Title: Laboy v. Grange Indem. Ins. Co.

State: ohio

Issuer: Ohio Supreme Court

Document:

[Until this opinion appears in the Ohio Official Reports advance sheets, it may be cited as 
Laboy v. Grange Indemn. Ins. Co., Slip Opinion No. 2015-Ohio-3308.] 
 
 
 
NOTICE 
This slip opinion is subject to formal revision before it is published in 
an advance sheet of the Ohio Official Reports.  Readers are requested 
to promptly notify the Reporter of Decisions, Supreme Court of Ohio, 
65 South Front Street, Columbus, Ohio 43215, of any typographical or 
other formal errors in the opinion, in order that corrections may be 
made before the opinion is published. 
 
 
SLIP OPINION NO. 2015-OHIO-3308 
LABOY ET AL., APPELLEES, v. GRANGE INDEMNITY INSURANCE COMPANY ET 
AL; GRANGE MUTUAL CASUALTY COMPANY, APPELLANT. 
[Until this opinion appears in the Ohio Official Reports advance sheets, it 
may be cited as Laboy v. Grange Indemn. Ins. Co., Slip Opinion  
No. 2015-Ohio-3308.] 
Insurance—Automobiles—Medical-payment coverage—Policy provision that 
insurer will pay “any negotiated reduced rate accepted by a medical 
provider” does not obligate insurer to pay reduced rates negotiated by 
insured’s third-party health-insurance provider. 
(No. 2014-0708─Submitted March 24, 2015─Decided August 20, 2015.) 
APPEAL from the Court of Appeals for Cuyahoga County, No. 100116, 
2014-Ohio-1516. 
____________________ 
LANZINGER, J. 
{¶ 1} The issue in this case is whether language in an automobile 
insurance policy providing that the insurer will pay “any negotiated reduced rate 
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accepted by a medical provider” includes the reduced rates negotiated by the 
insured’s third-party health-insurance provider.  We hold that it does not. 
Case Background 
{¶ 2} Appellant, Grange Mutual Casualty Company, issued an automobile 
policy to appellee Philip Laboy as the named insured.  As part of Laboy’s policy, 
Grange provided up to $5,000 in medical care for each person injured in any one 
accident.  Appellees Heidi Laboy, Alexandrea Laboy, and Gabrielle Laboy, also 
insureds under the policy, were involved in an automobile accident on May 23, 
2006.  The Laboys received medical treatment and submitted some of their bills 
both to Grange and to their health-insurance provider, Medical Mutual.  Grange 
did not deny any part of the claim for medical expenses.  The Laboys did not 
exhaust their medical-payment coverage, nor did they incur any out-of-pocket 
expenses. 
{¶ 3} The Laboys reached a settlement with the third-party tortfeasor for 
the May 2006 accident.  When Grange exercised its contractual right to 
subrogation against the Laboys, the Laboys objected, arguing that Grange had 
overpaid the medical providers. Under Section B of the policy’s medical-
payments coverage, Grange agreed to pay 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} For the medicals bills submitted to both Grange and Medical 
Mutual, the Laboys provided a chart in discovery showing, as an example, that 
medical providers had billed them $1,535 for services rendered to Heidi and 
Gabrielle Laboy. They acknowledged that for those services, Grange paid 
discounted rates to medical providers for reasonable and necessary charges, 
totaling $1,441.36 in medical expenses.  But the Laboys asserted that their own 
health insurer, Medical Mutual, paid only $648.32 for those same medical 
January Term, 2015 
 
