Driver's auto policy must pay for damages in accident when driving friend's car

A teen driver borrowed a friend's car, hit a light pole, and injured three passengers. The insurers of the car owner and the driver disputed which company should pay for the damage. The Supreme Court of Ohio ruled that the driver's insurance company should pay.

In a 5-2 decision, the Supreme Court found a policy owned by the driver's father provided coverage when his son was driving a vehicle with permission from the owner. The decision reversed an Eleventh District Court of Appeals ruling that the car owner's insurer would have to pay for the accident.

Writing for the Court majority, Justice R. Patrick DeWine wrote that under the plain language of the car owner's Progressive Specialty Insurance Company policy, the driver, 16-year-old Ashton Smith, was not covered because Smith was covered as a driver under his father's auto insurance policy issued by Acuity.

"Where two insurance policies exist, and where under the plain and natural reading of both policies, one policy provides coverage and the other does not, we must honor the parties' agreement," Justice DeWine wrote.

Chief Justice Sharon L. Kennedy and Justices Patrick F. Fischer, Melody Stewart, and Joseph T. Deters joined Justice DeWine's opinion.

In a dissenting opinion, Justice Jennifer Brunner wrote that a close reading of the Acuity policy does not plainly establish that Smith was insured while driving a borrowed automobile. She wrote the Eleventh District applied Supreme Court precedent and correctly determined that Progressive should have covered the damages.

Justice Michael P. Donnelly joined Justice Brunner's opinion.

Courts Split on Insurance Coverage Dispute

In June 2020, Smith was driving his friend's car in Streetsboro when he lost control and hit a city-owned utility pole. The city filed a claim for damages to the pole, and the three passengers in the car sought coverage for their injuries.

In insurance terms, Smith was considered a "permissive driver," which means that the policyholder gave him permission to drive the insured car. The Acuity and Progressive policies had the same limits of $100,000 per person and $300,000 per accident. The companies disputed which policy covered the accident.

Acuity filed a lawsuit in Portage County Common Pleas Court, claiming that Smith's policy only provided "excess coverage" to pay above anything Progressive owed. Progressive countered that because Smith was insured by his father's policy, Smith was not an "insured person" under the definitions of the Progressive policy, and Progressive was not responsible for the coverage.

Progressive pointed to its policy language, which stated that an "insured person" included "any person who is not insured for liability coverage by any other insurance policy" when an accident is caused by a permissive driver. The Acuity policy defined "insured person" to include the policy owner "or a relative while using a car" belonging to someone else.

The Progressive policy also had an excess coverage clause, which provided coverage only if there was not another applicable auto insurance policy that could cover the damage.

The trial court found that the Acuity policy should cover the damages. Acuity appealed the decision to the Eleventh District, which reversed the trial court's decision. The Eleventh District ruled each company should share in the costs of covering the accident.

Progressive appealed to the Supreme Court, which agreed to hear the case.

Supreme Court Interprets Insurance Policies

Justice DeWine explained that insurance policies are contracts. When the Court interprets contracts, it has "an obligation to give plain language its ordinary meaning and to refrain from rewriting the contractual agreement of the parties," he wrote.

The majority opinion stated the Eleventh District resolved the case not by looking at the contract, but by applying the decision of the Supreme Court's 1970 State Farm Mut. Auto. Ins. Co. v. Home Indemn. Ins. Co. decision. In State Farm, the Court found that when competing excess clause provisions were in each policy, each insurer was responsible for a portion of the damages.

Today's decision found the State Farm case did not apply to Smith's accident. In State Farm, the Court determined that if both policies were in effect, neither company would cover the damage. The Court in State Farm solved the issue "through a creative interpretation," the majority opinion stated.

When reading the Acuity and Progressive policies together, there is not the same conflict as in State Farm, the opinion stated. Under the Progressive policy, Smith is not an insured person because that definition applies to a permissive user who is not insured by another policy.

The Acuity policy allows Smith to qualify as an insured person when using someone else's car with permission, the Court stated. The excess clause in the Acuity policy applies only if there is other "applicable auto liability insurance." Because Smith does not meet Progressive's definition of an insured driver, the Progressive policy does not apply to Smith, the Court ruled.

"Thus, under the plain language of the contracts at issue, Acuity is responsible for providing liability coverage to Smith for the accident," the opinion stated.

Dissent Faults Court for Considering Case

In her dissent, Justice Brunner noted the Court has previously determined which policy covers the damages when a permissible driver causes an accident with a borrowed vehicle, albeit in cases with different factual scenarios regarding dueling insurance policies. The issue in this case does not present a "novel question nor an issue of public or great general interest," she wrote, adding that the Court should not have accepted the case for review.

The majority chose to engage in "error correction" of a lower court, which is not a valid reason to accept a case, the dissent stated. And when engaging in error correction, the majority's "plain-language analysis does not work," the dissent noted.

Justice Brunner wrote that a close reading of the Acuity policy indicated the coverage it provided was limited to any excess damages that would have to be paid after Progressive paid up to its policy limits. The policies raise the same issue that the Court confronted in State Farm and subsequent cases, the dissent maintained.

"The Eleventh District applied our precedent and made the required, careful analysis of the contract language at issue. Our review is unwarranted and unnecessary," Justice Brunner wrote.

The case is cited 2022-0863. Acuity, A Mut. Ins. Co. v. Progressive Specialty Ins. Co., Slip Opinion No. 2023-Ohio-3780.