JAMES CLARK and DONNA CLARK v. CHUBB GROUP OF INSURANCE COS. and FEDERAL INSURANCE CO.

*The Honorable David M. Lawson, United States District Judge for
the Eastern District of Michigan, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0250P (6th Cir.)
File Name: 03a0250p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
JAMES CLARK and DONNA
CLARK,
Plaintiffs-Appellants,
v.
CHUBB GROUP OF INSURANCE
COS. and FEDERAL
INSURANCE CO.,
Defendants-Appellees.
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No. 01-4178
Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 00-02989—Donald C. Nugent, District Judge.
Argued: March 11, 2003
Decided and Filed: July 25, 2003
Before: MOORE and CLAY, Circuit Judges; LAWSON,
District Judge.*
2 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
_________________
COUNSEL
ARGUED: Paul W. Flowers, LAW OFFICE OF PAUL W.
FLOWERS, Cleveland, Ohio, for Appellants. Robert D.
Anderle, PORTER, WRIGHT, MORRIS & ARTHUR,
Cleveland, Ohio, for Appellees. ON BRIEF: Paul W.
Flowers, LAW OFFICE OF PAUL W. FLOWERS,
Cleveland, Ohio, W. Craig Bashein, LAW OFFICES OF R.
WILLIAM BASHEIN, Cleveland, Ohio, for Appellants.
Robert D. Anderle, Daniel F. Gourash, Howard G. Strain,
PORTER, WRIGHT, MORRIS & ARTHUR, Cleveland,
Ohio, for Appellees.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. The plaintiffs,
James and Donna Clark, appeal the district court’s grant of
summary judgment to the defendants Federal Insurance
Company and Chubb Group of Insurance Companies
(collectively “Federal”) and the district court’s denial of their
motion for summary judgment. The Clarks allege that the
injuries James Clark sustained in an automobile accident were
covered under three policies of insurance issued by Federal to
Clark’s employer, the Clark Rubber Company (“Clark
Rubber”). On appeal, the Clarks claim that the district court
erred in holding that they did not comply with the prompt-
notice and subrogation provisions in the insurance policies,
and erred in holding that one of the policies was not a motor
vehicle liability policy at all.
Based on the facts of the case and for the reasons set forth
below, we REVERSE the district court’s judgment and
REMAND this case in light of the Ohio Supreme Court’s

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No. 01-4178 Clark et al. v. Chubb
Group of Ins. Cos. et al.
3
recent decision in Ferrando v. Auto-Owners Mutual
Insurance Co., 781 N.E.2d 927 (Ohio 2002).
I. BACKGROUND
The parties have stipulated to the facts of this case. On
March 9, 1994, James Clark was involved in an automobile
accident with David Sholtis. James Clark was an employee
of Clark Rubber, which was insured at the time under three
different policies with Federal. First, Clark Rubber was
insured under a Business Auto policy (the “Auto” policy).
The Auto policy explicitly provided uninsured and under-
insured motorist (“UM/UIM”) insurance and had a UM/UIM
per accident limit of $500,000 and an aggregate limit of
$1,000,000. Second, Clark Rubber was insured under a
Comprehensive General Liability policy (the “CGL” policy)
with limits of $1,000,000. Lastly, Clark Rubber carried a
Commercial Excess Liability policy (the “Excess” policy)
with limits of $1,000,000. Each of these policies was issued
for the period of March 23, 1993 to March 23, 1994 and was
in effect at the time of the accident.
The Clarks settled with Sholtis and his automobile insurer,
the Personal Service Insurance Company (“Personal”) on
October 28, 1994, for the limit of their liability policy,
$25,000. Clark received $12,500 and Donna Clark and their
two children received $12,500. It is undisputed that in
exchange for the proceeds of the settlement, the plaintiffs
released both Sholtis and Personal from all liability in
connection with this accident. James Clark has also
recovered $100,000 from his own automobile insurance
policy and $100,000 from his homeowner’s policy, both
issued by Prudential. The Clarks admit that Federal did not
receive notice of the accident or the Clarks’ claim until March
3, 2000. Each of the Federal policies contained clauses that
required insureds to notify Federal in case of an accident and
that gave Federal subrogation rights, namely, the rights to
4 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
pursue claims on behalf of the injured parties whom it
insures.
