In Angel, supra, the Ohio Supreme Court reviewed a case wherein the passenger was injured in a motor vehicle accident that occurred in 2001. The police report had stated that the driver of the motor vehicle was insured by Nationwide Insurance Company but, in reality, the driver’s policy had been cancelled three months before the accident. 

 

            The plaintiff-passenger timely filed a suit against the driver in 2003 but subsequently dismissed that action without prejudice. According to the plaintiff-passenger, she discovered in 2004 that the driver’s liability policy had been cancelled before the accident. Accordingly, in 2004, the plaintiff-passenger notified her uninsured motorist carrier that she was presenting a claim and, in 2005, she sued the defendant driver as well as her uninsured motorist carrier seeking benefits under her policy.

 

            The uninsured motorist carrier’s policy included the following provision at paragraph 3:

 

“... Any legal action against Allstate must be brought within two years of the date of the accident. No one may sue us under this coverage unless there is full compliance with all the policy terms and conditions.”

 

            The uninsured motorist carrier prevailed on a summary judgment motion at the trial court level. On appeal, the plaintiff-passenger argued that the two-year limitation of action period should only run once she learned that the defendant-driver had no insurance. Accordingly, she argued that the two-year period was triggered in May, 2004 when she discovered that the defendant-driver did not have a policy of insurance with Nationwide. The Court of Appeals agreed with that position and reversed the lower court and their holding was summarized in paragraph 7:

 

            “In a split decision, a majority of the court of appeals agreed with appellee and held that, based on the facts of this case, the two-year limitation period for bringing a cause of action for uninsured-motorist benefits was unenforceable. (Citation omitted.) The court of appeals determined that because Reed avoided service several times, it was ‘essentially impossible’ for appellee to discover Reed’s uninsured status within the two-year period. (Citation omitted.) The court concluded that ‘a cause of action for uninsured motorist benefits accrues when the injured party knows, or has reason to know, with the exercise of due diligence, that the tortfeasor was uninsured.’”

 

            The Ohio Supreme Court began its analysis of the limitation of action clause with a review of the enforceability of same. In upholding the limitation of action provision, the court stated in paragraphs 11 - 13 of its opinion, the following:

 

            “’In Ohio, the statutory limitation period for a written contract is 15 years. ... 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. 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.)  

 

            We noted in Miller that a two-year limitation period would be a ‘reasonable and appropriate’ period of time in which to require an insured who has suffered bodily injury to commence an action under the uninsured/underinsured-motorist provisions of an insurance policy. (Citations omitted.)

 

            Our precedent controls, and the two-year limitation period in the Allstate policy is enforceable.”

 

            The court next turned its attention to the “discovery” rule advanced by the plaintiff-passenger relative to the fact as to when the two-years begins to run. The court rejected the argument that the two-years begins to run when the plaintiff-passenger allegedly learned of the uninsured motorist status of the defendant-driver and stated, in paragraphs 15 – 17 of its opinion, the following:

 

            “Despite Reed’s (defendant-driver) representation that he was insured on the day of the motor vehicle accident, his policy had been canceled three months earlier, and as a result, he was uninsured. Based on the express language in the Allstate policy, appellee had two years from the date of the accident to file her uninsured-motorist claim with Allstate.

 

            Appellee argues that she tried repeatedly to serve Reed, but she was unsuccessful each time, that she therefore had no way of knowing that Reed was uninsured, and that the two-year limitation period in her Allstate policy could not begin to run until she learned of Reed’s uninsured status.

 

            We agree with the dissenting judge in the court of appeals, who stated: ‘The majority alleges that it was ‘virtually impossible for ... Angel to discover (Reed’s) uninsured status within (the) two year period.’ On the contrary, all that was necessary to determine Reed’s insurance status was to contact Nationwide. There is no reason why it should have taken Angel three years to realize Reed was uninsured.’”

 

            Based upon the foregoing, the two-year limitation of action clause was upheld and the effort to create a “discovery rule” in the context of the two-year limitation of action clause was rejected by the Ohio Supreme Court. 

 

 

 

 

            In our last Newsletter, discussion was had pertaining to the importance of equal protection/due process clause analysis as it relates to a better understanding of decisions that impact litigation and the insurance industry. Towards that end, the Ohio Supreme Court buttressed that assertion in a recent decision dealing with the topic of excessive punitive damages. Specifically, the court used the Due Process Clause to determine whether a $3,000,000 punitive damage award was excessive.

 

            In Barnes, the case involved a medical malpractice claim wherein Natalie Barnes suffered a coronary embolism and died while in the process of having kidney dialysis. Ms. Barnes suffered from kidney disease, mental retardation and epilepsy. The parents had contacted the Cuyahoga County Board of Mental Retardation and requested the services of a medical aide to sit with Ms. Barnes during the dialysis process inasmuch as she had a propensity, in the past, to pull at her catheter. The Board of Mental Retardation contracted with MedLink, a provider of health home care services to watch Ms. Barnes during the dialysis process and, in particular, with regard to avoidance of her displacement of the catheter. 

 

            The first aide successfully performed the duties.  The replacement aide did not have a high school diploma, had a felony conviction on her record and left the dialysis unit, went to the hospital cafeteria and walked around the hospital for several hours. The lack of a high school diploma is violative of the minimal education requirements established by MedLink but the health care aide did not disclose her lack of a high school diploma. Ms. Barnes’ catheter became detached (presumably by Ms. Barnes) and she suffered an air embolism, cardiac arrest and eventually died. The case proceeded to trial and the jury awarded $3,000,000 in punitive damages as well as other relief. It appears that University Hospital was no longer a party to the case, at the Supreme Court level, and thus MedLink argued that the punitive damage award was excessive and unconstitutional. 

 

            The Ohio Supreme Court began its constitutional analysis at paragraph 31 of its opinion and stated the following:

 

            “Since at least 1991, the United States Supreme Court has recognized that the Due Process Clause of the Fourteenth Amendment imposes a limit on the size of punitive damage awards. (Citations omitted.) The determination of whether a punitive damage award is unconstitutionally excessive is rooted in the Due Process Clause. (Citations omitted.) An award of punitive damages violates due process when it can be categorized as ‘grossly excessive’ in relation to the state’s legitimate interests in punishing unlawful conduct and deterring its repetition.”

 

            The Ohio Supreme Court vacated the punitive damage award and remanded it for the Appellate Court’s implementation of the “Gore Guideposts.”   Those guideposts were described in paragraph 32 of its decision wherein the court stated the following:

 

            “A line of cases announced by the United States Supreme Court, starting with Gore, guides us in reviewing punitive damage awards alleged to be unconstitutionally excessive. In Gore, the court instructed that elementary notions of fairness ‘dictate that a person receive fair notice not only of the conduct that will subject him to punishments, but also of the severity of the penalty that a State may impose.’ (Citation omitted.) The court set forth three guideposts to use in evaluating whether a lack of notice renders a punitive damage award grossly excessive and therefore unconstitutional: (1) the degree of reprehensibility of the defendant’s misconduct, (2) the disparity between the harm or potential harm suffered by the plaintiff and the punitive-damages award, and (3) the difference between the award and the civil penalties authorized or imposed in comparable cases.”

 

            Based upon the foregoing, the excessiveness of the punitive damages award was resolved upon due process grounds.