninsured vehicle, but its object is to afford the insured additional protection in the event of an accident.’ ” In Curran, supra, at page 38, a unanimous court stated that the legislative purpose is that “coverage be provided to persons injured through the acts of uninsured motorists.” More recently, in Orris v. Claudio (1980), 63 Ohio St. 2d 140, the majority recognized the merit of the view that the coverage is personal in nature. This interpretation of the statute was clearly enunciated in the dissent (Celebrezze, C. J.):
“The risk protected against by uninsured motorist coverage is not based on the vehicle driven or the negligence of the insured. The coverage protects against loss due to bodily injuries or death caused by another who is at fault. It should ordinarily attach to an insured, not to a vehicle.” Id., at page 145. The rationale of these cases indicates that the focus of the statute is the protection of personal losses, such as Terry Ady’s.
Furthermore, we have previously concluded that the statute requires mandatory offering of uninsured motorist coverage. In Abate, supra, at page 165, we stated that “R. C. 3937.18 makes mandatory offering of uninsured motorist coverage * * * .” Just last term we reiterated this in Kish v. Central Nat. Ins. Group (1981), 67 Ohio St. 2d 41, 44, citing Tomanski, supra. Moreover, this statutorily mandated coverage can not be whittled away by private parties. In Bartlett, supra, at page 53, we stated that “[p]rivate parties are without power to insert enforceable provisions in their contracts of insurance which would restrict coverage in a manner contrary to the intent of the statute.” Therefore, any restriction on full coverage should emanate from the General *597Assembly1; otherwise a contractual limitation in the insurance policy should comply with the statutory purpose.
In evaluating the validity of a contractual limitation, it is important to consider the nature of the parties involved. The General Assembly, realizing that insurance companies are in a much stronger bargaining position vis a vis their customers when insurance is sold, decided that uninsured motorist coverage is desirable and mandated that it be offered. Orris, supra, at 146. (Celebrezze, C. J., dissenting). Thus, the stronger position of an insurance company must be remembered when assessing the validity of an exclusion which reduces the mandated coverage.
Insurance companies write the policies and present the pre-printed forms to customers, most of whom are unfamiliar with terminology found in the multi-page policies. Most customers accept the policies in toto and do not question, let alone actively negotiate to change or omit, any of the provisions in the pre-printed forms. Therefore, an insurance company has the burden of showing that any rejection was knowingly made by the customer. A customer has the option of rejecting coverage. However, to make a rational decision to reject coverage, a customer has to be aware of a contractual provision, understand its terms and agree to it. Thus, any rejection or exclusion should be conspicuous so that a customer is aware of its existence.2 Furthermore, the language should be clear and easily understood by a lay person. Also there should be evidence that the customer agreed to the restriction on coverage.
Applying these principles to the facts in this case, the exclusion in this pre-printed insurance policy was in small print and complex terminology. The relevant definition interpreting the exclusion is on the reverse side of the page on which the exclusion is printed. To be covered, a vehicle must be described *598in a schedule which is also in yet another location in the policy. There is no cross reference to help a customer tie together these three items so that one might understand what is covered and what is being rejected by merely accepting the pre-printed form. This exclusion is not conspicuous and the terms and implications are not clear. Thus, it has not been shown that the customer was aware of, understood, or knowingly accepted this exclusion.
This conclusion is supported by our previous rule that language in an insurance policy is to be construed strictly against the drafter, the insurance company, and liberally in favor of the insured. Ohio Farmers' Ins. Co. v. Wright (1969), 17 Ohio St. 2d 73, 78. A decade ago this court stated in Curran, supra, at page 38, that 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.” Thus, if the insurance company intended such an exclusion, it should have the burden of using straightforward, simple language and showing that the exclusion was understood by the customer. Because this exclusion was not conspicuous and not clearly drafted for the lay person, it should be strictly construed against the insurance company and not permitted to limit the statutorily mandated coverage.
Appellant argues that invalidating the exclusion would result in a “free ride” for Terry Ady. That is, he could obtain uninsured motorist coverage, at no additional cost, under his father’s policy. Initially, it is important to note that Terry Ady paid premiums for uninsured motorist coverage under his own policy. Here, he was asking for coverage under his father’s policy only for expenses above those covered by his own policy. But for the exclusion, he would qualify for coverage under his father’s policy.
More importantly, the purpose of the statute is to protect persons injured by uninsured motorists, it does not limit coverage to a few situations. For example, Terry Ady would have been protected under his father’s policy if he had been a guest passenger or if he was a pedestrian and injured by an uninsured motorist. The statute mandates broad coverage to an insured and does not limit it merely to those who have pur*599chased separate insurance on all vehicles. The cost of this broad coverage is passed on to all insured drivers as a necessary means of achieving the public policy of protecting persons from losses due to uninsured motorists. Insurance companies are not disadvantaged because the cost of claims is passed on to customers. Although invalidating this exclusion may decrease the incentive for sales of separate insurance coverage on all vehicles, it is imperative to remember that the purpose of the statute is to protect injured persons and not to promote insurance sales. Thus, appellant’s “free ride” argument is not persuasive in light of the risk distribution and, more importantly, the public policy served.
Therefore, we conclude that because the statute mandates that full coverage be offered, any restriction must be closely scrutinized to be sure that it complies with the statutory purpose. Furthermore, an exclusion must be conspicuous and in terminology easily understood by a customer. A customer must be aware of the provision, understand the meaning and voluntarily agree to any restrictions on the full coverage statutorily mandated. In this case, a pre-printed form was used and it has not been shown that the customer was aware of the exclusion, let alone understood the meaning and then knowingly agreed to reject this portion of the coverage. Thus, the exclusion is invalid because it does not comply with the statutory purpose and, furthermore, is not clear and conspicuous.
In Orris, supra, a majority of the court upheld a similar exclusion based on the premise that the contractual provision was contemplated by the parties.3 To be consistent with our previous decisions4 and the case at bar, we conclude that the exclusion in Orris is contrary to the purpose of the statute. Furthermore, it is not clear that the exclusion meets the standards set forth above to ensure that the customer was aware of it, understood the implications and actually agreed to the restriction. Therefore, the exclusion is invalid and we overrule Orris to that extent.
Accordingly, the judgment of the Court of Appeals is affirmed.

*600
Judgment affirmed.

W. Brown, Sweeney and C. Brown, JJ., concur in the syllabus and judgment.
Locher, Holmes and Krupansky, JJ., dissent.

 Effective June 25,1980, R. C. 3937.18 was amended to provide that:
“(E) Any automobile liability or motor vehicle liability policy of insurance that includes uninsured motorist coverage may include terms and conditions that preclude stacking of uninsured motor vehicle coverages.”

 A provision which reduces coverage should be conspicuous and clear as required by the Federal Trade Commission and the U. C. C. for warranty disclaimers, which also decrease consumer rights. 16 C.F.R. 701.3 (1978); Sections 2301-2312, Title 15, U. S. Code; and U.C.C. 2-316(2).

 This rationale was criticized for ignoring the policy of the statute. 10 Capital University L. Rev. 415, 55 Law and Fact 8.

 Abate, Curran, Bartlett, Shearer, Tomanski, supra.