II. ANALYSIS
A. Jurisdiction
The district court had jurisdiction over this diversity case
pursuant to 28 U.S.C. § 1332, because the Clarks are citizens
of Ohio and Federal is an Indiana corporation that has its
principal place of business in New Jersey. See Lee-Lipstreu
v. Chubb Group of Ins. Cos., 329 F.3d 898, 899-900 (6th Cir.
2003) (holding that federal courts have jurisdiction over
actions by an insured against his or her own insurance
company if the two are of diverse citizenship because such
actions are not direct actions within the meaning of 28 U.S.C.
§ 1332(c)(1)). We have jurisdiction over the district court’s
final judgment pursuant to 28 U.S.C. § 1291.
B. Standard of Review
The question in this case is whether the district court
properly granted summary judgment to Federal and properly
denied the Clarks’ summary judgment motion. “This court
reviews a district court’s grant of summary judgment de
novo.” Plant v. Morton Int’l, Inc., 212 F.3d 929, 933 (6th
Cir. 2000). Although the district court’s denial of a motion
for summary judgment is usually treated as a nonappealable
interlocutory order, when “an appeal from a denial of
summary judgment is presented in tandem with a grant of
summary judgment, this court has jurisdiction to review the
propriety of the district court’s denial of summary judgment.”
Hamad v. Woodcrest Condo. Ass’n, 328 F.3d 224, 235 (6th
Cir. 2003) (quotation omitted). The district court’s denial of
summary judgment based on purely legal grounds is reviewed
de novo. Id. at 235-36. Summary judgment can be granted
only when, taking all justifiable inferences in the nonmoving
party’s favor, there is still no genuine issue of material fact

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Group of Ins. Cos. et al.
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1In Scott-Pontzer, the Ohio Supreme Court held that an employee,
who was not acting within the scope of his employm ent at the tim e of his
injury, was no netheless an insured under his corporate em ployer’s
commercial liability policy when the policy designated the corporation as
the named insured, but defined “insured” to include “you” and “[i]f you
are an individual, any family member.” Scott-Pontzer v. Liberty Mut. Fire
Ins. Co., 710 N.E .2d 1 116 , 1118 (O hio 199 9). T he O hio Supreme Co urt
reasoned that it “would be nonsensical to limit protection solely to the
corp orate entity, since a corporation, itself, cannot occupy an automobile,
suffer bodily injury or death, or operate a motor vehicle. Here, naming
the corporation as the insured is meaningless unless the coverage extends
to some p erson or p ersons — including to the corporation's em ployees.”
Id. at 1119. Claims that involve an employee seeking coverage under his
or her employer’s commercial policies that rely on an ambiguous
provision defining who is an insured have com e to be kno wn as Sco tt-
Pontzer claims. See Lee-Lipstreu v. Chubb Group of Ins. Cos., 329 F.3d
898, 899 (6th C ir. 200 3) (describing further the nature of these Sco tt-
Pontzer claims).
W e note that all of the insurance policies in this case have the same
sort of ambiguity regarding who is an insured as the policy in Sco tt-
Pontzer referred to above, making it reasonable for the parties to assume
that the C larks were, in fact, insureds under the po licy.
and the moving party is entitled to a judgment as a matter of
law. Plant, 212 F.3d at 934.
C. An Overview of the Plaintiffs’ Claims
There are three policies at issue: the Auto policy, the CGL
policy, and the Excess policy. Although James Clark is not
listed explicitly as an insured under any of the policies,
Federal does not dispute that the Clarks are insureds pursuant
to the Ohio Supreme Court’s decision in Scott-Pontzer v.
Liberty Mutual Fire Insurance Co., 710 N.E.2d 1116, 1120
(Ohio 1999).1 Considering the Clarks’ claims under each of
the policies in turn, we ultimately conclude (as the district
court did) that the Clarks have breached the prompt-notice
and subrogation provisions in all three of the policies.
