Ohio Supreme Court OKs Geographic Limitations on UM Coverage

The Ohio Supreme Court handed down an opinion on Oct. 12 holding that the former uninsured motorist (UM) law did not prohibit insurers from limiting the geographic scope of UM coverage and that the State Farm policy in question could limit UM coverage to the United States and Canada.

In Fazio v. Hamilton Mutual Insurance Company, the plaintiff was struck by a dune buggy while walking on a beach in Mexico. She filed a claim for UM coverage under her own State Farm auto policy. State Farm denied the claim, citing the provision in plaintiff’s policy that limited the application of most policy coverages to the United States, its territories and possessions or Canada.

The plaintiff filed suit against State Farm and both parties filed motions for summary judgment. The court found in favor of the plaintiff after finding that the geographic limitation was invalid and unenforceable.

Appeals court

The Court of Appeals for the 5th District affirmed the judgment of the trial court, holding that the geographic limitation in the policy did not apply to UM coverage and, even if did, it was unenforceable because it violated the former UM law. The Court of Appeals determined that its judgment was in conflict with the decisions of the 6th, 8th and 10th Districts and certified these questions to the Supreme Court:

• May an insurer limit the geographic scope of uninsured motorist coverage or does such a limitation violate R.C. 3937.18?

• If an insurer may limit the geographic scope of uninsured motorist coverage, what is the geographic scope of the uninsured motorist coverage arising under the State Farm policy?

The Supreme Court reviewed the prior version of R.C. 3937.18 and found no minimum amount of geographic coverage and no express prohibition against limiting geographic scope.

Further, the Court found that the former statute addressing liability coverage only required such coverage for damages arising out of the ownership or use of a motor vehicle in the United States or Canada. That being the case, the plaintiff’s argument here would result in a situation in which auto liability coverage would be required in the United States and Canada while UM coverage under the same policy would be required throughout the world, according to the ruling.

Having answered the first certified question in the positive, the Court moved on to analyze the State Farm policy provision that limited application of “coverages you chose” to the United States and Canada.

The law in effect at the time of the accident did not require insureds to purchase UM coverage but rather only that the insurer offer UM coverage. An insured who selected the offer of UM coverage chose to include the coverage in the insured’s policy and thus the geographic limitation applied.