Opinion
[Copyrighted Material Omitted]
Jeffrey Scott Goldenberg, Robert Brent Sherwood, Goldenberg Schneider, LPA, Todd B Naylor, Goldenberg Schneider, LPA, Cincinnati, OH, John Michael Snider, Stebelton Snider, LPA, Lancaster, OH, for Plaintiff.
Thomas F. A. Hetherington, Jarrett E. Ganer, Pro Hac Vice, McDowell Hetherington LLP, Houston, TX, Jeffrey L. Kingsley, Pro Hac Vice, Patrick B. Omilian, Pro Hac Vice, Goldberg Segalla LLP, Buffalo, NY, Lisa A. Weixelman, Pro Hac Vice, Polsinelli PC, Kansas City, MO, Patrick T. Lewis, Rodger L. Eckelberry, Baker & Hostetler LLP, Cleveland, OH, Patrick B. Omilian, for Defendant.
OPINION AND ORDER
MICHAEL H. WATSON, UNITED STATES DISTRICT JUDGE
Sheela K. O’Donnell ("Plaintiff") moves for summary judgment, on behalf of herself and on behalf of certified classes under Federal Rules of Civil Procedure 23(b)(2) and Rule 23(b)(3), on the following claims: Count One (declaratory judgment), Count Three (breach of contract), Count Four (bad faith), and on Defendant’s counterclaims. Financial American Life Insurance Co. ("Defendant") opposes the motion and cross-moves for summary judgment on Plaintiff’s bad faith claim (Count Four). For the reasons that follow, the Court GRANTS Plaintiff’s motion for summary judgment as to Count One and Count Three as to liability. The parties’ motions with respect to Count Four are DENIED WITHOUT PREJUDICE TO RENEWAL.
I. BACKGROUND
The facts of this case are set forth in the Court’s March 21, 2016, Opinion and Order denying Defendant’s motion for summary judgment on Plaintiff’s claims and on Defendant’s counterclaims for rescission and declaratory judgment. ECF No. 64. Those facts are incorporated by reference herein.
Essentially, Defendant entered into a contract for credit life insurance with Plaintiff and her late husband, Mr. O’Donnell (the "Policy"). The contract was made in connection with the O’Donnells’ purchase of an automobile, which they financed through Wells Fargo Dealer Service ("Wells Fargo").
The Policy contains certain eligibility requirements and a space for Plaintiff’s and Mr. O’Donnell’s signature. Above the signature line, the Policy states: "My signature below acknowledges that I have read and understand the above Insurability Requirements and represent that I meet both the Eligibility Requirements and the Statement of Insurability and am eligible for the coverage as requested in the Schedule." Policy 1, ECF No. 37-1. Both Plaintiff and Mr. O’Donnell signed the Policy and therefore represented that they were eligible for coverage thereunder. Defendant contends that Mr. O’Donnell did not meet the eligibility requirements such that his signature representing his eligibility was false.
The Policy also contains the following relevant provisions:
CERTIFICATE OF INSURANCE
We certify that, if we have been paid the premium shown in the Application, you are insured for the coverage shown in the Application, subject to the terms of the Group Policy issued to the Creditor and acceptance by us. Our acceptance will be in accordance with our procedures and practices. Under no circumstances will acceptance occur before sixty (60) days of the receipt of the Application.... All benefit payments are made to the Creditor shown in the Application to pay off or reduce your debt. If benefit payments are more than the balance of your loan, we will pay the difference to you or to a named Second Beneficiary....
...
PAYMENT OF A DEATH BENEFIT: If you or the insured Co-Borrower dies while insured, we will pay the amount of insurance then in force after we receive proof of death....
Id. at 2.
Mr. O’Donnell died approximately a year and a half after the O’Donnells purchased the Policy. Plaintiff submitted a claim, including a certified copy of Mr. O’Donnells’ death certificate, to Defendant under the Policy.
Defendant responded by requesting additional information about Mr. O’Donnell’s death. Plaintiff provided the requested information. From there, Defendant concluded that Mr. O’Donnell had been ineligible for coverage, denied Plaintiffs claim, refunded Mr. O’Donnell’s portion of the premium to Wells Fargo, and amended the Policy from joint to single coverage.
Plaintiff filed this lawsuit. On behalf of herself and a similarly-situated class, Plaintiff asserts claims for declaratory relief on two theories: (1) Defendant cannot deny claims ninety days or more after a policy goes into effect, pursuant to a "Misstated Terms" clause; and (2) Defendant cannot demand medical records as a condition for having a claim for life insurance death benefits evaluated unless the policy specifically reserves that right. Plaintiff also asserts claims for breach of the "Misstated Terms" clause; breach of contract for denying Plaintiff’s claim and, specifically, for wrongfully refusing to process Plaintiff’s claim unless Plaintiff and the class members released confidential medical records to Defendant; breach of the duty of good faith and fair dealing; and unjust enrichment.
Defendant counterclaims for rescission of the Policy and for declaratory judgment that Plaintiff’s claim is precluded because the Policy is void ab initio — or invalid from the outset— as a result of Mr. O’Donnell’s false representation that he was eligible for coverage.