However, while the district court believed that these breaches
alone were sufficient to justify the grant of summary
6 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
judgment to Federal, the Ohio Supreme Court’s recent
decision in Ferrando makes it clear that breaches of prompt-
notice and subrogation provisions are only considered
presumptively prejudicial. Since the Clarks as of yet have had
no opportunity to adduce evidence that might rebut this
presumption, we remand this case to the district court so that
it might hear evidence on this point with respect to all three
of the policies at issue.
D. The Auto Policy
The Clarks’ first claim is under the Auto policy. Federal
acknowledges that the Auto policy explicitly provides
UM/UIM insurance and does not dispute that the Clarks are
insureds under it. Three parts of the Auto policy are relevant
here. First, the Auto policy has a general notification clause,
which requires that insureds notify Federal “promptly”:
2. DUTIES IN THE EVENT OF ACCIDENT,
CLAIM, SUIT OR LOSS
a. In the event of “accident”, claim, “suit” or “loss”,
you must give us or our authorized representative
prompt notice of the “accident” or “loss”. Include:
(1) How, when and where the “accident” or “loss”
occurred;
(2) The “insured’s” name and address; and
(3) To the extent possible, the names and addresses
of any injured persons and witnesses.
b. Additionally, you and any other involved “insured”
must: . . .
(2) Immediately send us copies of any request,
demand, order, notice, summons or legal paper
received concerning the claim or “suit”.
(3) Cooperate with us in the investigation,
settlement or defense of the claim or “suit.”
J.A. at 237-38. This notification clause was later amended to
require prompt notification of a potential settlement:

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Group of Ins. Cos. et al.
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2. DUTIES IN THE EVENT OF ACCIDENT,
CLAIM, SUIT OR LOSS is changed by adding the
following:
. . .
c. A person seeking Uninsured Motorists Coverage
must also promptly notify us in writing of a tentative
settlement between the “insured” and the insurer of
the vehicle described in paragraph F.3.b. of the
definition of “uninsured motor vehicle” and allow us
30 days to advance payment to that insured in an
amount equal to the tentative settlement to preserve
our rights against the insurer, owner or operator of
such vehicle described in paragraph F.3.b. of the
definition of “uninsured motor vehicle.”
J.A. at 246. Lastly, in addition to these notice clauses, the
Auto policy also has a subrogation provision:
5. TRANSFER OF RIGHTS OF RECOVERY
AGAINST OTHERS TO US
If any person or organization to or for whom we
make payment under this Coverage Form has rights
to recover damages from another, those rights are
transferred to us. That person or organization must
do everything necessary to secure our rights and
must do nothing after “accident” or “loss” to impair
them.
J.A. at 238.
Federal claims that the Clarks breached these provisions by
not promptly notifying Federal of their claim and by releasing
both Sholtis and his insurance carrier from all liability,
thereby destroying Federal’s subrogation right against them.
The Clarks concede that they did not contact Federal until
March 3, 2000, roughly six years after the accident. They
also admit that they fully released Sholtis and Personal from
all liability — five years before notifying Federal.
8 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
The Ohio Supreme Court, in a decision issued after the
parties filed their appellate briefs (but before oral argument),
has made clear the law that governs breaches of these types of
notice and subrogation clauses. See Ferrando, 781 N.E.2d at
945-46. The Ohio Supreme Court explained its holdings as
follows:
Accordingly, we hold that when an insurer’s denial of
UIM coverage is premised on the insured’s breach of a
prompt-notice provision in a policy of insurance, the
insurer is relieved of the obligation to provide coverage
if it is prejudiced by the insured’s unreasonable delay in
giving notice. An insured’s unreasonable delay in giving
notice is presumed prejudicial to the insurer absent
evidence to the contrary.
. . .
As in cases involving a breach of a prompt-notice
provision, a presumption of prejudice should be applied
when evaluating the effects of the breach of a consent-to-
settle or other subrogation-related provision. As in
breach of prompt-notice cases, we find that the burden of
presenting evidence to show a lack of prejudice should
be on the insured who has failed to comply with the
terms of the policy. An additional reason for applying a
presumption of prejudice with the burden of presenting
evidence on the insured is that the General Assembly has
specifically allowed a right of subrogation to providers of
UIM coverage [in Ohio Rev. Code § 3937.18(j)].
