Wolfe v. Grange Indemn. Ins. Co.

[Cite as Wolfe v. Grange Indemn. Ins. Co., 2012-Ohio-598.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
: JUDGES:
TINA WOLFE : Sheila G. Farmer, P.J.
: John W. Wise, J.
Plaintiff-Appellee : Julie A. Edwards, J.
:
-vs- : Case No. 2010CA00339
:
:
GRANGE INDEMNITY INSURANCE : OPINION
COMPANY, et al.,
Defendants-Appellants
CHARACTER OF PROCEEDING: Civil Appeal from Stark County
Court of Common Pleas Case No.
2009-CV-01508
JUDGMENT: Affirmed In Part and Reversed and
Remanded In Part
DATE OF JUDGMENT ENTRY: February 13, 2012
APPEARANCES:
For Plaintiff-Appellee For Defendants-Appellants
ALLEN SCHULMAN, JR. F. JAMES FOLEY
BRIAN L. ZIMMERMAN Vorys, Sater, Seymour, and
Schulman Zimmerman & Associates Pease, LLP
236 third Street, S.W. 52 East Gay Street, P.O. Box 1008
Canton, Ohio 44702 Columbus, Ohio 43216-1008
PHILIP DOWNEY
JOHN W. SOLOMON
Vorys, Ster, Seymour, and
Pease, LLP
First National tower
106 South Main Street
Akron, Ohio 44308
[Cite as Wolfe v. Grange Indemn. Ins. Co., 2012-Ohio-598.]
Edwards, J.
{¶1} Appellants, Grange Indemnity Insurance Company and Grange Mutual
Casualty Company, (hereinafter “Grange”), appeal a judgment of the Stark County
Common Pleas Court certifying a class action. Appellee is Tina Wolfe.
STATEMENT OF FACTS AND CASE
{¶2} Appellee was injured in a one-vehicle automobile accident. Her medical
payment benefits were provided under an automobile insurance policy issued by
Grange which provides in pertinent part:
{¶3} “A. We will pay reasonable expenses incurred by the insured for
necessary medical and funeral services because of bodily injury: 1) caused by an auto
accident; and 2) sustained by an insured.
{¶4} “* * *
{¶5} “C. ‘Reasonable’ as used in this part means: expenses that are consistent
with the usual charges of the majority of similar medical providers in the geographic
area in which the expenses were incurred for the specific medical service.
{¶6} “D. ‘Necessary’ as used in this part means: Services that are rendered by
a medical provider within the legally authorized scope of the provider’s practice and are
recognized within that practice as being appropriate treatment in achieving maximum
medical improvement of the bodily injury sustained in the accident.
{¶7} “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) an negotiated reduced rate accepted by a
medical provider.
Stark County App. Case No. 2010CA00339 3
{¶8} “Part E – Duties after an accident or loss. B. A person seeking coverage
must: 5. Permit us to obtain outside review of medical treatment to determine if it (sic)
reasonable, customary and necessary.”
{¶9} After the accident, Grange sent appellee a letter dated January 19, 2009,
which stated that “Grange will review all submitted medical bills prior to payment to
assure that they are reasonable and necessary as required by the policy contract . . . .”
The letter included authorization to allow Grange to obtain appellee’s medical records
and bills.
{¶10} Grange forwarded appellee’s bills to an unaffiliated third party doing
business as “Review Works.” Review Works’ employees performed a review that
involved putting appellee’s medical expenses and billing codes into a computer
program. The program reduced the allowed medical bill amounts and printed out a
recommendation for payment that was returned to Grange.
{¶11} Grange paid this reduced amount on appellee’s bills, and appellee’s
medical providers billed her for the balance due. When appellee asked Grange to pay
the balance, they sent her a letter dated March 26, 2009, which provided in pertinent
part, “[Y]our personal auto policy provides benefits for reasonable and necessary
medical expenses incurred because of bodily injury caused by an accident. We review
all medical bills to insure that the treatment and charges meet this criteria. Our review
indicates that not all of the treatment or charges met these requirements. . .” Grange
advised appellee that she was liable for the remaining balance due.
