Katz v. Ohio Insurance Guaranty Ass'n

Moyer, C.J. ¶ 1 Dr. Gordon Katz, appellee, is a licensed doctor of osteopathy. He was insured under medical professional liability policies issued by P.I.E. Mutual Insurance Company (“P.I.E.”) for the period July 1, 1993, through July 1, 1995. The primary policy provided liability coverage of up to $200,000 per claim with a $600,000 aggregate limit. P.I.E. had also issued an excess insurance policy to Katz that provided an additional $1 million per claim with an aggregate limit for all claims of $1 million. ¶ 2 In 1995, Katz notified P.I.E. that claims arising out of the treatment of Teri Sue Robinson had been made against him. In 1996, Susan Robinson (“Robinson”), appellee, filed an action in her capacity as administrator of Teri’s estate, alleging that Katz negligently rendered medical care to Teri. Robinson included a survival claim to recover for Teri’s medical expenses and pain and suffering. Robinson also asserted a wrongful death claim on behalf of three individuals: Teri’s mother, father, and brother. ¶ 3 P.I.E. thereafter became insolvent. The parties agree that P.I.E.’s obligations to Katz in regard to Robinson’s claims are subject to the Ohio Insurance Guaranty Association Act, R.C. Chapter 3955 (“the Act”). ¶ 4 The Act created the Ohio Insurance Guaranty Association (“OIGA”), appellant herein, a nonprofit, unincorporated association. R.C. 3955.06(A). OIGA collects funds from member insurers and administers those funds to protect insureds and third-party claimants from certain losses resulting from the insolvency of its members. R.C. 3955.08(A)(3). Pursuant to R.C. 3955.01(D)(2)(b) and 3955.08(A)(1), OIGA is responsible for paying “covered claims” up to a statutory limit of $300,000. 6 ¶ 5 The cause before us is a declaratory judgment action filed by Katz pursuant to R.C. Chapter 2721. Katz named OIGA and sought a declaration of OIGA’s limits of responsibility under the Act. Katz alleged that a real and actual controversy exists as to how many covered claims have been in fact asserted against Katz: one survival claim and additionally one claim for each of Teri’s relatives entitled to recover under the wrongful-death statute, per policy, or only one combined claim statutorily capped at $300,000. ¶ 6 Robinson intervened as a party plaintiff in the action. Each of the parties filed a motion for summary judgment. Katz and Robinson contended that there are at least four separate claims covered under each of the P.I.E. policies: the survival claim and claims on behalf of the decedent’s relatives, including her mother, father, and brother. OIGA asserted that its exposure was limited to one payment of $300,000. ¶ 7 The primary policy included the following provision: ¶ 8 “V — LIMITS OF LIABILITY ¶ 9 “The Limits of Liability of The Company are as follows: ¶ 10 “a. as to each claim ¶ 11 “The Limit of Liability stated in the General Declarations, as applicable to ‘each claim,’ is the limit of The Company’s liability for all damages because of any one claim or suit or all claims or suits first made during the policy period because of injury to or death of any one person * * *.” (Boldface sic.) ¶ 12 Katz conceded that this provision “might arguably limit coverage to a single limit for all claims arising out of one occurrence” (emphasis added) but contended that the provision was nevertheless unenforceable pursuant to Savoie v. Grange Mut. Ins. Co. (1993), 67 Ohio St.3d 500, 620 N.E.2d 809. Similarly, in support of her motion for summary judgment, appellee Robinson asserted that Savoie controls to invalidate this provision. ¶ 13 The trial court entered summary judgment, recognizing four separate claims against the primary policy. It found that the primary policy provided coverage of up to $200,000 for each of those claims, with a total aggregate limit of $600,000. It declared OIGA liable to the same extent. The trial court grounded its decision in Savoie, which held, “Liability policy provisions which purport to consolidate wrongful death damages suffered by individuals into one ‘each person’ policy limit are unenforceable.” Id., paragraph one of the syllabus. ¶ 14 In regard to the excess policy, the trial court held, “[I]f any ‘covered’ claim