Ibid. We believe that two aspects of Ferrando are essential
to this case and thus are worth repeating. First, breaches of
notice and subrogation provisions serve to vitiate the
coverage provided by an insurance policy only if they are
prejudicial to the insurer. Second, breaches are presumed to
be prejudicial unless proven to be harmless by the insureds.

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Group of Ins. Cos. et al.
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2W e note that the state of the law before Ferrando was somewhat
unclear. It appears that before Ferrando, any breach of a subrogation
provision prevented an insured from recovering under an insurance
policy, at least in the context where an insured never even informs the
insurer of a prospective se ttlement. See Bogan v. Progressive Cas. Ins.
Co., 521 N.E.2d 447, syllabus para. 4 (O hio 198 8); see also Ferrando v.
Auto-Ow ners Mu t. Ins. Co., 781 N.E.2d 927, 945 (Ohio 2002) (noting that
under “paragraph four of the syllabus o f Bogan . . . there is no need to
inquire into insurer prejudice when such a [subrogation] clause is
breached”). Ferrando’s overruling of this aspect of Bogan
incontrovertibly was a change in the way Ohio law treated breaches of
subrogation-related insurance clauses. See Tha cker v. Cen t. Mut. Ins. Co.,
N o. 02 CA 9, 20 03 W L 1145449, at *6-*7 (Ohio Ct. App.–4th Dist. Mar.
11, 2003) (noting that “under Bogan, settlement without an op portunity
for the insurer to exercise its subrogation rights was a per se bar to
coverage under the policy” so that the Bogan court’s “analysis contained
no prejudice component,” and that all “this changed with the Supreme
Court of Ohio's decision in Ferrando”).
The Ohio Supreme Court’s decision in Ferrando was not a departure
from Ohio preceden t in its treatme nt of promp t-notice p rovisions, as it
was clear even before Ferrando that a breach of a prompt-notice
provision did no t necessarily preclude coverage. Instead, the breach of
the provision had to be prejudicial. See Ruby v. Midwestern Indem. Co.,
532 N.E.2d 730, 732 (Ohio 1988 ) (finding “ample evidence that [the
insurer] was prejudiced by the delay” in the case at bar, but noting that
prejudice could be presumed if there was an “[u]nreasonable delay in the
giving of notice”).
These twin principles apply equally to breaches of notice
provisions and subrogation provisions.2
Ferrando has essentially laid out a two-part inquiry
describing how courts should handle breaches of prompt-
notice and subrogation clauses. First, a court must determine
whether the provision was breached. If the relevant provision
was breached, a court must then ask whether the insurer was
prejudiced by the breach. Id. at 947. These inquiries are to
be kept “separate and distinct” (i.e., one does not determine
whether a provision was breached by looking to whether there
was any resultant prejudice from the breach). Id. at 949.
10 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
In this case, we hold that both the prompt-notice and the
subrogation provisions were breached. First, we turn to the
prompt-notice provisions. The Ohio Supreme Court affirmed
in Ferrando the earlier notion that “[a] provision in an
insurance policy requiring ‘prompt’ notice to the insurer
requires notice within a reasonable time in light of all the
surrounding facts and circumstances.” Ruby v. Midwestern
Indem. Co., 532 N.E.2d 730, 732 (Ohio 1988) (cited in
Ferrando, 781 N.E.2d at 947). The plaintiffs here notified
Federal in March of 2000, but the accident occurred in 1994.
Recognizing the apparent unreasonableness of the six-year
delay, the Clarks argue that we must consider that delay in
light of the fact that the Clarks’ claim against Federal only
became viable because of the 1999 Scott-Pontzer decision,
which was handed down five years after the accident and only
nine months before notice was given. We, however, have
already rejected this argument. See Lepley v. Hartford Acc.
& Indem. Co., No. 01-4304, __ F.3d __, 2003 WL 21487313
(6th Cir. June 30, 2003). In Lepley, the plaintiff argued “that
prior to the Scott-Pontzer decision, she had no reason to
believe that she would be covered under the policies, and she
claims that Hartford [in any event] would have denied her
claim.” Id. at *6. We stated that “Lepley may be correct that
Hartford would have denied coverage, but Lepley could have
litigated the matter” and that “[a]waiting a favorable Ohio
Supreme Court decision is not a reasonable excuse for
delaying notice and failing to preserve subrogation rights.”
