           RECOMMENDED FOR FULL-TEXT PUBLICATION
                Pursuant to Sixth Circuit Rule 206                        2   Walls et al. v. Amerisure Mutual Ins. Co.     No. 01-4320
        ELECTRONIC CITATION: 2003 FED App. 0333P (6th Cir.)
                    File Name: 03a0333p.06                                                    _________________
                                                                                                   COUNSEL
UNITED STATES COURT OF APPEALS
                                                                          ARGUED:        Claudia R. Eklund, LOWE, EKLUND,
                  FOR THE SIXTH CIRCUIT                                   WAKEFIELD & MULVIHILL CO., Cleveland, Ohio, for
                    _________________                                     Appellants. Laurie J. Nicholson, THOMPSON HINE,
                                                                          Cincinnati, Ohio, for Appellee. ON BRIEF: Claudia R.
 DORIS WALLS et al.,               X                                      Eklund, LOWE, EKLUND, WAKEFIELD & MULVIHILL
          Plaintiffs-Appellants, -                                        CO., Cleveland, Ohio, for Appellants. Laurie J. Nicholson,
                                    -                                     Christopher Mark Bechhold, THOMPSON HINE, Cincinnati,
                                    -  No. 01-4320                        Ohio, for Appellee.
            v.                      -
                                     >                                                        _________________
                                    ,
 AMERISURE MUTUAL                   -                                                             OPINION
 INSURANCE COMPANY ,                -                                                         _________________
           Defendant-Appellee. -
                                    -                                       KAREN NELSON MOORE, Circuit Judge. The plaintiffs,
                                   N                                      Reda Walls and her mother Doris Walls, appeal the district
       Appeal from the United States District Court                       court’s grant of summary judgment to the defendant
      for the Northern District of Ohio at Cleveland.                     Amerisure Mutual Insurance Company (“Amerisure”) and the
   No. 01-00722—Solomon Oliver, Jr., District Judge.                      district court’s denial of their motion for summary judgment.
                                                                          The plaintiffs allege that the injuries Reda received in an
                     Argued: July 29, 2003                                automobile accident were covered by an insurance policy held
                                                                          by the Ford Motor Company, which employed Reda’s father,
            Decided and Filed: September 18, 2003                         Jessie Walls.

   Before: DAUGHTREY and MOORE, Circuit Judges;                              The district court premised its grant of summary judgment
             CALDWELL, District Judge.*                                   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
    *
     The Honorable Karen Caldwell, United States District Judge for the   of their legal claim. Instead, the key question is whether the
Eastern District of Kentucky, sitting by designation.

                                  1
No. 01-4320     Walls et al. v. Amerisure Mutual Ins. Co. 3        4    Walls et al. v. Amerisure Mutual Ins. Co.      No. 01-4320

plaintiffs’ breach of these provisions was prejudicial to          entitled “Personal Auto Policy,” J.A. at 58-67. The Personal
Amerisure — an issue that the district court did not address in    Auto Policy contains a subsection that provides uninsured
its summary-judgment decision. Because the district court          motorists (“UM”) coverage. The Personal Auto Policy did
did not address this issue and because the plaintiffs should       not, however, include underinsured motorists (“UIM”)
have a clearly delineated opportunity to show that their           coverage, which was apparently never offered. Although the
breaches were not prejudicial, we REVERSE the district             policy has general liability limits in the amount of
court’s judgment and REMAND this case for the district             $1,000,000, an endorsement purports to limit the UM
court to conduct a prejudice inquiry under Ferrando.               coverage to $100,000 per person and $300,000 per accident.