under the primary policy exceeds $200,000, that claimant is entitled to an additional ‘covered’ claim under the excess policy up to $300,000 with a total aggregate amount of coverage available to plaintiffs under the excess policy of $1,000,000.00.” In so holding, the court rejected OIGA’s argument that it was 7 liable to pay only a single statutory maximum of $300,000, notwithstanding the existence of both a primary policy and an excess policy. ¶ 15 The court of appeals affirmed the judgment of the trial court. ¶ 16 We reverse the judgment of the court of appeals in part. We today limit the holding of the first paragraph of the syllabus of Savoie to cases presenting similar facts, i.e., cases involving claims against automobile insurance policies that contain “each person” limits. Accordingly, a medical doctor and a professional liability insurer may agree that the insurer’s liability for all damages sustained from the death of one person is subject to the monetary limit declared for “each claim,” irrespective of the number of wrongful-death claimants. Paragraph one of the Savoie syllabus does not apply to claims made against professional-liability insurance policies, whether those claims arose before or after October 20,1994, the effective date of Am.Sub.S.B. No. 20.1 I OIGA Coverage Limits Under the P.I.E. Primary Policy ¶ 17 R.C. Chapter 3955 exists, in part, “to provide a mechanism for the payment of covered claims under certain insurance policies [and to] avoid excessive delay in payment and reduce financial loss to claimants or policyholders because of the insolvency of an insurer.” R.C. 3955.03. ¶ 18 R.C. 3955.08(A)(1) provides that OIGA shall be obligated to the extent of “covered claims” existing within certain time limits relative to a determination that an insurer has become insolvent. However, “[i]n no event shall the association be obligated to a policyholder or claimant in an amount in excess of the face amount of the policy from which the claim arises.” Id. Moreover, OIGA is statutorily “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.” R.C. 3955.08(A)(2). Accordingly, under no circumstances is OIGA liable in an amount exceeding the amount for which P.I.E. itself would have been contractually liable. We are thus 8 required to interpret the PJ.E. policy to determine the application of its limits of liability to the case at bar. ¶ 19 OIGA argues that Section V(A) of the primary policy is a valid and enforceable contractual provision agreed to by both P.I.E. as insurer and Katz as insured. Katz and Robinson argue that Savoie applies to invalidate this provision. ¶ 20 The first paragraph of the syllabus in Savoie states: “Each person who is presumed to have been damaged as a result of a wrongful death claim may, to the extent of his or her damages, collect from the tortfeasor’s liability policy up to its per person limits subject to any per accident limit. Liability policy provisions which purport to consolidate wrongful death damages suffered by individuals into one ‘each person’ policy limit are unenforceable.” Savoie, 67 Ohio St.3d 500, 620 N.E.2d 809, paragraph one of the syllabus. OIGA argues that this proposition of law does not apply to medical-malpractice liability policies. We agree. ¶ 21 The facts of Savoie involved claims made pursuant to automobile liability policies. The first sentence of the majority opinion specifies that the case “raise[d] three questions of automobile insurance law.” (Emphasis added.) Id. at 503, 620 N.E.2d 809. Each of the three remaining syllabus paragraphs of the Savoie decision specifically refers to uninsured/underinsured insurance, which exists exclusively in automobile liability policies. Every case cited in the syllabus of Savoie as being overruled, applied, followed, or limited2 involved interpretation of an automobile insurance policy. ¶ 22 Moreover, the first paragraph of the Savoie syllabus, upon which the appellees rely in contending that the consolidation clause in the P.I.E. policy is unenforceable, overrules State Farm Auto. Ins. Co. v. Rose (1991), 61 Ohio St.3d 528, 575 N.E.2d 459, and paragraphs one and two of the syllabus of Burris v. Grange Mut. Cos. (1989), 46 Ohio St.3d 84, 545 N.E.2d 83. Both Rose and the