Id. In light of Lepley, we must hold that the Clarks have
breached the notice clauses of the Auto policy.
It is similarly clear that the Clarks have breached the
subrogation provision of the Auto policy. The policy
explicitly requires that the plaintiffs do nothing to impair
Federal’s right to subrogation, and the Clarks here admit that
they released the tortfeasor and his insurance company several
years before Federal was even notified of the accident. This
is a clear breach of the insurance agreement.

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Group of Ins. Cos. et al.
11
Having determined that the prompt-notice and subrogation
provisions were breached, however, we find ourselves unable
to proceed on the “prejudice” component of the Ferrando
analysis. Under Ferrando, the breach of the prompt-notice
and subrogation provisions is presumed to be prejudicial, and
the plaintiffs have the obligation of overcoming that
presumption with persuasive evidence. Here, however, the
Clarks as of yet have had no chance to prove that Federal was
not prejudiced by the Clarks’ breaches of the prompt-notice
and subrogation provisions. Without the benefit of Ferrando,
the district judge ended his analysis when he concluded that
the Clarks had breached the two provisions; he assumed that
any breach in the notice and subrogation provisions
foreclosed the Clarks’ claim.
Although the plaintiffs have not rebutted the presumption
of prejudice at this point in the litigation, it is certainly
possible that, now informed of Ferrando’s standards, they
could adduce evidence to this effect on remand. We therefore
remand this case to the district court so that it may determine,
as an initial matter, whether the plaintiffs can overcome the
presumption of prejudice that attaches to their breaches of the
prompt-notice and subrogation provisions. We note that this
has been the procedure in several post-Ferrando Ohio cases
where the factfinding was conducted before Ferrando was
decided; many courts have remanded Scott-Pontzer cases to
the trial court for further proceedings, reasoning that it would
be manifestly unjust to dismiss the plaintiffs’ claims before
they had an opportunity to show that their breaches of notice
and subrogation provisions were non-prejudicial. See, e.g.,
Marshall v. Colonial Ins. Co. of Cal., No. 80868, 2003 WL
21054784, at *4 (Ohio Ct. App.–11th Dist. May 12, 2003);
Contrucci v. Nationwide Mut. Fire Ins. Co., No.
2002CA00403, 2003 WL 1958247, at *3 (Ohio Ct. App.–5th
Dist. Apr. 21, 2003); Brozovic v. St. Paul Fire & Marine Ins.
Co., No. F-02-012, 2003 WL 252483, at *4 (Ohio Ct.
App.–8th Dist. Feb. 6, 2003); Cincinnati Ins. Co. v. Carroll,
12 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
3Our decisio n to rem and this case is in no way inconsistent with our
decision in Lepley, where we dismissed the plaintiff’s case after
determining that the prompt-notice provision in the policy was breached
and that the plaintiff had no t shown the breach to be no n-prejudicial. See
Lepley v. Hartford Acc. & Indem. Co., No. 01-4304, __ F.3 d __ , 20 03 W L
21487 313, at *6-*7 (6th Cir. June 30, 2003 ).
The distinguishing feature abo ut Lepley is that in Lepley the district
court had already analyze d the p rejud ice issue and had stated in its
opinion that Lepley offered “no evidence to show that the more than
fourteen-year delay in receiving [notice] did not prejudice the
defendants.” Id. at *6. Here, however, the district court did not examine
the issue of p rejud ice, believing that it was unnecessary. Given that the
purpo se of our remanding this case is to insure that the plaintiffs have, at
some point in the litigation, an opportunity to show that their breaches of
the prompt-notice and subrogation provisions are non-prejudicial, we find
Lepley’s dismissal of the plaintiff’s claim co mpletely consonant with our
decision to remand the case here.
F-02-012, 2003 WL 257407, at *1 (Ohio Ct. App.–6th Dist.
