Portsmouth Ins. Agency v. Med. Mut. of Ohio

2012 Ohio 2046

PORTSMOUTH INSURANCE AGENCY, Plaintiff-Appellee/ Cross-Appellant,

v.MEDICAL MUTUAL OF OHIO, Defendant-Appellant/ Cross-Appellee.

Case No. 10CA3405

COURT OF APPEALS OF OHIO FOURTH APPELLATE DISTRICT SCIOTO COUNTY

Dated: May 3, 2012

DECISION AND JUDGMENT ENTRY

APPEARANCES:

COUNSEL FOR APPELLANT/

CROSS-APPELLEE: David L. Day, 380 South Fifth Street, Suite 3, Columbus, Ohio 43215

COUNSEL FOR APPELLEE/CROSS-APPELLANT: David J. Wigham, John H. Schaeffer, and

Andrew P. Lycans, Critchfield, Critchfield & Johnston, LTD, 225 North Market Street, P.O. Box

599, Wooster, Ohio 44691

CIVIL CASE FROM COMMON PLEAS COURT

DATE JOURNALIZED: 5-3-12

ABELE, P.J.

{¶ 1} This is an appeal from a Scioto County Common Pleas Court judgment in favor of Portsmouth Insurance Agency, plaintiff below and appellee herein, following a jury trial. The jury determined that appellee did not breach an indemnity agreement that it entered into with Medical Mutual of Ohio, defendant below and appellant herein.

{¶ 2} Appellant assigns the following errors for review:

FIRST ASSIGNMENT OF ERROR:

"THE TRIAL COURT ERRED IN DENYING MEDICAL MUTUAL'S MOTION FOR JUDGMENT NOTWITHSTANDING THE VERDICT."

SECOND ASSIGNMENT OF ERROR:

"THE TRIAL COURT ERRED IN DENYING MEDICAL MUTUAL'S MOTION FOR NEW TRIAL."

THIRD ASSIGNMENT OF ERROR:

"THE JURY'S VERDICT IN FAVOR OF PORTSMOUTH AND AGAINST MEDICAL MUTUAL WAS AGAINST THE MANIFEST

WEIGHT OF THE EVIDENCE."

{¶ 3} Appellee/Cross-Appellant raises the following cross-assignment of error:

"THE TRIAL COURT ERRED IN OVERRULING [PLAINTIFF,] PORTSMOUTH INSURANCE AGENCY'S, MOTION FOR DIRECTED VERDICT MADE AT THE END OF THE [DEFENDANT], MEDICAL MUTUAL'S, PRESENTATION OF ITS CASE."

IOVERVIEW

{¶ 4} The present appeal involves appellee's obligation under an indemnity agreement to compensate appellant for attorney fees that appellant incurred when defending a separate lawsuit. The separate lawsuit began after appellant allegedly wrongfully terminated Luther and Donna Alley's health insurance policy (the Alley litigation). The Alley litigation involved appellant's, appellee's, and appellee's agent's (Todd Skaggs) liability to the Alleys. The parties eventually settled the matter. The lawsuit that gives rise to the instant appeal arises out of (1) appellee'sdeclaratory judgment complaint that requested the court to declare the parties rights and obligations under the indemnity agreement and (2) appellant's counterclaim for breach of contract.

IIBACKGROUND

ATHE AGENCY AGREEMENT

{¶ 5} On November 9, 2000, appellee and appellant entered into an agency agreement. Under the agreement, appellee warranted "that it will comply with [appellant]'s rules and regulations relating to the completion and submission of applications by groups for coverage." Appellee further warranted "that it will diligently and to the best of its ability ensure that the representations set forth by any applicant in the health statements solicited are true and correct. Agent further warrants that it will fully inform the applicant that [appellant] will rely solely upon these representations, conditionally accepting or contracting with applicant; that the subsequent discovery by [appellant] of material facts known by applicant and either not disclosed or misrepresented on the application can result in the rescission or cancellation by [appellant] of any contract entered into in reliance thereon * * *."

{¶ 6} The agreement also contained an indemnity provision that states: "The Agent agrees to indemnify and save [appellant] harmless from all loss, expense, cost and liability resulting from unauthorized acts or transactions by said Agent or any other persons engaged or acting on the Agent's behalf."

BTHE ALLEYS' HEALTH INSURANCE APPLICATION

{¶ 7} On December 13, 2001, Luther and Donna Alley applied for health insurance coverage with appellant through appellee's agent, Todd Skaggs. The application that Skaggs submitted on the Alleys' behalf contained a medical health questionnaire (MHQ) that asked the applicant whether the applicant, the applicant's spouse, or any listed dependent has "at any time been treated for or diagnosed as having any of the following [88 listed] conditions?" The Alleys' application answered "yes" to two conditions: (1) high blood pressure; and (2) hysterectomy. As further explanation of the conditions, the application stated that Mrs. Alley had an uncomplicated hysterectomy approximately 12 years ago, and that Mr. Alley has high blood pressure and takes Dyazide. The application additionally stated that Mr. Alley checks his blood pressure at home and contained Mr. Alley's three blood pressure readings from December, November, and October 2001.

