COURT OF APPEALS OF OHIO, EIGHTH DISTRICT COUNTY OF CUYAHOGA NO. 61158, 61159 : AMERICAN SELECT INS. CO., ET AL. : : JOURNAL ENTRY Plaintiffs-Appellees : : and -vs- : : OPINION : KENNETH J. STOPAR, ET AL. : : Defendants-Appellants : DATE OF ANNOUNCEMENT DECEMBER 10, 1992 OF DECISION: CHARACTER OF PROCEEDING: Civil appeal from Common Pleas Court Case No. 157240 JUDGMENT: Reversed and Remanded. DATE OF JOURNALIZATION: __________________________ APPEARANCES: FOR AMERICAN SELECT INS. CO. FOR KEITH E. PIERCY, ET AL. PLAINTIFFS-APPELLEES: DEFENDANTS-APPELLANTS: CAROLYN M. CAPPEL DENNIS R. LANSDOWNE WILLIAM H. BAUGHMAN, JR. Spangenberg, Shibley, Traci BRIAN P. DOWNEY and Lacione 2500 Terminal Tower 1500 National City Bank Bldg. Cleveland, Ohio 44113 Cleveland, Ohio 44114 -2- SARA J. HARPER, J.: Keith and Dianne Piercy, hereinafter Appellants, timely appeal the decision of the trial court in a declaratory judgment action, brought as a cross-claim, against American Select Insurance Company, hereinafter Appellees. Having reviewed the legal arguments of the parties and the record, this case is reversed and remanded for further proceedings not inconsistent with this opinion. On or about October 2, 1986, Keith Piercy was struck in the rear of his vehicle by another vehicle driven by Kenneth Stopar. Keith Piercy reported the collision to his insurance agent on the same day that the accident occurred. In response to this report, the insurance agent sent a form entitled Automobile Loss Notice to American Select Insurance Company. The Automobile Loss Notice was received by American Select Insurance Company on October 6, 1986. This Automobile Loss Notice contained information on how the accident occurred along with the types and amounts of coverage available to the Piercys. One of the coverages included on the Automobile Loss Notice and extended to Appellants was underinsured motorist coverage in the amount of Three Hundred Thousand Dollars ($300,000.00). At the time of this initial report, Keith Piercy did not allege any bodily injuries. In the midst of 1988, almost two years after the accident, Keith Piercy submitted medical bills to Appellees for payment under his medical payments coverage. In addition, Appellants requested through their attorney that their property damage claim be evaluated again and negotiated a second time. As a -3- consequence of the assertion of these claims, Appellees paid Four Thousand Six Hundred and Fifty Dollars ($4,650.00) to Appellants for both their medical payments and property damage. On or about September 27, 1988, Appellees filed a cause of action against the tortfeasor, Kenneth Stopar, in subrogation for the amounts paid to Appellants by Appellees. During September, 1988, Appellants also filed a lawsuit against Kenneth Stopar for personal injuries. Even though it was disclosed during discovery that Stopar's insurance policy had a liability limit of Twelve Thousand and Five Hundred Dollars ($12,500.00), the record is unclear as to when this information was provided to either Appellees or Appellants. In a letter dated October 12, 1989, more than three years after the accident, Appellants, through their counsel, advised Appellees of their intention to pursue a claim under their underinsured motorist coverage. In response to the October 12, 1989 notification, Appellees informed counsel for Appellants in a letter dated November 17, 1989 that their underinsured motorist claim was being denied because of the policy requirement that an insured submit written notice of a potential underinsured motorist claim to Appellees within twenty-four months of the occurrence. After Appellees denied underinsured motorist coverage to Appellants, Appellants filed a cross-claim against Appellees. According to Appellants, the claims alleged a breach of contract and bad faith. During the discovery process, Appellants propounded interrogatories to Appellees requesting information -4- about persons and documents that would lead to evidence about the notice provision utilized by Appellees to deny Appellants' underinsured motorist coverage. Appellees objected to the interrogatories on the grounds that the requested information was irrelevant, unduly burdensome, and not reasonably calculated to lead to the discovery of admissible evidence. Appellants filed a motion to compel the answers, which the trial court did not rule on before rendering judgment in favor of Appellees. The declaratory judgment hearing was conducted by the trial court on November 1, 1990. Thereafter, the trial court filed a judgment entry with findings and conclusions. In the judgment entry, the trial court indicated that the action raised two issues. The first was whether the language contained in Part IV of the insurance policy, the clause used to deny coverage, contained clear and unambiguous policy conditions. The second issue framed by the trial court was whether Appellants complied with the terms within Part IV of the insurance policy. The trial court found that the language used in Part IV of the Conditions section of the policy was clear and unambiguous. Secondly, the trial court found that the time limitation of twenty-four months contained in Part IV was a reasonable limitation period. Finally, the trial court concluded that the provisions contained in Part IV of the insurance policy were valid and enforceable and found in favor of Appellees. Appellants' assignments of error one and two are interrelated and will be discussed together. They state: -5- THE TRIAL COURT ERRED IN FAILING TO LIBERALLY CONSTRUE THE INSURANCE CONTRACT IN FAVOR OF THE INSURED WHERE THE CONTRACT WAS REASONABLY SUSCEPTIBLE OF MORE THAN ONE INTERPRETATION. THE TRIAL COURT ERRED IN HOLDING THAT A NOTICE PROVISION IN AN INSURANCE CONTRACT WAS