Feb. 4, 2003).3
E. The CGL Policy
We now turn to the second policy at issue in this case, the
comprehensive general liability (“CGL”) policy. Ultimately,
we draw the same conclusion with regard to the CGL policy
that we drew in our analysis of the Auto policy. While the
Clarks have breached the prompt-notice and subrogation
provisions of the CGL policy, it is unclear whether the
breaches have been prejudicial to Federal. For that reason, we
remand this claim as well to the district court for further
proceedings.
The CGL policy does not, by its text, provide UM/UIM
coverage. However, under the version of OHIO REV. CODE
ANN. § 3937.18 in existence at the time the policy covering
Clark’s accident was issued (and therefore the version legally
relevant here, see Wolfe v. Wolfe, 725 N.E.2d 261, 266 (Ohio
2000)), insurers were required to offer UM/UIM coverage

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Group of Ins. Cos. et al.
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4Federal does dispute that Donna Clark was an insured under the
CGL policy. Because the district court did not rule on this question and
because we have already decided to remand this case to the district court
for it to address the Clarks’ claim under the Auto policy, we decline to
address this issue. W e leave this issue to the district court to handle in the
first instance on remand.
whenever they offered a motor-vehicle insurance policy. See
OHIO REV. CODE ANN. § 3937.18(A) (1994); see also Gyori
v. Johnston Coca-Cola Bottling Group, Inc., 669 N.E.2d 824
(Ohio 1996) (interpreting the statute before the 1997 changes
made to it in H.B. 261); Linko v. Indem. Ins. Co. of N. Am.,
739 N.E.2d 338 (Ohio 2000) (same). Federal does not
dispute that UM/UIM coverage was not offered properly
under Linko and Gyori or that James Clark was an insured
under the CGL policy.4 Federal instead argues that it never
had any obligation to offer UM/UIM coverage because the
CGL policy was not a motor-vehicle policy within the
meaning of the statute.
At first glance the CGL policy does not appear to be a
motor-vehicle policy; it categorically excludes automobile
coverage. However, there are two exceptions to that general
exclusion, one providing coverage in cases of property
damage arising out of the operation of mobile equipment (the
“mobile equipment” exception), and the other providing
liability coverage for incidents arising out of the parking of
automobiles on or next to the company’s premises (the
“parking attendant” exception). The Clarks have expressly
abandoned the argument that the mobile-equipment exception
is sufficient to turn the CGL policy into a motor-vehicle
policy, see Appellant Br. at 20-21 n.5, and we have squarely
rejected the argument that a parking-attendant exception can
transform an insurance policy into a motor-vehicle policy
within the meaning of OHIO REV. CODE ANN. § 3937.18, see
Lee-Lipstreu, 329 F.3d at 903 (holding “that the ‘parking
attendant’ provision in the Federal policy,” which is identical
14 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
5The district court is bound to follow our decision in Lee-Lipstreu
unless our decision is rejected by the Ohio Supreme Co urt. All of our
decisions in diversity cases are efforts to apply state law; we welcome
clarifications of state law by the Ohio Supreme Court.
to the parking-attendant provision in the case at bar, “did not
create automobile liability coverage”). As a result, it would
not be inappropriate for us to conclude that the CGL policy
was not a motor-vehicle policy within the meaning of former
OHIO REV. CODE ANN. § 3937.18. Nevertheless, we decline
to do so at this time, because this very issue is currently
pending before the Ohio Supreme Court. See Burkhart v.
CNA Ins. Co., No. 2001CA00265, 2002 WL 316224 (Ohio
Ct. App.–5th Dist. Feb. 25, 2002), accepted for review, 770
N.E.2d 1048 (Ohio July 3, 2002) (argued April 15, 2003).
Burkhart involves precisely the same question presented here,
whether “parking attendant” and “mobile equipment”
exceptions to a commercial policy’s general exclusion of
automobile coverage are sufficient to render the policy a
motor-vehicle policy within the meaning of former OHIO
REV. CODE ANN. § 3937.18. Because the Ohio Supreme
Court’s decision in Burkhart will definitively resolve this
issue and because a remand is already in order in this case, we
choose not to rule upon this issue at this time, allowing the
district court below to reexamine it on remand with the
benefit of the Ohio Supreme Court’s decision in Burkhart,
which by then will have been decided.5
We now turn to Federal’s arguments that the Clarks cannot
recover under the CGL policy because they have breached the
prompt-notice and subrogation provisions therein. The CGL
policy contains the following provisions:

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Group of Ins. Cos. et al.
