Ohio Ins. Guar. Assn. v. Pikkel , 2012 Ohio 930 ( 2012 )

[Cite as Ohio Ins. Guar. Assn. v. Pikkel, 2012-Ohio-930.]
Court of Appeals of Ohio
EIGHTH APPELLATE DISTRICT
COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION
No. 97263
OHIO INS. GUARANTY ASSN.
PLAINTIFF-APPELLANT
vs.
BONNIE PIKKEL, ET AL.
DEFENDANTS-APPELLEES
JUDGMENT:
AFFIRMED
Civil Appeal from the
Cuyahoga County Court of Common Pleas
Case No. CV-726612
BEFORE: Sweeney, J., Boyle, P.J., and S. Gallagher, J.
RELEASED AND JOURNALIZED: March 8, 2012
ATTORNEYS FOR APPELLANT
Marcel C. Duhamel, Esq.
Heather M. Lutz, Esq.
Vorys, Sater, Seymour & Pease, L.L.P.
1375 East Ninth Street
2100 One Cleveland Center
Cleveland, Ohio 44114
Ronald A. Rispo, Esq.
Harry T. Sigmier, Esq.
Weston Hurd, L.L.P.
The Tower at Erieview
1301 East Ninth Street, Suite 1900
Cleveland, Ohio 44114-1862
ATTORNEYS FOR APPELLEES
Robert F. Linton, Esq.
Stephen T. Keefe, Esq.
Linton & Hirshman
Hoyt Block, Suite 300
700 West St. Clair Avenue
Cleveland, Ohio 44113
Douglas L. Hertlein, Esq.
Allen, Kuehnle, Stovall & Neuman, L.L.P.
17 South High Street, Suite 1220
Columbus, Ohio 43215
JAMES J. SWEENEY, J.:
{¶1} Plaintiff-appellant Ohio Insurance Guaranty Association (“OIGA”) appeals
the court’s granting summary judgment to defendants-appellees Bonnie Pikkel and her
family (“the Pikkels”) and MCS Capital, LLC (“MCS”) in this dispute over a settlement
agreement. After reviewing the facts of the case and pertinent law, we affirm.
{¶2} The Pikkels filed a medical malpractice claim against Lakeland Emergency
Associates. OIGA became involved in the litigation because Lakeland’s insurance
company was adjudicated insolvent and forced into liquidation proceedings. In August
2002, OIGA, the Pikkels, and the liquidator entered into a settlement agreement (“the
Agreement”), the relevant terms of which are as follows: 1) the reasonable settlement
value of the claim was $1,300,000; 2) OIGA agreed to pay the Pikkels $600,000
immediately; 3) the liquidator agreed to allow a claim for the remaining $700,000 “in any
final pro-rata distribution of * * * assets”; and 4) the Pikkels agreed to release any and all
claims against OIGA and the liquidator. The parties do not dispute that OIGA paid the
Pikkels $600,000 as promised.
{¶3} On the same day, the Pikkels and OIGA entered into an additional
confidential agreement (“the Additional Agreement”), of which the liquidator was
unaware. The Additional Agreement guaranteed the Pikkels $400,000 from the
liquidation proceedings — if the Pikkels received less, OIGA agreed to pay the Pikkels
the difference; if the Pikkels received more, the Pikkels agreed to pay OIGA the surplus.
{¶4} In October 2006, the liquidator paid the Pikkels $245,000 as a partial
distribution of the proceedings. In September 2008, the Pikkels sold and assigned the
remainder of their liquidation claim to MCS for $227,500. The Pikkels did not disclose
the existence of the Additional Agreement to MCS.
{¶5} In December 2009, the liquidator made a final distribution of $329,988 on
the Pikkel matter to MCS. The total amount the liquidator paid on the Pikkel claim was
$574,988.
{¶6} On May 13, 2010, OIGA filed a complaint against the Pikkels and MCS,
seeking to recover $174,988 (the amount the liquidator paid on the Pikkel claim in excess
of $400,000) under the Additional Agreement. On August 8, 2011, the court denied
OIGA’s summary judgment motion and granted the Pikkel’s summary judgment motion,
finding that the Additional Agreement was void and unenforceable as a matter of law.
{¶7} OIGA appeals and raises three assignments of error for our review.
I.
The trial court erred in granting summary judgment in favor of [the
Pikkels].
II.
The trial court erred in denying [OIGA’s] motion for summary judgment.
III.
The trial court erred in entering judgment as a matter of law in favor of
[MCS].
{¶8} Appellate review of summary judgment is de novo. Grafton v. Ohio
Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996). The Ohio Supreme Court
set forth the test for determining whether summary judgment is appropriate in Zivich v.
Mentor Soccer Club, 82 Ohio St.3d 367, 369–370, 696 N.E.2d 201 (1998), as follows:
Pursuant to Civ.R. 56, summary judgment is appropriate when (1) there is
no genuine issue of material fact, (2) the moving party is entitled to
judgment as a matter of law, and (3) reasonable minds can come to but one
conclusion and that conclusion is adverse to the nonmoving party, said party
being entitled to have the evidence construed most strongly in his favor.
Horton v. Harwick Chem. Corp. (1995), 73 Ohio St.3d 679, 653 N.E.2d
1196, paragraph three of the syllabus. The party moving for summary
judgment bears the burden of showing that there is no genuine issue of
material fact and that it is entitled to judgment as a matter of law. Dresher
v. Burt (1996), 75 Ohio St.3d 280, 292–293, 662 N.E.2d 264, 273–274.
