[Cite as UH Rainbow Babies & Children's Hospital v. Caresource , 2018-Ohio-2839.] 

# Court of Appeals of Ohio

EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA

JOURNAL ENTRY AND OPINION No. 106151

UH RAINBOW BABIES & CHILDREN’S HOSPITAL

PLAINTIFF-APPELLEE

vs. CARESOURCE [Appeal By United Healthcare Insurance Company]

DEFENDANT-APPELLEE

JUDGMENT:

AFFIRMED

Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-16-867735

BEFORE: Keough, J., E.A. Gallagher, A.J., and Boyle, J.

RELEASED AND JOURNALIZED: July 19, 2018ATTORNEYS FOR APPELLANT

Brent S. Silverman Robert A. West Ciano & Goldwasser, L.L.P. 1610 Midland Building 101 Prospect Avenue, West, Suite 1610 Cleveland, Ohio 44115 Donald T. Campbell Aalook K. Sharma 150 South Fifth Street, Suite 2300 Minneapolis, Minnesota 55402

ATTORNEYS FOR APPELLEE

FOR UNIVERSITY HOSPITALS RAINBOW BABIES & CHILDREN’S HOSPITAL

John F. Garswood Daniel W. Dreyfuss 1801 East Ninth Street, Suite 1110 Cleveland, Ohio 44114

FOR CARESOURCE Katrina M. English CareSource 230 North Main Street Dayton, Ohio 45402

Matthew C. O’Connell Sutter O’Connell Co. 3600 Erieview Tower 1301 East Ninth Street Cleveland, Ohio 44114KATHLEEN ANN KEOUGH, J.: {¶1} Third-party defendant-appe llant, UnitedHealthcare Insurance Company (“United”) appeals from the trial court’s decision denying its motion to stay the proceedings, compel arbitration, and dismiss with prejudice. For the reasons that follow, we affirm. {¶2} In February 2014, mother-insured gave birt h to multiple children at Rainbow Babies & Children’s Hospital, a medical facility operated by University Hospitals (“UH”). At the time of the births, mother had employer-sponsored health insurance provided by United. It is undisputed that United provided medical covera ge from the children’s birth until at least February 28, 2014. On March 1, 2014, mother en rolled in Caresource, a Medicaid-managed care plan, that continued to provide medical coverage to the children until they were discharged from UH in April 2014. {¶3} UH billed both United and Caresource for services rendered to the children. Caresource initially paid the claim for one of the children, but denied the other claim. However, about a month later, Caresource re versed the payment and denied both claims until it could verify coverage through mother’s c oordination of benefits. {¶4} In August 2016, UH filed a breach of contr act action against Caresource for failure to pay the medical bills of its insured. UH did not bring an action against United. Caresource filed its answer, denying liability and asserting that United is the sole responsible party for the payment of the medical bills. {¶5} In March 2017, without objection, the trial c ourt granted Caresource leave to file a third-party complaint and a count erclaim against UH. Count 1 of the third-party complaint sought indemnification and contribution against United. Count 2 requested declaratory reliefagainst United and UH, requesting that the trial court declare that United is the primary insurer and responsible party to UH, and that Caresource is the secondary insurer and not responsible for

the medical bills. 1 {¶6} In response, United admitted that a justiciabl e controversy existed but asserted that Caresource is liable for the payments to UH. Accordingly, United raised as an affirmative

defense that the trial court lack ed jurisdiction over the declarator y judgment action, claiming that the matter was subject to arbitration because Un ited’s Facility Pa rticipation Agreement (“FPA”) with UH contains an arbitration provision that requires the parties to arbitrate “any and all disputes” covered under the FPA. Subseque ntly, pursuant to R.C. 2701.01, United moved to stay the proceedings, compel arbitration, a nd dismiss the case with prejudice. United maintained that because Caresource was seeking the benefit of United paying UH’s claims, it was subject to the arbitration agreement between United and UH. {¶7} Caresource opposed the motion to compel, cont ending that the action is not subject to arbitration because (1) Caresource is not a party or signatory to the FPA containing the arbitration provision; (2) there is no dispute between United and UH; rather the dispute is between United and Caresource, and (3) the controlling contract is mother-insured’s certificate of coverage (“COC”) issued by Un ited. In support, Caresource att ached to its brief in opposition mother’s health insurance policy, which is titled, “UnitedHealthcare Insurance Company; UnitedHealthcare Choice Plus; Certificate of C overage, Riders, Amendments, and Notices for [mother’s employer].” The lengthy document iden tifies the eligible indi viduals under the policy,