{¶12} Appellee filed a complaint seeking class action status, alleging that
Grange engaged in a company-wide policy of systematically underpaying medical
Stark County App. Case No. 2010CA00339 4
payment coverage claims in violation of its own insurance policies and representations
to their insureds; Grange breached its contract with members of Class 2 and Class 3 by
charging them for medical payments coverage that was not provided; Grange breached
its contracts with members of Class 2 and Class 3 by failing to make medical payments
as required under its contracts of insurance; Grange acted fraudulently, inducing the
members of both classes to purchase policies which included medical payment
coverage which it did not intend to provide; Grange acted in bad faith in charging the
members of both classes for medical coverage it did not provide and did not intend to
provide and in failing to properly evaluate and pay medical payment claims presented
by members of both classes, and Grange’s claims regarding members of both classes
render it liable for punitive damages.
{¶13} The classes were defined by appellee as follows:
{¶14} “Class 2: All Ohio residents who made medical payment claims under
policies of automobile insurance coverage purchased from Grange Mutual Casualty
Company on which Grange made a payment that was reduced pursuant to the terms of
the medical payments provision of the policy following submission of the Claim to
Review Works, an assumed name of LaHousse-Barlett Disability Management, Inc., for
which medical payment limits under the applicable policy were not exhausted.
{¶15} “Class 3: All Ohio residents, from April 1, 2003, who made medical
payment claims on policies of automobile insurance coverage purchased from Grange
Mutual Casualty Company, on which Grange submitted those claims for review by an
unaffiliated third party.”
{¶16} Proposed Narrowed and/or Clarified Class Definitions, October 15, 2010.
Stark County App. Case No. 2010CA00339 5
{¶17} The trial court certified both Class 2 and Class 3. Grange assigns three
errors on appeal:
{¶18} “I. THE TRIAL COURT ERRED WHEN IT FOUND THAT PLAINTIFF MET
THE TYPICALITY REQUIREMENTS FOR CLASS CERTIFICATION UNDER CIVIL
RULE 23(A)(3).
{¶19} “II. THE TRIAL COURT ERRED WHEN IT FOUND THAT PLAINTIFF
MET THE INCOMPATIBILITY AND SUBSTANTIAL IMPAIRMENT REQUIREMENTS
FOR CLASS CERTIFICATION UNDER CIVIL RULE 23(B)(1).
{¶20} “III. THE TRIAL COURT ERRED WHEN IT FOUND THAT PLAINTIFF
MET THE PREDOMINANCE AND SUPERIORITY REQUIREMENTS FOR CLASS
CERTIFICATION UNDER CIVIL RULE 23(B)(3).”
{¶21} All three assignments of error pertain to the certification of the class and
therefore are reviewed within the same legal framework.
{¶22} An order determining class certification constitutes a final appealable
order pursuant to R.C. 2505.02(B)(5). See, e.g., Blumenthal v. Medina Supply Co.
(2000), 139 Ohio App.3d 283, 743 N.E.2d 923. Civ.R. 23 provides the framework for the
prosecution of class actions lawsuits in Ohio courts:
{¶23} “(A) Prerequisites to a class action. One or more members of a class
may sue or be sued as representative parties on behalf of all only if (1) the class is so
numerous that joinder of all members is impracticable, (2) there are questions of law or
fact common to the class, (3) the claims or defenses of the representative parties are
typical of the claims or defenses of the class, and (4) the representative parties will fairly
and adequately protect the interests of the class.
Stark County App. Case No. 2010CA00339 6
{¶24} “(B) Class actions maintainable. An action may be maintained as a
class action if the prerequisites of subdivision (A) are satisfied, and in addition:
{¶25} “(1) the prosecution of separate actions by or against individual members
of the class would create a risk of
{¶26} “(a) inconsistent or varying adjudications with respect to individual
members of the class which would establish incompatible standards of conduct for the
party opposing the class; or
{¶27} “(b) adjudications with respect to individual members of the class which
would as a practical matter be dispositive of the interests of the other members not
parties to the adjudications or substantially impair or impede their ability to protect their
interests; or
{¶28} “(2) the party opposing the class has acted or refused to act on grounds
generally applicable to the class, thereby making appropriate final injunctive relief or
corresponding declaratory relief with respect to the class as a whole; or
{¶29} “(3) the court finds that the questions of law or fact common to the
members of the class predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for the fair and
efficient adjudication of the controversy. The matters pertinent to the findings include:
(a) the interest of members of the class in individually controlling the prosecution or
defense of separate actions; (b) the extent and nature of any litigation concerning the
controversy already commenced by or against members of the class; (c) the desirability
or undesirability of concentrating the litigation of the claims in the particular forum; (d)
the difficulties likely to be encountered in the management of a class action.”
