United States: Second Time Lucky: In Phantom Vehicle Cases, Ohio Insureds Can Now Corroborate Their Own Testimony

Hit-and-run drivers don't always hit; some motorists recklessly cause accidents without making contact, then vanish from the scene. Victims in such cases can often obtain coverage under the uninsured motorist (UM) provisions of their automobile policies. To prevent fraudulent claims, however, those policies typically condition coverage on the existence of objective evidence—something other than the testimony of the policyholder—showing that a so-called "phantom vehicle" was at fault. Recently, in Smith v. Erie Ins. Co., No. 2016-Ohio-7742 (Ohio Nov. 16, 2016), the Supreme Court of Ohio ruled that the policyholder's own out-of-court statements can satisfy this requirement. According to a 4-3 majority, the mere fact that an insured repeatedly blames an accident on an absent driver makes the insured's statements qualify as "independent corroborative evidence," sufficient to impose liability on the insurer. Like the result, the majority's reasoning in this case is highly problematic in at least two important ways. It potentially creates a serious difficulty for insurers processing future claims for UM coverage in Ohio.

It Happened One Night

Late one evening in July 2011, while headed south on Plasterbed Road in Ohio's Black Swamp region, Scott Smith's pickup truck swerved off the thoroughfare. Mr. Smith called 911 and reported that a "dark colored SUV" had crossed the divider from the northbound lane, and that he had driven into a group of trees to avoid a more serious collision. When a trooper of the Ohio State Highway Patrol arrived at the scene, Mr. Smith repeated his statement, and it was recorded in the trooper's report. Mr. Smith was then taken to a nearby emergency room, where his account of the accident was recorded in a medical report. It later made its way into reports prepared by Mr. Smith's physical therapist, as well.

The missing SUV was never identified. There were no other witnesses, and there was no physical evidence that another vehicle had entered the southbound lane.

The Phantom Menace

By the time of Mr. Smith's collision, accidents caused by "phantom vehicles" had already made a mark on Ohio's insurance law. Until the mid-1990s, UM coverage would apply to such cases, but only if there had been physical contact between the insured vehicle and the missing one. In 1996, in Girgis v. State Farm Mut. Auto. Ins. Co., 75 Ohio St.3d 302 (1996), Ohio's Supreme Court acknowledged that this physical contact requirement served an "obvious" purpose: "to prevent the filing of fraudulent claims." It nevertheless declared the requirement a violation of public policy, on the ground that a less exacting requirement could still prevent fraud, while avoiding the problem that the physical contact requirement "deprive[d] insured individuals of ... [UM] coverage even when independent third-party testimony is available."

To remedy that problem, the court adopted the "corroborative evidence test," which was already the rule in more than a dozen other states, and which

In 2001, Ohio's legislature amended the state's uninsured motorist statute. That law now provides (Ohio Rev. Code § 3937.18(B)(3)):

The statute's requirement differed from the one adopted in Girgis, in that it could be satisfied by any form of "independent corroborative evidence," and not just "third-party testimony."

Mr. Smith's insurance policy closely tracked the language of this statute:

Judgment Day

When Mr. Smith and his wife sought UM coverage for his accident, their insurer denied the claim, on the ground that they had failed to provide "independent corroborative evidence" for the involvement of the "dark colored SUV." The Smiths filed an action in an Ohio state court, for breach of contract and declaratory judgment, and the court granted summary judgment to the insurer. The court found that the term "additional evidence," although not defined in the policy, could not include police and medical reports that merely transcribed (or, in the insurer's words, "repackaged") the insured's own statements.

An intermediate appellate court reversed that award, on the ground that the term "additional evidence" was "susceptible of at least two interpretations," one of which would include "items of evidence, such as medical records and police reports, that are based on the testimony of the insured ... ." Thus, the court held that the term was ambiguous, and that the ambiguity had to be resolved in favor of the policyholder.

This decision conflicted with the ruling of another District Court of Appeals, in Brown v. Philadelphia Indemn. Ins. Co., No. CA2010–10–094 (Ohio Ct. App. May 9, 2011). The Supreme Court accepted the Smith case to resolve the conflict.

