Doris Walls v. Amerisure Mutual Insurance Company

*The Honorable Karen Caldwell, United States District Judge for the
Eastern District of Kentucky, sitting by designation.
1
RECOMMENDED FOR FULL-TEXT PUBLICATION
Pursuant to Sixth Circuit Rule 206
ELECTRONIC CITATION: 2003 FED App. 0333P (6th Cir.)
File Name: 03a0333p.06
UNITED STATES COURT OF APPEALS
FOR THE SIXTH CIRCUIT
_________________
DORIS WALLS et al.,
Plaintiffs-Appellants,
v.
AMERISURE MUTUAL
INSURANCE COMPANY,
Defendant-Appellee.
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No. 01-4320
Appeal from the United States District Court
for the Northern District of Ohio at Cleveland.
No. 01-00722—Solomon Oliver, Jr., District Judge.
Argued: July 29, 2003
Decided and Filed: September 18, 2003
Before: DAUGHTREY and MOORE, Circuit Judges;
CALDWELL, District Judge.*
2 Walls et al. v. Amerisure Mutual Ins. Co. No. 01-4320
_________________
COUNSEL
ARGUED: Claudia R. Eklund, LOWE, EKLUND,
WAKEFIELD & MULVIHILL CO., Cleveland, Ohio, for
Appellants. Laurie J. Nicholson, THOMPSON HINE,
Cincinnati, Ohio, for Appellee. ON BRIEF: Claudia R.
Eklund, LOWE, EKLUND, WAKEFIELD & MULVIHILL
CO., Cleveland, Ohio, for Appellants. Laurie J. Nicholson,
Christopher Mark Bechhold, THOMPSON HINE, Cincinnati,
Ohio, for Appellee.
_________________
OPINION
_________________
KAREN NELSON MOORE, Circuit Judge. The plaintiffs,
Reda Walls and her mother Doris Walls, appeal the district
court’s grant of summary judgment to the defendant
Amerisure Mutual Insurance Company (“Amerisure”) and the
district court’s denial of their motion for summary judgment.
The plaintiffs allege that the injuries Reda received in an
automobile accident were covered by an insurance policy held
by the Ford Motor Company, which employed Reda’s father,
Jessie Walls.
The district court premised its grant of summary judgment
to the defendant (and its denial of summary judgment to the
plaintiffs) on the fact that the plaintiffs did not comply with
notice and subrogation provisions in the insurance policy. It
is clear that the plaintiffs did in fact breach at least some of
these provisions. After the district court decided this case,
however, the Ohio Supreme Court decided Ferrando v. Auto-
Owners Mutual Insurance Co., 781 N.E.2d 927 (Ohio 2002).
Under Ferrando, the mere fact that the plaintiffs may have
breached the notice and subrogation clauses is not dispositive
of their legal claim. Instead, the key question is whether the

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No. 01-4320 Walls et al. v. Amerisure Mutual Ins. Co. 3
plaintiffs’ breach of these provisions was prejudicial to
Amerisure — an issue that the district court did not address in
its summary-judgment decision. Because the district court
did not address this issue and because the plaintiffs should
have a clearly delineated opportunity to show that their
breaches were not prejudicial, we REVERSE the district
court’s judgment and REMAND this case for the district
court to conduct a prejudice inquiry under Ferrando.
I. BACKGROUND
According to the complaint, on March 28, 1986, Reda
Walls was riding in an automobile when it was struck by a car
negligently operated by Lawrence Lavrich. Reda, who was
seventeen years old at the time, sustained significant
permanent injuries. At the time of the accident, Reda’s father,
Jessie Walls, was an employee of the Ford Motor Company.
The Ford Motor Company had an insurance policy (“the
policy”) with the Michigan Mutual Insurance Company (now
in business as Amerisure Mutual Insurance Company), that
provided automobile liability insurance. This policy was
issued for the period of December 15, 1983 to December 15,
1986, and was in effect at the time of the accident.
On June 1, 1988, the plaintiffs settled their claims against
Lavrich, who was an underinsured motorist, and released him
and his insurance carrier from all liability in exchange for a
payment of $50,000. It was not until February 21, 2001 that
the plaintiffs notified Amerisure of the accident. Apart from
the settlement that the plaintiffs received from Lavrich and his
insurer, the plaintiffs also received $50,000 from the State
Farm Insurance Company, which insured the vehicle in which
Reda was riding at the time of the accident.
