Csulik v. Nationwide Mutual Insurance , 88 Ohio St. 3d 17 ( 2000 )

Pfeifer, J.

We hold that the phrase “due by law” in the Nationwide policy regarding UM/UIM coverage is ambiguous, susceptible of more than one interpretation, and that the ambiguity must be construed strictly against the insurer and liberally in favor of the insured.

The phrase at issue in this case is:

“We will pay compensatory damages, including derivative claims, which are due by law to you or a relative from the owner or driver of an uninsured motor vehicle because of bodily injury suffered by you or a relative.” (Emphasis added.) The Nationwide policy carried a virtually identical clause for passengers.

We agree with the trial court that the contract fails to specifically set forth what “due by law” means, i.e., whether Nationwide must pay what is due by the law of the state where the accident occurred or due by Ohio law.

Nationwide could have explicitly set forth that “due by law” meant damages subject to the UM/UIM laws of the home state of the insured. In at least four other portions of the policy, Nationwide specifically sets forth which state’s law applies.

In Section 3(a) of the General Policy Conditions, the policy provides:

“[A]ny terms of the policy which may be in conflict with statutes of the state in which the policy is issued are hereby amended to conform.” (Emphasis added.)

Endorsement 2352, an Uninsured Motorists Coverage endorsement issued to Ohio insureds, contains an arbitration clause that reads in pertinent part:

“5. When used, arbitration of uninsured motorists claims is binding on the insured and the company only if the award is within the limits of state financial responsibility laws where your auto is principally garaged.” (Emphasis added.)

Section 9 of the General Policy Conditions explicitly sets forth the statute of limitations for uninsured motorist claims:

“Under the Uninsured Motorists Coverage, legal action against us must begin within the time limit allowed for bodily injury or death actions in the state where the accident occurred.” (Emphasis added.)

Endorsement 2251A, an amendatory endorsement issued to Ohio insureds relating to statutes of limitations, reads:

“General Policy Condition 9 is replaced in its entirety to read:

“ * * *

“Under the Uninsured Motorists coverage, any * * * legal action against us must begin within a certain time period. * * * [T]he proper papers for any other legal action against us must be filed, within two years or the time limit allowed by law:

“a) for death actions if the claim involves the death of an insured; or

“b) for bodily injury actions if the claim involves injury to an insured but not death.

“The laws of the state in which the accident occurred will determine these time limits.” (Emphasis added.)

Thus, Nationwide demonstrated in the same policy the ability to specifically set forth which state’s law controlled certain policy provisions. Certainly, Nationwide could have clarified the “due by law” language.

But as written, the “due by law” phrase is subject to more than one interpretation. The phrasing itself is imprecise. Also, given the treatment of underinsured motorist claims in the contract, the language can easily be interpreted as embracing the law of the accident state. Under the contract, one of the most elemental factors of the insured/insurer relationship vis-a-vis an uninsured motorist claim, the statute of limitations, is controlled by the law of the state where the accident occurred. That policy language takes the insured and insurer outside the state where the contract was executed.

Thus, despite Nationwide’s argument that the payment of uninsured claims is a contractual matter subject to the law of the state where the contract was entered into, its own contract sets forth a key jurisdictional element, i.e., time limits, as being subject to the law of the state of the accident. That contract language sets the stage for the insured’s claim against the insurer to be controlled by the law of the accident state. No contract language states otherwise. One could logically conclude that the law of the accident state also determines plaintiffs rights under the policy.

This case is simply one of an ambiguous clause in a particular insurance contract. As this court has often held: “Where provisions of a contract of insurance are reasonably susceptible of more than one interpretation, they will be construed strictly against the insurer and liberally in favor of the insured.” King v. Nationwide Ins. Co. (1988), 35 Ohio St.3d 208, 519 N.E.2d 1380, syllabus. That fundamental holding negates Nationwide’s argument that this court should employ a choice-of-law analysis to determine whether Pennsylvania or Ohio law applies in this case. A choice-of-law analysis might be appropriate in regard to an ordinary contract, but this is an insurance contract. Insurance contracts are a special breed, and ambiguous clauses are resolved in favor of the insured.

We accordingly reverse the judgment of the court of appeals and remand the cause to the trial court for a determination of plaintiffs’ rights under the policy pursuant to Pennsylvania law.

Judgment reversed

and cause remanded.

Resnick and F.E. Sweeney, JJ., concur. Douglas, J., concurs separately in judgment. Moyer, C.J., Cook and Lundberg Stratton, JJ., dissent.