15
6Presumably this was meant to read ‘notified.’
DUTIES IN THE EVENT OF OCCURRENCE, CLAIM
OR SUIT
a. You must see to it that we are modified6 as soon as
practicable of an occurrence which may result in a
claim
. . .
c. You and any other involved insured must:
(1) immediately send us copies of any demands,
notices, summonses or legal papers received in
connection with the claim or suit;
(2) authorize us to obtain records and other
information;
(3) cooperate with us in the investigation,
settlement or defense of the claims or suit; and
(4) assist us, upon our request, in the enforcement
of any right against any person or organization
which may be liable to the insured because of
injury or damage to which this insurance may
also apply.
J.A. at 259.
OUR RIGHT TO RECOVER PAYMENT
If the insured has rights to recover all or part of any
payment we have made under this insurance, those rights
are transferred to us. The insured must do nothing after
loss to impair them. At our request, the insured will
bring suit or transfer those rights to us and help us
enforce them.
J.A. at 261.
For the same reasons that we concluded that the Clarks had
breached the prompt-notice and subrogation provisions in the
Auto policy, we must also conclude that the Clarks had
16 Clark et al. v. Chubb
Group of Ins. Cos. et al.
No. 01-4178
breached the above prompt-notice and subrogation provisions
in the CGL policy. The Clarks argue that the prompt-notice
and subrogation provisions that appear in the CGL policy do
not apply to the UM/UIM coverage that arises by operation of
law. We, however, rejected this argument in Lepley, where
we made the distinction between conditions precedent, which
do “carry over” into coverage implied from an insurance
policy, and liability exclusions, which do not “carry over”
into implied coverage. This distinction was necessary to
reconcile the Ohio Supreme Court’s holding that scope-of-
employment exclusions in a written policy did not apply to
UM/UIM coverage that arose as a matter of law under that
policy, see Scott-Pontzer, 710 N.E.2d at 1120, with the
obvious fact that some provisions of the written policy (such
as the definition of who an insured is under the policy) must
also apply to implied UM/UIM coverage — as otherwise even
parties with absolutely no connection to Federal that were
injured by an underinsured motorist could recover under
Federal’s policy. Lepley concluded that notice and
subrogation clauses were conditions precedent (rather than
liability exclusions), and held that “notice and subrogation
clauses are valid and enforceable preconditions to an
insured’s duty to provide underinsured motorist coverage
even where UM/UIM coverage arises as a matter of law.”
Lepley, __ F.3d __, 2003 WL 21487313, at *4 (quotation and
brackets omitted). Under Lepley, notice and subrogation
provisions do apply to implied UM/UIM coverage, and we
reject the Clarks’ contentions to the contrary.
Having concluded that the prompt-notice and subrogation
provisions do apply to the UM/UIM coverage that arises by
operation of law under the CGL policy and having determined
that the Clarks did in fact breach those provisions, we find
ourselves again unable to determine whether the breaches
were prejudicial because the district court ended its analysis
after determining the issue of breach. Because the Clarks
should be given the chance to show that the breaches were in

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No. 01-4178 Clark et al. v. Chubb
Group of Ins. Cos. et al.
17
fact not prejudicial, we remand this issue to the district court
for further proceedings.
F. The Excess Policy
Having remanded this case on the issues of whether the
Clarks should recover on the Auto and CGL policies, we do
not address the Clarks’ claim under the excess policy. In
order to recover under the excess policy, the policy apparently
requires the Clarks to have recovered under one of the other
policies and to have exhausted the limits of the other policy.
The district court, having concluded that the Clarks could not
recover under either of the two other policies, did not address
the excess policy. Because the district court did not rule on
the excess policy, we decline to do so as well, leaving this
matter for the district court to address on remand.
III. CONCLUSION
For the foregoing reasons, we REVERSE the district
court’s judgment and REMAND this case for further
proceedings consistent with this opinion.

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