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expenses.  The Laboys contended that they would have been entitled to an 
increased settlement of $793.04 because Grange’s subrogation claim would have 
been reduced by that amount if Grange had paid the rates that were available to 
Medical Mutual. 
{¶ 5} The Laboys filed a class-action lawsuit against Grange, alleging 
claims for breach of contract, breach of good faith and fair dealing, and breach of 
fiduciary duty.1  Grange filed a motion for summary judgment.  After noting that 
the Laboys had withdrawn their claim for breach of fiduciary duty, the trial court 
determined that the only reasonable interpretation of the language “any negotiated 
reduced rate accepted by a medical provider” in Section (B)(2) was that Grange 
had to have access to the negotiated rate through its own contract with the medical 
provider.  Because the claim for breach of good faith and fair dealing was 
contingent on finding a breach of contract, the trial court found that both claims 
failed as a matter of law and entered summary judgment for Grange. 
{¶ 6} The Laboys appealed to the Eighth District Court of Appeals.  The 
appellate court began its analysis by stating that the language in Section (B)(2) is 
plain and unambiguous.  But the court also noted that the disputed language is 
without qualification and, taken to the extreme, “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.”  2014-Ohio-1516, at ¶ 6.  Although the Eighth District determined that 
it would be impossible for Grange to comply with such an absurd interpretation, 
the court of appeals disagreed with the trial court that Grange’s interpretation of 
the policy was the only reasonable one.  The judgment was reversed and the case 
was remanded for fact-finding to determine whether Grange actually did have 
                                                 
1 The class was never certified. 
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access to the lower rates provided by the Laboys’ healthcare insurer and to ensure 
that was the most sensible and reasonable interpretation of the policy.  Id. at ¶ 7-9. 
{¶ 7} We accepted Grange’s discretionary appeal on the following two 
propositions of law: 
 
“1. An insurer does not breach an obligation to pay negotiated rates for 
medical care when it has no contractual right to pay those rates. 
 
“2. When a contract is found to be unambiguous, it is error to order further 
fact finding about its meaning.” 
Analysis 
{¶ 8} “An insurance policy is a contract whose interpretation is a matter of 
law.” Sharonville v. Am. Emp. Ins. Co., 109 Ohio St.3d 186, 2006-Ohio-2180, 846 
N.E.2d 833, ¶ 6.  The fundamental goal when interpreting an insurance policy is 
to ascertain the intent of the parties from a reading of the policy in its entirety and 
to settle upon a reasonable interpretation of any disputed terms in a manner 
designed to give the contract its intended effect.  Burris v. Grange Mut. Cos., 46 
Ohio St.3d 84, 89, 545 N.E.2d 83 (1989).  Words and phrases must be given their 
plain and ordinary meaning “unless manifest absurdity results, or unless some 
other meaning is clearly evidenced from the face or overall contents of the 
instrument.”  Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 
146 (1978), paragraph two of the syllabus. 
{¶ 9} We have held that provisions in an insurance contract that are 
reasonably susceptible of more than one interpretation will be construed liberally 
in favor of the insured. King v. Nationwide Ins. Co., 35 Ohio St.3d 208, 519 
N.E.2d 1380 (1988), syllabus.  See also Westfield Ins. Co. v. Galatis, 100 Ohio 
St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶ 13.  “This rule, however, will not 
be applied so as to provide an unreasonable interpretation of the words of the 
policy.”  Cincinnati Ins. Co. v. CPS Holdings, Inc., 115 Ohio St.3d 306, 2007-
January Term, 2015 
 
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Ohio-4917, 875 N.E.2d 31, ¶ 8, citing Morfoot v. Stake, 174 Ohio St. 506, 190 
N.E.2d 573 (1963), paragraph one of the syllabus. 
{¶ 10} The single issue here is the meaning of the phrase “any negotiated 
reduced rate accepted by a medical provider” in Section (B)(2) of the policy.  
Both the parties and the courts in this case agree that this phrase cannot be 
interpreted to mean “any negotiated rate anywhere in the world.”  We agree.  But 
this logical limitation placed on the word “any” does not necessarily mean that the 
policy is ambiguous.  If a reasonable interpretation of the language exists, then we 
should give the agreement its intended legal effect. 
{¶ 11} Grange argues that the only reasonable construction of Section 
(B)(2) is to read the phrase “any negotiated reduced rate accepted by a medical 
provider” as meaning a negotiated reduced rate that Grange itself is contractually 
entitled to pay.  A healthcare insurer’s negotiated rates are not available to an 
automobile insurer simply because they both have the same insured.  Because 
Grange is not a party to the contract between Medical Mutual and the different 
medical providers, it has no right or access to those negotiated reduced rates.  
Grange did have access to negotiated reduced rates, which it did pay when 
available, through a contract with ReviewWorks, a medical-bill review company.2   
{¶ 12} The Laboys disagree that Grange has access only to rates that it 
negotiates itself or that are negotiated on its behalf via a contract with 
ReviewWorks.  They contend that under Section (B)(2), Grange is contractually 
obligated to utilize the reduced rates accepted by their health insurer when paying 
medical expenses.  But there is no evidence in the record that the Laboys have an 
independent right to insist that their medical providers accept from Grange rates 
that were negotiated by Medical Mutual. 
                                                 
2 Grange has a contract with ReviewWorks.  ReviewWorks has a contract with a provider network 
called PPMO.  Under the contract between ReviewWorks and PPMO, clients of ReviewWorks 
have access to the network’s discounted rates.   
 