CLEAR AND UNAMBIGUOUS WHEN THE INSURANCE COMPANY'S OWN EMPLOYEES WERE UNCERTAIN OF ITS MEANING. These two assignments of error raise the issue of whether the language contained in Part IV of the Conditions section of the automobile insurance policy at issue in this case is clear and unambiguous. Language in a contract of insurance reasonably susceptible of more than one meaning will be construed liberally in favor of the insured and strictly against the insurer. Buckeye Union Insurance Co. v. Price (1974), 39 Ohio St.2d 95. Part IV of the Conditions section of Appellants' automobile policy states: "In the event that any person entitled to recovery under Part IV of this policy shall suffer bodily injuries, for which a claim could be presented under the underinsured motorist provision of this policy, written notice of such potential claim must be given to this company within twenty-four (24) months after the occurrence of the accident in which such claim arose." Appellants argued, during the hearing and now on appeal, that the phrases "could be presented" and "potential claim" are susceptible to more than one interpretation and are therefore ambiguous and unenforceable. Appellants took the position that Appellees chose to phrase the provision prospectively or -6- hypothetically with the utilization of the terms "potential claim" or "could be presented." The trial court, however, ruled that "the words used in Part IV 'such potential claim' should be and are accorded their ordinary and plain meaning, that being possible, unrealized or not yet in being." The trial court further found that Appellants contention that the words "potential claim" are subject to varying definition is without merit. Additionally, the trial court cited the fact that Appellants did not present any evidence that they in fact misunderstood the word potential or any of the other language contained in the policy. Lastly, regarding the issues of clarity and ambiguity, the trial court pointed out the fact that Appellants invoked their Appraisal provision which is contained in the same Conditions section as Part IV. This court finds the terminology "could be presented" and "Potential claim" to be susceptible of more than one interpretation and, therefore, unenforceable and ambiguous. One of the most compelling reasons for this conclusion is the testimony of Pencak and McAfee, two of Appellees' adjusters. Pencak stated that "a potential claim would be, could be anything." McAfee testified that the terminology "potential claim" was confusing to her. The problem of ambiguity is compounded by the fact that any accident intrinsically could be a potential claim for any of the coverages afforded under a automobile liability insurance policy that could be presented. -7- Therefore, a reasonable interpretation of Part IV of the Conditions section of Appellants' automobile is that when Appellee received the Automobile Loss Notice, it received written notice of not just a potential claim for underinsured motorist coverage but other coverages as well that "could be presented." The language contained in Part IV of the Conditions section of Appellants' automobile policy is susceptible to more than one interpretation and is therefore unenforceable and ambiguous. This is a necessary conclusion when the rule of law relating to interpretation is followed that the provision must be construed liberally in favor of the insured and strictly against the insurer. Appellants' assignments of error one and two are well taken. Appellant's third assignment of error states: THE TRIAL COURT ERRED IN FINDING THAT THE TWO YEAR LIMITATION PERIOD IS REASONABLE AND ENFORCEABLE. In support of its finding that the two year time limitation contained in Part IV of the Conditions section of the policy was a reasonable limitation period, the trial court cited Colvin v. Globe American Casualty Co. (1982), 69 Ohio St.2d 293. Appellees are of the opinion that the trial court correctly found this limitation to be reasonable under the Colvin standard which is also set forth in its progeny Duriak v. Globe American Casualty Co. (1986), 28 Ohio St.3d 70. The rule established in both cases is that limitations in insurance policies are enforce- -8- able if they are reasonable and clearly and unambiguously set forth the time period. In this regard, Appellees argue first of all that twenty-four months is a clear and unambiguous time period. Secondarily, Appellees argues that the policy clearly and unambiguously sets forth the date on which the limitation period begins and that is the date of occurrence. Finally, Appellees assert that a twenty-four month period is per se reasonable because it exceeds the one year period upheld in Colvin and Duriak. However, Appellants take the position that Colvin and Duriak are distinguishable from the instant case because they involve uninsured motorist coverage and not underinsured motorist coverage. Appellants submit that it is a more difficult proposition to determine the policy limits of tortfeasor's liability coverage than it is to make a determination of the existence of any liability coverage. This court does not agree with Appellees that these arguments of Appellants have no merit. It is indeed a more difficult endeavor to determine the extent of a tortfeasor's liability coverage than to determine whether any liability coverage exists. This court will take judicial notice of the fact that liability carriers often will not disclose policy limits without compulsory process. Indeed, it is conceivable that a claimant may request the policy limit information from the tortfeasor's carrier for almost two years prior to the filing of a lawsuit and only obtain the information once a lawsuit has been -9- filed. The end result then being that the insured claimant is told by their own carrier that they will be denied underinsured motorist coverage because of their failure to comply with a provision like Part IV requiring notice within twenty-four months. It is an established rule of law in Ohio that under certain circumstances an insurance carrier can waive its right to deny coverage or be estopped from such a denial. It is a well recognized rule that since provisions in insurance policies in respect of notice and proofs of loss, or, in the case of liability insurance, notice of accident, are inserted for the benefit of the insurer, they may be waived by the insurer in a case in which it has knowledge of the facts. 