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Driver of Chartered Bus Is Insured Under 'Hired Vehicle' Clause in College's Insurance Policy

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2009-2307.  Fed. Ins. Co. v. Executive Coach Luxury Travel, Inc., Slip Opinion No. 2010-Ohio-6300.
Allen App. Nos. 1-09-17 and 1-09-18, 2009-Ohio-5910.  Judgment of the court of appeals reversed, and cause remanded to the trial court.
Brown, C.J., and Pfeifer, O'Connor, and Cannon, JJ., concur.
Lanzinger, J., concurs in judgment only.
Lundberg Stratton and O'Donnell, JJ., dissent.
Timothy P. Cannon, J., of the Eleventh Appellate District, sitting for Cupp, J.
Opinion: http://www.supremecourt.ohio.gov/rod/docs/pdf/0/2010/2010-Ohio-6300.pdf

Video clip View oral argument video of this case.

(Dec. 28, 2010) The Supreme Court of Ohio ruled today that when an auto insurance policy issued to a university extends liability coverage to any person operating “with permission” a vehicle that is “owned, hired or borrowed” by the university, the policy language provides coverage for injuries resulting from a traffic accident in which a bus driver employed by a charter bus company was operating the company’s bus while it was under charter by the university.

The Court’s 5-2 decision, which reversed the ruling by the Third District Court of Appeals and remanded to the trial court for further proceedings, was authored by Justice Paul E. Pfeifer.

In March 2007, five baseball players from Bluffton University, the bus driver and the bus driver’s wife were killed and others were injured when a chartered bus in which they were traveling to a Florida tournament crashed in Atlanta, Ga. The university’s baseball coach had made arrangements to charter the bus from Executive Coach Luxury Travel Inc. and had agreed to Executive Coach’s suggestion that one of its drivers known to the coach, Jerome Niemeyer, be assigned as the driver for the Florida trip.

At the time of the crash, the university was covered by a primary auto insurance policy issued by the Hartford Insurance Company, an “umbrella” policy issued by American Alternative Insurance Company and an additional excess liability policy issued by the Federal Insurance Company. The terms and conditions of coverage under the umbrella and excess liability policies were the same terms and conditions of Bluffton’s primary auto insurance policy with Hartford. The Hartford policy included in its definition of an insured person, anyone “while using with (the university’s) permission” a covered vehicle that the university “owned, hired or borrowed.”

American Alternative and Federal Insurance both sought declaratory judgments that their policies did not provide coverage for the injuries suffered by the victims of the bus accident. The Allen County Court of Common Pleas granted summary judgment in favor of the insurers, holding that neither Niemeyer nor Executive Coach qualified as “insureds” under the university’s insurance policies because the university did not own and had not “hired” or “borrowed” the bus involved the accident, but rather had contracted with Executive Coach to provide transportation services in a vehicle owned by Executive Coach and driven by one of its employees. The accident victims and families of the deceased students, who were permitted to intervene in the declaratory judgment action as interested parties, appealed the trial court’s judgment. On review, the Third District Court of Appeals affirmed the grant of summary judgment in favor of the insurers.

The accident victims sought and were granted Supreme Court review of the Third District’s ruling

In today’s decision, the Court concluded that the lower courts erred when they determined that Niemeyer was not an “insured” under the terms of Bluffton’s insurance policies.

“Based on the facts of this case,” Justice Pfeifer wrote, “we conclude that Bluffton hired the bus when (baseball coach James) Grandey procured the use of the bus in exchange for payment to Executive. We also conclude that Niemeyer was driving the bus hired by Bluffton with Bluffton’s permission because Executive had sought and Grandey had granted a request to allow Niemeyer to drive the bus. Accordingly, we conclude that Niemeyer is an ‘insured’ pursuant to the omnibus clause.”

While the insurers argued that Niemeyer was an “unforeseen third party” and they never intended to provide coverage for him, Justice Pfeifer wrote: “We consider this contention disingenuous. ... The omnibus clause is broad. … We are not persuaded by the contention that the driver of a bus that Bluffton rented from a company in the business of renting buses is an unforeseen third party, when a clause in the insurance policy covers ‘anyone else’ driving a hired auto.”

In addition, the majority wasn’t persuaded by several cases cited by the insurers as defining the word “hire.” “We are not persuaded that these cases should be the law of Ohio. First, they are factually inapposite in that they involved the loading and hauling of construction equipment and materials, not the transportation of people. Second, even under this test, we would conclude that Bluffton hired the bus,” wrote Justice Pfeifer.

The majority opinion also addressed the issue of whether Niemeyer could be excluded from coverage once it was determined that he fit the definition of an insured. Of the five listed exceptions in the policy, the Court found that none applied.

Justice Pfeifer’s opinion was joined by Chief Justice Eric Brown and  Justice Maureen O’Connor and Judge Timothy P. Cannon of the 11th District Court of Appeals, who sat in place of  Justice Robert R. Cupp. Justice Judith Ann Lanzinger concurred in judgment only.

In Justice Evelyn Lundberg Stratton’s dissenting opinion, which was joined by Justice Terrence O’Donnell, she agreed with the lower courts that found Bluffton did not “hire” the Executive Coach bus because Executive selected the bus and hired the driver.

“The majority’s narrow interpretation expands the scope of coverage beyond what the parties to the insurance policy intended,” Justice Stratton wrote. “Today’s opinion unreasonably extends coverage to a third party and effectively opens the door for similar claims under other scenarios because the omnibus clause is standard in many insurance policies.”

Steven B. Ayers, 614.229.4535 and D. John Travis, 216.241.5310, for American Alternative Insurance Corp and Federal Insurance Co.

James E. Yavorcik, 419.243.7243; Steven R. Smith, 419.243.2100, for the Appellants (among multiple counsel).