On September 4, 2015, Defendant moved for summary judgment on all of Plaintiffs claims and on its counterclaims. ECF No. 36. The thrust of Defendant’s position was that an Ohio statute, Ohio Revised Code § 3911.06, voided the Policy and relieved Defendant of its obligation to pay Plaintiff’s claim. Defendant alternatively argued that, even if § 3911.06 did not apply, Ohio’s common law allowed it to rescind the Policy based on Mr. O’Donnells’ false representation that he was eligible for coverage.
This Court, in an Opinion and Order dated March 21, 2016, by now-retired Judge Frost, denied Defendant’s motion ("March 21 Order"), ECF No. 64. Judge Frost analyzed the text of § 3911.06, which applies by its plain language only to "answer[s] to any interrogatory," and concluded that it did not apply to Mr. O’Donnell’s signature on the Policy.
Judge Frost next addressed Defendant’s common law argument. Ohio law distinguishes between representations and warranties in an insurance contract, see Ramsey v. Penn Mutual Life Insurance Co., 787 F.3d 813, 821 (6th Cir. 2015), and each has a different effect on the contract: "whereas a misstatement of fact in a warranty voids a policy ab initio, a misrepresentation by the insured renders the policy voidable at the insurer’s option." March 21 Order 16, ECF No. 64 (citing Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216, 218-19, 271 N.E.2d 855 (1971) ). Because Defendant did not dispute that the O’Donnells’ signatures were representations and not warranties, and because Ohio law does not permit an insurer to void a contract after liability has accrued, see id., Judge Frost found that liability attached once Plaintiff submitted proof of Mr. O’Donnell’s death thus precluding Defendant from voiding the contract. Judge Frost therefore concluded that Defendant was not entitled to summary judgment on its counterclaims.
Because Defendant’s arguments for summary judgment on Plaintiff’s claims were based on its argument that it was entitled to rescind the Policy, Judge Frost likewise denied Defendant’s motion for summary judgment on Plaintiff’s claims. Judge Frost articulated additional, alternative reasons that Defendant was not entitled to summary judgment on Plaintiffs breach of contract claim:
Regarding the issue of whether Defendant was entitled to request Mr. O’Donnell’s medical records before processing Plaintiffs claim, the Policy clearly obligated Defendant to "pay the amount of insurance then in force after it receive[d] proof of death." (ECF No. 37-1, at PAGEID # 387.) Nothing in the Policy authorized Defendant to delay payment, after receiving proof of death, in order to obtain and evaluate the deceased’s medical records. Defendant’s argument that nothing in the Policy prevented it from requesting medical records after it received proof of death is disingenuous. If accepted, Defendant’s proposed interpretation of the Policy would have allowed it to delay processing Plaintiff’s claim indefinitely simply because nothing in the Policy explicitly prevented it from doing so.
March 21 Order 19, ECF No. 64.
Finally, regarding the bad faith claim, Judge Frost found that Defendant’s argument relied on its position that § 3911.06 gave it a reasonable justification to deny Plaintiffs claim. Because § 3911.06 did not apply, Judge Frost found that Defendant failed to prove as a matter of law that summary judgment was warranted. Judge Frost noted that, based on the briefs as presented, genuine issues of fact existed with respect to Defendant’s knowledge and motivation in denying Plaintiffs claim for benefits.
Having denied Defendant’s motion for summary judgment, Judge Frost considered Plaintiffs motion for class certification ("April 18 Order"), ECF No. 65. Plaintiff presented evidence that there are 110 Ohio policyholders who submitted claims for benefits (including the death certificate of the insured) and had their claims denied for misrepresentations discovered during a post-death investigation. See April 18 Order 10-11. Defendant classified those files pursuant to a "3DL" status action code. See id. Judge Frost ultimately granted Plaintiff’s motion and certified the following class pursuant to Federal Rule of Civil Procedure 23(b)(3) ("Rule 23(b)(3) Class"):
All persons who, from August 4, 2006 through the date of class notice, filed a claim for payment of benefits pursuant to a credit life insurance policy issued by Defendant in Ohio, submitted proof of the insured’s death, and had the claim denied pursuant to the 3DL Status Action Code.
April 18 Order 24, ECF No. 65. Judge Frost also certified the following class pursuant to Rule 23(b)(2) ("Rule 23(b)(2) Class"):
Judge Frost’s order defined the relevant time period as "the maximum period of time permitted by law; " that period was subsequently amended at the parties’ request to substitute "from August 4, 2006 through the date of class notice" as the relevant time period. See ECF No. 81.
Those persons who currently are insured under credit life insurance policies issued by Defendant in Ohio.
Id. at 30. Because the Rule 23(b)(2) Class only makes sense for those Ohioans who are insured under the same version of the policy that exists in this case, however, the Rule 23(b)(2) Class definition must be amended to include:
Those persons who currently are insured under credit life insurance policies issued by Defendant in Ohio, provided that the policies are the same version as the Policy at issue in this case.
In other words, to the extent Defendant amended the language of its policies at any point after Plaintiff filed her motion for class certification, the class definition must be amended to exclude those policyholders.
Defendant vehemently disagreed with both the March 21 and April 18 Orders. Several months later, Defendant moved to certify to the Ohio Supreme Court the same issues that it had argued in its motion for summary judgment. ECF No. 86. Defendant also moved for reconsideration, arguing that the March 21 Order was manifestly unjust and contrary to law. ECF No. 99.
