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Two-Year Policy Limit for Filing Uninsured Motorist Claims Upheld, Applies to Foreign State Crashes

2004-0193. Sarmiento v. Grange Mut. Cas. Co. , 2005-Ohio-5410.
Cuyahoga App. No. 82807, 2003-Ohio-6485. Judgment affirmed in part and reversed in part.
Moyer, C.J., Lundberg Stratton, O'Connor and O'Donnell, JJ., concur.
Lanzinger, J., concurs in part and dissents in part.
Resnick and Pfeifer, JJ., dissent.
Opinion: http://www.supremecourt.ohio.gov/rod/newpdf/0/2005/2005-Ohio-5410.pdf

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(Oct. 26, 2005) The Supreme Court of Ohio ruled today that a two-year time limit in an Ohio auto insurance policy for filing uninsured/underinsured motorist (UM/UIM) claims is reasonable and enforceable, including cases in which the injury triggering coverage took place in a foreign state and that state's statute of limitations for the claimant to file suit against the uninsured driver is longer than two years.

In a 4-3 decision written by Justice Evelyn Lundberg Stratton, the Court also held that an Ohio statute that “tolls” (delays the beginning of) the statute of limitations for filing lawsuits on behalf of a minor until the minor reaches age 18 does not delay the running of the contractual limitation period in an insurance policy.

The case involved insurance claims filed by seven Ohio residents (five adults and two minors) who were injured in a November 1998 traffic accident in Portales , New Mexico . The victims were injured when the pickup truck they were riding in was struck by another vehicle operated by Florencio Arballo, who was later determined to be an uninsured driver. The pickup truck was owned by Maria Sarmiento of Cleveland and covered by a Grange Mutual auto policy that provided UM/UIM coverage for occupants of insured vehicles.

The pickup truck occupants filed claims with Grange seeking uninsured motorist coverage under Mrs. Sarmiento's policy. Grange disputed those claims. The Sarmientos also filed a negligence suit against Arballo in New Mexico within that state's three-year deadline for filing such actions, preserving Grange's subrogation rights against the at-fault driver. When Grange and the Sarmientos were unable to resolve the disputed UM/UIM claims, the Sarmientos filed suit against the insurer in Cuyahoga County Common Pleas Court in November 2001. Grange moved for summary judgment on the basis that its policy included a two-year time limit for a policyholder to commence a legal action against the insurer on a disputed claim, and the Sarmientos had waited until three years after the accident to file suit. The trial court agreed that the two-year time limit in the policy was enforceable, and granted summary judgment against all of the claimants.

The claimants appealed that ruling to the 8th District Court of Appeals. They argued that, because the Sarmiento claimants were injured in New Mexico, which has a three-year statute of limitations for bringing personal injury actions, the trial court erred when it allowed Grange to enforce a policy limit that gave the claimants less time to sue their insurer than they had under the applicable state law to sue the at-fault driver. The claimants also raised the argument that, even if the two-year policy limit was enforceable against the injured adults, that time limit could not be invoked against the two victims who were minors because Ohio's “tolling” statute (R.C. 2305.16) delays the running of a statutory or contractual time limit for a minor to initiate a legal action until the minor reaches the age of 18.

In a 2-1 decision, the 8th District held that, because the claimants' suit against Grange was a contract dispute among parties who were all situated in Ohio and whose insurance contract was drafted in this state, it was subject to the two-year contractual time limit explicitly set forth in the policy language. The appellate panel also held, however, that the trial court's summary judgment against the two crash victims who were minors was improper, because the tolling statute prevented the two-year policy limitation from beginning to run against their right to sue until they turned 18. The minor plaintiffs' claims against Grange were remanded to the trial court for further proceedings. The parties appealed and cross-appealed the 8th District's rulings that were unfavorable to them to the Supreme Court.

Writing for the majority in today's decision, Justice Stratton agreed with the 8th District's holding that, while the Sarmientos' underlying negligence claim against the at-fault driver was a matter of tort law and subject to New Mexico's three-year statute of limitations for filing tort lawsuits, their action to enforce the UM/UIM coverage in the Grange insurance policy was a contractual dispute governed by Ohio contract law because “(t)he insurance contract was entered into in Ohio, it was issued to Maria Sarmiento, a resident of Ohio, and it covered vehicles principally garaged in Ohio.”

