AIA Says Sixth Circuit Decision on UM/UIM Coverage Upholds Intent of Ohio Legislature

In a decision praised by the American Insurance Association (AIA), the Sixth Circuit of the U.S. Court of Appeals has affirmed a lower court’s ruling that a commercial general liability (CGL) policy with a “parking attendant” or “valet parking” exception to the automobile exclusion is not a motor vehicle liability policy of insurance subject to the mandatory offer of uninsured/underinsured motorist (UM/UIM) coverage previously required by Ohio law.

“Like the District Court before it, the Sixth Circuit has rendered a decision that is consistent with Ohio public policy surrounding UM/UIM coverage,” said David Snyder, AIA vice president and assistant general counsel. “The Ohio legislature has dealt decisively with the issue of the expansion of UM/UIM coverage, and AIA is heartened that the Court has upheld the legislature’s intent.” AIA filed a brief of amicus curiae with the Sixth Circuit in November 2001, urging it to uphold the District Court’s ruling.

In Lee-Lipstreu v. Chubb, the plaintiffs, Edith Lee-Lipstreu and Edwin Lipstreu, argued that the defendant was obligated to pay them underinsured motorist benefits under the CGL policy of Edith’s employer, National City Bank. The CGL policy expressly excluded coverage for bodily injury or damage arising out of the operation of a motor vehicle, but included an incidental coverage designed to protect National City from cases in which it may have been liable to third parties who parked on or adjacent to its property. Plaintiffs argued that this incidental parking lot coverage transformed the CGL policy into a commercial automobile liability policy under which UM/UIM coverage was required by law to have been offered. The automobile accident in which Edith Lee-Lipstreu was injured did not involve the parking of a vehicle on National City’s property, nor did it occur in the course of the plaintiff’s employment.

The Sixth Circuit upheld the District Court’s ruling that, under Davidson v. Motorists Mutual, in which the Court found that a homeowners insurance policy that includes incidental coverage for golf carts, riding lawnmowers and other motorized vehicles, is not an automobile insurance policy for purposes of collecting UM/UIM benefits.

In upholding the District Court’s decision, the Court wrote:

“Besides the deference we owe to the Ohio Court of Appeals on the issue before us, we think the reasoning in Szekeres is sound and, applying Davidson, we conclude that the ‘parking attendant’ provision in the . . . policy did not create automobile liability coverage . . . and therefore did not contain uninsured and underinsured motorist coverage.”

In 2001, the Ohio General Assembly passed SB 97, a statute repealing the mandatory offer of UM/UIM coverage on commercial and personal automobile policies. The statute was introduced in response to a series of decisions by the Ohio Supreme Court that greatly expanded the scope of UM/UIM coverage beyond its original intent.

“Ohio insurance policyholders – businesses and individuals alike – need to know that their contracts mean what they intended them to mean,” Snyder said. “This decision is another step towards a more stable and predictable insurance marketplace in the Buckeye State.”