Shortly thereafter, Defendant filed a second motion for summary judgment on Plaintiff’s bad faith claim. ECF No. 106. This motion offers new arguments and case law suggesting that the Court should grant Defendant summary judgment on the bad faith claim.
Plaintiff opposes Defendant’s second motion for summary judgment on two grounds. First, Plaintiff opposes Defendant’s contention that it had a reasonable basis to deny Plaintiff’s claim. Second, Plaintiff states that its bad faith claim is based on additional theories that Defendant did not address: that Defendant acted in bad faith by unilaterally converting the joint policy to an individual policy and then retroactively issuing a new individual policy to Plaintiff without Plaintiff’s agreement; and that Defendant acted in bad faith by refunding Mr. O’Donnell’s portion of the premium to Wells Fargo rather than to Mr. O’Donnell’s estate.
Plaintiff also argues that Defendant is not entitled to summary judgment on the unjust enrichment claim; however, Defendant does not seek summary judgment on this claim.
Plaintiff then filed her own motion for summary judgment, on behalf of herself and of the certified classes, on each of her claims and on Defendant’s counterclaims. Plaintiff argues that Judge Frost’s March 21 Order decided most— if not all— of the legal issues in this case. Because the factual issues regarding her and the certified class’ eligibility for recovery are undisputed, Plaintiff argues that summary judgment is appropriate.
Defendant opposes Plaintiffs motion. Defendant spends a majority of its seventy-page brief reiterating its already-rejected arguments that § 3911.06 voids the Policy or that Ohio’s common law allows it to rescind the Policy and that Judge Frost’s decision holding otherwise should be ignored.
The parties are advised that any future briefs must comply with the Undersigned’s standing orders, which prohibit briefs exceeding twenty pages without prior leave of court.
On August 21, 2017, the Undersigned denied Defendant’s motion to certify questions to the Ohio Supreme Court and motion for reconsideration. ECF No. 111. The Undersigned confronted and squarely rejected Defendant’s arguments that Judge Frost’s March 21 Order was contrary to law or manifestly unjust. As such, the issues that Defendant attempts to relitigate in the summary judgment briefing regarding the March 21 Order— specifically concerning the applicability of § 3911.06, which both Judge Frost and the Undersigned analyzed in detail— are moot.
The remainder of the motions for summary judgment remain pending. The Court’s analysis of those motions follows.
II. STANDARD OF REVIEW
The parties move for summary judgment pursuant to Federal Rule of Civil Procedure 56, which provides that summary judgment is appropriate "if the movant shows that there is no genuine dispute as to any material fact and the movant is entitled to judgment as a matter of law." Fed.R.Civ.P. 56(a). The Court therefore may grant a motion for summary judgment if the nonmoving party who has the burden of proof at trial fails to make a showing sufficient to establish the existence of an element that is essential to that party’s case. See Muncie Power Prods., Inc. v. United Tech. Auto., Inc., 328 F.3d 870, 873 (6th Cir. 2003) (citing Celotex Corp. v. Catrett, 477 U.S. 317, 322, 106 S.Ct. 2548, 91 L.Ed.2d 265 (1986) ).
In viewing the evidence, the Court must draw all reasonable inferences in favor of the nonmoving party, which must set forth specific facts showing that there is a genuine issue of material fact for trial. Id. (citing Matsushita Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 587, 106 S.Ct. 1348, 89 L.Ed.2d 538 (1986)); Hamad v. Woodcrest Condo. Ass’n, 328 F.3d 224, 234 (6th Cir. 2003). A genuine issue of material fact exists "if the evidence is such that a reasonable jury could return a verdict for the nonmoving party." Muncie, 328 F.3d at 873 (quoting Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 91 L.Ed.2d 202 (1986) ). Consequently, the central issue is "whether the evidence presents a sufficient disagreement to require submission to a jury or whether it is so one-sided that one party must prevail as a matter of law." Hamad, 328 F.3d at 234-35 (quoting Anderson, 477 U.S. at 251-52, 106 S.Ct. 2505).
III. ANALYSIS
A. Plaintiff’s Motion for Partial Summary Judgment
1. Breach of Contract Claim (Count One)
Plaintiff moves for summary judgment on her claim that Defendant breached the Policy by refusing to pay her claim. The Court begins its analysis with the standard tenets of insurance law.
"An insurance policy is a contract whose interpretation is a matter of law." Lager v. Miller-Gonzalez, 120 Ohio St.3d 47, 2008-Ohio-4838, 896 N.E.2d 666, ¶ 15 (quoting Alexander v. Buckeye Pipe Line Co., 53 Ohio St.2d 241, 374 N.E.2d 146, paragraph one of the syllabus (1978) ). The purpose of contract interpretation is to ascertain and effectuate the intent of the parties. Savedoff v. Access Grp., Inc., 524 F.3d 754, 763 (6th Cir. 2008). "The intent of the parties is presumed to reside in the language they chose to use in their agreement." Id. (citing Graham v. Drydock Coal Co., 76 Ohio St.3d 311, 313, 667 N.E.2d 949 (1996) ). "Where the terms in a contract are not ambiguous, courts are constrained to apply the plain language of the contract." Id. (citing City of St. Marys v. Auglaize Cty. Bd. of Commr’s, 115 Ohio St.3d 387, 2007-Ohio-5026, 875 N.E.2d 561, ¶ 18). "A court ‘is not permitted to alter a lawful contract by imputing an intent contrary to that expressed by the parties’ in the terms of their written contract." Id. (quoting Westfield Ins. Co. v. Galatis, 100 Ohio St.3d 216, 2003-Ohio-5849, 797 N.E.2d 1256, ¶ 12).