Stark County App. Case No. 2010CA00339 7
{¶30} In order for a case to be certified as a class action, the trial court must
make seven affirmative findings as to the requirements of Civ.R. 23. Warner v. Waste
Mgt., Inc. (1988), 36 Ohio St.3d 91, 521 N.E.2d 1091, paragraph one of the syllabus.
The following seven requirements must be satisfied: (1) an identifiable class must exist
and the definition of the class must be unambiguous; (2) the named representatives
must be members of the class; (3) the class must be so numerous that joinder of all
members is impracticable; (4) there must be questions of law or fact common to the
class; (5) the claims or defenses of the representative parties must be typical of the
claims or defenses of the class; (6) the representative parties must fairly and adequately
protect the interests of the class; and (7) one of the three Civ.R. 23(B) requirements
must be met. Id., citing Civ.R. 23(A) and (B).
{¶31} A trial court must carefully apply the class action requirements and
conduct a rigorous analysis into whether the prerequisites of Civ.R. 23 have been
satisfied. Hamilton v. Ohio Sav. Bank (1998), 82 Ohio St.3d 67, 70, 694 N.E.2d 442.
The Ohio Supreme Court in Hamilton suggested, but did not mandate, that trial courts
make separate written findings as to each of the seven class action requirements under
Civ.R. 23, and specify their reasoning as to each finding. Id. at 71, 694 N.E.2d 442.
However, a trial court has broad discretion in determining whether a class action may
be maintained. Planned Parenthood Ass'n of Cincinnati, Inc. v. Project Jericho (1990),
52 Ohio St.3d 56, 62, 556 N.E.2d 157. Abuse of discretion connotes more than an error
of law or judgment; it implies that the trial court's attitude is unreasonable, arbitrary, or
unconscionable. Blakemore v. Blakemore (1983), 5 Ohio St.3d 217, 219, 450 N.E.2d
1140.
Stark County App. Case No. 2010CA00339 8
{¶32} In interpreting and applying Civ. R. 23, the Ohio Supreme Court has held
that because the Ohio Rule is virtually identical to the federal rule governing class
actions, federal authority is an appropriate aid to use in interpreting the Ohio rule.
Marks v. C.P. Chemical Co. (1987), 31 Ohio St. 3d 200, 201.
I
{¶33} Grange first argues that the court erred in finding that appellee fulfilled the
typicality requirement of Civ. R. 23(A)(3).
{¶34} Typicality involves consideration of the similarity between proposed class
plaintiff’s legal and remedial theories and those of the persons he or she purports to
represent. Lightbourn v. County of El Paso, Tex., 118 F.3d 421, 426 (5th Cir.1997). The
class representative “must be part of the class and possess the same interest and suffer
the same injury as the class members.” Gen. Tel. Co.v. Falcon, 457 U.S. 147, 156, 102
S.Ct. 2364 (1982). Accordingly, the party seeking to represent the class must be able to
prove actual injury to herself, as opposed to other members of the class. O'Shea v.
Littleton, 414 U.S. 488, 494, 94 S.Ct. 669, 38 L.Ed.2d 674 (1974). Although it is not
necessary that all class members suffer the same injury as the class representatives,
where a purported class representative is subject to a unique defense that cannot be
asserted against other members of the class, typicality may be lacking. Rosario v.
Livaditis, 963 F.2d 1013, 1018 (7th Cir.1992); Gary Plastic Packaging Corp. v. Merrill
Lynch, Pierce, Fenner & Smith, Inc., 903 F.2d 176, 180 (2nd Cir.1990).