The Amerisure insurance policy provided both general
commercial liability insurance and automobile insurance.
The automobile insurance component of the policy consists
of a section entitled “Comprehensive Automobile Liability
Insurance,” J.A. at 47-57, and a supplementary section,
4 Walls et al. v. Amerisure Mutual Ins. Co. No. 01-4320
entitled “Personal Auto Policy,” J.A. at 58-67. The Personal
Auto Policy contains a subsection that provides uninsured
motorists (“UM”) coverage. The Personal Auto Policy did
not, however, include underinsured motorists (“UIM”)
coverage, which was apparently never offered. Although the
policy has general liability limits in the amount of
$1,000,000, an endorsement purports to limit the UM
coverage to $100,000 per person and $300,000 per accident.
There are several notice and subrogation provisions in this
insurance policy. First, the Comprehensive Automobile
Liability Insurance part of the policy contains apparently
policy-wide consent-to-settle and subrogation provisions:
In the event of any payment under this Policy, the
Company shall be subrogated, subject to the rights of
others, including the INSURED, to the INSURED’s
rights to recover from others to the extent of the
Company’s payments and will act in concert with all
other interests concerned in the exercise of the
INSURED’s rights of recovery against any person or
organization. The INSURED shall execute and deliver
such assignments and similar instruments and papers as
are necessary to secure such rights and shall cooperate
with the Company.
The INSURED may release others from liability and
also waive the Company’s right of subrogation against
third parties but only if such releases or waivers are prior
to loss and are by contract.
J.A. at 55 (emphasis added).
Second, the Personal Auto Policy has notice and
subrogation provisions:
We must be notified promptly of how, when and where
the accident or loss happened . . . .

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No. 01-4320 Walls et al. v. Amerisure Mutual Ins. Co. 5
A person seeking any coverage must:
1. Cooperate with us in the investigation,
settlement or defense of any claim or suit.
2. Promptly send us copies of any notices or legal
papers received in connection with the accident
or loss.
* * *
If we make a payment under this policy and the person to
or for whom payment was made has a right to recover
damages from another we shall be subrogated to that
right. That person shall do:
1. Whatever is necessary to enable us to exercise
our rights; and
2. Nothing after loss to prejudice them.
J.A. at 65-66.
Finally, the uninsured motorists coverage part of the
Personal Auto Policy itself contains a consent-to-settle
“exclusion”:
We do not provide Uninsured Motorists Coverage for
bodily injury sustained by any person:
* * *
2. If that person or the legal representative settles the
bodily injury claim without our consent.
J.A. at 63.
In addition to these provisions, the Comprehensive
Automobile Liability Insurance part of the policy also
contains the following provision:
B. Notice of Occurrence, Claim, or Legal Proceeding
Whenever the Corporate Insurance Manager, Ford
Motor Company, Dearborn, Michigan, becomes aware of
and in his reasonable judgment concludes that an
OCCURRENCE covered hereunder is likely to involve
this Policy, notice of the OCCURRENCE shall be given
6 Walls et al. v. Amerisure Mutual Ins. Co. No. 01-4320
to the Company or its agent as soon as practicable;
however, failure to give notice of any OCCURRENCE
shall not prejudice such claims.
J.A. at 55.
II. ANALYSIS
A. Jurisdiction
The district court had jurisdiction over this diversity case
pursuant to 28 U.S.C. § 1332, because the plaintiffs are
citizens of Ohio and the defendant is a Michigan corporation
that has its principal place of business in Michigan. See Lee-
Lipstreu v. Chubb Group of Ins. Cos., 329 F.3d 898, 899-900
(6th Cir. 2003). Pursuant to 28 U.S.C. § 1291, we have
jurisdiction over the district court’s final judgment.
B. Standard of Review
This court reviews de novo a grant of summary judgment.
Bukowski v. City of Akron, 326 F.3d 702, 707 (6th Cir. 2003).