identified paragraphs in Burris establish law relative to automobile liability insurance provisions. ¶ 23 We acknowledge that a surviving spouse, the children, and the parents of a decedent are “rebuttably presumed to have suffered damages” resulting from wrongful death. R.C. 2125.02(A)(1). However, it does not follow that a claim for damages, even though legally viable, is necessarily within the coverage of a liability policy procured by a tortfeasor. See Savoie, 67 Ohio St.3d at 516, 620 9 N.E.2d 809 (Moyer, C.J., dissenting) (Section 19a, Article I of the Ohio Constitution, providing that wrongful-death damages shall not be limited by law, does not mean that an insurer and an insured may not contract for limited levels of coverage). Even in the context of automobile insurance law, Savoie was an aberration in terms of construing provisions in liability policies, as opposed to uninsured and underinsured insurance provisions. Id. ¶ 24 In short, we refuse to extend the rationale of the first paragraph of Savoie beyond the context of automobile insurance cases. ¶ 25 In the case at bar, Katz purchased a primary policy with a limit of “$200,000 each claim” from P.I.E. OIGA contends that Section V(A) of that policy was clearly included to cover circumstances in which one act of malpractice may result in multiple damage claims, such as may occur in a wrongful-death action. Both Katz and Robinson have consistently argued that issues of interpretation of Section V(A) are irrelevant, in that the provision is nevertheless moot pursuant to Savoie. Our decision today that Savoie does not invalidate Section V(A) revives the relevance of the issue in view of our established precedent that ambiguous insurance provisions are construed in favor of the insured. ¶ 26 In the case at bar, the Sixth District Court of Appeals determined that Section V(A) was a limits-of-liability provision. We agree insofar as the clause provides a monetary limit on P.I.E.’s obligation under the policy. We do not, however, believe that Section V(A) is a consolidation clause for purposes of counting how many “claims” exist under the policy. There simply is no language in the clause indicating that all claims recognized as lawful under the wrongful-death statute are consolidated into “one claim” under the policy. Section V(A) instead imposes a valid and enforceable $200,000 limit of liability on all claims resulting from the death of a single person, irrespective of the number of people recognized under law as having a wrongful-death claim. It provides that the $200,000 limit applicable to “each claim,” as set forth in the declarations, caps P.I.E.’s exposure “for all damages because of * * * all claims * * * because of * * * death of any one person.” (Emphasis added.) In short, there remain at least four claims under the P.I.E. policy. Each of those claims is a “covered claim” as defined in R.C. 3955.01(D)(1). But had P.I.E. remained solvent, it would have been liable up to only a total maximum of $200,000 for all of those claims pursuant to Section V(A). OIGA, per statute, is not obligated to pay more than that maximum. II OIGA Coverage Limits Under the P.I.E. Excess Policy ¶ 27 R.C. 3955.01 defines “covered claim” as follows: 10 ¶ 28 “(D)(1) ‘Covered claim’ means an unpaid claim * * * which arises out of and is within the coverage of an insurance policy to which sections 3955.01 to 3955.19 of the Revised Code apply * * *. ¶ 29 “(2) ‘Covered claim’ does not include any amount: ¶ 30 “* * * ¶ 31 “(b) In excess of three hundred thousand dollars on any claim.” ¶ 32 OIGA argues that it is irrelevant that Katz had procured two separate policies — one primary and one excess — in determining the statutory maximum of its indemnification liability. It argues that Katz “purchased medical malpractice liability insurance coverage that had been divided by the carrier between a primary insurance policy and an excess insurance policy.” It further argues that the “fact that the insurance coverage is provided through two integrated policies, rather than through a single policy, was of absolutely no significance” and that it is liable up to only one $300,000 statutory limit. ¶ 33 OIGA correctly asserts that the fact that there are two separate