COURT OF APPEALS ENFORCES UNLICENSED DRIVER EXCLUSION

IN AUTOMOBILE INSURANCE POLICY

By Timothy P. Heather, Esq.

Benjamin, Yocum & Heather, LLC

            In Smith v. Safe Auto Insurance Co., 179 Ohio App.3d 240, 2008-Ohio-5806, insureds under an automobile insurance policy brought a declaratory judgment action against their insurer, seeking a declaration that the policy provided coverage for the subject accident which occurred while the insured’s driver’s license was expired. The insureds, Lisa and Shane Smith, were involved in a one-car accident wherein Shane Smith was driving. The insured vehicle was damaged and Lisa Smith sustained bodily injury. Safe Auto Insurance Co. was their insurer.

            At the time of the accident, Mr. Smith’s driver’s license had recently expired. Safe Auto’s policy with the Smiths included the following provision under the heading “Valid Driver License”:

No coverage is afforded under any section of this policy if the covered auto is being operated by a person who is not a qualified, licensed driver, or is without a valid driver license, or whose driver license is expired, revoked or suspended, or is in violation of any condition of their driving privileges, or is without privileges to drive for any reason.

            Mr. Smith, shortly after the accident, renewed his license pursuant to R.C. §4507.10(B), which provides a six-month grace period for renewing an expired license without penalty. Thus, the Smiths claimed that Mr. Smith was not in violation of the terms of the Safe Auto policy, and that they were, therefore, entitled to coverage under both the collision and uninsured motorist provisions of the policy.

            The Sixth District Court of Appeals disagreed with the Smiths, stating:

Reading the clear and unambiguous language of the insurance contract at issue, it is clear that the Smiths were not entitled to collision or uninsured motorist coverage for the damages they sustained as a result of the accident, because Shane Smith’s driver’s license had expired at the time of the accident. The fact that he renewed his license three days after the accident is irrelevant.

            Additionally, the Court rejected an equitable estoppel argument which the Smiths had made. Before denying coverage, Safe Auto had sent a property damage inspector to prepare an estimate of the vehicle’s damages. The appraisal contained a turn which stated that, “The appraiser does not have the authority to authorize repairs or guaranteed payment to any business or individual.” As such, equitable estoppel did not apply.

            Interestingly, it has been this writer’s experience that “Valid Driver License” exclusions routinely show up in the insurance policies of high risk insurers, such as Safe Auto, but not in the policies of standard insurers. Based on the Smith case, as well as precedent cited therein, such exclusions are valid in Ohio, and it would behoove standard insurers to consider adding such an exclusion to their policies, also.