Although the denial of a motion for summary judgment is
usually an interlocutory order that is not immediately
appealable, where “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). We review de novo a denial of summary
judgment on purely legal grounds. Id. at 235-36. Summary
judgment can only be granted when, taking all justifiable
inferences in the nonmoving party’s favor, there is still no
genuine issue of material fact and the moving party is entitled
to a judgment as a matter of law. Fed. R. Civ. P. 56(c).

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No. 01-4320 Walls et al. v. Amerisure Mutual Ins. Co. 7
C. The Notice and Subrogation Issues
The issue in this case on appeal is whether the plaintiffs
have breached the notice and subrogation provisions in the
Amerisure policy, and whether such breaches vitiate their
claim for coverage. We conclude that at least some of the
provisions related to notice and subrogation do apply to the
plaintiffs’ claim, and that the plaintiffs have indisputably
breached them. However, it is now clear that a mere breach
of these provisions does not necessarily vitiate coverage.
Instead, the question is whether the breach prejudiced the
insurer. Because the district court did not examine that issue
and because the plaintiffs have shown that they could
possibly demonstrate a lack of prejudice, we remand this case
to the district court for further proceedings on this issue.
1. The Effect of Notice and Subrogation Provisions in
Policies Where UM/UIM Coverage is Implied by
Law
It is important to stress that the plaintiffs are not seeking to
recover under the written policy. They concede that the
policy only insures damages caused by the operator of an
uninsured motor vehicle and that Lavrich was insured to some
extent — in fact, the plaintiffs recovered $50,000 from
Lavrich’s insurer. Instead, the plaintiffs apparently are
arguing that the insurer’s failure to offer underinsured
motorists coverage created underinsured motorists coverage
in the amount of the policy limits pursuant to Gyori v.
Johnston Coca-Cola Bottling Group, Inc., 669 N.E.2d 824
(Ohio 1996), and Linko v. Indemnity Insurance Co. of North
America, 739 N.E.2d 338 (Ohio 2000).
Because they are not seeking to recover under the written
policy, the plaintiffs claim that the notice and subrogation
clauses in the written policy do not apply to their claims for
implied UIM benefits. This court, however, has already
rejected this assertion. In Lepley v. Hartford Accident &
Indemnity Co., 334 F.3d 544 (6th Cir. 2003), we stated that
8 Walls et al. v. Amerisure Mutual Ins. Co. No. 01-4320
1As explained infra, the policy has several other notice and
subrogation provisions. T he Perso nal Auto P olicy contains notice and
subrogation provisions, and the uninsured moto rists coverage part of the
Personal Auto P olicy itself has a separate co nsent-to-settle provision. It
is unclear to us whether the se pro visions also apply to the plaintiffs’ claim
for implied UM /UIM benefits. It is frankly difficult to tell whether these
provisions are policy-wide, and, relatedly, whether provisions that are not
policy-wide “carry over” onto implied UM/U IM cove rage. Cf. Lepley v.
Hartford Acc. & Indem. Co., 334 F.3d 544 , 549 (6th Cir. 2003)
(suggesting that only those conditions that are “general conditions
precedent that must be satisfied before an insured is entitled to any
coverage” apply to claims of implied coverage) (emphasis added).
Mo reover, it is unclear whether any provisions requiring prompt notice
are operative in light of language in the policy stating that “failure to give
notice of any OCCURREN CE shall not prejudice such claims.” J.A. at
55. Because we find that the policy-wide consent-to-settle and
subrogation provisions do have effect, however, we do not addre ss these
issues, instead leaving them for the district court to consider, if need be,
“if an insurance policy specifies general conditions precedent
that must be satisfied before an insured is entitled to any
coverage, then an insured’s failure to comply with those
conditions precedent precludes recovery under UM/UIM
coverage that arises by operation of law.” Id. at 549. We
then held that the notice and subrogation provisions in Lepley
were such general conditions precedent, and that they
therefore did “carry over” onto implied UM/UIM coverage.
Id. (holding that “the notice and subrogation clauses are valid
and enforceable preconditions to an insure[r]’s duty to
provide underinsured motorist coverage even where UM/UIM
coverage arises as a matter of law”) (quotation and brackets
omitted); see also Clark v. Chubb Group of Ins. Cos., 337
F.3d 687, 696 (6th Cir. 2003) (explaining this point).
