Ferrando Decision “Disappointing, But Not Surprising,” Alliance Says

The Alliance of American Insurers, which had filed an amicus brief in the Ferrando uninsured motorist case with the Ohio Supreme Court, said the decision “to overturn an appellate court ruling related to underinsured motorist (UIM) coverage inappropriately grants coverage when there has been a material breach of the policy’s terms and will result in further disruption of the state’s auto insurance market.”

In its opinion, the Ohio Supreme Court held that when an insurer’s denial of UIM coverage is premised upon either the insured’s breach of a consent-to-settle or a prompt-notice provision in the policy, the insurer is relieved of the obligation to provide coverage only if it is in fact prejudiced by such a breach. (See IJ Website Dec. 30)

Ann Spragens, Alliance senior VP and general counsel, commented that, “Given the Ohio Supreme Court’s spotty record on the uninsured/underinsured motorist issue, the ruling isn’t surprising. However, it is disappointing. The court’s decision will almost certainly lead to the reopening of closed UIM claims and the filing of numerous new claims on policies that expired years ago.”

“In addition to the added administrative and court costs this will incur, it probably will make insurers think twice about doing business in a jurisdiction in which seemingly clear contract language can be interpreted so broadly, she added.”

She noted that the “one bright spot in all this is that, with the impending change in the Ohio Supreme Court’s makeup from November’s general election, this decision hopefully will be the last in a long line of cases greatly expanding the scope of UIM coverage. Insurers and other businesses now will have a fighting chance that the court will make its decision on the unbiased facts, rather than politics.”

“The wording in the insurance contract is clear that an insured cannot sign away an insurer’s right to subrogate against a third party without the insurer’s consent,” noted Joyce Kraeger, an Alliance attorney. “The purpose of a subrogation clause is to prevent an insured from extinguishing any right of subrogation an insurer would have against a tortfeasor. Ferrando’s failure to give any notice or to seek the consent of the insurer to the proposed settlement with Marvin [the defendant in the original accident case] is a material breach of the contract.”

Topics Carriers Ohio