1 Whether Caresource’s use of Civ.R. 14 to bring a d eclaratory judgment action against United was proper was not an issue that was raised with the trial court or with this court. We further note that United did not object and specifically admitted that a justiciable controversy existed between it and Caresource.when coverage begins, and when that covera ge ends. Caresource maintained that these provisions determine whether the children were covered by United or Caresource during the disputed time period. Caresource noted that the document does not contain an arbitration

clause. {¶8} Following a hearing, the trial court denied United’s motion to compel, finding: The court is not persuaded that equ ity demands defenda nt Caresource be compelled to arbitrate as a nonsignatory to the agreement. In the case law cited by third party defendant United, it is clear that the nonsignatory parties in those cases benefitted from the contract that contained the arbitration clause. In the case before the court, Caresource has not benefitted in any respect from the contract between United and UH Rainbow Babies and Children’s Hospital. {¶9} United now appeals, raising as its sole assignment of error the trial court abused its discretion in denying its motion to compel ar bitration. United maintains that even though Caresource is not a signatory to the FPA between United and UH, Caresource is seeking to benefit from the FPA and thus, it should be est opped from denying a corresponding obligation to

arbitrate. {¶10} United maintains that Caresource’s entire theory in its third-party complaint depends entirely upon the terms of the FPA, wh ich governs United and UH’s arrangement for UH to be an in-network provider to United’s cust omers. According to United, the FPA dictates, among other things, how claims are paid. United asserts that the only way it can be held liable for payment of UH’s claims in this matter rests exclusively through the FPA. And because the FPA contains a mandatory arbitration provision requiring any and all disputes between United and UH to be resolved by arbitr ation, Caresource must be compelle d to arbitrate, even though it is not a signatory to the FPA. {¶11} Caresource, on the other hand, contends that the FPA is irrelevant to the declaratory judgment action on the issue of w ho provides primary cove rage for the newbornchildren (which according to Caresource must be determined before the issue of indemnification and contribution is resolved). Caresource maintains that United’s COC issued to the insureds will determine whether it provide s coverage for the medical se rvices received by newborn children. Additionally, it contends that bot h the COC and R.C. 3923.26 (coverage for newly born children) will resolve the issue of the duration of time that United must pay for covered health services in this case. Accordingly, because the FPA does not dictate whether United’s coverage is primary, Caresource c ontends that the FPA is not rele vant, and the issue of whether United provides primary coverage would still exist even if United had not entered into a FPA

with UH. {¶12} We conclude that the COC and R.C. 3923.26 determine if Unite d’s coverage is primary, meaning United must pay claims before they are submitted to Caresource. And

because the COC does not contain an arbitration provision, the trial court did not err in denying United’s motion to compel arbitration. {¶13} Succinctly, it is undisputed that Unite d provided medical coverage from the children’s birth until at least February 28, 2014. The dispute between Caresource and United is which insurer must provide primary coverage fo r the 31 days of care that the infants received during March 2014. Caresource cla ims that United provides primary coverage for 31 days from their births pursuant to the COC and R.C. 3923.26. United maintains th at Caresource provided primary coverage as of March 1, 2014. Thus, the issue to be resolved by the trier of fact is whether United provides coverage for 31 days, as Caresource argues, or only for the 8 days as United maintains. The sole issue on appeal , however, is whether Caresource should be compelled to arbitrate its claim against United.{¶14} Denials of motions to dismiss or stay pr oceedings pending arbitration are generally

reviewed for an abuse of discretion. See generally McCaskey v. Sanford-Brown College , 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543. However, deciding whether the claims arise from the agreement containing the arb itration clause involves an interp retation of the contract, which is a question of law subject to de novo review. Cleveland-Akron-Canton Advertising Coop. v. Physician’s Weight Loss Ctrs. of Am. , 184 Ohio App.3d 805, 2009-Ohio-5699, 922 N.E.2d 1012 (8th Dist.). However, whether the parties can be compelled to arbitrate requires a trial court to make factual findings, which “must be accorded appropriate deference.” Taylor Bldg. Corp. of Am. v. Benfield , 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 2. Accordingly, a reviewing court accepts the trial court’s findings of fact that are not “clearly erroneous,” but decides questions of law de novo. Ghanem v. Am. Greetings Corp ., 8th Dist. Cuyahoga No. 82316, 2003-Ohio-5935, ¶ 11. {¶15} The Ohio Supreme Court has held: “‘“[A]rb itration is a matter of contract and a party cannot be required to submit to arbitration any dispute which [it] has not agreed so to submit.” * * * This axiom recognizes the fact that arbitrators derive their authority to resolve disputes only because the parties have agreed to submit such grievances to arbitration.’” Council of Smaller Ents. v. Gates, McDonald & Co. , 80 Ohio St.3d 661, 665, 687 N.E.2d 1352 (1998), quoting AT&T Technologies, Inc. v. Co mmunications Workers of Am. , 475 U.S. 643, 648-649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), quoting United Steel Workers of Am. v. Warrior & Gulf Navigation Co. , 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960); Taylor v. Ernst & Young, L.L.P. , 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d 1203, ¶ 20. Accordingly, when deciding motions to compel arbitration, the proper focus is whether theparties actually agreed to arbitrate the issue, i.e., the scope of the arbitration clause, not the general policies of the arbitration statutes. Waffle House , 534 U.S. at 294. {¶16} Ohio courts recognize a presumption in favor of arbitration when a claim falls within the scope of an arbitration provision. Williams v. Aetna Fin. Co. , 83 Ohio St.3d 464, 471, 700 N.E.2d 859 (1998). But significantly, there is a counter-weighing presumption against arbitration when a party seeks to invoke an arbitration provision against a nonsignatory. Council of Smaller Ents ., at 667, citing First Options of Chicago, Inc. v. Kaplan , 514 U.S. 938, 945, 115 S.Ct. 1920, 131 L.Ed.2d 985 (1995). In the latter instan ce, “there is serious doubt that the party resisting arbitration has empowered the ar bitrator to decide anything * * *.” Id

