[Cite as Allstate Ins. Co. v. Smeltzer, 2011-Ohio-2632.]
STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT )
ALLSTATE INSURANCE CO. C.A. No. 25136
Appellant
v. APPEAL FROM JUDGMENT ENTERED IN THE ROBERT SMELTZER, et al. COURT OF COMMON PLEAS COUNTY OF SUMMIT, OHIO Appellees CASE No. CV 2007-06-4107
DECISION AND JOURNAL ENTRY
Dated: June 1, 2011
BELFANCE, Presiding Judge.
{¶1} Appellant, Allstate Insurance Company, appeals the order of the Summit County
Court of Common Pleas that granted summary judgment to Appellees, Robert and Mary
Smeltzer. Because the trial court did not properly determine a threshold question in the course of
deciding that the Smeltzers are entitled to judgment as a matter of law, this Court reverses and
remands the case for consideration of the Smeltzers’ counterclaim.
{¶2} Mary Smeltzer was injured in an automobile accident on February 20, 2002, while
a passenger in a car operated by her husband, Robert Smeltzer. The Smeltzers were insured by
Allstate. Three lawsuits followed. In the first, a jury determined that Mr. Smeltzer and two
other drivers were each one-third at fault for the accident and entered judgment against each,
jointly and severally. Cargo Transporters, which employed one of the tortfeasors, satisfied the
judgment. In the second lawsuit, Cargo Transporters sought contribution from Mr. Smeltzer
who, in turn, sought coverage from Allstate for the contribution claim. 2
{¶3} In the third lawsuit, which is at issue in this appeal, Allstate sought a declaratory
judgment that it did not have an obligation to provide indemnification and defense for the
contribution claim under the Smeltzers’ liability coverage. The Smeltzers counterclaimed,
requesting a declaration that Allstate had “the contractual obligation to indemnify Mr. Smeltzer
for the damages to his wife pursuant to the terms of the underinsured/uninsured motorist benefits
of their policy.”
{¶4} Allstate and the Smeltzers filed cross motions for summary judgment. Allstate
argued, in part, that Mr. Smeltzer was excluded from liability coverage under a household
member exclusion that provided that “Allstate will not pay for any damages an insured person is
legally obligated to pay because of * * * bodily injury to any person related to an insured person
by blood, marriage or adoption and residing in that person’s household.” It also argued that Mrs.
Smeltzer was not entitled to UM coverage. Specifically, Allstate argued that the automobile that
Mr. Smeltzer was driving at the time of the accident was not an “uninsured auto” because it was
“a motor vehicle * * * insured for bodily injury liability under the Automobile Liability
Insurance of [the Smeltzers’] policy.”
{¶5} In their motion for summary judgment, the Smeltzers’ argued that the uninsured
motorist coverage applied not on the theory that Mr. Smeltzer was entitled to indemnification
under the uninsured motorist coverage for what he paid to Cargo Transporters, but under the
theory that Mrs. Smeltzer had not been made whole:
“On March 7, 2008, Judge Mary Spicer, the Judge for the contribution [a]ction, entered a Judgment Order holding that Robert Smeltzer was liable for $36,921.25 to Cargo Transporters. As a result, the Smeltzers have been forced to take out a loan on their home to satisfy this judgment, incurring not only the principle amount, but also the accrual of interest and bank fees. Prior to this satisfaction, Robert Smeltzer was forced to go through the public humiliation of wage- garnishment hearing as well. Because Mary has borne out these expenses with 3
her husband, in no way has she been made whole as to the judgment she obtained for her injuries.”
The Smeltzers extended this argument to Mr. Smeltzer under a theory of subrogation, arguing
that “[b]ecause Cargo Transporters, and ultimately Robert Smeltzer, paid Mary’s damages as
determined by the original lawsuit, they are now subrogated to any benefits Mary might receive
through her UM/UIM policy.”
{¶6} The trial court granted summary judgment to Allstate on its claim regarding the
applicability of the liability insurance provisions of the insurance policy. With respect to the
Smeltzers’ counterclaim regarding uninsured motorist coverage, the trial court granted summary
judgment to the Smeltzers and declared that “Defendant Mary Smeltzer is entitled to uninsured
motorist coverage under the insurance policy and Plaintiff Allstate Insurance Company is
obligated to provide said coverage.” The trial court based its decision on its conclusion that the
exclusion from uninsured motorist coverage upon which Allstate relied was invalid.
