Contractual Limitation of Action Clause Upheld –
Contractual Limitation Supersedes Filing Jurisdiction Statute of Limitations – Contractual Limitation Applies to Minors
Sarmiento v. Grange Mut. Cas. Co., (2005) 106 Ohio St.3d 403
In Sarmiento v. Grange Mut. Cas. Co., the Ohio Supreme Court dealt with three issues in the uninsured/underinsured motorist context:
Whether a two year limitation of action clause contained in an uninsured/underinsured motorist policy is valid and enforceable.
Whether or not the validity of the foregoing clauses is affected by virtue of a filing jurisdiction’s statute of limitations which is longer than the limitation of action clause contained in the insurance contract.
Whether the limitation of action clause is applicable to a minor.
The Court dealt with the situation wherein an accident had occurred in New Mexico involving an adult plaintiff and a minor plaintiff. Tort claims, for adults is governed by New Mexico’s three year statute of limitations. The Court began its analysis by reviewing the challenge asserted to the limitation of action clauses and stated the following:
“Although the underlying tort claims of the Sarmientos were subject to the laws of New Mexico, where the accident occurred, the appellate court properly concluded that Ohio contract law applied to their UM claims. The insurance contract was entered into in Ohio, it was issued to Maria Sarmiento, a resident of Ohio, and it covered vehicles principally garaged in Ohio
...
In Ohio, the statutory limitations period for a written contract is 15 years. R.C. 2305.06. However, the parties to a contract may validly limit the time for bringing an action on a contract to a period that is shorter than the general statute of limitations for a written contract, as long as the shorter period is a reasonable one. (citations omitted) A contract provision that reduces the time provided in the statute of limitations must be in words that are clear and unambiguous to the policyholder. (citations omitted)
There is no dispute that Sarmiento’s policy clearly and unambiguously limits to two years the time in which an insured may sue Grange for UM/UIM benefits. Under a pure contract analysis, we need go no further. The Sarmientos’ complaint would fail as a matter of law because it was filed more than two years after the accident occurred.”
The Court determined that even though the statute of limitations for New Mexico was three years, this fact alone did not abrogate the effect of the two year limitation of action clause.
The Court next turned its attention to the argument that the two year limitations of action clause could not be applied to a minor. In rejecting this argument, the Court noted that not all claims of minors are tolled by statute. The Court pointed out that the statute of limitations for minors with wrongful death claims is not tolled by O.R.C. 2305.16 and the two year statute of limitations for filing a Workers’ Compensation claim is not tolled by the same statute. Therefore, the Court concluded that the minor child was bound by the two year limitation of action clause and stated in paragraph 30 of its opinion, the following:
“Other jurisdictions have held that the limitation period in an insurance policy controls, not the general statute of limitations, even in the case of minors. (citation omitted). The reason given for this holding is that one who seeks the benefits of a contract, including a beneficiary who is a minor, must also assume its burdens. (citation omitted). We agree with that reasoning. Thus, the minors in this case who seek to reap the benefits of the Grange policy must comply with the requirements of the insurance policy.”
Geographical Limitation in an Insurance Contract Upheld
Fazio v. Hamilton Mut. Ins. Co., (2005) 106 Ohio St.3d 327:
Fazio v. Hamilton Mut. Ins. Co. dealt with the situation wherein a policy of insurance including uninsured and underinsured motorist coverage was issued which restricted said coverage to the United States and Canada. An accident occurred in Mexico and a lawsuit ensued.
The Supreme Court stated in paragraphs 12 and 13 of its opinion, the following issues which were reviewed:
“(1) May an insurer limit the geographic scope of uninsured motorist coverage, or does such a limitation violate R.C. 3937.18?
(2) 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?”
In upholding the restriction for coverage to the United States and Canada, the Court applied business analysis approach in its opinion and stated the following in paragraph 27:
“Strong public-policy considerations can be asserted against requiring uninsured-motorist coverage for accidents occurring in all foreign countries, in many of which the risk that insureds would be struck by uninsured vehicles is either unknown or so high as to make coverage impractical. The increased scope of the risk, in addition to the increased difficulty and expense associated with investigating claims in those countries, would result in dramatic increases in the premiums for uninsured-motorist coverage. Furthermore, insured motorists who do not travel to foreign countries would be required to subsidize the additional cost of underwriting the risk of insureds who do.”
Based upon the foregoing, the Court concluded that a geographic scope of uninsured motorist coverage is satisfactory inasmuch as they agreed that Mexico could be excluded, it was unnecessary to reach the second question and the Court so indicated in paragraph 39 of its opinion wherein it stated the following:
“Therefore, the State Farm policy clearly and unambiguously provides uninsured-motorist coverage in the United States and Canada only. Pursuant to our resolution of the first certified question, State Farm was permitted to limit the geographic scope of uninsured-motorist coverage in this way.”
The information contained in this newsletter is not a legal opinion and is for informational purposes only. Specific questions should be directed to an attorney for a legal opinion.