{¶35} Grange relies on Ostrof v. State Farm Mut. Auto. Ins. Co. (D. Md. 2001),
200 F.R.D. 521 in support of its proposition that typicality is lacking in the instant case.
In Ostrof, the plaintiffs sought class certification of their claim that State Farm had
Stark County App. Case No. 2010CA00339 9
improperly denied reimbursement for medical bills and lost income under the personal
injury protection (PIP) provision of their insurance policies. As Grange did in the instant
case, State Farm used computer reviews to check the claimed costs against the usual
and customary costs in the area where the service was rendered. The computer
flagged any charges above the 85th percentile of charges for the same service in the
area where it was rendered and then conditionally reduced the fee to the maximum
customary charge. State Farm also used “medical records reviews” consisting of
reviews by firms of medical professionals with past experience in the evaluation of
personal injury claims, who considered the medical propriety of the treatment to cross-
check against the possibility of unnecessary services being provided by medical
providers.
{¶36} The plaintiffs in Orstrof accused State Farm of deceptive and unfair
practices through the PIP review process. They sought to certify a class including all
individuals who had PIP and/or medical payments claims reviewed based on the
computerized fee review schedules or medical record reviews and who received or
were tendered an amount of benefits less than the PIP policy limits and the amount
claimed.
{¶37} The Orstrof court found that the class lacked typicality:
{¶38} “The Court has already referred to proposed Class Plaintiff Ostrof's
situation. He, it appears, is either not a member of the proposed class or may be subject
to a unique defense. It is uncontested that he has never had to pay his health care
providers the amounts that were denied him. No suits for the fees are pending against
him nor, apparently, are any such suits imminent. See McGill v. State. Farm Mut. Auto.
Stark County App. Case No. 2010CA00339 10
Ins. Co., 207 Mich.App. 402, 526 N.W.2d 12, 14 (1994)(finding proposed class plaintiff's
claims atypical: “[There is] no evidence that Plaintiffs have suffered injury as a result of
Defendants' partial payment of their medical bills; nor is any injury threatened.”)
{¶39} “Defenses unique to Plaintiff Corbitt have also been noted. Since she was
involved in two automobile accidents only eight days apart, she would need to prove
which accident or incident gave rise to what quantum of injury. Furthermore, at least
colorably, it appears that she may have submitted duplicate bills to State Farm asking
for payment for a single treatment rendered in consequence of the two accidents and
possibly collected twice for the same lost wages. Additionally, since her PIP claim was
submitted under her father's insurance policy, it is clear that she could not assert a
breach of contract claim nor could she have been the victim of any fraudulent
misrepresentation regarding the extent of State Farm's PIP coverage.” Id. at 529.
{¶40} The trial court in the instant case distinguished Orstrof:
{¶41} “However, the Ostrof case appears distinguishable from the case
subjudice (sic). While denying certification, the Ostrof court was concerned as to the
numerous individual inquires which would be required in the lawsuit, including: 1)
‘whether the individual claim incurred ‘additional losses and damages in pursuit of
personal injury protection provision damages; and 2) whether the individual claim had
suffered ‘consequential damages’ due to ‘emotional stress’, ‘concern and worry’.
However, the Court does not see these types of obstructions in the case here. The
Court is more convinced that the facts alleged by Wolfe and established thus far
through depositions meets the requirements set forth under 23(A) for numerosity,
Stark County App. Case No. 2010CA00339 11
questions of law or fact common to the class, and the claims or defense are typical of
the class.” Judgment Entry, November 17, 2010.
{¶42} We find that the trial court did not abuse its discretion in finding appellee’s
claims were typical of Class 2. Unlike Orstrof, it does not appear that she is subject to a
unique claim or defense that makes her claim atypical of those of other persons who
had their claims reduced following submission of their claim to Review Works.
However, we do find an abuse of discretion in finding appellee’s claim met the typicality
requirement as to Class 3. Class 3 includes anyone who made a medical claim
pursuant to a Grange automobile insurance policy on which Grange submitted those
claims for review by an unaffiliated third party. This class by definition will include
people who have not suffered the damage suffered by Wolfe – or any damage at all -
because their claims were not reduced by the review process.
