Court Opinion

ID: 6760168
Source: CourtListenerOpinion
Date Created: 2022-07-21 00:30:38.176211+00
Date Added: 2024-06-11T16:02:21.821643
License: Public Domain

Douglas, J.,
dissenting. I respectfully dissent from the majority decision. I do so because I find the opinion to be confusing and internally contradictory. In addition, the majority’s decision leaves unanswered several questions which have troubled insureds and insurers for a long time. The facts of the case at bar provide the opportunity to make definitive pronouncements on these issues. Instead, it is my fear that we have just further complicated the questions this case presents and that today’s decision will lead to multifarious litigation between insured tortfeasors and their insurance carriers, between insureds and their underinsured motorist carriers and between the carriers of both insured tortfeasors and injured insureds.
The facts of this case are undisputed. The tortfeasor (Daniels) was the party negligent in the underlying accident. At the time of the accident, Daniels had $25,000 liability coverage with Nationwide. Further, the injured party (Bogan) was insured by a policy issued by Progressive which included undermwred motorist coverage with a limit of $100,000. Thus, there was a substantial pool of insurance available to Bogan to compensate him for the injuries he suffered in the accident.
*33However, under the facts of this case (and many more cases like it), Bogan could obtain none of this money unless he sacrificed certain rights — a sacrifice that, in my judgment, was never really intended by the legislature. I believe that those provisions in Bogan’s policy that bring about such an incongruous result are against public policy as being in violation of the clear intent of the General Assembly in enacting R.C. 3937.18.
The Progressive policy includes several provisions that I will set forth in detail and then jointly consider. For ease of description, these clauses can be identified as (1) consent to settle, (2) consent to sue, (3) exhaustion and (4) subrogation. In pertinent parts, the policy provides that: the uninsured (underinsured) motorist coverage does not apply “* * * to bodily injury to an insured with respect to which such insured * * * without written consent of the company, make[s] any settlement with any person * * * who may be legally liable therefor.” (Emphasis added.) This is the “Consent to settle” clause.
Next, we find thát “[n]o judgment against any person * * * alleged to be legally responsible for the bodily injury shall be conclusive, as between the insured and the company, of the issues of liability * * * or of the amount of damages to which the insured is legally entitled unless such judgment is entered pursuant to an action prosecuted by the insured with the written consent of the company.” (Emphasis added.) This is the “consent to sue” clause.
Related to these clauses is the “exhaustion” clause which provides that “[t]he company shall not be obligated to make any payment because of bodily injury to which this insurance applies and which arises out of the ownership * * * of an underinsured motor vehicle until after the limits of liability under all bodily injury liability bonds or insurance policies applicable at the time of the accident have been exhausted by payment of judgments or settlements.” (Emphasis added.)
Finally, there is a standard subrogation clause which requires Bogan to “* * * hold in trust for the benefit of the company [Progressive] all rights of recovery which he shall have against such other person [Daniels] * * * because of the damages which are the subject of a claim made under this Part; * *
These clauses now can be applied, in narrative form, to the facts of this case — a case which is not unique. Bogan alleges damages exceeding $25,000. Nationwide,. on behalf of Daniels, offers to settle for $21,000 in exchange, of course, for a full release of Daniels. It makes sense for Bogan to settle with Daniels for this amount because even if Bogan obtains a judgment against Daniels which exceeds $25,000, the most Nationwide will have to pay is $25,000. Given the uncertainty of prejudgment interest, there is no reason for Nationwide to settle for the full $25,000. It wants to “shave” something off the policy limits in exchange for an early settlement. Given the realities of the situation, Bogan agrees. Bogan then asks Progressive, pursuant to the “consent to settle” clause, for permission to settle. Progressive refuses consent. Bogan now has a choice. Settle with Daniels and Nationwide and lose any right to file a claim pursuant to the underinsured coverage in the Progressive policy or not settle and bring suit against Daniels. If Bogan elects to sue under the “consent to sue” clause in his policy with Progressive, his carrier will not be bound by any judgment Bogan gets against Daniels. But, see, Motorists Mut. Ins. Co. v. *34Handlovic (1986), 23 Ohio St. 3d 179, 23 OBR 343, 492 N.E. 2d 417.