The insurance policy in this case does have at least two
policy-wide conditions that act as general conditions
precedent that must be satisfied before any recovery under the
policy is permitted. These are the policy-wide consent-to-
settle provision and the policy-wide subrogation provision.
J.A. at 55. These provisions, under Lepley, apply to any
claim for implied UM/UIM benefits.1

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No. 01-4320 Walls et al. v. Amerisure Mutual Ins. Co. 9
on remand.
2As we explained in Clark, Ferrando marked a significant change in
how Ohio law treated breaches of subrogation provisions (which include
consent-to-settle provisions, see Ferrando v. Auto-Owners Mut. Ins. Co.,
781 N.E.2d 927, 947 (Ohio 2002)). Before Ferrando, a breach o f a
subrogation provision automatically vitiated coverage. Ferrando,
however, conformed to Ohio precedent in its treatment of notice
provisions, as it was clear even before Ferrando that a breach of a notice
provision did not necessarily preclude coverage. Instead, the breach of
the provision had to be prejud icial. See Clark v. Chu bb G roup of Ins.
Cos., 337 F.3d 687 , 692 n.2 (6th Cir. 2003).
2. The Question of Breach
The question now becomes what legal effect the consent-to-
settle and subrogation clauses have. The Ohio Supreme
Court, in a recent decision issued after the parties filed their
appellate briefs, has made clear the law that governs breaches
of these types of subrogation clauses. See Ferrando v. Auto-
Owners Mut. Ins. Co., 781 N.E.2d 927 (Ohio 2002). As we
have recently explained, Ferrando held that “breaches of
notice and subrogation provisions serve to vitiate the
coverage provided by an insurance policy only if they are
prejudicial to the insurer,” but that “breaches are presumed to
be prejudicial unless proven to be harmless by the insureds.”
Clark, 337 F.3d at 692.2
We hold that the plaintiffs here have breached the policy-
wide consent-to-settle and subrogation provisions. The
provisions clearly require that insureds not release others
from liability or waive Amerisure’s subrogation rights
without Amerisure’s permission. By releasing Lavrich and
his insurer, the plaintiffs breached these provisions. The
plaintiffs’ only defense is their claim that the unforeseeable
nature of the Ohio Supreme Court’s Scott-Pontzer decision
(which provided the basis for considering Reda Walls to be an
insured) meant that they had no idea that a claim against
Amerisure was viable until 1999 (which was when Scott-
10 Walls et al. v. Amerisure Mutual Ins. Co. No. 01-4320
Pontzer was decided). See Scott-Pontzer v. Liberty Mut. Fire
Ins. Co., 710 N.E.2d 1116, 1120 (Ohio 1999). We, however,
rejected this precise argument in both Clark and Lepley and
will not consider it again. See Lepley, 334 F.3d at 551
(stating that while the plaintiff’s claim was only viable
because of the Scott-Pontzer decision, the plaintiff still “could
have litigated the matter,” as “[a]waiting a favorable Ohio
Supreme Court decision is not a reasonable excuse for
delaying notice and failing to preserve subrogation rights”);
see also Clark, 337 F.3d at 693. We therefore hold that the
plaintiffs have breached the consent-to-settle and subrogation
provisions in the policy.
3. The Question of Prejudice (and of Remand)
Having addressed the issue of breach, we now turn to the
issue of prejudice. Under Ferrando, once it has been shown
that plaintiffs have breached a notice or subrogation
provision, the plaintiffs must submit evidence to overcome
the presumption of prejudice that attaches to such a breach.
Clark, 337 F.3d at 693. The parties seem to agree that the
plaintiffs have not, as of yet, overcome that presumption. The
parties disagree, however, as to what should happen as a
consequence. The defendant argues that we should dismiss
the plaintiffs’ claim. The plaintiffs argue that we should
remand this case to the district court to allow them an
opportunity to show a lack of prejudice. Ultimately, we agree
with the plaintiffs and remand this case.
We have considered the appropriateness of a remand under
these circumstances twice before, both in Clark and in Lepley.
In Lepley, when faced with the plaintiffs’ breach of notice and
subrogation provisions, we dismissed the plaintiffs’ claims.