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{¶ 13} In fact, our opinion in one tort case arising out of an automobile 
accident suggests that they have no such right.  See King v. ProMedica Health 
Sys., Inc., 129 Ohio St.3d 596, 2011-Ohio-4200, 955 N.E.2d 348.  In King, the 
injured insured objected when the hospital chose to bill her automobile-insurance 
company for its services rather than her healthcare insurance company, 
presumably to take advantage of a higher rate of compensation.  We held that the 
hospital’s actions did not violate R.C. 1751.60(A) (prohibiting a medical provider 
from seeking compensation from an insured person when the provider has a 
contract with the insured’s health-insurance company) because the statute did not 
prohibit the hospital from seeking recovery from entities or insurers other than the 
healthcare insurer.  R.C. 1751.60 is not at issue here, but the principle holds. 
{¶ 14} The Laboys have “access” to the rates that Medical Mutual has 
negotiated with medical providers when they submit their medical bills to 
Medical Mutual for payment pursuant to their healthcare insurance policy.  Here, 
however, they chose to seek payment for some of their medical expenses from 
Grange in the first instance. 
{¶ 15} Nonetheless, the Laboys maintain that nothing in the automobile 
policy prevents Grange from accepting lower rates when the rates are offered 
without a contract.  They state that Grange has reimbursed health-insurance 
companies if the medical services covered by Grange’s policy were initially paid 
by the health insurer instead of by Grange.  But that is not the reality of this case.  
The Laboys never asked Grange to reimburse Medical Mutual and apparently did 
not inform Grange that they had submitted some of the same bills to Medical 
Mutual.  Instead, they submitted the bills from their medical providers directly to 
Grange for payment.  And Grange did exactly as the Laboy contract specified, 
either using the discounted rates it had available for certain providers through its 
contract with ReviewWorks or paying the reasonable expense for that service. 
January Term, 2015 
 
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{¶ 16} Finally, there is no evidence that any of the medical providers 
offered to accept Medical Mutual’s rates from Grange. 
{¶ 17} At oral argument, the Laboys asked this court to impose a duty on 
Grange to ask its insureds whether they have access to better rates through other 
insurance.  But such an obligation does not appear in the contract. We therefore 
decline to interpret the policy in this manner.  Instead, we agree with the trial 
court that the only reasonable interpretation of the policy’s contested language is 
that “any negotiated reduced rate accepted by a medical provider” means a 
negotiated reduced rate that Grange is contractually entitled to pay. 
Conclusion 
{¶ 18} Under the medical-payments coverage, Grange is obligated to pay 
the expenses of an insured for medical services related to a bodily injury sustained 
in an accident.  The only reasonable interpretation of Section (B)(2) is that Grange 
is obliged to pay reduced rates only when such rates have been negotiated 
between the medical provider and Grange or when the provider is in the 
preferred-provider network that Grange has access to through its contract with 
ReviewWorks. 
{¶ 19} The judgment of the Eighth District Court of Appeals is reversed, 
and the judgment of the trial court is reinstated. 
 
 
 
 
 
 
 
 
Judgment reversed. 
O’CONNOR, C.J., and PFEIFER, O’DONNELL, KENNEDY, FRENCH, and 
O’NEILL, JJ., concur. 
____________________ 
 
Connick Law, L.L.C., and Thomas J. Connick; and Cochran & Cochran 
and Edward W. Cochran, for appellees Phillip and Heidi Laboy. 
 
Baker Hostetler, L.L.P., Mark A. Johnson, Rand L. McClellan, and 
Michael K. Farrell, for appellant. 
____________________