                    I. BACKGROUND                                    There are several notice and subrogation provisions in this
                                                                   insurance policy. First, the Comprehensive Automobile
   According to the complaint, on March 28, 1986, Reda             Liability Insurance part of the policy contains apparently
Walls was riding in an automobile when it was struck by a car      policy-wide consent-to-settle and subrogation provisions:
negligently operated by Lawrence Lavrich. Reda, who was
seventeen years old at the time, sustained significant                    In the event of any payment under this Policy, the
permanent injuries. At the time of the accident, Reda’s father,        Company shall be subrogated, subject to the rights of
Jessie Walls, was an employee of the Ford Motor Company.               others, including the INSURED, to the INSURED’s
The Ford Motor Company had an insurance policy (“the                   rights to recover from others to the extent of the
policy”) with the Michigan Mutual Insurance Company (now               Company’s payments and will act in concert with all
in business as Amerisure Mutual Insurance Company), that               other interests concerned in the exercise of the
provided automobile liability insurance. This policy was               INSURED’s rights of recovery against any person or
issued for the period of December 15, 1983 to December 15,             organization. The INSURED shall execute and deliver
1986, and was in effect at the time of the accident.                   such assignments and similar instruments and papers as
                                                                       are necessary to secure such rights and shall cooperate
  On June 1, 1988, the plaintiffs settled their claims against         with the Company.
Lavrich, who was an underinsured motorist, and released him               The INSURED may release others from liability and
and his insurance carrier from all liability in exchange for a         also waive the Company’s right of subrogation against
payment of $50,000. It was not until February 21, 2001 that            third parties but only if such releases or waivers are prior
the plaintiffs notified Amerisure of the accident. Apart from          to loss and are by contract.
the settlement that the plaintiffs received from Lavrich and his
insurer, the plaintiffs also received $50,000 from the State       J.A. at 55 (emphasis added).
Farm Insurance Company, which insured the vehicle in which
Reda was riding at the time of the accident.                         Second, the Personal Auto Policy has notice and
                                                                   subrogation provisions:
  The Amerisure insurance policy provided both general
commercial liability insurance and automobile insurance.               We must be notified promptly of how, when and where
The automobile insurance component of the policy consists              the accident or loss happened . . . .
of a section entitled “Comprehensive Automobile Liability
Insurance,” J.A. at 47-57, and a supplementary section,
No. 01-4320      Walls et al. v. Amerisure Mutual Ins. Co. 5    6    Walls et al. v. Amerisure Mutual Ins. Co.   No. 01-4320

  A person seeking any coverage must:                               to the Company or its agent as soon as practicable;
     1. Cooperate with us in the investigation,                     however, failure to give notice of any OCCURRENCE
         settlement or defense of any claim or suit.                shall not prejudice such claims.
     2. Promptly send us copies of any notices or legal
         papers received in connection with the accident        J.A. at 55.
         or loss.
  ***                                                                                  II. ANALYSIS
  If we make a payment under this policy and the person to
  or for whom payment was made has a right to recover           A. Jurisdiction
  damages from another we shall be subrogated to that
  right. That person shall do:                                     The district court had jurisdiction over this diversity case
     1. Whatever is necessary to enable us to exercise          pursuant to 28 U.S.C. § 1332, because the plaintiffs are
         our rights; and                                        citizens of Ohio and the defendant is a Michigan corporation
     2. Nothing after loss to prejudice them.                   that has its principal place of business in Michigan. See Lee-
                                                                Lipstreu v. Chubb Group of Ins. Cos., 329 F.3d 898, 899-900
J.A. at 65-66.                                                  (6th Cir. 2003). Pursuant to 28 U.S.C. § 1291, we have
                                                                jurisdiction over the district court’s final judgment.
  Finally, the uninsured motorists coverage part of the
Personal Auto Policy itself contains a consent-to-settle        B. Standard of Review
“exclusion”:                                                       This court reviews de novo a grant of summary judgment.
                                                                Bukowski v. City of Akron, 326 F.3d 702, 707 (6th Cir. 2003).
    We do not provide Uninsured Motorists Coverage for          Although the denial of a motion for summary judgment is
  bodily injury sustained by any person:                        usually an interlocutory order that is not immediately
  ***                                                           appealable, where “an appeal from a denial of summary
    2. If that person or the legal representative settles the   judgment is presented in tandem with a grant of summary
         bodily injury claim without our consent.               judgment, this court has jurisdiction to review the propriety
                                                                of the district court’s denial of summary judgment.” Hamad
J.A. at 63.                                                     v. Woodcrest Condo. Ass’n, 328 F.3d 224, 235 (6th Cir. 2003)
                                                                (quotation omitted). We review de novo a denial of summary
  In addition to these provisions, the Comprehensive            judgment on purely legal grounds. Id. at 235-36. Summary
Automobile Liability Insurance part of the policy also          judgment can only be granted when, taking all justifiable
contains the following provision:                               inferences in the nonmoving party’s favor, there is still no
