Laboy v. Grange Indemn. Ins. Co.

[Cite as Laboy v. Grange Indemn. Ins. Co., 2014-Ohio-1516.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 100116
PHILIP LABOY, ET AL.
PLAINTIFFS-APPELLANTS
vs.
GRANGE INDEMNITY INSURANCE CO., ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
REVERSED AND REMANDED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-12-773808
BEFORE: Stewart, J., S. Gallagher, P.J., and E.A. Gallagher, J.
RELEASED AND JOURNALIZED: April 10, 2014
ATTORNEYS FOR APPELLANTS
Thomas J. Connick
Dubyak Connick Sammon & Bloom, L.L.C.
3401 Enterprise Parkway, Suite 205
Cleveland, OH 44122
Edward W. Cochran
Cochran & Cochran
20030 Marchmont Road
Shaker Heights, OH 44122
ATTORNEYS FOR APPELLEE
Michael K. Farrell
David A. Carney
Baker & Hostetler, L.L.P.
PNC Center
1900 East Ninth Street, Suite 3200
Cleveland, OH 44114
Mark A. Johnson
Rand L. McClelland
Baker & Hostetler, L.L.P.
65 East State Street, Suite 2100
Columbus, OH 43215
MELODY J. STEWART, J.:
{¶1} Plaintiffs-appellants Philip and Heidi Laboy carried automobile insurance
issued by defendant-appellee Grange Mutual Casualty Company (“Grange”). The policy
contained a medical payments clause that said Grange would pay the lesser of reasonable
medical expenses or “any negotiated reduced rate accepted by a medical provider.”
When the Laboys were injured in an automobile accident, they submitted their medical
bills not only to Grange, but to their health insurance company, Medical Mutual of Ohio.
Medical Mutual reimbursed the Laboys’ health care providers at negotiated rates; Grange
reimbursed those same health care providers at higher rates. After all the bills were paid,
Grange exercised its contractual right of subrogation against the Laboys for the medical
payments it made on their behalf. The Laboys complained that Grange violated the
terms of the policy by paying a higher rate than that negotiated by Medical Mutual for the
same bills. They claimed that Grange’s higher rate of reimbursement ($891.99) meant
that Grange could seek a higher amount in subrogation, which would lead to a
corresponding reduction in the net proceeds they received from their settlement with the
tortfeasor.
{¶2} The court rejected the Laboys’ arguments. It found that the Laboys’
interpretation of the medical payments clause would lead to the absurd result that the
obligation to reimburse medical expenses at a negotiated reduced rate accepted by “a
medical provider” would result in Grange having to reimburse medical expenses at a rate
negotiated by any medical provider, anywhere, regardless of whether the Laboys had a
right, or access, to that rate. It found that a more reasonable interpretation of the policy
language was that the language “any negotiated reduced rate accepted by a medical
provider” implies that “Defendant Grange has to have access to that negotiated rate by
contracting with the medical provider.” Grange negotiated its own rate with PPOM Ohio
network and made that rate available to its insureds if they chose to receive medical
treatment in that network. The court found no evidence to show that Grange had access
to the same negotiated rate charged by Medical Mutual because Grange was not a party to
the contracts between Medical Mutual and its providers. On that basis, the court granted
summary judgment to Grange and this appeal followed. The sole assignment of error
contests the court’s ruling.
{¶3} The language at issue appears in a “limit of liability” section of the policy. It
states:
B. We will pay under Part B - Medical Payments Coverage, the lesser of:
1. reasonable expenses incurred by the insured for necessary medical and
funeral services because of bodily injury; or
2. any negotiated reduced rate accepted by a medical provider.
{¶4} When reviewing language used in an insurance policy, we give words their
plain and ordinary meaning unless another meaning is clearly apparent from the contents
of the policy. Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146(1978), paragraph two of the syllabus.
{¶5} The parties give different interpretations of the policy. Grange maintains
that Section (B)(2) should mean any reduced rate negotiated by Grange that is accepted
by a medical provider (i.e., its PPOM network); the Laboys maintain that the clause
should mean a lesser negotiated rate that Grange has access to through its insured’s health
insurer (i.e., Medical Mutual). Their differences center on whether Grange has “access”
to reduced negotiated rates accepted by medical providers (Grange says it does not
because it lacks privity; the Laboys say it does through reduced negotiated rates by its
insurer, Medical Mutual). These differing interpretations of the policy suggest that
Section (B)(2) is ambiguous. On its face, it is not.