Conversely, if Bogan decides to settle and accepts the $21,000 from Nationwide, he will be in violation of both the “exhaustion” clause and the “subrogation” clause. Bogan has not exhausted the limits of Daniels’ policy and he has been required to give a full release which would affect Progressive’s subrogation rights against Daniels for any amount above $25,000 that Progressive might have to pay under Bogan’s own underinsured coverage.
Thus, even if the full $25,000 were to be offered by Nationwide (an unlikely event given the realities), Bogan still cannot settle with Daniels because Progressive will refuse to consent on the basis that its subrogation rights against Daniels would be destroyed. In addition, Bogan cannot settle for less than the $25,000 offered because then he has not exhausted Daniels’ policy limits with Nationwide. Pursuant to the Progressive policy, Bogan cannot sue Daniels to get a judgment binding on Progressive without first getting Progressive’s consent.
This dilemma places Bogan in a sea of quicksand from which he cannot extricate himself. If he settles without consent, then he loses his underinsured coverage. If he does not settle and sues, then Progressive will contend the suit was without its consent and thus it is not bound by a judgment in Bogan’s favor. Meanwhile, only Bogan (and to a lesser degree, Daniels) is being hurt by this whipsawing and it is he who has bought and paid for insurance coverage just to keep himself out of such a predicament.
Further complicating Bogan’s position (and those similarly situated) is the so-called “twelve months” clause. Progressive’s policy provides that “[n]o suit or action whatsoever or any proceeding * * * in arbitration shall be brought against the company for the recovery of any claim under this coverage unless as a condition precedent thereto, the insured * * * has fully complied with all of the terms of the policy and unless same is commenced within twelve months next after the date of the accident.” (Emphasis added.) The terms of the policy, of course, include exhaustion and subrogation. Given this court’s express approval of such contractually shortened suit limitation clauses in Colvin v. Globe American Cas. Co. (1982), 69 Ohio St. 2d 293, 23 O.O. 3d 281, 432 N.E. 2d 167, and Duriak v. Globe American Cas. Co. (1986), 28 Ohio St. 3d 70, 71, 28 OBR 168, 169, 502 N.E. 2d 620, 622, this means that Bogan would have to bring about exhaustion of Daniels’ policy limits without affecting Progressive’s subrogation rights (an impossible task) before he could file any action against Progressive to recover pursuant to his underinsured coverage. Further, this impossible task must be accomplished within twelve months from the date of the accident. Obviously, if Bogan does not have Progressive’s consent, he cannot exhaust Daniels’ policy limits without affecting Progressive’s subrogation rights. Therefore, these clauses take from an insured what the policy purports to give him and, thus, are in violation of the clear intent of R.C. 3937.18.
In my judgment, there is a solution. I would hold that where the clauses of a policy are in conflict and operate to deprive a policyholder of his rights, such clauses are void. Additionally, I would hold that a policyholder, in order to preserve his right to a trial by jury, may sue a tortfeasor without the consent of the policyholder’s carrier and that, pursuant to Handlovic, supra, the carrier and the policyholder would be bound *35by any judgment rendered. I would also permit the policyholder to proceed pursuant to the policy’s arbitration clause. Since the amount due Bogan (if anything), pursuant to his underinsured coverage, is in dispute, arbitration is proper.
Permitting a policyholder to proceed in these ways places the burden where it rightfully belongs. Nationwide, in not paying its policy limits, runs the risk of a judgment being rendered in excess of the amount for which it could have settled on behalf of Daniels, thereby raising a possible bad-faith claim by Daniels. Likewise, Progressive runs the risk of being bound by a judgment as to both liability and damages without having the opportunity to contest either. Thus, the impetus given to the fair processing of a policyholder’s claim would be compelling.
Accordingly, I would hold that a policyholder who is injured has the right to settle with the tortfeasor and to demand from his own company immediate arbitration of his claims. This would allow for speedy resolution of underinsured motorist claims without prejudice to either the policyholder or his insurance carrier. Since the majority decision does not provide such relief, I dissent.
Sweeney, J., concurs in the foregoing dissenting opinion.