CARE Risk Retention Group v. Martin , 2012 Ohio 1426 ( 2012 )

[Cite as CARE Risk Retention Group v. Martin, 2012-Ohio-1426.]
IN THE COURT OF APPEALS OF MONTGOMERY COUNTY, OHIO
:
CARE RISK RETENTION GROUP
Plaintiff-Appellant : C.A. CASE NO. 24791
vs. : T.C. CASE NO. 07-CV-3734
: (Civil Appeal from
DERRICK MARTIN, M.D., et al. Common Pleas Court)
Defendants-Appellees :
. . . . . . . . .
O P I N I O N
Rendered on the 30th day of March, 2012.
. . . . . . . . .
James S. Oliphant, Atty. Reg. No. 0023086, Kendall Verrett Shaw,
Atty. Reg. No. 0076556, 41 South High Street, Suite 2900, Columbus,
OH 43215
Attorneys for Plaintiff-Appellant
Dwight D. Brannon, Atty. Reg. No. 0021657, 130 W. Second Street,
Suite 900, Dayton, OH 45402
Attorney for Intervening Defendants-Appellees
Charles McKinney, 137 North Main Street, Suite 618, Dayton, OH
45402
Attorney for Defendants-Appellees
. . . . . . . . .
GRADY, P.J.:
{¶ 1} Plaintiff, CARE Risk Retention Group (“CARE Risk”), appeals from an order
granting a motion for summary judgment filed by Intervening Defendants Iva Burnett,
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individually and as executor of the estate of Floyd Burnett, Rebecca Osborn, and Shawn
Burnett (“the Burnetts”).
{¶ 2} A thorough recitation of the pertinent facts is set forth in our prior opinion,
Care Risk Retention Group v. Martin, 191 Ohio App. 3d 797, 2010-Ohio-6091, 947 N.E.2d
1214. For purposes of clarity and convenience, we will repeat a few of the pertinent facts.
{¶ 3} In the summer of 2005, Derrick Martin, M.D., performed gastric surgery on
Floyd Burnett, who developed a postoperative leak, which was immediately repaired. After
being discharged to the care of a home nurse, Floyd Burnett was readmitted to the hospital and
died of a massive coronary, less than one month after surgery. At the time, Dr. Martin was
insured against medical malpractice liability by ProAssurance.
{¶ 4} In October and November of 2005, Dr. Martin received letters from attorney
Dwight Brannon, who stated that he represented “Floyd C. Burnett, deceased.” In November
of 2005, Dr. Martin spoke to an insurance agency about obtaining bariatric malpractice
coverage. Ultimately, Dr. Martin selected CARE Risk as his insurer.
{¶ 5} Dr. Martin completed the CARE Risk insurance application in February of
2006. Dr. Martin stated that he was unaware of any claims against him. In April of 2006,
CARE Risk issued a policy of insurance to Dr. Martin as the named insured. The term was
from April 11, 2006, to April 11, 2007. The policy is a claims-made policy that covers
claims for professional services rendered after the retroactive date for coverage in the
declarations, July 11, 2003, that were first made against the insured and reported to CARE
Risk during the policy period, April 11, 2006, to April 11, 2007.
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{¶ 6} In July of 2006, the Burnetts commenced an action against Dr. Martin and
Martin Surgical Associates, L.L.C., which is an additional insured on the policy, alleging that
Dr. Martin committed negligence and medical malpractice in connection with gastric surgery
performed on Lloyd Burnett in August of 2005, during the retroactive coverage period.
{¶ 7} CARE Risk canceled Dr. Martin’s insurance policy in December of 2006,
claiming material misstatements were made by Dr. Martin concerning prior claims, relying on
the letters to Dr. Martin from Attorney Brannon. In May of 2007, CARE Risk filed a
declaratory judgment action against Dr. Martin, arguing that Dr. Martin’s material
misrepresentations rendered the policy of insurance void. The trial court permitted the
Burnetts to intervene in the declaratory judgment action. Both the Burnetts and CARE Risk
filed motions for partial summary judgment.
{¶ 8} The trial court granted summary judgment to CARE Risk, finding that the
professional liability policy issued to Dr. Martin was void ab initio due to misstatements made
by Dr. Martin in his application concerning prior claims. The Burnetts filed a timely notice
of appeal from that order. On appeal, we concluded, at ¶ 3 of our opinion, that “Dr. Martin’s
statements in the application of insurance are representations, not warranties that void the
policy ab initio.” Consequently, we reversed the trial court’s grant of summary judgment in
favor of CARE Risk and remanded the cause for further proceedings consistent with our
opinion.
{¶ 9} On remand, the Burnetts moved for partial summary judgment and for
declaratory judgment under R.C. 2721.03 with regard to whether Dr. Martin has medical
malpractice insurance coverage under the CARE Risk policy for the claims made by the
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Burnetts. On March 28, 2011, the magistrate granted the Burnetts’ motion for partial
summary judgment, concluding:
Whether the statements of Dr. Martin were reckless, negligent, or intentionally
false does not matter because the Court of Appeals determined as a matter of
law that the statements were representations and not warranties. Because a
claim has been made against the policy, under the controlling cases of Boggs
and Davidson, Care Risk may only cancel the policy prospectively, as a matter
of law.
