Readers of this blog know of the very serious consequences of an OVI/DUI conviction. Direct consequences include jail, fines, suspensions, loss of commercial driving privileges, confiscation of the automobile. Indirect consequences include employment issues, insurance premium increases or loss of insurance, and professional ethics issues.

A recent federal court case points to another consequence – denial of insurance coverage. The case, Shelby County Health Care Corp. v. Majestic Star Casino, LLC Group Health Benefit Plan, 2009 FED App. 0339P (6th Cir.) involved a claim by an insured for medical coverage under his policy of insurance. The insured was involved in a traffic accident. At the time the insured was driving without a license and, at the time of their investigation, the officers checked a box on the citation indicating that alcohol consumption might be a contributing factor to the accident. The insured eventually pled no contest to the failure to have a valid drivers license but was never charged with a DUI.

As with most medical insurance policies, the following covenant was contained in the policy:

“This Plan does not cover and no benefits shall be paid for any loss caused by, incurred for or resulting from . . . . [c]harges for or in connection with an injury or illness arising out of the participation in, or in consequence of having participated in, a riot, insurrection or civil disturbance or being engaged in an illegal occupation or the commission or attempted commission of an illegal or criminal act.”

The company denied coverage claiming the insured’s failure to have a driver’s license and his possible OVI were illegal acts and therefore, were not covered. Since the term “illegal act” was not defined in the policy, the court, in a very narrow interpretation, said the “ the Plan’s illegal-act provision did not exclude coverage for [the insured’s] injuries because driving without a license and driving without insurance did not “cause” [the insured’s] accident and resulting injuries. Apparently, the court determined that 1) the contributing factor causing the accident had to be an illegal act, AND 2) it had to be a contributing factor to the incident that gave rise to the claim. Therefore, the court ordered the claim paid.

It is important to note that the court said since the insured was never charged with DUI it was not required to base its opinion on an act for which the insured was never charged. But, what would the court’s decision have been had the insured been convicted of DUI? Does DUI amount to a “criminal or illegal act?” If convicted, it could certainly be argued it was a contributing factor to the accident.

So, what do we conclude from this case? With a little tweaking, an insurance company could write an exclusionary clause that could easily exclude coverage for an accident where DUI is a contributing factor. Or, using the reciprocal argument that can be made in the Shelby case, the insurance company could argue that DUI is an illegal act AND it contributed to the incident that gave rise to the claim, and, therefore, the claim should be denied.

Companies should be aware of the tightening noose recently placed around the neck of those holding commercial drivers’ licenses in Ohio.  If you’ve followed various articles placed in this newsletter, you are aware of the potential liability of owners of companies who hire and retain drivers having poor driving histories, especially those convicted of driving while intoxicated.

By reading those articles, it is apparent Ohio has promulgated one of the nation’s toughest DUI laws.  The loosening of pre-test requirements and harsher sentences to offenders have produced a draconian burden on anyone having alcohol in their system while driving.  First time offenders are subject to a minimum of three days in jail or a mandatory three-day alcohol intervention program, mandatory license suspension, and large fines.  If the offender has additional violations within a six-year period these penalties are enhanced dramatically (See Figure A).  In the event an offender has four or more offenses in a six-year period, the offense becomes a Felony – a major crime in Ohio.

1 3 days or DIP* $375 6 Months None

2 10 days $525 1 Year 90 day Immob.

3 30 days $ 850 2 Years Car Forfeiture

4** 60 Days – Local $1350 3 Years Car Forfeiture

5 60 days – Prison $1350 3 Years Car Forfeiture

* Three-day Driver Intervention Program

** Four or more convictions are Felonies

If the offender has a breath-alcohol reading greater than .17, all penalties are doubled!  For example, if it is the offender’s second conviction in six years and he had a reading of .17 or greater, he will be incarcerated for twenty days, double the ordinary time.

After a term of actual suspension, when the offender is given no driving privileges (known as “hard time”), an offender may apply to the court for limited driving privileges during the period of the offender’s suspension (See Figure B)

While these penalties appear to be draconian, the consequences to an individual having a Commercial Driver’s License (CDL) are even more severe.  Historically, if a commercial driver was intoxicated while driving his commercial vehicle, the offender suffered a CDL suspension of one year – without any privileges.  There was no provision for limited driving privileges.

1 15 days

2 45 Days

3 180 Days

4 None

5 None

*Known as “Hard Time,” the offender may not drive for any reason for the period set forth.

Therefore, a CDL offender could not drive any vehicle, car, truck, bus for one year.  Basically, he could not be employed as a commercial driver for one year.  It is important to note that the offender had to be driving a commercial vehicle at the time of the offense.

Recently, the Ohio legislature amended its commercial drivers license statute relating to DUI offenders.  As stated prev
iously, O.R.C. 4506.16 contains a prohibition against those driving under the influence.  This provision was expanded by eliminating any referral to a commercial vehicle.  Therefore, any violation of DUI, whether in a commercial or private vehicle, requires the Ohio Bureau of Motor Vehicles to revoke the commercial driver’s license of any offender found guilty of operating a vehicle under the influence for one year.  This statute provides no relief or provision for limited privileges.  The bottom line is any person holding a commercial driver’s license in Ohio is essentially out of work for one year if they make their living driving a commercial truck, cab, bus or other vehicle which requires a CDL.  By the way, a second offense disqualifies the offender for life!

Beside the fact that an employer may lose a valuable employee, there are other consequences.

Companies have been held liable for consequential, and in some instances, punitive damages for injuries caused by an employee who the employer knew or should have known was driving under the influence or who allowed the employee to drive without having a CDL. In some cases, insurance companies have denied coverage under these circumstances.  In addition to possible third-party liability, there are worker’s compensation issues as well as Federal OSHA standards that may be at issue.  Any accident caused by an offending employee could have grave consequences to the employer.

To prevent this, employers must continually conduct insurance audits for any employee or prospective employee that will drive a commercial vehicle or will do any driving on behalf of the company – whether or not a CDL is required.  At the time of hire, and on a yearly basis, the employer should make a review of its employees’ driving record making sure all licenses, including CDLs, are current and valid.  Companies should obtain waivers from their employees permitting the company or its agent to conduct driving record searches to review employees’ driving records.  Companies should require their insurance agent or carrier to make their own evaluation and notify the company in the event any employee is not covered.  I remember a client who suffered a $50,000 increase in workers’ compensation premiums due to an employee’s accident and consequential WC claim.  Companies must be very diligent in this area.