Court Opinion

ID: 9941741
Source: CourtListenerOpinion
Date Created: 2024-02-16 20:08:34.168485+00
Date Added: 2024-06-11T13:46:59.755546
License: Public Domain

[Cite as U.S. Acute Care Solutions, L.L.C. v. Doctors Co. Risk Retention Group Ins. Co., 2024-Ohio-605.]

                                        COURT OF APPEALS
                                       STARK COUNTY, OHIO
                                    FIFTH APPELLATE DISTRICT

U.S. ACUTE CARE SOLUTIONS, LLC.                             JUDGES:
                                                            Hon. Patricia A. Delaney, P.J.
        Plaintiff-Appellant                                 Hon. W. Scott Gwin, J.
                                                            Hon. John W. Wise, J.
-vs-

THE DOCTORS COMPANY RISK                                    Case No. 2023 CA 00084
RETENTION GROUP INSURANCE
COMPANY

        Defendant-Appellee                                  OPINION

CHARACTER OF PROCEEDING:                               Civil Appeal from the Court of Common
                                                       Pleas, Case No. 2023 CV 00510

JUDGMENT:                                              Reversed and Remanded

DATE OF JUDGMENT ENTRY:                                February 15, 2024

APPEARANCES:

For Plaintiff-Appellant                                For Defendant-Appellee

CRAIG G. PELINI                                        ANECA E. LASLEY
PELINI, CAMPBELL & RICHARD                             ICE MILLER LLP
Bretton Commons - Suite 400                            250 West Street
8040 Cleveland Avenue NW                               Suite 700
North Canton, Ohio 44720                               Columbus, Ohio 43215-7509

ANTHONY F. STRINGER
K. JAMES SULLIVAN
CALFEE, HALTER & GRISWOLD LLP
1405 East Sixth Street
Cleveland, Ohio 44114-1607
Stark County, Case No. 2023 CA 00084                                                      2

Wise, J.

      {¶1}   Appellant U.S. Acute Care Solutions, LLC, appeals the July 12, 2023,

decision of the Stark County Court of Common Pleas granting a Motion to Stay

Proceedings and Compel Arbitration filed by Appellee The Doctors Company Risk

Retention Group Insurance Company.

                                 STATEMENT OF THE FACTS

      {¶2}   This action arises out of claim for insurance bad faith claims handling.

      {¶3}   The facts and procedural history relevant to this appeal are as follows:

      {¶4}   Appellant U.S. Acute Care Solutions, LLC (USACS), is a Delaware

company, with its principal place of business in Canton, Ohio. USACS provides

emergency care services to health care systems across the United States. Appellee, The

Doctors Company Risk Retention Group Insurance Company (TDC), is an insurance

company located in Napa, California.

      {¶5}   From October 1, 2017, through October 1, 2019, TDC was USACS' medical

malpractice insurer.

      {¶6}   In January, 2020, David Klein filed a medical malpractice lawsuit in

Stamford, Connecticut Superior Court against Emergency Medicine Physicians of New

Haven County, LLC and Dr. Lyncean Ung (collectively, USACS’ Insureds).                  The

Complaint generally alleges that Mr. Klein went to the emergency room at Stamford

Hospital complaining of chills, fever and shaking. While at the hospital, he developed

gangrene on his feet and fingers from a bacterial infection. Approximately one month

later, Mr. Klein left the hospital with both legs amputated below the knee and nine of his

fingers partially amputated. Specifically, Mr. Klein alleged that Dr. Ung "failed to timely
Stark County, Case No. 2023 CA 00084                                                      3

and properly evaluate, diagnose, and treat Mr. Klein's sepsis, which was allowed to

progress unchecked and untreated for an unreasonable period of time, resulting in DIC

and related sequelae, including amputations of Mr. Klein's legs and portions of his fingers"

and "failed to properly and timely ensure that David Klein received timely treatment with

antibiotics."

       {¶7}     USACS, whose insured parties had been sued in the medical malpractice

case, had a malpractice insurance policy with TDC with a policy number of 1519815.

USACS tendered the lawsuit to TDC, which accepted coverage. TDC then opened a claim

and assigned a claims specialist to handle the claim process, including attending a

mediation.