{¶9} In the instant case, the trial court issued a 24-page opinion detailing its
reasoning behind granting summary judgment to the Pikkels. In essence, the court
concluded that the Additional Agreement was void and unenforceable for the following
reasons: 1) the Additional Agreement amounted to champerty and maintenance under
Rancman v. Interim Settlement Funding Corp., 99 Ohio St.3d 121, 2003-Ohio-2721, 789
N.E.2d 217; 2) OIGA acted outside the scope of its limited statutory power in entering
into the Additional Agreement; 3) OIGA’s actions contradicted the purpose for which
OIGA was created; 4) OIGA’s promise in the Additional Agreement was illusory; and 5)
the Additional Agreement violated a court order approving the liquidation distribution.
{¶10} Upon review, we find that OIGA lacked the statutory authority to enter
into the Additional Agreement. As such, we limit our focus to this point of law.
An administrative agency has no authority beyond the authority conferred
by statute and it may exercise only those powers that are expressly granted
by the General Assembly. State ex rel. Lucas Cty. Bd. of Commrs. v. Ohio
Environmental, 88 Ohio St.3d 166, 171, 724 N.E.2d 411 (2000). This
court has held that a contract entered into by a county board was void when
“the Board acted in contravention of the applicable statute when awarding
the contract * * *. Cuyahoga County Bd. of Commissioners v. Richard L.
Bowen & Associates, Inc., 8th Dist. No. 81867, 2003-Ohio-3663, ¶20. See
also Bohach Advery, 7th Dist. No. 00CA265, 2002-Ohio-3202, ¶18
(holding that a zoning inspector’s promise, which was made outside the
scope of his statutory authority, amounted to an ultra vires act).
{¶11} The purpose of OIGA is “to provide a mechanism for the payment of
covered claims * * *, avoid excessive delay in payment and reduce financial loss to
claimants * * * because of the insolvency of an insurer * * *.” R.C. 3955.03. In PIE
Mut. Ins. Co. v. Ohio Ins. Guar. Assoc., 66 Ohio St.3d 209, 212, 611 N.E.2d 313 (1993),
the Ohio Supreme Court stated that OIGA was “created to provide a means to compensate
insureds or third-party claimants when an insurance company is unable to meet its
obligations.”
{¶12} The statutory powers and duties of the OIGA are expressed in R.C.
3955.08, which states in pertinent part that OIGA shall:
(A)(1) Be obligated to the extent of the covered claims existing prior to the
determination that an insolvent insurer exists * * *.
(2) Be deemed the insurer to the extent of its obligation on the covered
claims and to such extent shall have all rights, duties, and obligations of the
insolvent insurer as if the insurer had not become insolvent;
***
(4) Investigate claims brought against [OIGA] and adjust, compromise,
settle, or pay covered claims to the extent of [OIGA’s] obligation and deny
all other claims * * *.
{¶13} Pursuant to R.C. 3955.01(D), a covered claim is “an unpaid claim, * * *
which arises out of and is within the coverage of an insurance policy * * * when issued by
an insurer which becomes * * * insolvent * * *.”
{¶14} The PIE Mut. Court also expanded on what it means have an unpaid
claim. “An unpaid claim is one which arose from an insured event and has yet to be
satisfied either by the insolvent carrier or by OIGA.” Id. at 213. The court determined
that a subrogation cause of action was not a “covered claim” under R.C. Chapter 3955,
because “the claim has been converted from an unpaid claim to a paid claim through
settlement.” Id.
{¶15} Although we are not concerned with subrogation rights in the instant case,
we analogize the issue at hand with the court’s holding in PIE Mut. OIGA settled its
claim with the Pikkels when the parties entered into the Agreement and OIGA paid the
Pikkels $600,000. Paragraph 4(A) of the Agreement states that:
[i]n consideration of the payment made by the OIGA and the allowance of a
* * * claim by the Liquidator, [the Pikkels] hereby [agree] * * * [t]o release,
settle, cancel and forever discharge and acknowledge to be fully and fairly
satisfied, any and all claims, demands, rights and causes of action * * *
which [the Pikkels] * * * may have or assert against * * * OIGA * * *.
{¶16} Pursuant to R.C. 3955.08, OIGA had no obligation to pay the Pikkels
more than $600,000. When this was paid, the Pikkel matter was no longer a covered
claim as envisioned by R.C. Chapter 3955. Not only does OIGA have no duty regarding
claims that are not covered, when it comes to uncovered claims, OIGA has no power to
take any action at all. Compare Lake Hosp. Sys., Inc. v. Ohio Ins. Guar. Assn., 69 Ohio
St.3d 521, 526, 634 N.E.2d 611 (1994) (holding that
[t]he language of R.C. 3955.08(A) is mandatory and does not provide any
discretion on the part of [OIGA] to entertain claims that have been filed
after the final date set for filing claims in a liquidation proceeding. * * *
OIGA, as a creature of statute, must comply with the clear provisions of the
Act that defines its powers and duties).
{¶17} Accordingly, under the unique facts of the case at hand, OIGA lacked the
authority to enter into the Additional Agreement. Therefore, it is unenforceable and the
Pikkels, along with MCS, are entitled to summary judgment as a matter of law. OIGA’s
three assignments of error are overruled.
{¶18} Judgment affirmed.
It is ordered that appellee recover from appellant costs herein taxed.
The court finds there were reasonable grounds for this appeal.
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 Appellate Procedure.
JAMES J. SWEENEY, JUDGE
MARY J. BOYLE, P.J., and
SEAN C. GALLAGHER, J., CONCUR