Special rules apply to the interpretation of insurance contracts. Clear and unambiguous insurance contracts must be interpreted in accordance with the rules stated above--that is, a court must apply the clear and unambiguous terms to the facts without engaging in any construction. Toledo-Lucas Cty. Port Auth. v. Axa Marine & Aviation Ins. (UK), Ltd., 368 F.3d 524, 530 (6th Cir. 2004). When an insurance contract is subject to more than one interpretation, however, a court must "construe the terms strictly against the insurer and in favor of the insured." Id. (quoting King v. Nationwide Ins., Co., 35 Ohio St.3d 208, 519 N.E.2d 1380, 1383 (1988) ). In other words, "any reasonable construction which results in coverage of the insured must be adopted." Howard Indus., Inc. v. Ace Am. Ins. Co., No. 2:13-cv-677, 2014 WL 978445, at *6 (S.D. Ohio Mar. 12, 2014) (quoting Nationwide Mut. Ins. Co. v. Wright, 70 Ohio App.3d 431, 434, 591 N.E.2d 362 (3d Dist. 1990) ).
Here, as stated above, the Policy reflects an agreement that, in exchange for a premium paid by the O’Donnells, Defendant would "pay the amount of insurance then in force after we receive proof of death." Policy 2, ECF No. 37-1. Defendant received proof of death but refused to pay the amount of insurance then in force. Absent a defense relieving Defendant of its obligation under the Policy, therefore, Defendant breached the same.
Defendant argues that Mr. O’Donnell’s signature on the Policy misrepresented his eligibility for coverage and therefore relieved Defendant of its obligation to pay Plaintiffs claim. Defendant argues that Ohio’s common law allowed it to void the Policy after it received proof of Mr. O’Donnell’s death. In the March 21 Order, Judge Frost set forth the common law principles applicable to this dispute:
Courts applying Ohio law to insurance contracts (outside the confines of § 3911.06) must distinguish between representations and warranties. See Ramsey v. Penn Mut. Life Ins. Co., 787 F.3d 813, 821 (6th Cir. 2015) (citing James v. Safeco Ins. Co. of Ill., 195 Ohio App.3d 265, 959 N.E.2d 599 (2011) ); see also Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216, 218-19, 271 N.E.2d 855 (1971). "[A] representation is a statement made prior to the issuance of the policy which tends to cause the insurer to assume the risk." BoggsId., 27 Ohio St.2d at 219 . "A warranty is a statement, description or undertaking by the insured of a material fact either appearing on the face of the policy or in another instrument specifically incorporated in the policy." (citing Harford [Hartford] Protection Ins. Co. v. Harmer (1853), 2 Ohio St. 452). "The insurer’s decision to incorporate the statement in or to omit it from the policy generally controls whether the statement is a warranty or a representation." Id. The distinction between a warranty and a representation in an insurance contract is important: whereas a misstatement of fact in a warranty voids a policy ab initio, a misrepresentation by the insured renders the policy voidable at the insurer’s option. Seeab initio id. at 218-19 . Notably for purposes of this case, if an insurance contract is voidable (as opposed to void ), an insurer cannot void the contract after liability has accrued. See id. ; see also Ramsey, 787 F.3d at 821. As such, the Ohio Supreme Court has held that an insurance policy must clearly and unambiguously state that a misstatement by the insured will render the policy void ab initio in order for the statement to be considered a warranty. Id. The court in Fifth Third Mortg. Co. v. Chicago Title Ins. Co. reiterated this standard. See 758 F.Supp.2d [476, 487-88 (S.D. Ohio 2010) ] (quoting Boggs, 271 N.E.2d at 857). The Fifth Third court explicitly noted that the five-pronged standard it cited (which Defendant cites in support of its position in this case) did not apply because the insurer was attempting to void a policy based on a misrepresentation after it had incurred liability under that policy. See id. In effect, the Fifth Third court acknowledged that a party can rescind a contract based on fraudulent misrepresentations if it can prove the five elements Defendant cites, but only if the rescission occurs before liability accrues under the policy.
March 21 Order 17, ECF No. 64.
Defendant argues that Judge Frost erred in relying on the Sixth Circuit’s statements in Ramsey v. Penn Mutual Life Insurance Co., 787 F.3d 813, 821 (6th Cir. 2015), because Ramsey is factually distinguishable in that it involved a group life insurance policy subject to a pre-issuance investigation. Defendant contrasts a policy subject to a pre-issuance investigation with the credit life insurance policy at issue here, "which issues without an investigation of the applicant’s health." Memo. Opp. 39 n.6, ECF No. 103. This distinction ignores entirely the fact that Ramsey cited the standard from the Ohio Supreme Court case Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216, 218-19, 271 N.E.2d 855 (1971), which involved an automobile insurance policy. The Boggs court made no mention of pre-issuance investigations and made no suggestion that the representation/warranty dichotomy was limited to a certain type of insurance policies. See generally Boggs, 271 N.E.2d 855. To the contrary, the Boggs court suggested that the dichotomy applies broadly "[i]n the law of insurance." Id. at 858.