. {¶17} Generally, parties who have not agreed to arbitrate th eir disputes cannot be forced to forego judicial remedies. Physician’s Weight Loss , at ¶ 14, citing Moore v. Houses on the Move, Inc ., 177 Ohio App.3d 585, 2008-Ohio-3552, 895 N.E.2d 579 (8th Dist.). There are instances, however, “where equity demands that parties who have not agreed to arbitrate their disputes may be forced to do so when ‘ordinary principles of contract and agency’ require.” Physician’s Weight Loss at id ., quoting McAllister Bros., Inc. v. A & S Transp. Co. , 621 F.2d 519, 524 (2d Cir.1980). One such instance where a nonsignatory will be bound to an arbitration agreement is under an estoppel theory. See Thomson-CSF, S.A. v. Am. Arbitration Assn. , 64 F.3d 773 (2d Cir.1995). {¶18} Estoppel applies where “a nonsignatory w ho knowingly accepts the benefits of an agreement is estopped from denying a co rresponding obligation to arbitrate.” I Sports v. IMG Worldwide, Inc. , 157 Ohio App.3d 593, 2004-Ohio-3631, 813 N.E.2d 4, ¶ 13 (8th Dist.), citing

Thomson-CSF at 778 (estoppel analysis depends on whet her the nonsignatory derived a direct benefit from the contract containing the arbitration clause such that acceptance of the benefitwould also require acceptance of a contractual obligation). “This doctrine ‘precludes a party from enjoying rights and benefits under a contract while at the same time avoiding its burdens and obligations.’” Physician’s Weight Loss , 184 Ohio App.3d 805, 2009-Ohio-5699, 922 N.E.2d 1012, at ¶ 15, quoting InterGen N.V. v. Grina , 344 F.3d 134, 145 (1st Dist.2003). {¶19} In this case, United contends that because the FPA contains mandatory arbitration of any and all disputes between United and UH, Caresource must be compelled to arbitrate, even though it is not a signatory to the FPA, becau se Caresource seeks the benefit of the FPA, specifically that United pay UH’s cl aims. In support, United relies on Gerig v. Kahn , 95 Ohio St.3d 478, 2002-Ohio-2581, 769 N.E.2d 381. {¶20} In Gerig , the Ohio Supreme Court addresse d whether an issue of insurance coverage was subject to arbitration in accordance with an agreement between the physician and the hospital. While under the care of the physici an, mother gave birth to twins at a local hospital. At the time of the deliveries, the physician was working at the hospital under an affiliation agreement, which cont ained an arbitration provision, that required the hospital to insure him against medical-malpractice claims. The Gerigs filed suit against the physician and alleged that he caused birth defects to one of the twins by malpractice during the delivery. At the time the suit was filed, the hospital provided malpractice insurance to the physician through an insurance company with liability limits up to $4 million. In addition, the hospital funded a self-insurance plan to pay malpractice claims. {¶21} Thereafter, the insurance company b ecame insolvent and was forced into liquidation. The Ohio Insurance Guaranty Asso ciation (“OIGA”) became i nvolved in the case to pay any covered claims brought by consumers against the insolvent insurance company.{¶22} Because the statutory limit for OIGA claims was $300,000 and because OIGA pays claims only after a claimant has exhausted her rights under a ll other insurance policies, the Gerigs, the physician, and OIGA soug ht judicial clarification on th e issue of insurance coverage, in light of the insurance company’s insolvency. The Gerigs and the physician sought a declaration that by virtue of the affiliation agreement, the hospital was responsible for any judgment up to $4 million. The OIGA sought a decl aration that under the affiliation agreement, the hospital was required to pay any judgment to the Gerigs unde r its self-insurance fund thus, OIGA was not obligated to pay any damages unless the Gerigs exhausted that fund. Therefore, the hospital sought an order compelling arbitration of the dispute regarding whether the hospital was legally required, pursuant to the agreement, to insure the physician through its self-insurance plan. The physician, who was the only other signatory to the affiliation agreement, did not oppose the hospital’s motion. {¶23} In deciding the issue, the court noted that the Gerigs and OIGA sought a declaration of the hospital’s rights and oblig ations to the physician under the affiliation agreement, even though they did not have a direct dispute with the hospital. Id . at ¶ 12. The