After noting that “(t)here is no dispute that the Sarmientos' policy clearly and unambiguously limits to two years the time in which an insured may sue Grange for UM/UIM benefits,” Justice Stratton went on to reject arguments that the Court's 1994 decision in Miller v. Progressive Casualty Co. invalidated as “unreasonable” and therefore unenforceable any policy limitation that gave a policyholder less time to sue his insurer for UM/UIM benefits than that person had to file a tort action against the driver who caused his injuries.

“We do not read Miller v. Progressive as broadly as the Sarmientos suggest we should,” wrote Justice Stratton. While the Miller court rejected a one-year policy limit as unreasonable in light of Ohio's two-year statute of limitations for filing tort actions, she said, “The court noted, however that a two-year limitation period would be a ‘reasonable and appropriate period of time' in which to require an insured to commence an action under the UM/UIM provisions of an insurance policy.” The majority went on to point out that, despite New Mexico 's three-year statute of limitations for torts, “nothing prevented the Sarmientos from commencing an action against Grange for UM benefits within the two-year contractual limitation period and then assigning their rights against (the at-fault driver) to Grange.”

With regard to the applicability of Ohio 's “tolling statute,” R.C. 2305.16, to the claims of the Sarmiento plaintiffs who were minors, Justice Stratton wrote that the statute is narrowly worded to “toll” only statutes of limitation created under specific sections of the revised code. While one of those sections is R.C. 2305.06, which sets a general “default” statute of limitations of 15 years for filing suits in written contract disputes, Justice Stratton noted that “when the parties (to a contract) agree to a shorter period in which to commence an action, the general statute of limitations for written contracts in R.C. 2305.06 does not apply.”

Because the Sarmientos' suit was based on the Grange policy, and that policy expressly required that an action against the insurer be brought within two years, Justice Stratton found that “the general statute of limitations in R.C. 2305.06 is irrelevant when the parties have agreed to a different contractual limitation period.” And since it is the applicability of R.C. 2305.06 that invokes the tolling statute, she concluded “(W)e hold that R.C. 2305.16 does not toll the limitation period in an insurance contract for persons who are minors at the time the cause of action accrues. If a minor seeks coverage as a third-party beneficiary of an insurance policy, the minor must comply with the policy's limitation period in which to commence an action.”

Justice Stratton's opinion was joined by Chief Justice Thomas J. Moyer and Justices Maureen O'Connor and Terrence O'Donnell.

Justice Paul E. Pfeifer entered a dissenting opinion, joined by Justice Alice Robie Resnick, in which he disputed the majority's interpretation of Miller v. Progressive . “In Miller … this court did not set forth a judicially created two-year limitations period for UM/UIM claims against insurers. The court did not pull ‘two years' from thin air and proclaim it good. The court determined in that case that a two-year period … was appropriate because in that case two years was the statutory period an insured had to bring a claim against the tortfeasor on the underlying claim,” wrote Justice Pfeifer.

Asserting that the Miller decision did not establish two years as a reasonable limitation period under all factual situations, Justice Pfeifer said the case instead “stood for the proposition that an insured should enjoy the same limitation period whether the tortfeasor was insured or not. … The contract provision in this case clearly diluted the rights of appellants under New Mexico law. Thus, the two-year limitation period in the contract should be declared void in this case.”

Justice Judith Ann Lanzinger entered a separate opinion in which she concurred with the majority's holding that a two-year policy limit for suing the insurer was enforceable, but dissented from its holding with regard to the tolling statute.

“The majority holds that because parties to a contract can agree to validly limit the time for bringing any action to less than the statutory period … this removes the action from R.C. 2305.16's tolling provisions,” wrote Justice Lanzinger. “For minors, the time period in which to bring an action can be reasonable and appropriate only if it begins after the minor reaches the age of majority. Therefore, while the minor must comply with the policy's limitation period in which to commence an action, he or she can be required to do so only after reaching the age of majority. To hold otherwise circumvents legislation enacted to protect the legal rights of minors.” Justices Resnick and Pfeifer concurred with the dissenting portion of Justice Lanzinger's opinion.

Brenda M. Johnson, 216.621.2300, for Francisco Sarmiento et al.

Timothy J. Fitzgerald, 216.241.5310, for Grange Mutual Casualty Co.