{¶6} Section (B)(2) requires Grange to pay any negotiated reduced rate accepted
by a health care provider. Taken literally, this section clearly indicates that Grange’s
duty to pay a negotiated reduced rate is without qualification and applies regardless of
geographic proximity or even privity of contract. It would apply to rates negotiated on
the other side of the globe or to the rate negotiated by someone who perhaps persuades a
medical provider to accept less than that provider’s normal rate for services. The words
are plain. There is no ambiguity.
{¶7} The difficulty with Section (B)(2) is that it is so all-encompassing, it would
be impossible for Grange to comply. This brings into application the rule that “[e]ven an
apparently unambiguous contract may be rendered ambiguous and open to construction if
its words, taken literally, lead to absurdity or illegality when applied to the facts.”
Clappenback v. New York Life Ins., Co., 136 Wis. 626, 630, 118 N.W. 245 (1908); United
Refining Co. v. Jenkins, 410 Pa. 126, 138, 189 A.2d 574 (1963); Sanders v. Gen. Motors
Acceptance Corp., 180 S.C. 138, 185 S.E. 180 (1936). When this kind of absurdity
exists, the court should engage in fact-finding to give the contract the most sensible and
reasonable interpretation. Kelly v. Med. Life Ins. Co., 31 Ohio St.3d 130, 132, 509
N.E.2d 411 (1987).
{¶8} The trial court ruled that Grange’s interpretation of the policy, that Section
(B)(2) applies only to reduced rates negotiated by Grange and accepted by medical
providers in their network, was “the only reasonable interpretation” of the policy, but it
did so on the mistaken basis that the Laboys were arguing that Section (B)(2) should be
applied as written and be found to mean any negotiated rate regardless of geography.
The Laboys’ brief in opposition to Grange’s motion for summary judgment made it clear
that “Grange does, in fact, have access to a lesser negotiated rate via medical providers
who have agreed with [sic] Laboys’ medical insurer to provide a discounted rate.” Brief
In Opposition to Motion for Summary Judgment at 12. Furthermore, the court did not
consider the merits of the Laboys’ argument when deciding how to interpret the policy
and did not engage in fact-finding to ensure the most sensible and reasonable
interpretation of the policy. This error was doubly prejudicial because the Laboys, as the
insureds, were entitled to have any ambiguity in the policy construed most favorably to
them. Fed. Ins. Co. v. Executive Coach Luxury Travel, Inc., 128 Ohio St.3d 331,
2010-Ohio-6300, 944 N.E.2d 215, ¶ 8.
{¶9} We agree that interpreting Section (B)(2) to mean any negotiated reduced rate
anywhere in the world would be an absurd interpretation. However, without the benefit
of fact-finding, we are not convinced that interpreting the policy as Grange asserts is the
only reasonable interpretation. There are genuine issues of material fact and Grange has
not demonstrated that it is entitled to judgment as a matter of law. We, therefore, sustain
the assigned error.
{¶10} This cause is reversed and remanded to the trial court for further
proceedings consistent with this opinion.
It is ordered that appellants recover of appellee their costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate issue out of this court directing the Cuyahoga
County Court of Common Pleas to carry this judgment into execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
MELODY J. STEWART, JUDGE
EILEEN A. GALLAGHER, J., CONCURS WITH
SEPARATE OPINION;
SEAN C. GALLAGHER, P.J., CONCURS IN
JUDGMENT ONLY
EILEEN A. GALLAGHER, J., CONCURRING:
{¶11} I concur with the majority but write separately to express my concerns
regarding the initiation of this case.
{¶12} The Cuyahoga County Court of Common Pleas case designation sheet in
this case, completed by plaintiff’s counsel, identifies this case as a “Commercial Docket”
case.
{¶13} This matter, however, is not a case appropriate for a commercial docket
pursuant to the parameters set out by the Ohio Supreme Court.
{¶14} The commercial dockets were established to focus on litigation between
business entities or a business entity and an owner, sole proprietor, shareholder, partner or
member of a business entity.
{¶15} A class action lawsuit is eligible for the commercial docket if it qualifies
under one of the several provisions under Sup.R. 49.05 for the Courts of Ohio. This
case does not so qualify.
{¶16} In order to maintain the integrity of commercial dockets as envisioned, I
suggest that plaintiffs, as well as commercial docket judges, be cautious in their
identification of commercial docket cases and the maintenance of a case that is
inappropriate on a commercial docket.