court held that “it woul d be inequitable to allow an intere sted nonsignatory to determine the forum in which an agreement is to be interpreted when the signatories previously agreed in writing to arbitrate any controversy relating to the agreement.” Id . at ¶ 19. Accordingly, based on the principle of equitable estoppel, the court found the arbitration agreement to be enforceable against the interested nonsignatories. Id

. {¶24} The court’s holding in Gerig only applies when a nonsignatory is seeking a declaration of the signatorie s’ rights and obligations under the contract . The test is whether a nonsignatory has asserted claims that arise from th e contract containing th e arbitration clause.Taylor , 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d 1203 at ¶ 33, citing Gerig, 95 Ohio St.3d 478, 2002-Ohio-2581, 769 N.E.2d 381 at ¶ 19. In the Gerig case, the nonsignatories’ entire claim against the signatory seeking to compel arbitration hinged on the interpretation of the agreement containing the arbitra tion provision. Therefore, the cour t held that the nonsignatories each sought to benefit from the agreement — that the hospital would be required to pay the claims first. Accordingly, it was determined that the nonsignatories were subject to the

arbitration clause. {¶25} In this case, however, the claims raised by Caresource do not arise from the contract containing the ar bitration clause and thus, Gerig is factually distinguishable. Caresource’s entire claim against United rests entir ely on coverage of the insureds — not how or if United will pay UH once it is de termined that United is the re sponsible party to cover the expenses incurred from the services rendered by UH. Therefore, the nonsignatory’s claim does not hinge on the interpretation of the FPA that contains the arbitration provision. {¶26} Moreover, Caresource contends that the coverage of the FPA is unknown because United has only offered a redacted version of the FPA — only the portion containing the arbitration agreement was provided. The party seeking to compel arbitration with a nonsignatory bears the burden of establishing th at the nonsignatory seeks to receive a benefit

under the contract and that the contract governs the nonsignatories’ claims. See, e.g., Fifth Third Bank v. Senvisky , 8th Dist. Cuyahoga Nos. 100030 and 100571, 2014-Ohio-1233, ¶ 11 (party seeking to compel arbitration bears the burden of establishing the existence of an enforceable arbitration agreement between it and the compelled party). Because only a redacted copy of the FPA was provided, this court agrees with Caresource that it is uncertain exactly what the FPA covers. The FPA appears to be the agreement memorializing that UH would be an in-networkprovider to United’s customers. It seems unr easonable to conclude that whether a specific

individual is covered as an insured w ith United would be found in the FPA. {¶27} United maintains that the issue is not a “coverage dispute” but merely a payment dispute. In its appellate brief, United contends that if it “has any obligation to pay UH for in-network services, it exists only through the [F PA] it has with UH to provide those services.” And that “[i]nstead the present dispute is a pa yment dispute seeking reimbursement that would be controlled by certain rate s and methods dictated by the FPA.” We disagree. {¶28} Our review of Caresource’s claims, th e provided unredacted portion of the FPA, and the COC demonstrates that this matter is a coverage dispute that must be determined using the COC. Caresource is purely seeking a judicial declaration that United is the primary insurance company required to pay UH’s claims . Whether or how United actually pays the

claims in accordance with the FPA is not an issue with Caresource and is not an issue in the declaratory judgment action. {¶29} Who covers these children during this 31-day time period? This issue does not

involve whether the UH is an in-net work provider to United’s customers. This is not in dispute. Furthermore, this issue does not involve whether the children we re insured. It is undisputed that they were insured. The question is w ho covers these children during a specific and relatively small timefra me. That is a legal question based on contract interpretation, i.e. through

the COC and relevant Ohio law. Because th e COC does not contain an arbitration provision, Caresource cannot be compe lled to arbitrate its claims against United. {¶30} Accordingly, the trial court did not abuse its discretion in denying United’s motion to stay the proceedings and compel arbitra tion. The assignment of error is overruled. {¶31} Judgment affirmed.It is order that appellee recover of appellant its co sts herein taxed. It is ordered that a special mandate be sent to said court to carry this judgment into

execution. A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of the Rules of Appella te Procedure.

KATHLEEN ANN KEOUGH, JUDGE EILEEN A. GALLAGHER, A.J., and MARY J. BOYLE, J., CONCUR