                                                                genuine issue of material fact and the moving party is entitled
  B. Notice of Occurrence, Claim, or Legal Proceeding           to a judgment as a matter of law. Fed. R. Civ. P. 56(c).
    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
No. 01-4320     Walls et al. v. Amerisure Mutual Ins. Co. 7          8   Walls et al. v. Amerisure Mutual Ins. Co.                  No. 01-4320

C. The Notice and Subrogation Issues                                 “if an insurance policy specifies general conditions precedent
                                                                     that must be satisfied before an insured is entitled to any
  The issue in this case on appeal is whether the plaintiffs         coverage, then an insured’s failure to comply with those
have breached the notice and subrogation provisions in the           conditions precedent precludes recovery under UM/UIM
Amerisure policy, and whether such breaches vitiate their            coverage that arises by operation of law.” Id. at 549. We
claim for coverage. We conclude that at least some of the            then held that the notice and subrogation provisions in Lepley
provisions related to notice and subrogation do apply to the         were such general conditions precedent, and that they
plaintiffs’ claim, and that the plaintiffs have indisputably         therefore did “carry over” onto implied UM/UIM coverage.
breached them. However, it is now clear that a mere breach           Id. (holding that “the notice and subrogation clauses are valid
of these provisions does not necessarily vitiate coverage.           and enforceable preconditions to an insure[r]’s duty to
Instead, the question is whether the breach prejudiced the           provide underinsured motorist coverage even where UM/UIM
insurer. Because the district court did not examine that issue       coverage arises as a matter of law”) (quotation and brackets
and because the plaintiffs have shown that they could                omitted); see also Clark v. Chubb Group of Ins. Cos., 337
possibly demonstrate a lack of prejudice, we remand this case        F.3d 687, 696 (6th Cir. 2003) (explaining this point).
to the district court for further proceedings on this issue.
                                                                       The insurance policy in this case does have at least two
  1.   The Effect of Notice and Subrogation Provisions in            policy-wide conditions that act as general conditions
       Policies Where UM/UIM Coverage is Implied by                  precedent that must be satisfied before any recovery under the
       Law                                                           policy is permitted. These are the policy-wide consent-to-
                                                                     settle provision and the policy-wide subrogation provision.
  It is important to stress that the plaintiffs are not seeking to   J.A. at 55. These provisions, under Lepley, apply to any
recover under the written policy. They concede that the              claim for implied UM/UIM benefits.1
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                  1
                                                                           As explained infra, the policy has several other notice and
Lavrich’s insurer. Instead, the plaintiffs apparently are            subrogation provisions. T he Perso nal Auto P olicy contains notice and
arguing that the insurer’s failure to offer underinsured             subrogation provisions, and the uninsured moto rists coverage part of the
motorists coverage created underinsured motorists coverage           Personal Auto P olicy itself has a separate co nsent-to-settle provision. It
in the amount of the policy limits pursuant to Gyori v.              is unclear to us wh ether the se pro visions also apply to the plaintiffs’ claim
                                                                     for implied UM /UIM benefits. It is frankly difficult to tell whether these
Johnston Coca-Cola Bottling Group, Inc., 669 N.E.2d 824              provisions are policy-wide, and, relatedly, whether provisions that are not
(Ohio 1996), and Linko v. Indemnity Insurance Co. of North           policy-wide “carry over” onto implied UM/U IM cove rage. Cf. Lepley v.
America, 739 N.E.2d 338 (Ohio 2000).                                 Hartford Acc. & Indem. Co., 334 F.3d 544 , 549 (6th Cir. 2003)
                                                                     (suggesting that only those conditions that are “general conditions
  Because they are not seeking to recover under the written          precedent that must be satisfied before an insured is entitled to any
policy, the plaintiffs claim that the notice and subrogation         coverage” apply to claims of implied coverage) (emphasis added).