{¶ 8} The application further recites certain terms and conditions, one of which states: "I represent and warrant that I have read this Health and Life Insurance Application, and understand each of the questions and the answers to each of the questions I have given are complete and true to the best of my knowledge. I agree that any misrepresentation or concealment on this Application will void my policy at the discretion of MMO and/or MLI. I further agree that if a policy is issued, it will be issued by MMO and/or MLI (if applicable) in full reliance and in consideration of the information, answers, and statements contained herein." The Alleys' signatures appear on the same page as this paragraph.

{¶ 9} Appellant subsequently issued a policy. Appellant later observed more medical claims on the Alleys' behalf than it had expected, and decided to investigate.

CTHE INVESTIGATION

{¶ 10} Appellant obtained the Alleys' medical records and discovered that Mr. Alley had medical conditions (high cholesterol, coronary artery disease, gout, high blood pressure, and prostatitis) that existed before December 13, 2001 that were not disclosed on the application's MHQ section.

{¶ 11} Appellant subsequently contacted the Alleys to inquire about the medical conditions that had not been listed on the MHQ. On January 12, 2004, Medical Mutual Underwriting Analyst Edward A. Stewart and Medical Mutual Supervisor of Financial Investigations Christopher J. Ferrara spoke with Mr. Alley and first questioned him about some cardiac catheterization procedures that he had undergone. Mr. Alley advised them that his most recent procedure had been performed in 2002. Stewart then informed Mr. Alley that the medical records show that Dr. Barry George had performed a cardiac catheterization in February 2001. Mr. Alley stated that although Dr. George told him he had a 60% blockage, Dr. Bradley, who performed a cardiac catheterization in 2002, informed Mr. Alley that Mr. Alley did not have a 60% blockage and that the doctor "doubted if it was even 50% blockage."

{¶ 12} Ferrara asked Mr. Alley why he answered "no" to the question on the MHQ regarding coronary artery disease. Mr. Alley stated that he was "not really sure." Mr. Alley advised Ferrara and Stewart that he did not "think he had a heart problem, because Dr. George said 60% blockage, then Dr. Bradley said doubtful if even a 50% blockage, so he didn't think there was a problem when he filled out his application." Stewart "challenged" Mr. Alley's response by pointing out that Dr. George performed the cardiac catheterization before Mr. Alley enrolled with MMO and that Dr. Bradley performed the procedure after Mr. Alley's enrollment. Mr. Alleyresponded by stating that he did not "trust the word of Dr. George, that he thought it was just a money making thing. [Mr. Alley] stated he had a cardiac cath[eterization] done 11 years ago by Dr. Dreitcher, and Dreitcher told him his heart was fine." Stewart then asked Mr. Alley why he had so many heart catheterizations. Mr. Alley stated that "he has had little chest pains over the years, and a brother who had bypass surgery, so he was checked out to make sure he was OK."

{¶ 13} Stewart and Ferrara next questioned Mr. Alley about his cholesterol problem. They informed Mr. Alley that the medical records show in October 2001, Dr. Mullins noted that Mr. Alley has high cholesterol and "gave him low cholesterol sheets." Mr. Alley responded that "Dr. Mullins never told him the numbers, he didn't tell him he had high cholesterol, he just told him to watch his diet."

{¶ 14} Stewart questioned Mr. Alley why the prostate condition was not reported on the application. Stewart informed Mr. Alley that the medical records show that Mr. Alley had two flare-ups in 2000 and that the doctor gave him antibiotic for it. Mr. Alley stated that the doctor prescribed the antibiotic for a yeast infection and not for a prostate flare-up.

{¶ 15} Stewart next inquired why Mr. Alley did not report that he had suffered from gout. Mr. Alley responded that "if he had been having a problem with it, he would have." Mr. Alley explained that he had kidney stones in the past and that he never thought the medicine was for gout. Mr. Alley thought the medication had been prescribed for kidney stones. Stewart advised Mr. Alley that the medical records show that Mr. Alley had a gout flare-up in 1998. Mr. Alley stated that he did not remember the 1998 flare-up.

{¶ 16} The parties then discussed the application process. Mr. Alley stated that "the guywho sold him the policy misled him. [Mr. Alley] said he thought only the medical stuff that was a problem that year or the last year was all that needed to be put down. This is how he answered the questions." Stewart then read the statement on the MHQ that requires the applicant(s) to report conditions that the applicant(s) has "at any time been treated for or diagnosed as having."

{¶ 17} Stewart asked Mr. Alley if Skaggs read the questions to him. Mr. Alley stated that Skaggs read the questions to him and then filled in the boxes on the MHQ. Stewart then inquired whether Skaggs had completed the name and address information as well. Mr. Alley stated that he did not know who completed that information and that Stewart and Ferrara "better talk to [Skaggs] about...