{¶7} On appeal, Allstate has argued that the trial court erred by determining that Mrs.
Smeltzer was entitled to uninsured motorist coverage for Cargo Transporters’ contribution claim
because the trial court applied the wrong law to its analysis of the uninsured motorist coverage
exclusion. We do not reach the merits of this argument, however, because the trial court failed to
address the crucial threshold issue in this case: whether, under any of the theories argued by the
Smeltzers, the judgment in the contribution case falls within the scope of the uninsured motorist
coverage in the first place.1
1 We note that the Smeltzers did not amend their counterclaim to request a declaratory judgment under any additional theory beyond Mr. Smeltzer’s claim of indemnification. 4
{¶8} This Court reviews an award of summary judgment de novo. Grafton v. Ohio
Edison Co. (1996), 77 Ohio St.3d 102, 105. According to Civ.R. 56(C), summary judgment is
appropriate when “there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.”
{¶9} Exclusions to insurance coverage are only relevant to the extent that coverage
exists in the first place. For that reason, the threshold question in an uninsured motorist case is
whether the terms of the coverage apply on their face to the claim at issue. This is a significant
question in this case because it is not clear that uninsured motorist coverage applies to the
Smeltzers’ counterclaim as there are several key terms that are not defined in the policy.
{¶10} It is clear that the Smeltzers want Allstate to pay them for the judgment that Mr.
Smeltzer paid to Cargo Transporters in the contribution case. Their theory of how they are
entitled to uninsured motorist coverage is less clear. The Smeltzers did not seek a declaration
that there is uninsured motorist coverage for Mrs. Smeltzer’s physical injuries. In fact, the
parties agree that Mrs. Smeltzer’s judgment against the tortfeasors was satisfied in full by Cargo
Transporters. In their counterclaim for declaratory judgment, the Smeltzers requested a
declaration that Mr. Smeltzer was entitled to indemnification from Allstate for the payment to
Cargo Transporters. In their later filings, however, they argued that Mrs. Smeltzer bore this
financial loss and that Mr. Smeltzer was subrogated to her right of recovery under the uninisured
motorist coverage.
{¶11} In this respect, we note that indemnification and subrogation are “distinctly
different concepts[.]” See, generally, Essad v. Cincinnati Cas. Co./The Cincinnati Ins. Cos, 7th
Dist. No. 00 CA 207, 2002-Ohio-1947, at ¶11. “Indemnification occurs when one who is
Free access — add to your briefcase to read the full text and ask questions with AI
[Cite as Allstate Ins. Co. v. Smeltzer, 2011-Ohio-2632.]
STATE OF OHIO ) IN THE COURT OF APPEALS )ss: NINTH JUDICIAL DISTRICT COUNTY OF SUMMIT )
ALLSTATE INSURANCE CO. C.A. No. 25136
Appellant
v. APPEAL FROM JUDGMENT ENTERED IN THE ROBERT SMELTZER, et al. COURT OF COMMON PLEAS COUNTY OF SUMMIT, OHIO Appellees CASE No. CV 2007-06-4107
DECISION AND JOURNAL ENTRY
Dated: June 1, 2011
BELFANCE, Presiding Judge.
{¶1} Appellant, Allstate Insurance Company, appeals the order of the Summit County
Court of Common Pleas that granted summary judgment to Appellees, Robert and Mary
Smeltzer. Because the trial court did not properly determine a threshold question in the course of
deciding that the Smeltzers are entitled to judgment as a matter of law, this Court reverses and
remands the case for consideration of the Smeltzers’ counterclaim.
{¶2} Mary Smeltzer was injured in an automobile accident on February 20, 2002, while
a passenger in a car operated by her husband, Robert Smeltzer. The Smeltzers were insured by
Allstate. Three lawsuits followed. In the first, a jury determined that Mr. Smeltzer and two
other drivers were each one-third at fault for the accident and entered judgment against each,
jointly and severally. Cargo Transporters, which employed one of the tortfeasors, satisfied the
judgment. In the second lawsuit, Cargo Transporters sought contribution from Mr. Smeltzer
who, in turn, sought coverage from Allstate for the contribution claim. 2
{¶3} In the third lawsuit, which is at issue in this appeal, Allstate sought a declaratory
judgment that it did not have an obligation to provide indemnification and defense for the
contribution claim under the Smeltzers’ liability coverage. The Smeltzers counterclaimed,
requesting a declaration that Allstate had “the contractual obligation to indemnify Mr. Smeltzer
for the damages to his wife pursuant to the terms of the underinsured/uninsured motorist benefits
of their policy.”