{¶43} The first assignment of error is overruled as to Class 2 but sustained as to
Class 3.
II
{¶44} Grange next argues that the court erred in finding that appellee met the
incompatibility and substantial impairment requirements pursuant to Civ. R. 23(B)(1):
{¶45} “(B) Class actions maintainable. An action may be maintained as a
class action if the prerequisites of subdivision (A) are satisfied, and in addition:
{¶46} “(1) the prosecution of separate actions by or against individual members
of the class would create a risk of
Stark County App. Case No. 2010CA00339 12
{¶47} “(a) inconsistent or varying adjudications with respect to individual
members of the class which would establish incompatible standards of conduct for the
party opposing the class; or
{¶48} “(b) adjudications with respect to individual members of the class which
would as a practical matter be dispositive of the interests of the other members not
parties to the adjudications or substantially impair or impede their ability to protect their
interests. . .”
{¶49} Because we have found that the court erred in finding appellee met the
typicality requirement as to Class 3, this assignment of error is moot as to Class 3 and
will be addressed only as to Class 2.
{¶50} Pursuant to Civ. R. 23(B)(1)(a), certification is permissible if separate
actions could lead to incompatible standards of conduct. Warner v. Waste Mgmt., Inc.
(1988), 36 Ohio St.3d 91, 95, 521 N.E.2d 1091. In the instant case, the court did not
abuse its discretion in finding that separate actions could lead to incompatible standards
of conduct. At issue is the propriety of the referral of medical claims to Review Works
where they are allegedly run through a standardized computer program. Appellee’s
action alleges breach of contract, fraud and bad faith in the manner in which medical
payments claims are reviewed by Grange. Separate actions risk different triers of fact
finding that all of the procedures employed by Grange were improper, some part of the
procedure was improper but another part was not, or all of the review procedures were
permissible under the contract the insured entered into with Grange. Such varying
results could lead to incompatible standards of conduct for Grange to use in the method
in which review procedures are undertaken.
Stark County App. Case No. 2010CA00339 13
{¶51} Because the findings in subsection (B) are in the disjunctive, the court
need only find one in order to certify the class. Warner, supra. Because we have found
no abuse of discretion the court’s finding under subsection (B)(1)(a), we need not reach
the issue of whether the court erred in finding certification proper under Civ. R.
23(B)(1)(b).
{¶52} The second assignment of error is overruled.
III
{¶53} In the final assignment of error, Grange argues that the court erred in
finding certification proper under Civ. R. 23(B)(3). The trial court did not specifically
refer to Civ. R. 23(B)(3), but in the court’s opinion, the court does cite to the language of
Civ. R. 23(B)(3), which provides in pertinent part:
{¶54} “An action may be maintained as a class action if the prerequisites of
subdivision (A) are satisfied, and in addition:
{¶55} “(3) the court finds that the questions of law or fact common to the
members of the class predominate over any questions affecting only individual
members, and that a class action is superior to other available methods for the fair and
efficient adjudication of the controversy. The matters pertinent to the findings include:
(a) the interest of members of the class in individually controlling the prosecution or
defense of separate actions; (b) the extent and nature of any litigation concerning the
controversy already commenced by or against members of the class; (c) the desirability
or undesirability of concentrating the litigation of the claims in the particular forum; (d)
the difficulties likely to be encountered in the management of a class action.”
Stark County App. Case No. 2010CA00339 14
{¶56} Because we have found that the court erred in finding appellee met the
typicality requirement as to Class 3, this assignment of error is moot as to Class 3 and
will be addressed only as to Class 2.
{¶57} The Ohio Supreme Court has found that cases involving a common
scheme or standardized practice are particularly suited for certification under Civ. R.
23(B)(3) because the common issues predominate over those affecting individual
members:
{¶58} “It is now well established that ‘a claim will meet the predominance
requirement when there exists generalized evidence which proves or disproves an
element on a simultaneous, class-wide basis, since such proof obviates the need to
examine each class member's individual position.’ Lockwood Motors, Inc. v. Gen.