Defendant next argues that Mr. O’Donnell’s misrepresentation was a warranty under the Boggs test. As stated above, "[a] warranty is a statement, description or undertaking by the insured of a material fact either appearing on the face of the policy or in another instrument specifically incorporated in the policy." Id. The Boggs court expanded on the concept as follows:
[T]he mere fact that a statement of an insured is incorporated in a policy does not necessarily make such statement a warranty. Courts do not favor warranties, or forfeitures from the breach thereof, and a statement as to conditions does not constitute a warranty unless the language of the policy, construed strictly against the insurer, requires such an interpretation. The fundamental principle is that inasmuch as policies of insurance are in the language selected by the insurer they are to be construed strictly against the insurer, and liberally in favor of the insured. Butche v. Ohio Cas. Ins. Co. (1962), 174 Ohio St. 144, 187 N.E.2d 20. See 30 Ohio Jurisprudence 2d 225 and 227, Sections 215 and 216. In other words, an insurer is bound by the provisions which he chooses to incorporate in his policy. If it is his purpose to provide that a misstatement by the insured shall render the policy void ab initio, such facts must appear clearly and unambiguously from the terms of the policy.
Id.
Courts interpret Boggs as setting forth a two-pronged test. See, e.g., Unencumbered Assets, Trust v. Great Am. Ins. Co., 817 F.Supp.2d 1014, 1026 (S.D. Ohio 2011). To prove that an insured’s false statement is a warranty— such that it voids the policy ab initio — the insurer must prove that: (1) the statement either appears "on the face of the policy or in another instrument specifically incorporated into the policy; " and (2) "the terms of the policy must ‘clearly and unambiguously’ provide that a misstatement by the insured shall render the policy void ab initio. " Id. (quoting Boggs, 271 N.E.2d at 858).
Regarding the second prong of this test, the policy must contain a provision "to the effect that any misstatement or misrepresentation made by the insured shall render the policy void." Id. at 1028. Language "cautioning that a misrepresentation will render the policy ‘void,’ or ‘null and void,’ or ‘null and without effect’ " will satisfy this prong. Id. (collecting cases). Importantly for purposes of this case, the policy must unequivocally state that a misrepresentation will void the policy; a clause that gives the insurer discretion to void the policy will not suffice. Compare id. (finding second prong of Boggs test satisfied when a policy stated that, "[i]n the event that any statement or representation in the Application is untrue, this Policy shall be void and of no effect whatsoever"), with James v. Safeco Ins. Co. of Illinois, 195 Ohio App.3d 265, 959 N.E.2d 599, 2011-Ohio-4241, at ¶ 25 (8th Dist.) ("[T]he policy language ‘we may void this policy’ is not a clear warning to the insured that a misstatement shall render the policy void. Rather, it is a general statement reflecting the long-standing point of law that a ‘contract induced by fraud is not void, but is voidable at the election of the one defrauded.’ ") and Am. Family Ins. Co. v. Johnson, No. 93022, 2010 WL 1712240, 2010-Ohio-1855, ¶¶ 16-17 (8th Dist.) (finding that the clause " ‘[w]e may void this policy if the statements you have given us are false and we have relied on them’ ... does not specifically state that a misrepresentation as to prior claims would render the policy void ab initio"). This distinction makes sense in the larger scheme: if an insurer "may" void a policy based on a misrepresentation, then the policy is voidable (as opposed to void ab initio ).
But see Medical Protective Co. v. Fragatos, 190 Ohio App.3d 114, 2010-Ohio-4487, 940 N.E.2d 1011, ¶ 33 (8th Dist.) (finding second prong of Boggs test satisfied when policy stated that "the Company reserves the right to rescind this policy, or any coverage provided herein, for any material misrepresentations made by the Insured"). Ohio’s Eighth District Court of Appeals, which decided Fragatos , James, and Johnson, cited all three cases in a subsequent case and reiterated that, to be treated as a warranty under Boggs, a policy must "plainly warn that a misrepresentation about potential claims renders the policy void ab initio. " Goodman v. Medmarc Ins., 977 N.E.2d 128, 2012-Ohio-4061, at ¶¶ 18-21. The Goodman court summarized the policy in Fragatos as containing a "warning that any material misrepresentation would render the policy ‘null and without effect,’ [which was] equivalent to warning that the policy is void ab initio. " Id. at ¶ 18. As a whole, this body of case law suggests that Fragatos is an outlier that does not alter the Court’s analysis.
Here, Defendant argues that Mr. O’Donnell’s signature misrepresenting his eligibility for coverage is a warranty because the Policy states that an applicant’s statements, "in the absence of fraud, are deemed representations and not warranties." ECF No. 37 at PAGEID #: 340, ¶ 18. Defendant argues that the "in the absence of fraud" qualifier reserves its right to treat fraudulent statements as warranties. Defendant also points to the Policy’s statement that, if "there is any misstatement in this Application or if any information concerning the medical history of any insured person has been omitted, you should advise the Company, otherwise your Certificate may not be a valid contract," Policy 1, ECF No. 37-1, as satisfying the second prong of the Boggs test.
