Court Opinion

ID: 6783653
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:59:05.443573+00
Date Added: 2024-06-11T16:02:54.637373
License: Public Domain

Cook, J.,
dissenting. Because today’s decision compounds a prior error of law and reaches an issue that the court cannot address in this case, I respectfully dissent.
I
The UIM insurance policy at issue in this case provides for two events that would trigger Insura’s payment of UIM benefits. First, Fulmer could pursue UIM benefits if she had exhausted the tortfeasor’s liability limits by payment of judgments or settlements. Second, she could seek UIM benefits if she had sent Insura prompt written notice of a tentative settlement between Fulmer and the tortfeasor, and Insura had advanced payment equal to the settlement amount within thirty days of the notification. Because Insura did not tender payment, the only issue before this court is whether exhaustion occurred.
In disposing of the exhaustion issue, the majority purports to follow a “clarified” Bogan v. Progressive Cas. Ins. Co. (1988), 36 Ohio St.3d 22, 521 N.E.2d 447. This court stated in Bogan that “[t]he precise meaning of ‘exhaust,’ although not a legal term per se, would seem rather easily ascertained,” and proceeded to quote a dictionary definition of the term (“ ‘to use up the whole supply or store of: expend or consume entirely’ ”). Id. at 27, 521 N.E.2d at 453, quoting Webster’s Third New International Dictionary (1986) 796. Although the court then “accept[ed] the above definition as accurately describing the term at issue,” the court nonetheless “disagree[d] with so strict an application” that would require that the entirety of the tortfeasor’s policy be paid to the injured insured. Id. at 28, 521 N.E.2d at 453. Instead, the court reasoned that “[t]he exhaustion clause must be construed as it was intended, i.e., a threshold requirement and not a barrier to *98underinsured motorist insurance coverage.” Id. Thus, the Bogan court reached its “settlement plus credit” rule.
But Bogan strays from fundamental contract interpretation principles. See Hybud Equip. Corp. v. Sphere Drake Ins. Co., Ltd. (1992), 64 Ohio St.3d 657, 665, 597 N.E.2d 1096, 1102 (insurance contracts must be construed by the same rules as other written contracts). The problems with Bogan are threefold. First, its analysis fails to credit the contractual language that bars UIM coverage when the party seeking coverage fails to meet the policy’s threshold requirement. Second, the analysis disregards the plain meaning of “exhaust.” Both the Bogan exhaustion clause and the policy provision in the instant case require in relevant part that the limits of the tortfeasor’s policy be “exhausted by payment of judgments or settlements.” Neither policy defines “exhausted.” But the commonly accepted meaning of the term “exhaust” is “to consume entirely.” Webster’s Third New International Dictionary (1986) 796. Bogan, however, contrary to the text of the policy provision, rewrites the policy so that “exhausted” means to have consumed less than entirely. Third, the analysis ignores the meaning of “payment.” The policy provisions require exhaustion by payment. Contrary to the Bogan rationale, this does not encompass credit. The Supreme Court of Wisconsin explains:
“[T]he exhaustion clause specifies that only one manner of exhaustion will trigger the obligation to pay UIM benefits: exhaustion ‘by payment of judgements [sic] or settlements.’ * * *
“[A] ‘settlement plus credit’ does not constitute ‘payment’ of liability limits as that term is commonly and ordinarily understood. It is true that a settlement of this nature bars further claim against the tortfeasor’s insurer and protects the UIM carrier against liability of the difference between the settlement amount and the tortfeasor’s full policy limits. But it plainly does not exhaust the tortfeasor’s policy limits by payment of those limits, as required by the UIM policy.
“A ‘payment’ is ‘1. something that is paid; an amount paid; compensation; recompense. 2. the act of paying * * *.’ Random House Unabridged Dictionary 1424 (2d ed.1993). The court of appeals concluded that, in the context of this UIM exhaustion clause, the term ‘payment’ is susceptible of only one reasonable meaning: ‘compensation paid by the liability insurer and received by the insured.’ [Citation omitted.] We agree.” (Emphasis and boldface sic.) Danbeck v. Am. Family Mut. Ins. Co. (2001), 245 Wis.2d 186, 195-196, 629 N.W.2d 150, 155.