58 O. Jur.3d Section 1019, citing, Greulich v. Monin (1943), 142 Ohio St.113. In this regard, the trial court stated in its judgment entry that "the evidence reveals no intervening dispute which might have tolled the time nor any hint to the insurer that an underinsured claim would be presented. However, the record reflects no evidence either pro or con that Appellees knew or should have known of a potential underinsured motorist claim, with one exception. The record reflects that Appellees filed a subrogation cause of action against the tortfeasor in September of 1988, seeking reimbursement for medical payments and property damage payments made by Appellees to Appellants. The actual payments themselves for the medical expenses were made to Appellants in mid 1988. These actions, on the part of Appellees, -10- were all taken within twenty-four months of the occurrence. Presumably, Appellees would have knowledge of some of the pertinent facts of this accident through its investigation, the making of property damage and medical payments, and the filing of the subrogation case against the tortfeasor wherein the mechanisms of discovery were available to Appellees in order to determine the liability coverage limits of the tortfeasor. The determination of whether the tortfeasor has any liability coverage is a much simpler determination than a determination of whether the tortfeasor has insufficient coverage. For this reason, the twenty-four month time period may in fact under certain circumstances be unreasonable. It is conceivable that a claimant may not file a lawsuit until the last month of the twenty-four month period. The mechanisms for discovery are only then available to a claimant to inquire about liability limits, which still may not necessarily be revealed prior to the expiration of the period of twenty-four months. We, therefore, hold that in circumstances where it appears that the insurance carrier knew or should have known that their insured could potentially present an underinsured motorist claim; an evidentiary hearing based on the sound discretion of the trial court to determine what facts and circumstances were within the carrier's knowledge should be conducted. If the trial court determines based on the evidence that the carrier had sufficient knowledge to place them on constructive notice of the fact that their insured could present a bodily injury claim under their -11- underinsured motorist coverage, the carrier will be estopped from denying coverage based on the notice provision. In this regard, as it relates to the instant case, there are several factors of concern to this court. The first is the fact that Appellee made medical payments to Appellant in mid 1988. The second is that a subrogation claim was filed by Appellees in September, 1988, against the tortfeasor. Appellees could have, and may have, began the discovery process and would therefore be in a position to determine the liability limits of the tortfeasor's policy. In fact, Appellees may have known what the liability limits of the tortfeasor were prior to the expiration of the twenty-four months. This court must emphasize the narrow nature of this holding. This determination of the necessity for an evidentiary hearing only applies to underinsured motorist claims and the notice provision of twenty-four months specifically related to underinsured motorist coverage. For reasons previously stated, uninsured motorist coverage can readily be determined within a two year period and no such hearing is necessary. Our concern is that liability carriers would therefore be in a position to determine the liability limits of the tortfeasor's policy. In fact, Appellees may have known what the liability limits of the tortfeasor were prior to the expiration of the twenty-four months. Appellant's third assignment of error is overruled. Appellant's fourth assignment of error states: -12- THE TRIAL COURT ERRED IN FAILING TO RULE UPON AND GRANT A MOTION TO COMPEL DISCOVERY CONCERNING THE POLICY PROVISION AT ISSUE IN THIS LITIGATION. Because of our ruling with respect to assignments of error one and two, this assignment of error is overruled. Judgment reversed and case remanded for an evidentiary hearing consistent with the mandate of this opinion. -13- This cause is reversed and remanded. It is, therefore, considered that said Appellants recover of said Appellees their costs herein. It is ordered that a special mandate issue out of this Court directing the Common Pleas Court to carry this judgment into execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appellate Procedure. Exceptions. FRANCIS E. SWEENEY, P.J., CONCURS. BLANCHE KRUPANSKY, J., CONCURS IN JUDGMENT ONLY SARA J. HARPER JUDGE N.B. This entry is made pursuant to the third sentence of Rule 22(D), Ohio Rules of Appellate Procedure. This is an announcement of decision (see Rule 26). Ten (10) days from the date hereof this document will be stamped to indicate journaliza- tion, at which time it will become the judgment and order of the court and time period for review will begin to run. .