{¶4} Allstate and the Smeltzers filed cross motions for summary judgment. Allstate
argued, in part, that Mr. Smeltzer was excluded from liability coverage under a household
member exclusion that provided that “Allstate will not pay for any damages an insured person is
legally obligated to pay because of * * * bodily injury to any person related to an insured person
by blood, marriage or adoption and residing in that person’s household.” It also argued that Mrs.
Smeltzer was not entitled to UM coverage. Specifically, Allstate argued that the automobile that
Mr. Smeltzer was driving at the time of the accident was not an “uninsured auto” because it was
“a motor vehicle * * * insured for bodily injury liability under the Automobile Liability
Insurance of [the Smeltzers’] policy.”
{¶5} In their motion for summary judgment, the Smeltzers’ argued that the uninsured
motorist coverage applied not on the theory that Mr. Smeltzer was entitled to indemnification
under the uninsured motorist coverage for what he paid to Cargo Transporters, but under the
theory that Mrs. Smeltzer had not been made whole:
“On March 7, 2008, Judge Mary Spicer, the Judge for the contribution [a]ction, entered a Judgment Order holding that Robert Smeltzer was liable for $36,921.25 to Cargo Transporters. As a result, the Smeltzers have been forced to take out a loan on their home to satisfy this judgment, incurring not only the principle amount, but also the accrual of interest and bank fees. Prior to this satisfaction, Robert Smeltzer was forced to go through the public humiliation of wage- garnishment hearing as well. Because Mary has borne out these expenses with 3
her husband, in no way has she been made whole as to the judgment she obtained for her injuries.”
The Smeltzers extended this argument to Mr. Smeltzer under a theory of subrogation, arguing
that “[b]ecause Cargo Transporters, and ultimately Robert Smeltzer, paid Mary’s damages as
determined by the original lawsuit, they are now subrogated to any benefits Mary might receive
through her UM/UIM policy.”
{¶6} The trial court granted summary judgment to Allstate on its claim regarding the
applicability of the liability insurance provisions of the insurance policy. With respect to the
Smeltzers’ counterclaim regarding uninsured motorist coverage, the trial court granted summary
judgment to the Smeltzers and declared that “Defendant Mary Smeltzer is entitled to uninsured
motorist coverage under the insurance policy and Plaintiff Allstate Insurance Company is
obligated to provide said coverage.” The trial court based its decision on its conclusion that the
exclusion from uninsured motorist coverage upon which Allstate relied was invalid.
{¶7} On appeal, Allstate has argued that the trial court erred by determining that Mrs.
Smeltzer was entitled to uninsured motorist coverage for Cargo Transporters’ contribution claim
because the trial court applied the wrong law to its analysis of the uninsured motorist coverage
exclusion. We do not reach the merits of this argument, however, because the trial court failed to
address the crucial threshold issue in this case: whether, under any of the theories argued by the
Smeltzers, the judgment in the contribution case falls within the scope of the uninsured motorist
coverage in the first place.1
1 We note that the Smeltzers did not amend their counterclaim to request a declaratory judgment under any additional theory beyond Mr. Smeltzer’s claim of indemnification. 4
{¶8} This Court reviews an award of summary judgment de novo. Grafton v. Ohio
Edison Co. (1996), 77 Ohio St.3d 102, 105. According to Civ.R. 56(C), summary judgment is
appropriate when “there is no genuine issue as to any material fact and that the moving party is
entitled to judgment as a matter of law.”
{¶9} Exclusions to insurance coverage are only relevant to the extent that coverage
exists in the first place. For that reason, the threshold question in an uninsured motorist case is
whether the terms of the coverage apply on their face to the claim at issue. This is a significant
question in this case because it is not clear that uninsured motorist coverage applies to the
Smeltzers’ counterclaim as there are several key terms that are not defined in the policy.