Neither of these provisions is a clear an unequivocal statement that a misrepresentation regarding a claimant’s eligibility will render the policy void. See, e.g., James, 959 N.E.2d at 602. Defendant therefore fails to satisfy the second prong of the Boggs test. The affirmations at issue are representations that, per Boggs, gave Defendant the right to void the Policy at any time before liability accrued. See 271 N.E.2d at 858.
Judge Frost found in the March 21 Order that liability necessarily accrued under the Policy at the time Defendant received proof of Mr. O’Donnell’s death. The Undersigned agrees and, indeed, Defendant offers no argument to the contrary on this point. As such, Defendant’s discovery of Mr. O’Donnell’s misrepresentation after Defendant received proof of Mr. O’Donnell’s death did not relieve Defendant of its obligation to pay Plaintiffs claim.
Defendant next defense to liability is that the Policy is void ab initio because there was no meeting of the minds due to Mr. O’Donnell’s misrepresentation. This argument fails. Mutuality is an objective concept requiring "that the terms of the agreement establish an objective meeting of the minds, which is to say that the contract was clear and unambiguous." 216 Jamaica Ave., LLC v. S & R Playhouse Realty Co., 540 F.3d 433, 440 (6th Cir. 2008) (citing Nilavar v. Osborn, 127 Ohio App.3d 1, 711 N.E.2d 726, 733 (1998) ). Fraud only becomes relevant to a mutuality defense if the party seeking relief from its contractual obligations argues fraud in the factum— i.e., that it believed the nature of the instrument to be "something entirely different than it turned out to be," such as a party who signs "a brokerage agreement under the impression that it is an insurance form." Krist v. Curtis, 8th Dist. No. 76074, 2000 WL 640616, at *5 (Ohio Ct.App. May 18, 2000) (Kilbane, J., dissenting) (explaining the difference between fraud in the factum and fraud in the inducement as applied to a mutuality defense). When a party argues fraud in the inducement— i.e., "there has been ... a meeting of the minds and the defrauded party has made an agreement although it is based upon a misrepresentation"— the contract is not void ab initio but is instead voidable at the defrauded party’s option. Id. Such is the case here and, because an insurer loses the option to void a policy once liability accrues, see Boggs, 271 N.E.2d at 858, fraud in the inducement does not apply in this case.
Having rejected each of Defendant’s proffered defenses to liability, the Court agrees with Plaintiff that Defendant breached the Policy by failing to pay Plaintiffs claim after she submitted proof of death. The Court accordingly GRANTS Plaintiff’s motion for summary judgment on her breach of contract claim as to liability. The Court likewise GRANTS Plaintiff’s motion for summary judgment on Defendant’s counterclaims.
It is undisputed that each member of the certified Rule 23(b)(3) Class submitted proof of death to Defendant under his or her policy, the terms of which are identical to Plaintiff’s Policy, and that Defendant refused to pay each class member’s claim because of a misrepresentation discovered after the class member submitted proof of death. Because each class member’s policy is identical to Plaintiff’s, the misrepresentations discovered necessarily were representations (not warranties), and liability accrued under each class member’s policy at the time he or she submitted proof of death. Defendant therefore breached each class member’s policy by failing to pay his or her claim. The Court GRANTS the motion for summary judgment on the breach of contract claim as to liability filed by the certified Rule 23(b)(3) Class.
Although the parties discuss two breach of contract claims— one for Defendant’s failure to pay each claim, and one for requesting medical records after Plaintiff and each class member submitted proof of death— the former claim subsumes the latter. Plaintiff has not identified any injury incurred from Defendant’s medical records request independent of the injury incurred by Defendant’s refusal to pay each claim. The Court therefore need not consider this alternative theory of relief as a separate claim.
2. Declaratory Judgment Claim
Plaintiff moves for summary judgment on her claim for a declaratory judgment pursuant to 28 U.S.C. § 2201. Plaintiff seeks a declaration "that Defendant may not demand that a claimant provide it with a medical records release authorization as a condition of having a claim for life insurance death benefits evaluated." Mot. Summ. J. 20, ECF No. 106-1.
Regarding § 2201’s statutory prerequisites, Judge Frost found in the March 21 Order that this case satisfies the same. See March 21 Order 10-11, ECF No. 64. The Undersigned agrees and, for the same reasons as those set forth in the March 21 Order, finds this case suitable for a declaratory judgment.
The Court’s analysis of the declaratory judgment claim begins and ends with the Policy’s plain language. As stated above, the Policy obligates Defendant to pay a claimant the amount of insurance then in force "after [Defendant] receive[s] proof of death." Policy 2, ECF No. 37-1. The Policy contains no caveat that Defendant can unilaterally decide to require certain claimants to produce medical records after submitting proof of death before Defendant will evaluate their claim.
Plaintiff cites Ohio Revised Code § 3917.06(D) as additional relevant authority. Section 3917.06(D) states that no group life insurance policy may issue unless it contains "[a] provision setting forth the conditions, if any, under which the insurer reserves the right to require an individual eligible for insurance to furnish evidence of individual insurability satisfactory to the insurer as a condition to part or all of the individual’s coverage." Because the Policy does not contain a medical records release, Plaintiff argues, Defendant cannot require claimants to submit such records as a condition to having their claims evaluated.
