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Arn v. McLean2/18/2005
{ } "Nothing in this section prohibits an insurer from incorporating into a policy any changes that are permitted or required by this section or other sections of the Revised Code at the beginning of any policy period within the two-year period set forth in division (A) of this section."
{ } The uncodified law accompanying the addition of R.C. 3937.31(E) states the General Assembly's intent:
{ } "It is the intent of the General Assembly in amending Section 3937.31 of the Revised Code to make it clear that an insurer may modify the terms and conditions of any automobile insurance policy to incorporate changes that are permitted or required by that section and other sections of the Revised Code at the beginning of any policy period within the two-year period set forth in division (A) of that section." S.B. 267, Section 5, 148 Ohio Laws, Part V, 11386.
{ } According to State Farm, this amendment superseded the holding in Wolfe and allowed insurers to make changes in policy provisions during the two-year guarantee period. The significance of this point is that the umbrella policy issued to the McLeans was a one-year policy. State Farm could, therefore, modify or change the policy provisions when the policy was renewed at the beginning of the February 21, 2002 policy period. Any such changes would then apply to the determination of coverage at the time of the accident.
{ } State Farm claims that it did, in fact, make changes and that those changes were authorized by S.B. 97, which was effective October 31, 2001. At that time, S.B. 97 amended R.C. 3937.18(A) by deleting the requirement that insurers provide UM or UIM coverage. In the bill, the General Assembly also stressed its intent to eliminate the possibility of UM coverage being implied by operation of law and to eliminate "any requirement of a written offer, selection, or rejection form for uninsured motorist coverage, underinsured motorist coverage, or both uninsured and underinsured motorist coverages from any transaction for an insurance policy." S.B. 97, Sections 3(B)(2) and (4), effective October 31, 2001.
{ } As we mentioned earlier, State Farm included a paragraph on the February 2002 renewal certificate indicating that the named insured had been given the opportunity to purchase UM/UIM coverage in an amount equal to the bodily-injury limit but had declined coverage. According to State Farm, this paragraph incorporated previous rejections of UIM coverage and informed the McLeans that the coverage was not included in the policy.
{ } In contrast, the McLeans claim that UIM coverage arose by operation of law when the new policy was issued on February 21, 2001, that this contractual provision was effective for the two-year period guaranteed under Wolfe, and that the contractual rights that arose could not be divested by the subsequent enactment of S.B. 97. However, the flaw in this argument is that when the new policy was issued, the legislature had already acted to eliminate the two-year guarantee period, during which policy terms could not be altered. Consequently, when the policy was renewed on February 21, 2002, State Farm was free to modify the policy or to incorporate any changes that were then permitted or authorized by law.
{ } In response to State Farm's arguments, the McLeans contend that the amendment in S.B. 267 was not substantive and that Wolfe's two-year guaranteed period of coverage was not eliminated. In particular, the McLeans rely on the fact that the legislature retained the second sentence in R.C. 3937.31(A), which refers to cancellation. Specifically, this sentence says:
{ } "Where renewal is mandatory, 'cancellation,' as used in sections
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