By way of contrast, in Clark, we remanded the case to the
district court. Lepley and Clark, however, are “in no way
inconsistent.” Clark, 337 F.3d at 694 n.3. In Lepley, the
district court had previously “analyzed the prejudice issue and
had stated in its opinion that Lepley offered ‘no evidence to
[rebut the presumption of prejudice].’” Clark, 337 F.3d at

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No. 01-4320 Walls et al. v. Amerisure Mutual Ins. Co. 11
3In addition to asking this court for a remand , the plaintiffs also
moved to reopen their case in the district court. The plaintiffs argued that,
in light of Ferrando and the fact that the district court had made no
findings regarding prejudice, the case should be reopened. In denying the
plaintiffs’ motio n to reo pen, the district court ac know ledged that it did not
examine the prejudice issue in its summary-judgment decision. The
district court explained that the plaintiffs had not shown evidence of a
lack of prejudice either before summary judgment was granted in the
district court or in any later affidavits attached to the motion to reopen.
W e nonetheless believe a remand to be ap propriate here. A s we
explain infra, there is evidence (both within and outside of the current
record) suggesting that the plaintiffs’ breaches were not prejudicial. The
fact that the plaintiffs did not refer to this evidence in their motio n to
reopen may justify the district court’s denial of that motion, but we are not
reviewing the district court’s denial of that motion; we are reviewing the
grant of summary judgment to the defend ants. Given the fact that the
district court did no t make any de termination on the issue of prejudice
befo re granting summary judgment against the plaintiffs and given the
possibility that the plaintiffs could in fact show a lack of prejudice, we
continue to believe that a remand is appropriate here even in light of the
district court’s subsequent decision to deny the motion to reopen.
694 n.3 (quoting Lepley, 334 F.3d at 552). In Clark,
however, “the district court did not examine the issue of
prejudice, believing that it was unnecessary.” Id. This is the
pivotal distinction on which the result in Clark turned; in
Clark, a remand was necessary to allow the district court to
do the initial fact-finding on the prejudice issue, thereby also
“insur[ing] that the plaintiffs have, at some point in the
litigation, an opportunity to show” a lack of prejudice. Id.
As was the case in Clark, the district court below did not
evaluate the prejudice issue in its summary-judgment
decision; it instead viewed any breach as automatically
vitiating coverage. As a result, the district court made no
findings regarding prejudice that we review here.3 Moreover,
we note that the plaintiffs at oral argument pointed to specific
pieces of evidence that could well establish that their breaches
of the consent-to-settle and subrogation provisions were not
prejudicial to Amerisure. The plaintiffs stated that State Farm
(which insured the car in which Reda Walls was riding) did
12 Walls et al. v. Amerisure Mutual Ins. Co. No. 01-4320
an investigation of the accident, consented to the settlement
Walls reached with Lavrich and his insurer, and paid benefits
on the UIM claim. The fact that State Farm, another
UM/UIM carrier, accepted the settlement with Lavrich after
an investigation suggests that State Farm viewed a recovery
from Lavrich above the $50,000 settlement figure to be
unlikely, if not impossible. This, in turn, suggests that
Amerisure perhaps lost nothing of value when the plaintiffs
settled with Lavrich and his insurer and destroyed
Amerisure’s subrogation rights. Cf. Ferrando, 781 N.E.2d at
949 (noting that whether “the prejudicial effect [of a consent-
to-settle provision’s breach] on the insurer [is] minimal” will
“depend[] on the value of the subrogation rights sought to be
protected”). We also note that the record already contains a
certified copy of Lavrich’s conviction for failing to stop at a
red light as well as evidence that Reda Walls was merely a
passenger in the impacted car. This evidence tends to suggest
strongly that it was Lavrich (who was an underinsured driver)
who was responsible for the accident and that Reda Walls was
free of any contributory fault.
While the facts listed above do not establish a lack of
prejudice, it does appear that the plaintiffs may, on remand,
be able to adduce evidence to support such a conclusion. As
the prejudice inquiry is a factual one that we feel ill equipped
to resolve, we (consistent with Ohio practice) choose to
remand this case and leave it to the district court to handle in
the first instance. See Clark, 337 F.3d at 693-94 (noting the
“many [Ohio intermediate] courts [that] have remanded Scott-
Pontzer cases to the trial court for further proceedings”).
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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