Contractual Limitation of Action Clause Upheld –
Contractual Limitation Supersedes Filing Jurisdiction Statute of Limitations – Contractual Limitation Applies to Minors
Sarmiento v. Grange Mut. Cas. Co., (2005) 106 Ohio St.3d 403
In Sarmiento v. Grange Mut. Cas. Co., the Ohio Supreme Court dealt with three issues in the uninsured/underinsured motorist context:
Whether a two year limitation of action clause contained in an uninsured/underinsured motorist policy is valid and enforceable.
Whether or not the validity of the foregoing clauses is affected by virtue of a filing jurisdiction’s statute of limitations which is longer than the limitation of action clause contained in the insurance contract.
Whether the limitation of action clause is applicable to a minor.
The Court dealt with the situation wherein an accident had occurred in New Mexico involving an adult plaintiff and a minor plaintiff. Tort claims, for adults is governed by New Mexico’s three year statute of limitations. The Court began its analysis by reviewing the challenge asserted to the limitation of action clauses and stated the following:
“Although the underlying tort claims of the Sarmientos were subject to the laws of New Mexico, where the accident occurred, the appellate court properly concluded that Ohio contract law applied to their UM claims. The insurance contract was entered into in Ohio, it was issued to Maria Sarmiento, a resident of Ohio, and it covered vehicles principally garaged in Ohio
...
In Ohio, the statutory limitations period for a written contract is 15 years. R.C. 2305.06. However, the parties to a contract may validly limit the time for bringing an action on a contract to a period that is shorter than the general statute of limitations for a written contract, as long as the shorter period is a reasonable one. (citations omitted) A contract provision that reduces the time provided in the statute of limitations must be in words that are clear and unambiguous to the policyholder. (citations omitted)
There is no dispute that Sarmiento’s policy clearly and unambiguously limits to two years the time in which an insured may sue Grange for UM/UIM benefits. Under a pure contract analysis, we need go no further. The Sarmientos’ complaint would fail as a matter of law because it was filed more than two years after the accident occurred.”
The Court determined that even though the statute of limitations for New Mexico was three years, this fact alone did not abrogate the effect of the two year limitation of action clause.
The Court next turned its attention to the argument that the two year limitations of action clause could not be applied to a minor. In rejecting this argument, the Court noted that not all claims of minors are tolled by statute. The Court pointed out that the statute of limitations for minors with wrongful death claims is not tolled by O.R.C. 2305.16 and the two year statute of limitations for filing a Workers’ Compensation claim is not tolled by the same statute. Therefore, the Court concluded that the minor child was bound by the two year limitation of action clause and stated in paragraph 30 of its opinion, the following:
“Other jurisdictions have held that the limitation period in an insurance policy controls, not the general statute of limitations, even in the case of minors. (citation omitted). The reason given for this holding is that one who seeks the benefits of a contract, including a beneficiary who is a minor, must also assume its burdens. (citation omitted). We agree with that reasoning. Thus, the minors in this case who seek to reap the benefits of the Grange policy must comply with the requirements of the insurance policy.”
Geographical Limitation in an Insurance Contract Upheld
Fazio v. Hamilton Mut. Ins. Co., (2005) 106 Ohio St.3d 327:
Fazio v. Hamilton Mut. Ins. Co. dealt with the situation wherein a policy of insurance including uninsured and underinsured motorist coverage was issued which restricted said coverage to the United States and Canada. An accident occurred in Mexico and a lawsuit ensued.
The Supreme Court stated in paragraphs 12 and 13 of its opinion, the following issues which were reviewed:
“(1) May an insurer limit the geographic scope of uninsured motorist coverage, or does such a limitation violate R.C. 3937.18?
(2) 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?”
In upholding the restriction for coverage to the United States and Canada, the Court applied business analysis approach in its opinion and stated the following in paragraph 27:
“Strong public-policy considerations can be asserted against requiring uninsured-motorist coverage for accidents occurring in all foreign countries, in many of which the risk that insureds would be struck by uninsured vehicles is either unknown or so high as to make coverage impractical. The increased scope of the risk, in addition to the increased difficulty and expense associated with investigating claims in those countries, would result in dramatic increases in the premiums for uninsured-motorist coverage. Furthermore, insured motorists who do not travel to foreign countries would be required to subsidize the additional cost of underwriting the risk of insureds who do.”
Based upon the foregoing, the Court concluded that a geographic scope of uninsured motorist coverage is satisfactory inasmuch as they agreed that Mexico could be excluded, it was unnecessary to reach the second question and the Court so indicated in paragraph 39 of its opinion wherein it stated the following:
“Therefore, the State Farm policy clearly and unambiguously provides uninsured-motorist coverage in the United States and Canada only. Pursuant to our resolution of the first certified question, State Farm was permitted to limit the geographic scope of uninsured-motorist coverage in this way.”
The information contained in this newsletter is not a legal opinion and is for informational purposes only. Specific questions should be directed to an attorney for a legal opinion.