Defendant argues that it is entitled to conduct post-death investigations of the policies at issue. Defendant concedes that the Policy does not contain an express right to request and evaluate medical records after an insured submits proof of death, but argues that it had certain defenses to coverage that implicitly authorized a post-death investigation. Defendant suggests that its only option outside of an investigation was to deny Plaintiff’s claim based on Mr. O’Donnell’s death certificate alone— and, compared to that option, Defendant was "obligated to investigate [Plaintiff’s] claim" to avoid breaching the duty of good faith. Memo. Opp. 49-50, ECF No. 103.
Obviously, Defendant had a third option it ignores: to pay Plaintiff’s claim after receiving proof of death. The suggestion that Defendant was "obligated" to investigate Plaintiff’s claim is a nonstarter. The question is whether the defenses to coverage Defendant advances gave it an implicit right to request and evaluate a deceased’s medical records after receiving proof of death but prior to evaluating a claim. Defendant offers three arguments in this regard. First, Defendant points to the Policy’s incontestability clause, which states:
INCONTESTABILITY: We will not contest this insurance: (a) except for non-payment of a premium, after it has been in force two (2) years during the Insured Borrower’s lifetime ... or (b) during the first two (2) years it is in force unless the contest is based on a written statement signed by the Insured Borrower and furnished to the Insured Borrower or the beneficiary. All statements made by you and your insured Co-Borrower, in the absence of fraud, are deemed representations and not warranties.
Policy 3, ECF No. 37-1. Defendant argues that this clause gives it the affirmative right to contest a claimant’s eligibility for coverage at any time during the first two years the policy is in effect, regardless of whether a claimant has submitted proof of death. Defendant concludes that the right to contest eligibility includes the right to require the insured to furnish proof of eligibility.
Applying the rules of contract interpretation set forth above, however, the plain language of this provision sets forth the circumstances under which Defendant "will not contest this insurance." Id. It does not grant Defendant an affirmative right to contest coverage. And even if it did, to the extent an insured died within two years of the policy being issued, the affirmative right to contest coverage would conflict with the Policy’s statement that Defendant will pay the amount of insurance then in force after receiving proof of death. Ohio law dictates that the Court construe the terms of an insurance policy "strictly against the insurer and in favor of the insured." Toledo-Lucas Cty. Port Auth., 368 F.3d at 530. It is reasonable to construe the two provisions as setting forth a right to contest coverage within the first two years unless Defendant receives proof of death within that period, at which time Defendant assumes the obligation to pay the amount of insurance then in force. The Court must adopt "any reasonable construction [that] results in coverage of the insured." Howard Indus., Inc., 2014 WL 978445, at *6.
Defendant next argues that the Policy includes an autopsy provision that includes the lesser right to receive medical records. The autopsy provision is in the "General Provisions" section of the Policy and "relate[s] to both Life Insurance Benefits and Total Disability Benefits." The provision states:
PHYSICAL EXAM AND AUTOPSY: We, at our own expense, have the right, and you must allow us the opportunity, to examine your person as often as it is reasonably required while a total disability claim is pending and to make an autopsy in the case of your death, if it is not forbidden by law.
Policy 3, ECF No. 37-1. Defendant argues that the autopsy provision gives Defendant the right to investigate a claim after receiving proof of death, which creates a "gap in a contract that is silent on [the] particular point" of whether Defendant can request and evaluate a decedent’s medical records before paying a claim. Memo. Opp. 54, ECF No. 103. Defendant concludes that the Court must fill that gap with the "good faith" conclusion that Defendant must be entitled to request and investigate medical records before processing a claim.
This argument is not well taken. Defendant argues, in essence, that its proposed construction (which would infer the right to request and evaluate medical records) is reasonable such that the Court should adopt it. But contrary to Defendant’s proposal, the Court must construe the Policy strictly against Defendant and adopt any reasonable construction that results in coverage of the insured. Howard Indus., Inc., 2014 WL 978445, at *6. There simply is nothing about the autopsy provision that grants Defendant the right to request and review medical records. And even if there was, given that the autopsy provision grants Defendant the right to perform an autopsy but does not expressly reserve the right to delay payment on a claim while Defendant does so, it is far from clear that such a provision could be invoked in the manner Defendant attempts.
Defendant’s final argument on this issue is that § 3917.06 does not apply because it applies only to "eligible" claimants. Because the Court’s analysis begins and ends with the four corners of the Policy, however, it need not address this argument.
In short, the Court agrees with Plaintiff that she— an insured policyholder— and the Rule 23(b)(2) Class members— all of whom are insured under the same version of the credit life insurance policy at issue in this case— are entitled to a declaration articulating their rights under their policies with respect to medical releases. The Court GRANTS Plaintiff’s motion for summary judgment filed on behalf of herself and the certified Rule 23(b)(2) Class. The Court DECLARES that, under the policy, Defendant may not demand that a claimant provide it (Defendant) with a medical records release authorization as a condition of having a claim for life insurance death benefits evaluated.