The Narrow Margin

In the Supreme Court, the justices sparred over the meaning of the last sentence of the relevant provision in the plaintiffs' policy (i.e., "Testimony of 'anyone we protect' seeking recovery does not constitute independent corroborative evidence, unless the testimony is supported by additional evidence"). Three dissenting justices read the sentence to mean that "the insured's testimony does not by itself constitute [the] independent corroborative evidence" that is required to invoke coverage, and they concluded:

The four-justice majority, on the other hand, saw the glass as half-full: they read the same sentence to mean that an insured's testimony can count as "independent corroborative evidence"—so long as it is "supported by additional evidence." They noted that this possibility marks a "big difference" from the rule adopted in Girgis, under which the only acceptable form of "corroborative evidence' was "third-party testimony." In the majority's view, the insured's testimony becomes "corroborative" when accompanied by evidence that "need be only additional and supportive"—and it found that "[s]upport is an exceedingly broad concept."

In light of that analysis, the majority held that the policy's "generous language" is

Consequently:

Begin Again

The majority's opinion failed to address some important questions.

To begin with, while acknowledging that "courts must give effect to the intent of the parties" when interpreting insurance policies, the court ignored the evidence that what the parties intended was to make the coverage co-extensive with the requirements of Ohio's UM statute—the language of which the policy closely tracked. The majority even speculated that the insurer "may now wish it had not included" in its policy the "generous language" that allowed for more types of corroborative evidence than just "third-party testimony." That suggestion ill accords with the statute, which uses identical "generous language" to define the term "uninsured motorist," and which also states that this definition applies to "any uninsured motorist coverage included in a policy of insurance."

In other words, a less "generous" term in the Smiths' policy (for example, one which required that the insured's testimony be corroborated by a third-party witness) would almost certainly have been unenforceable. Therefore, the real question about the meaning of the policy was whether it reasonably reflects an intent to apply evidentiary rules that are even more "generous" than the ones created by Section 3937.18.

If the answer to that question is "no" (as the virtually identical language of the two texts suggests), then there was no ambiguity, and the case should have been resolved by interpreting the statute's requirements. In that regard, it is significant that when the legislature adopted the current language in 2001, it did so as part of a broader group of amendments that reduced the requirements imposed on insurers—such as a prior mandate that UM coverage be offered to all insureds. Furthermore, the Editor's and Revisor's Notes which accompanied the amendments stated:

The Notes stated that the amendments were intended to "supersede" several decisions of the Ohio Supreme Court—but Girgis was not among them. There is little evidence, then, that the General Assembly was trying to be more "generous" to insureds than the Supreme Court had already been.

The Outer Limits

A second matter that the majority's decision failed to clarify is the question of how far its ruling extends. The opinion cited two types of evidence which, in the majority's view, could be both "supportive" of, and "additional" to, an insured's own account of her accident. Both types were present in the claim submitted by Mr. and Mrs. Smith.

One type consists of independent, circumstantial evidence that is consistent with the "phantom vehicle" theory: in this case, Mr. Smith produced "[a] police report that describes a straight, dry roadway and that references no impairment to the driver and no finding of excessive speed." The other is a statement the insured has made when he had a special motive or incentive to be truthful. Here, the court implied that Mr. Smith's 911 call was a kind of "excited utterance"  (it was made "when the insured was in peril"), and it observed that the statement recorded in the Highway Patrol report (arguably, a "public record" under FRE 803(8))  was one for which he "could face criminal liability if [it] were knowingly false."

But the court did not discuss other possibilities that were raised in the insurer's brief—such as a case in which the policyholder "writ[es] on a napkin that another vehicle had run his vehicle off of the road, and then submit[s] the napkin as 'additional evidence.'" Would evidence of this type be sufficiently "supportive" to turn the insured's testimony into "corroborative evidence"? The majority said the concept of "support" is "broad," not "infinitely broad." But it also said the policy could reasonably be interpreted to mean that "any evidence apart from the insured's testimony ... is sufficient to constitute 'additional evidence' under the policy."

The question is not an idle one, because Ohio insurers now risk exposure to bad faith claims if they guess wrong about what the Smith decision requires. Even if the insured who scribbles his "additional evidence" on a serviette is not entitled to UM coverage (perhaps a document that is of little or no probative value doesn't count as "evidence"?), there is still no clear answer to the question of how insurers are supposed to measure the level of "support" that other out-of-court statements provide. Do the hearsay exceptions set the boundaries? Can statements which would not be admissible under the rules of evidence nevertheless serve to establish a valid UM claim? The majority simply failed to address these matters.

Tune In Tomorrow

Phantom vehicle cases have always been hard, because the risk of doing injustice to the insured is basically in equipoise with the risk of fraudulent claims. In Smith, the Ohio Supreme Court put a thumb on the scale for the policyholder. Equally troubling, it exposed insurers to bad faith claims for hard cases that arise in the future.

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