{¶10} It is clear that the Smeltzers want Allstate to pay them for the judgment that Mr.
Smeltzer paid to Cargo Transporters in the contribution case. Their theory of how they are
entitled to uninsured motorist coverage is less clear. The Smeltzers did not seek a declaration
that there is uninsured motorist coverage for Mrs. Smeltzer’s physical injuries. In fact, the
parties agree that Mrs. Smeltzer’s judgment against the tortfeasors was satisfied in full by Cargo
Transporters. In their counterclaim for declaratory judgment, the Smeltzers requested a
declaration that Mr. Smeltzer was entitled to indemnification from Allstate for the payment to
Cargo Transporters. In their later filings, however, they argued that Mrs. Smeltzer bore this
financial loss and that Mr. Smeltzer was subrogated to her right of recovery under the uninisured
motorist coverage.
{¶11} In this respect, we note that indemnification and subrogation are “distinctly
different concepts[.]” See, generally, Essad v. Cincinnati Cas. Co./The Cincinnati Ins. Cos, 7th
Dist. No. 00 CA 207, 2002-Ohio-1947, at ¶11. “Indemnification occurs when one who is
primarily liable is required to reimburse another who has discharged a liability for which that 5
other is only secondarily liable.” Krasny-Kaplan Corp. v. Flo-Tork, Inc. (1993), 66 Ohio St.3d
75, 78. By implication, then, Mr. Smeltzer’s request for declaratory judgment urged the trial
court to find that it was Allstate that was primarily liable for payment of the contribution claim
and that Mr. Smeltzer was only secondarily so. See id.
{¶12} While indemnification involves reimbursement of the party who paid a liability
by virtue of their contractual relationship, see id., subrogation allows one party to stand in the
place of another to succeed to that person’s legal rights. See State, Dept. of Taxation v. Jones
(1980), 61 Ohio St.2d 99, 101. Conventional subrogation arises out of a contractual relationship
between the parties in question. Midland Title Sec., Inc. v. Carlson, 171 Ohio App.3d 678, 2007-
Ohio-1980, at ¶17. Equitable subrogation, however, does not arise by contract, but by virtue of
the relationship between the parties. American Ins. Co. v. Ohio Bur. of Workers Comp. (1991),
62 Ohio App.3d 921, 924. It is “‘essentially a theory of unjust enrichment’ * * * [that] shifts a
loss from one merely secondarily liable on a debt to one more primarily liable on the debt who in
equity should have paid it in the first instance.” Id., quoting Ridge Tool Co. v. Silva (1986), 33
Ohio App.3d 260, 261. Because the focus of Mr. Smeltzer’s arguments regarding subrogation is
his wife, with whom he does not have a contractual right of subrogation, it appears that these
arguments are based on equitable subrogation. “In order to be entitled to equitable subrogation,
‘the equity must be strong and the case clear.’” Washington Mut. Bank, FA v. Aultman, 172
Ohio App.3d 584, 2007-Ohio-3706, at ¶24, quoting Jones, 61 Ohio St.2d at 102.
{¶13} We reiterate that the Smeltzers’ counterclaim as pleaded requested a declaration
that Mr. Smeltzer was entitled to payment under the uninsured motorists portion of their policy
on a theory of indemnification alone. In any event, the threshold legal issue in this case is
whether the uninsured motorist coverage is implicated. If the uninsured motorist coverage is not 6
implicated in the first place, any discussion of the exclusions from coverage that may arise
thereunder is unnecessary and premature.
{¶14} The trial court, however, did not consider the applicability of uninsured motorist
coverage in the first instance. According to the policy of insurance that is in the record before
this Court, uninsured motorists coverage applies to “damages which an insured person * * * is
legally entitled to recover from the owner or operator of an uninsured auto * * * because of
bodily injury sustained by an insured person[.]” The November 2, 2001, endorsement contains
the same language. Neither the general definition section of the policy nor the definition section
specific to uninsured motorist coverage defines “damages.”