                                                                     Mo reover, it is unclear whether any provisions requiring prompt notice
clauses in the written policy do not apply to their claims for       are operative in light of language in the policy stating that “failure to give
implied UIM benefits. This court, however, has already               notice of any OCCURREN CE shall not prejudice such claims.” J.A. at
rejected this assertion. In Lepley v. Hartford Accident &            55.    Because we find that the policy-wide consent-to-settle and
Indemnity Co., 334 F.3d 544 (6th Cir. 2003), we stated that          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,
No. 01-4320       Walls et al. v. Amerisure Mutual Ins. Co. 9                10 Walls et al. v. Amerisure Mutual Ins. Co.       No. 01-4320

  2. The Question of Breach                                                  Pontzer was decided). See Scott-Pontzer v. Liberty Mut. Fire
                                                                             Ins. Co., 710 N.E.2d 1116, 1120 (Ohio 1999). We, however,
  The question now becomes what legal effect the consent-to-                 rejected this precise argument in both Clark and Lepley and
settle and subrogation clauses have. The Ohio Supreme                        will not consider it again. See Lepley, 334 F.3d at 551
Court, in a recent decision issued after the parties filed their             (stating that while the plaintiff’s claim was only viable
appellate briefs, has made clear the law that governs breaches               because of the Scott-Pontzer decision, the plaintiff still “could
of these types of subrogation clauses. See Ferrando v. Auto-                 have litigated the matter,” as “[a]waiting a favorable Ohio
Owners Mut. Ins. Co., 781 N.E.2d 927 (Ohio 2002). As we                      Supreme Court decision is not a reasonable excuse for
have recently explained, Ferrando held that “breaches of                     delaying notice and failing to preserve subrogation rights”);
notice and subrogation provisions serve to vitiate the                       see also Clark, 337 F.3d at 693. We therefore hold that the
coverage provided by an insurance policy only if they are                    plaintiffs have breached the consent-to-settle and subrogation
prejudicial to the insurer,” but that “breaches are presumed to              provisions in the policy.
be prejudicial unless proven to be harmless by the insureds.”
Clark, 337 F.3d at 692.2                                                       3. The Question of Prejudice (and of Remand)
  We hold that the plaintiffs here have breached the policy-                    Having addressed the issue of breach, we now turn to the
wide consent-to-settle and subrogation provisions. The                       issue of prejudice. Under Ferrando, once it has been shown
provisions clearly require that insureds not release others                  that plaintiffs have breached a notice or subrogation
from liability or waive Amerisure’s subrogation rights                       provision, the plaintiffs must submit evidence to overcome
without Amerisure’s permission. By releasing Lavrich and                     the presumption of prejudice that attaches to such a breach.
his insurer, the plaintiffs breached these provisions. The                   Clark, 337 F.3d at 693. The parties seem to agree that the
plaintiffs’ only defense is their claim that the unforeseeable               plaintiffs have not, as of yet, overcome that presumption. The
nature of the Ohio Supreme Court’s Scott-Pontzer decision                    parties disagree, however, as to what should happen as a
(which provided the basis for considering Reda Walls to be an                consequence. The defendant argues that we should dismiss
insured) meant that they had no idea that a claim against                    the plaintiffs’ claim. The plaintiffs argue that we should
Amerisure was viable until 1999 (which was when Scott-                       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.
on remand.                                                                      We have considered the appropriateness of a remand under
                                                                             these circumstances twice before, both in Clark and in Lepley.
    2
      As we explained in Clark, Ferrando marked a significant change in      In Lepley, when faced with the plaintiffs’ breach of notice and
how Ohio law treated breaches of subrogation provisions (which include       subrogation provisions, we dismissed the plaintiffs’ claims.
consent-to-settle provisions, see Ferrando v. Auto-Owners Mut. Ins. Co.,     By way of contrast, in Clark, we remanded the case to the
781 N.E.2d 927, 947 (Ohio 2002)). Before Ferrando, a breach o f a
subrogation provision automatically vitiated coverage.         Ferrando,
                                                                             district court. Lepley and Clark, however, are “in no way
however, conformed to Ohio precedent in its treatment of notice              inconsistent.” Clark, 337 F.3d at 694 n.3. In Lepley, the
provisions, as it was clear even before Ferrando that a breach of a notice   district court had previously “analyzed the prejudice issue and
provision did not necessarily preclude coverage. Instead, the breach of      had stated in its opinion that Lepley offered ‘no evidence to
the provision had to be prejud icial. See C lark v. Chu bb G roup of Ins.    [rebut the presumption of prejudice].’” Clark, 337 F.3d at
Cos., 337 F.3d 687 , 692 n.2 (6th Cir. 2003).