       {¶8}     In December, 2022, after two years of litigation, Mr. Klein reduced his

settlement demand to an amount within policy limits, with the caveat that it expired on

December 31, 2022.

       {¶9}     After initial and repeated attempts at resolution of the underlying medical

malpractice claim were unsuccessful, allegedly due to extra-contractual bad faith actions

by TDC, USACS’ insured parties were forced to self-fund a settlement of the malpractice

claim or else face the potential risk of a verdict in excess of the limits of coverage under

the malpractice insurance policy.

       {¶10} On March 17, 2023, USACS filed a Complaint in the Stark County Court of

Common Pleas alleging a single count of Bad Faith Claims Handling against TDC to

recover the amount of its settlement payment.

       {¶11} On April 20, 2023, TDC moved to stay this action and compel arbitration

pursuant to an arbitration endorsement in its insurance policy. USACS opposed the
Stark County, Case No. 2023 CA 00084                                                       4

motion arguing that its tort claim does not fall within the scope of TDC's arbitration

endorsement.

       {¶12} By Judgment Entry filed July 12, 2023, the trial court granted the motion.

       {¶13} It is from this decision Appellant now appeals, raising the following errors

for review:

                                  ASSIGNMENTS OF ERROR

       {¶14} “I. THE TRIAL COURT ERRED BY GRANTING APPELLEE'S MOTION TO

STAY     PROCEEDINGS          AND     COMPEL          ARBITRATION      BASED      ON     ITS

CONSTRUCTION         OF    AN    ARBITRATION          ENDORSEMENT       TO    APPELLEE'S

INSURANCE POLICY.”

                                                 I.

       {¶15} In its sole assignment of error, Appellant argues the trial court erred in

granting Appellee’s motion to stay the proceedings and compel arbitration. We agree.

       {¶16} Appellant’s assignment of error focuses upon the interpretation and

application of an arbitration clause contained within the insurance policy. When reviewing

a challenge to an arbitration clause, the appropriate standard of review depends on “the

type of questions raised challenging the applicability of the arbitration provision.”

McCaskey v. Sanford-Brown College, 8th Dist. Cuyahoga No. 97261, 2012-Ohio-1543,

2012 WL 1142880, ¶ 7. Whether a controversy is arbitrable under an arbitration provision

of a contract is a question of law for the court to decide; therefore, the standard of review

on those issues is de novo. Church v. Fleishour Homes, Inc., 5th Dist., 172 Ohio App.3d

205, 2007-Ohio-1806, 874 N.E.2d 795, ¶ 9. “Under a de novo standard of review, we give
Stark County, Case No. 2023 CA 00084                                                      5

no deference to a trial court's decision.” Hedeen v. Autos Direct Online, Inc., 8th Dist.,

2014-Ohio-4200, 19 N.E.3d 957, ¶ 9 (Citations omitted).

      {¶17} “Ohio courts recognize four principles that guide arbitrability[.]” Entire

Energy & Renewables, LLC v. Duncan, 2013-Ohio-4209, 999 N.E.2d 214, ¶ 17 (10th

Dist.), quoting Academy of Medicine of Cincinnati v. Aetna Health, Inc., 108 Ohio St.3d

185, 2006-Ohio-657, 842 N.E.2d 488, ¶ 10-14. They are:

             (1) that arbitration is a matter of contract and a party cannot be

      required to so submit to arbitration any dispute which he has not agreed to

      so submit; (2) that the question whether a particular claim is arbitrable is

      one of law for the court to decide; (3) that when deciding whether the parties

      have agreed to submit a particular claim to arbitration, a court may not rule

      on the potential merits of the underlying claim; and (4) that when a contract

      contains an arbitration provision, there is a presumption of arbitrability in the

      sense that [a]n order to arbitrate the particular grievance should not be

      denied unless it may be said with positive assurance that the arbitration

      clause is not susceptible of an interpretation that covers the asserted

      dispute.