{¶15} This Court has refused to consider a matter for the first time on appeal when the
trial court did not “consider alternate grounds in support of a motion for summary judgment[]” or
“failed to consider the evidence within the proper legal context.” Guappone v. Enviro-Cote, Inc.,
9th Dist. No. 24718, 2009-Ohio-5540, at ¶12, citing B.F. Goodrich Co. v. Commercial Union
Ins., 9th Dist. No. 20936, 2002-Ohio-5033. Because the trial court has yet to address the
threshold issue in determining whether the Smeltzers were entitled to judgment as a matter of
law, this appeal fits squarely within that framework. Accordingly, this Court declines to address
the merits of Allstate’s argument regarding the applicability of S.B. 97 as these arguments
related to the exclusions to coverage. Nonetheless, we conclude that the trial court erred by
determining that the Smeltzers were entitled to judgment on their counterclaim for declaratory
judgment as a matter of law because it did so without determining the threshold issue of whether
the counterclaim falls within the scope of the uninsured motorists coverage at issue. Although a
similar analysis could be employed with respect to Allstate’s complaint for declaratory judgment
under the liability portions of the policy, we note that the Smeltzers have not appealed the trial 7
court’s order to the extent that it granted Allstate’s motion for summary judgment. In fact, the
Smeltzers characterized uninsured motorist coverage as the “one material issue in the case[.]”
As such, liability coverage is beyond the scope of this opinion.
{¶16} Allstate’s assignment of error is sustained. The order of the trial court that
granted summary judgment to the Smeltzers on their counterclaim is reversed. This Court
remands the matter to the trial court for further proceedings consistent with this opinion.
Specifically, the matter is remanded for proceedings necessary to determine whether the
contribution sought by Cargo Transporters from Mr. Smeltzer falls within the scope of uninsured
motorists coverage.
Judgment reversed and cause remanded.
There were reasonable grounds for this appeal.
We order that a special mandate issue out of this Court, directing the Court of Common
Pleas, County of Summit, State of Ohio, to carry this judgment into execution. A certified copy
of this journal entry shall constitute the mandate, pursuant to App.R. 27.
Immediately upon the filing hereof, this document shall constitute the journal entry of
judgment, and it shall be file stamped by the Clerk of the Court of Appeals at which time the
period for review shall begin to run. App.R. 22(E). The Clerk of the Court of Appeals is
instructed to mail a notice of entry of this judgment to the parties and to make a notation of the
mailing in the docket, pursuant to App.R. 30. 8
Costs taxed to Appelles.
EVE V. BELFANCE FOR THE COURT
CARR, J. CONCURS
WHITMORE, J. CONCURS, IN PART, AND DISSENTS, IN PART, SAYING:
{¶17} Although I concur in the majority’s opinion to the extent that it reverses the trial
court’s judgment in favor of the Smeltzers, I dissent from the rest of the opinion.
{¶18} Mrs. Smeltzer was injured in a car that fell under the definition of what “an
uninsured auto is not” in the Smeltzers’ uninsured motorist coverage. Because this analysis is
dispositive of the case, I would not engage in the majority’s analysis. I conclude that the
endorsement provided by Allstate placed the Smeltzers on notice that the policy language had
changed, and I would reverse the trial court’s decision on that basis.
{¶19} In Advent v. Allstate Ins. Co., 118 Ohio St.3d 248, 2008-Ohio-2333, the Ohio
Supreme Court considered whether amendments to R.C. 3937.18 contained in S.B. 97 could be
incorporated into an insurance contract at a renewal period during the two-year guarantee period
as permitted by S.B. 267. The Advents carried a policy of automobile insurance dating from
March 12, 1989. The policy contained liability coverage limits of $300,000 per person and
$500,000 per occurrence, but UM coverage limits of $50,000 per person and $100,000 per
occurrence. Apart from the amendments contained in S.B. 97, therefore, UM coverage up to the
general policy limits of $300,000/$500,000 would have arisen as a matter of law by application
of R.C. 3937.18(A). Advent at ¶9-10. 9
{¶20} Mrs. Advent died as the result of an automobile accident on September 28, 2002.