Motors Corp. (D.Minn.1995), 162 F.R.D. 569, 580.
{¶59} “As explained in the 1966 Advisory Committee Notes to Fed.R.Civ.P.
23(b)(3):
{¶60} “``Subdivision (b)(3) encompasses those cases in which a class action
would achieve economies of time, effort, and expense, and promote uniformity of
decision as to persons similarly situated, without sacrificing procedural fairness or
bringing about other undesirable results. * * *
{¶61} “``The court is required to find, as a condition of holding that a class action
may be maintained under this subdivision, that the questions common to the class
predominate over the questions affecting individual members. It is only where this
predominance exists that economies can be achieved by means of the class-action
device. In this view, a fraud perpetrated on numerous persons by the use of similar
Stark County App. Case No. 2010CA00339 15
misrepresentations may be an appealing situation for a class action. * * * On the other
hand, although having some common core, a fraud case may be unsuited for treatment
as a class action if there was material variation in the representations made or in the
kinds or degrees of reliance by the persons to whom they were addressed.’
{¶62} “Courts generally find that the existence of common misrepresentations
obviates the need to elicit individual testimony as to each element of a fraud or
misrepresentation claim, especially where written misrepresentations or omissions are
involved. They recognize that when a common fraud is perpetrated on a class of
persons, those persons should be able to pursue an avenue of proof that does not focus
on questions affecting only individual members. If a fraud was accomplished on a
common basis, there is no valid reason why those affected should be foreclosed from
proving it on that basis.” Cope v. Metropolitan Life Insurance Company (1998), 82 Ohio
St. 3d 426, 249-430, internal citations omitted.
{¶63} The Ohio Supreme Court went on to note that a wide variety of claims
may be established by common proof in cases involving similar form documents or the
use of standardized procedures and practices. Id., citing Hamilton v. Ohio Savings Bank
(1998), 81 Ohio St. 3d 67.
{¶64} In the instant case, the trial court did not err in finding predominance as to
Class 2. The claims are based on a common pattern of review procedures employed by
Grange. The plaintiffs allege that they were harmed by the use of a standardized
practice and procedure, and the same issues thus predominate throughout the class
and will require common proof.
Stark County App. Case No. 2010CA00339 16
{¶65} We further find the trial court did not err in finding a class action to be
superior to other available methods for the fair and efficient adjudication of the
controversy as to Class 2. As to the considerations enumerated in Civ. R. 23(B)(3), the
court specifically found:
{¶66} “Finally, there appears to be minimal interest in the class members
controlling the litigation since individual claims are to be relatively small. Wolfe alleges
that she is unaware of any similar litigation by members of Class II and III against
Grange. More importantly, the Court sees the class certification as a superior method
for resolving these claims rather than a ‘voluminous’ number of separate trials that could
lead to inconsistent results, and the management of this action does not outweigh the
potential benefits to the class members in a judicial system as a whole. The members
of the class will save on court costs, attorneys fees, and the class certification will
provide for judicial economy of the issues.”
{¶67} We find no abuse of discretion in this finding.
{¶68} The third assignment of error is overruled.
Stark County App. Case No. 2010CA00339 17
{¶69} The judgment of the Stark County Common Pleas Court certifying Class 2
is affirmed. The judgment of the court certifying Class 3 is reversed. This cause is
remanded to that court for further proceedings according to law.
By: Edwards, J.
Farmer, P.J. and
Wise, J. concur
______________________________
______________________________
______________________________
JUDGES
JAE/r0728
[Cite as Wolfe v. Grange Indemn. Ins. Co., 2012-Ohio-598.]
IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
TIAN WOLFE :
:
Plaintiff-Appellee :
:
:
-vs- : JUDGMENT ENTRY
:
GRANGE INDEMNITY INSURANCE
COMPANY, et al., :
:
Defendants-Appellants : CASE NO. 2010CA00339
For the reasons stated in our accompanying Memorandum-Opinion on file, the
judgment of the Stark County Court of Common Pleas is affirmed in part, and reversed
and remanded in part. Costs assessed 50% to appellee and 50% to appellant.
_________________________________
_________________________________
_________________________________
JUDGES