Thus, giving the clear and unambiguous terms of the exhaustion clause their natural and commonly accepted meanings, I conclude that the policy requires that the tortfeasor’s policy be consumed entirely, by payment of either judgments or settlements. The exhaustion clause does not provide for crediting. Absent *99complete depletion via payment of the tortfeasor’s policy amount, the injured insured fails to satisfy the threshold requirement to pursuing UIM coverage.
The majority errs by adhering to — and extending — Bogan’s, rewriting of policy language. There is no basis for concluding that “public policy” warrants such judicial revision of the meaning of the policy language. The statutory scheme, for example, does not directly address exhaustion clauses. To the contrary, R.C. 3937.18(A)(2) provides only for a setoff of the amounts actually paid to the injured insured from the tortfeasor’s policy. Littrell v. Wigglesworth (2001), 91 Ohio St.3d 425, 437-439, 746 N.E.2d 1077, 1090-1091 (Cook, J., dissenting) (explaining that the Littrell majority reached this correct conclusion, albeit using erroneous reasoning, despite the fact that the case did not actually present the issue).
I conclude that the exhaustion clause in this case requires the complete depletion of the tortfeasor’s policy, by payment, before the insured can pursue UIM recovery. I would therefore overrule Bogan’s second syllabus paragraph and reason that, because Fulmer failed to satisfy the exhaustion clause of her policy, the trial court properly entered summary judgment for Insura. In reaching this conclusion, I am mindful that the issue before this court is not the validity of exhaustion clauses, but solely the meaning of such clauses. I therefore express no opinion on whether such exhaustion clauses are void as against public policy. See Taylor v. Govt. Employees Ins. Co. (1999), 90 Hawaii 302, 312-313, 978 P.2d 740, 750-751.
II
Today’s majority also errs in deciding the subrogation issue and carrying that decision over to the first syllabus paragraph. The majority states in footnote 3 that “although the trial court did not base its ruling on the subrogation clause, the court of appeals held that failure to satisfy the subrogation clause was an additional reason for upholding the trial court’s ruling. Moreover, if we do not address subrogation, it will remain an issue for Insura to argue on remand. Therefore, we believe that it is prudent to address the issue herein.” This rationale rejects the court’s inherently reactive role of settling the law as it comes to us on appeal, in favor of proactively addressing issues that the trial court did not develop. Further, this reasoning bootstraps the majority’s overreaching by relying in part on an error by the court of appeals’ majority.
In its judgment entry, the trial court stated that this case specifically “asked [the court] to find whether the gap of $12,500.00 constitutes an exhaustion of the policy for legal or practical purposes.” That court also characterized the issue more generally: “[T]he issue for this Court to decide is whether or not a settlement by the Plaintiff with the tortfeasor constitutes exhaustion as a pre*100condition to the receipt of underinsured motorist coverage.” The trial court proceeded to grant summary judgment on the basis of a lack of exhaustion. Nowhere in the trial court’s judgment entry does that court analyze — or even mention — the policy’s subrogation clause. Consequently, the appeals court majority’s discussion of subrogation is mere dictum.
Lackey, Nusbaum, Harris, Reny & Torzewski, L.P.A., and Jay Harris, for appellant.
John S. Wasung and Susan Healy Zitterman, for appellee.
McCarthy, Palmer, Volkema & Thomas and Michael S. Miller; Law Firm of Frank Todaro and Robert J. Wagoner, urging reversal for amicus curiae Ohio Academy of Trial Lawyers.
Gallagher, Gams, Pryor, Tallan & Littrell, L.L.P., and James R. Gallagher, urging affirmance for amicus curiae Ohio Association of Civil Trial Attorneys.
As today’s majority implies, it would be more convenient to address the subrogation issue at this juncture. But convenience is not a substitute for following the law. Cf. Murphy v. Reynoldsburg (1992), 65 Ohio St.3d 356, 360, 604 N.E.2d 138, 141 (“[Civ.R. 56(C)] mandates that the trial court make the initial determination whether to award summary judgment; the trial court’s function cannot be replaced by an ‘independent’ review of an appellate court”). Judicial economy does not confer carte blanche upon an appellate court to resolve potential issues that a trial court did not decide. Because even the most measured sense of judicial restraint confines this court to passing upon only those issues developed below, the majority’s creation of syllabus law on subrogation lacks legitimacy.
I would affirm the judgment of the court of appeals.
Moyer, C.J., and Lundberg Stratton, J., concur in the foregoing dissenting opinion.