The relevant two-year guarantee period began on March 12, 2001, six months after the effective
date of S.B. 267 and seven months before the effective date of S.B. 97. The contract renewed at
six-month intervals and, on March 12, 2002, just over six months before the accident, Allstate
included an “Important Notice” of policy changes with the Advents’ renewal. The notice
informed the Advents that “[t]he coverage limits you have chosen for Uninsured Motorists
Insurance for Bodily Injury are less than your limits for Bodily Injury under Automobile
Liability Insurance[,]” and “the Advents were advised to contact their agent or Allstate if they
wished to increase their UM limits.” Advent at ¶16. Mr. Advent ultimately made a claim against
Allstate under their own insurance policy for $200,000 “on the theory that by operation of law,
the amount of UM coverage was equivalent to his policy’s liability limits of $300,000, subject to
an offset of the $100,000 recovered from the tortfeasor’s policy.” Id. at ¶4. In other words, Mr.
Advent’s position was that Allstate could not incorporate the S.B. 97 amendments into their
insurance policy at the March 2002 policy renewal and that, under S.B. 267, UM coverage still
arose in the general policy limits as a matter of law.
{¶21} The Supreme Court held that “insurers may incorporate any changes permitted or
required by the Revised Code at the beginning of any policy-renewal period on or after October
31, 2001 (the effective date of S.B. 97) within the policy’s two-year guarantee period that began
on or after September 21, 2000 (the effective date of S.B. 267).” Id. at ¶11. Applying this
conclusion to Mr. Advent’s claim, the Court concluded that Allstate could incorporate changes
permitted by S.B. 97 into the Advents’ policy at the March 2002 policy renewal. The Court also
concluded that the notices that accompanied the renewal “contained sufficient information to put
the Advents on notice that the provisions regarding UM coverage in the policy had changed, that 10
the UM coverage was as stated on the policy declarations page, and that action on their part was
necessary to modify the stated UM limits.” Id. at ¶18. Accordingly, the Court determined that
R.C. 3937.18 did not require higher UM coverage limits to be implied as a matter of law.
{¶22} In this case, a two-year guarantee period on the Smeltzers’ policy with Allstate
began on November 2, 2000, less than two months after the effective date of S.B. 267, which
provided that changes in the law permitted by R.C. 3937.18 could be incorporated into an
insurance policy at any renewal during a two-year guarantee period. A six-month renewal of the
Smeltzers’ policy occurred on May 2, 2001, and the amendments contained in S.B. 97 became
effective on October 31, 2001. Another six-month renewal occurred on November 2, 2001, just
over three months before the accident at issue. As provided by R.C. 3937.31(E), pursuant to
S.B. 267, any change permitted by S.B. 97 could be incorporated into the Smeltzers’ policy with
Allstate at the November 2, 2001 renewal or any subsequent renewal within the two-year
guarantee period. See Advent at ¶11.
{¶23} Allstate’s November 2, 2001 renewal policy endorsement provided that “An
Uninsured Auto Is Not *** a motor vehicle which is insured for bodily injury liability under the
Automobile Liability Insurance of this policy.” Because R.C. 3937.18, as amended by S.B. 97,
provided that UM coverage could be subject to “terms and conditions that preclude coverage ***
included but not limited to” those specifically stated in the statute, this was a permitted limitation
to the UM coverage provided therein. According to R.C. 3937.18 and Advent, therefore, Allstate
could incorporate this exclusion into the Smeltzers’ contract of insurance at any six-month
renewal, including those within the two-year guarantee period recognized by Wolfe v. Wolfe
(2000), 88 Ohio St.3d 246. 11
{¶24} The November 2, 2001, policy endorsement that Allstate sent to the Smeltzers
informed them that “[t]he following endorsement changes your policy” and instructed them to
“read this document carefully and keep it with your policy.” Underneath this statement, in bold
and capital letters, is the heading “Amendment of Policy Provisions – Ohio.” Along with other
changes to the policy, the definition of what “an uninsured auto is not” was clearly set forth on
page two of the endorsement. Adequate notice of the policy change, therefore, was given by
virtue of the notice itself. Applying this conclusion to the Smeltzers’ claim, it is clear that the
exclusion eliminates whatever coverage they might arguably have had under the UM portion of
the policy.
{¶25} For this reason, I conclude that application of the exclusion to the Smeltzers’
claim is dispositive of this case, and I would reverse the trial court’s judgment on that basis.
APPEARANCES:
DAVID L. LESTER, Attorney at Law, for Appellant.
HENRY W. CHAMBERLAIN, Attorney at Law, for Appellees.
PAUL W. FLOWERS, Attorney at Law, for Appellees.