      {¶18} In the instant case, the insurance policy contained the following change

endorsement:

             “Any dispute between you and us relating to this Policy (including

      any disputes regarding our contractual obligations) will be resolved by

      binding arbitration in accordance with the Commercial Arbitration Rules and

      Mediation Procedures of the American Arbitration Association. ***”
Stark County, Case No. 2023 CA 00084                                                       6

       {¶19} Prior to this change endorsement, the original policy contained the following

arbitration clause:

       {¶20} “Any dispute between you and us relating to this Policy (including any

disputes regarding our extra-contractual obligations) will be resolved by binding

arbitration in accordance with the Commercial Arbitration Rules and Mediation

Procedures of the American Arbitration Association.”

       {¶21} Appellee argues that because the parties agreed to arbitrate any dispute

that “relat[es] to” the policy and because Appellant is arguing that Appellee breached its

duty of care owed to it, the only source of the duty must be the policy. Therefore, the bad

faith claim is a dispute which relates to the policy and as such, is subject to binding

arbitration.

       {¶22} Appellant herein argues that its bad faith claims handling claim does not fall

within the scope of the arbitration endorsement contained in the Policy because it is not

based upon, nor relies upon, any language in the insurance policy.

       {¶23} In its decision, the trial court found:

               Plaintiff and Defendant's relationship arises out of the insurance

       policy at issue and there is no duty to act in good faith, or claim for bad faith

       for that matter, in the absence of the insurance policy. Given the nature of

       Plaintiff's single claim against Defendant, the Court therefore cannot

       conclude that Plaintiff's bad faith insurance claim exists in a vacuum without

       reliance upon the underlying contractual insurance policy relationship.

       {¶24} (7/12/2023, Judgment Entry at 6).
Stark County, Case No. 2023 CA 00084                                                         7

       {¶25} On November 1, 2023, subsequent to the filing of the briefs in this matter,

the Ohio Supreme Court decided Scott Fetzer Co. v. Home Assur. Co., Inc., Slip Opinion

No. 2023-Ohio-392.

       {¶26} In Scott Fetzer, the issue before the Court was which choice-of-law rule

applies to an insurance bad faith claim. The insurer argued that a bad faith claim is

inseparable from an insurance contract because the contract creates the claim.

Therefore, a bad faith claim is one of the "rights created thereby" under Section 193. Id.

at 19-20. In Scott-Fetzer, Traveler’s Insurance also contended that a bad-faith claim

should be viewed as arising out of a contract because, unlike a typical tort claim, a bad-

faith claim can be brought only by one contracting party against another.

       {¶27} The insured argued that an insurer's duty to act in good faith is not one of

the "rights created thereby," because a bad faith claim is a tort, which arises by operation

of law. ld. at 21. The Court agreed stating:

              We disagree with Travelers' argument that a bad-faith claim is one of the

       "rights created thereby." That a bad-faith claim can be litigated only between the

       parties to an insurance contract does not mean that the contract creates it.

       Importantly, a bad-faith claim is not rooted in any particular text of the contract.

       Instead, as we explained in Hoskins [ v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 452

       N.E.2d 1315 (1983)], it arises by operation of law:

              The liability of the insurer [on a bad-faith claim] does not arise from its mere

       omission to perform a contract obligation, for it is well established in Ohio that it is

       no tort to breach a contract, regardless of motive. * * * Rather, the liability arises

       from the breach of the positive legal duty imposed by law due to the relationships
Stark County, Case No. 2023 CA 00084                                                           8

       of the parties. * * * This legal duty is the duty imposed upon the insurer to act in

       good faith and its bad faith refusal to settle a claim is a breach of that duty and

       imposes liability sounding in tort.

              (Emphasis added.) Hoskins at 276, 452 N.E.2d 1315. Consequently, the

       existence of an insurance contract is what causes the common-law rule to apply

       to particular entities.

       {¶28} (Scott-Fetzer at 5, ¶23)

       {¶29} Based on the holding of Scott-Fetzer, supra, we find that an insurance bad-

faith claim is not rooted in any particular text of the contract; instead, it arises by operation

of law. We therefore find that Appellant’s bad faith handling tort claim is an extra-

contractual matter to which the arbitration endorsement in the insurance contract is not

applicable.

       {¶30} Appellants’ first assignment of error is sustained.

       {¶31} For the reasons stated in the foregoing opinion, the judgment of the Stark

County Court of Common Pleas is reversed and remanded to the trial court for further

proceedings consistent with the law and this opinion.

By: Wise, J.
Delaney, P. J., and
Gwin, J., concur.

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