No. 01-4320         Walls et al. v. Amerisure Mutual Ins. Co. 11                     12 Walls et al. v. Amerisure Mutual Ins. Co.      No. 01-4320

694 n.3 (quoting Lepley, 334 F.3d at 552). In Clark,                                 an investigation of the accident, consented to the settlement
however, “the district court did not examine the issue of                            Walls reached with Lavrich and his insurer, and paid benefits
prejudice, believing that it was unnecessary.” Id. This is the                       on the UIM claim. The fact that State Farm, another
pivotal distinction on which the result in Clark turned; in                          UM/UIM carrier, accepted the settlement with Lavrich after
Clark, a remand was necessary to allow the district court to                         an investigation suggests that State Farm viewed a recovery
do the initial fact-finding on the prejudice issue, thereby also                     from Lavrich above the $50,000 settlement figure to be
“insur[ing] that the plaintiffs have, at some point in the                           unlikely, if not impossible. This, in turn, suggests that
litigation, an opportunity to show” a lack of prejudice. Id.                         Amerisure perhaps lost nothing of value when the plaintiffs
                                                                                     settled with Lavrich and his insurer and destroyed
   As was the case in Clark, the district court below did not                        Amerisure’s subrogation rights. Cf. Ferrando, 781 N.E.2d at
evaluate the prejudice issue in its summary-judgment                                 949 (noting that whether “the prejudicial effect [of a consent-
decision; it instead viewed any breach as automatically                              to-settle provision’s breach] on the insurer [is] minimal” will
vitiating coverage. As a result, the district court made no                          “depend[] on the value of the subrogation rights sought to be
findings regarding prejudice that we review here.3 Moreover,                         protected”). We also note that the record already contains a
we note that the plaintiffs at oral argument pointed to specific                     certified copy of Lavrich’s conviction for failing to stop at a
pieces of evidence that could well establish that their breaches                     red light as well as evidence that Reda Walls was merely a
of the consent-to-settle and subrogation provisions were not                         passenger in the impacted car. This evidence tends to suggest
prejudicial to Amerisure. The plaintiffs stated that State Farm                      strongly that it was Lavrich (who was an underinsured driver)
(which insured the car in which Reda Walls was riding) did                           who was responsible for the accident and that Reda Walls was
                                                                                     free of any contributory fault.

     3                                                                                 While the facts listed above do not establish a lack of
      In addition to asking this court for a remand , the plaintiffs also
moved to reopen their case in the district court. The plaintiffs argued that,
                                                                                     prejudice, it does appear that the plaintiffs may, on remand,
in light of Ferrando and the fact that the district court had made no                be able to adduce evidence to support such a conclusion. As
findings regarding prejudice, the case should be reopened. In denying the            the prejudice inquiry is a factual one that we feel ill equipped
plaintiffs’ motio n to reo pen, the district court ac know ledge d that it did not   to resolve, we (consistent with Ohio practice) choose to
examine the prejudice issue in its summary-judgment decision. The                    remand this case and leave it to the district court to handle in
district court explained that the plaintiffs had not shown evidenc e of a            the first instance. See Clark, 337 F.3d at 693-94 (noting the
lack of prejudice either before summary judgment was granted in the
district court or in any later affidavits attached to the motion to reopen.          “many [Ohio intermediate] courts [that] have remanded Scott-
     W e nonetheless b elieve a remand to be ap propriate here. A s we               Pontzer cases to the trial court for further proceedings”).
explain infra, there is evidence (both within and outside of the current
record) suggesting that the plaintiffs’ breaches were not prejudicial. The                               III. CONCLUSION
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          For the foregoing reasons, we REVERSE the district
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
                                                                                     court’s judgment and REMAND this case for further
district court did no t make any de termination on the issue of prejudice            proceedings consistent with this opinion.
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.