B. The Parties’ Cross Motions for Summary Judgment: Bad Faith Claim
The parties cross-move for summary judgment on the bad faith claim. When confronted with cross motions for summary judgment, the Court must evaluate each motion on its own merits and view all facts and inferences in the light most favorable to the non-moving party. Spectrum Health Continuing Care Grp. v. Anna Marie Bowling Irrevocable Trust, 410 F.3d 304, 309 (6th Cir. 2005). The filing of cross-motions for summary judgment does not necessarily mean that an award of summary judgment is appropriate. Id.
The Court notes that Plaintiff had the benefit of filing her motion for summary judgment after the Court adjudicated Defendant’s motion. As such, and although Defendant already moved for summary judgment, the Court will consider Defendant’s second motion for summary judgment on the bad faith claim.
The crux of Defendant’s arguments on this claim is that Plaintiff cannot meet the heightened showing required to obtain punitive damages. See, e.g., Motorists Mut. Ins. Co. v. Said, 63 Ohio St.3d 690, 696, 590 N.E.2d 1228, 1992-Ohio-94 ("The requisite conduct necessary to support an award of punitive damages is separate and distinct from that sufficient to establish bad faith on the part of the insurer for wrongfully refusing to pay a claim.... [For a court to assess punitive damages,] the insured is required to plead and prove by a preponderance of the evidence actual malice, fraud, or insult on the part of the insurer.") (quoting Staff Builders, Inc. v. Armstrong, 37 Ohio St.3d 298, 525 N.E.2d 783, 789 (1988) ), overruled on other grounds, Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552, 554, 1994-Ohio-461, 644 N.E.2d 397. In response to Defendant’s motion, Plaintiff withdrew her request for punitive damages.
Given that Plaintiff withdrew her request for punitive damages and that she does not identify any damages for Defendant’s alleged bad faith that are independent from her damages for the breach of contract, it is unclear whether the bad faith claim is duplicative of the breach of contract claim. If so, because the Court granted summary judgment on Plaintiffs breach of contract claim, it is unclear whether Plaintiff can also pursue the bad faith claim. The Court accordingly DENIES WITHOUT PREJUDICE both motions for summary judgment on the bad faith claim. Plaintiff SHALL FILE a notice within fourteen days of this Opinion and Order setting forth her intent with respect to this claim. Should Plaintiff intend to pursue this claim, she shall set forth in detail the grounds for recovery on this claim given the Court’s finding with respect to the breach of contract claim. In that instance, and within thirty days of the date on which Plaintiff files her notice, the parties may file new motions for summary judgment with respect to the bad faith claim.
As stated above, any such motion must comply with the Undersigned’s standing orders.
C. Damages
The final issue for the Court is damages. Plaintiff requests in her motion a damages award of $1,821,423.70 (plus interest). The basis for this award is a spreadsheet that Plaintiffs counsel affirms "is a true and accurate copy of FAMLI0001191-92." Naylor Decl. ¶ 5, ECF No. 106-2. Plaintiff presents no evidence regarding the meaning of "FAMLI0001191-92." The spreadsheet includes a column entitled "Claim No.," presumably representing each of the Rule 23(b)(3) class members, and another column entitled "Claim Amount," presumably representing the amounts owed under the loan at the time each class member submitted proof of death to Defendant. See id.
Defendant responds to this evidence as follows:
[i]n the context of credit life insurance, the beneficiary is the lender or creditor for the loan.... Although Plaintiff seeks an award of damages in the amount of the unpaid loan balance for herself and each of the class members, Plaintiff has failed to demonstrate that she or the class members are the policy beneficiaries or otherwise entitled to payment of the policy benefits.
Memo. Opp. 46, ECF No. 103.
Plaintiff replies by arguing— without evidence— that the class members have been forced to continue making payments to their lenders after having their claims denied and that, "once judgment is entered and the checks are ready to be issued, determining the ever-declining portion of the $1,821,423.70 (plus interest) that should be paid to the lenders will be a relatively simple calculation." Reply 45, ECF No. 107.
Ultimately, the Court finds that a damages award is premature given that adjudication of the bad faith claim remains outstanding. Once that claim is resolved, the Court will schedule an evidentiary hearing regarding Plaintiff’s and the Rule 23(b)(3) Class members’ damages for Defendant’s breaches of contract. Defendant shall present any arguments about Plaintiff’s and the class members’ entitlement to those damages at the evidentiary hearing. The parties are encouraged to pursue settlement and to advise the Court as to the status of any such negotiations.
IV. CONCLUSION
For the foregoing reasons, the Court GRANTS Plaintiff’s motion for summary judgment on Count One (on behalf of the certified Rule 23(b)(2) Class) and Count Three as to liability (on behalf of the certified Rule 23(b)(3) Class) and on Defendant’s counterclaims. Regarding the Rule 23(b)(2) Class, the Court DECLARES that, under the policy, Defendant may not demand that a claimant provide it (Defendant) with a medical records release authorization as a condition of having a claim for life insurance death benefits evaluated.
The parties’ motions with respect to Count Four are DENIED WITHOUT PREJUDICE TO RENEWAL. The Clerk shall terminate ECF Nos. 96, 100, and 106 from the Court’s pending motions list.
IT IS SO ORDERED.