{¶ 10} CARE Risk filed objections to the magistrate’s decision. On May 27, 2011,
the trial court, relying on the first paragraph of the syllabus in Allstate Ins. v. Boggs, 27 Ohio St. 3d 216,
271 N.E.2d 855 (1971), and our December 10, 2010 opinion, overruled the
objections and granted summary judgment to the Burnetts on their
counterclaim for declaratory judgment. Upon motion of CARE Risk,
the trial court certified its May 27, 2011 order as a final,
appealable order and found that there was no just cause for delay
pursuant to Civ.R. 54. CARE Risk filed a timely notice of appeal
from the trial court’s order, raising the following assignment
of error:
{¶ 11} “THE TRIAL COURT ERRED IN GRANTING THE BURNETTS’ MOTION
FOR PARTIAL SUMMARY JUDGMENT.”
{¶ 12} When reviewing a trial court’s grant of summary judgment, an appellate court conducts a de novo
review. Village of Grafton v. Ohio Edison Co., 77 Ohio St. 3d 102, 105, 671 N.E.2d 241 (1996). “De Novo review
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means that this court uses the same standard that the trial court should have used, and we examine the evidence to
determine whether as a matter of law no genuine issues exist for trial.” Brewer v. Cleveland City Schools Bd. Of Edn., 122
Ohio App. 3d 378, 383, 701 N.E.2d 1023 (8th Dist.1997), citing Dupler v. Mansfield Journal Co., 64 Ohio St. 2d 116, 119-20,
413 N.E.2d 1187 (1980). Therefore, the trial court’s decision is not granted any deference by the reviewing appellate
court. Brown v. Scioto Cty. Bd. Of Commrs., 87 Ohio App. 3d 704, 711, 622 N.E.2d 1153 (4th Dist.1993).
{¶ 13} In Allstate Ins. v. Boggs, 27 Ohio St. 3d 216, 218-219, 271 N.E.2d 855 (1971),
the Supreme Court explained the importance of distinguishing between warranties and representations in the insurance
context:
The consequences of a misstatement of fact by an insured are entirely different, depending on whether
the statement is a warranty or a representation. If the statement is a warranty, a misstatement of fact
voids the policy ab initio. However, if the statement is a representation, a misstatement by the
insured will render the policy voidable, if it is fraudulently made and the fact is material to the risk, but it
does not void the policy ab initio.
{¶ 14} In our February 10, 2010 opinion, we concluded that the alleged misstatements
concerning prior claims made by Dr. Martin were representations rather than warranties. CARE
Risk concedes that our conclusion that Dr. Martin’s alleged misstatements of fact are representations rather than warranties
represents the law of the case and the court and the parties are bound by this conclusion. The fact that Dr. Martin’s
alleged misstatements of fact are not warranties means that CARE Risk may rely on the misstatements to prospectively
cancel its insurance policy with Dr. Martin, if the misstatements are shown to be material to the risk and fraudulently made.
However, CARE Risk cannot use the misstatements to retroactively avoid coverage under the insurance policy after the
underlying liability has been incurred. Boggs at paragraph one of the syllabus. Consequently, the trial court did not err
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in granting summary judgment to the Burnetts.
{¶ 15} CARE Risk argues, however, that our statement at ¶ 76 of our prior opinion
precludes the trial court from granting summary judgment to the Burnetts on the issue of
coverage. We stated, at ¶ 76:
We agree with the Burnetts. Whether Dr. Martin made a representation in bad
faith is an issue for the trier of fact to decide. Under Legler, a defense to a suit
on the insurance policy or bond is that an applicant’s statements were
intentionally false or were recklessly or negligently made without reasonable
grounds to believe the statements were true. 88 Ohio St. at 338, 103 N.E. 897.
{¶ 16} Legler held that the several provisions of a surety bond application in that case
prevented a finding that the applicant’s innocent misstatements rendered the bond void, and
that the truth of the matter “would be no defense to a suit upon the bond, unless it further
appears that such statements were intentionally false or were recklessly or negligently made
without any reasonable grounds on the part of the [applicant] to believe that said statements
were true, and without reasonable effort on his part to make use of the means at hand to
discover the truth or falsity of the statements.” Legler v. U.S. Fidelity & Guaranty Co., 88
Ohio St. 336, 337, 103 N.E. 897 (1913).
{¶ 17} The defenses mentioned in Legler are available to a surety that cancels a bond
or refuses to perform, in a suit filed by the principal and/or a person aggrieved by the
principal’s conduct. In either event, the “defenses” apply to voidability of the contract at the
election of the surety. As explained in Boggs, when a contract is not void but voidable, its
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voidability “may not be used to avoid liability arising under a policy after such liability has
been incurred.” In short, while the holding in Legler provided an additional reason to
overrule CARE Risk’s motion for summary judgment on the issue of coverage in the prior
appeal, it does not provide a reason to overrule the Burnetts’ motion for summary judgment in
this appeal.
{¶ 18} The assignment of error is overruled. The judgment of the trial court will be
affirmed.
FAIN, J., And FROELICH, J., concur.
Copies mailed to:
James S. Oliphant, Esq.
Kendall Verrett Shaw, Esq.
Dwight D. Brannon, Esq.
Charles McKinney, Esq.
Hon. Steven K. Dankof