policies here does not affect the number of claims. It does, however, affect the amount of P.I.E.’s exposure under the two policies and thus also the extent to which OIGA’s statutory maximum liability will be invoked. Contrary to OIGA’s contention, however, the two policies cover not one claim, but four claims, as set forth in Section I of this opinion. Hence OIGA’s maximum statutory exposure is $1.2 million, i.e., the statutory maximum of $300,000 per covered claim multiplied by four claimants. ¶ 34 Robinson presented four covered claims in her action against Katz: three wrongful-death claims and a survival claim. As discussed previously, Section V(A) of the P.I.E. primary policy limits maximum recovery for all claims to $200,000 under that policy; contrary to OIGA’s contentions, the policy did not consolidate the claims to one claim. Because OIGA steps into P.I.E.’s shoes, it, too, has a $200,000 exposure under the primary policy. ¶ 35 Katz purchased an excess policy with a $1 million limit of liability per claim in addition to his primary policy. Had P.I.E. remained solvent, it would have been liable for excess coverage up to a limit of $1 million under the excess policy. We have recognized that OIGA “steps into the shoes of that insurer” when an insurer becomes insolvent, and it assumes all of the carrier’s obligations except as otherwise provided in the Act. Lake Hosp. Sys., Inc. v. Ohio Ins. Guar. Assn. (1994), 69 Ohio St.3d 521, 523, 634 N.E.2d 611. The four claims Robinson made against Katz are subject not only to the coverage provided under the primary policy, but also to the additional coverage provided under the excess policy. To the extent that the claims arising from Katz’s alleged malpractice exhaust the $200,000 coverage under the P.I.E. primary policy, those claims are 11 afforded additional coverage of up to $1 million under the excess policy. Because OIGA steps into the shoes of P.I.E., its exposure under the P.I.E. excess policy is $1 million. OIGA’s maximum exposure under the two policies is thus $1.2 million. ¶ 36 Pursuant to R.C. 3955.01(D)(2)(b), however, OIGA’s exposure is limited to $300,000 per covered claim. Because four covered claims are presented in this action, OIGA’s statutory exposure is $1.2 million. That this exposure is coextensive with P.I.E.’s exposure, had P.I.E. remained solvent, under the primary and excess policies combined is a mathematical coincidence. Ill Conclusion ¶ 37 Section V(A) of the P.I.E. policy is not a consolidation clause, as it does not purport to consolidate all wrongful-death claims arising from the death of a single person — here, Teri Sue Robinson — into one claim for purposes of applying the policy limits. It does, however, provide a limitation of P.I.E.’s total exposure for all claims under the primary policy. Accordingly, pursuant to R.C. 3955.08(A)(1), OIGA’s maximum exposure under the primary policy as to claims made in connection with the death of Teri Sue Robinson is $200,000. ¶ 38 The P.I.E. excess policy provided coverage with a $1 million per claim limit, with an aggregate limit for all claims of $1 million. When the $200,000 available under the primary policy is combined with the $1,000,000 maximum exposure under the excess policy, the total liability under both P.I.E. policies is $1,200,000. Pursuant to R.C. 3955.01(2)(b), however, OIGA is not liable to pay any individual claimant an amount in excess of $300,000. Judgment affirmed in part and reversed in part. Bryant, F.E. Sweeney and Farmer, JJ., concur. Pfeifer, J., concurs in part and dissents in part. Lundberg Stratton, J., concurs in part and dissents in part. O’Connor, J., concurs in part and dissents in part. Peggy Bryant, J., of the Tenth Appellate District, sitting for Resnick, J. Sheila G. Farmer, J., of the Fifth Appellate District, sitting for O’Donnell, J. Footnotes [1] {¶ a} Am.Sub.S.B. No. 20 added R.C. 3937.44, which provides: {¶ b} “Any liability policy of insurance including, but not limited to, automobile liability or motor vehicle liability insurance that provides a limit of coverage for payment for damages for bodily injury, including death, sustained by any one person in any one accident, may, notwithstanding Chapter 2125. of the Revised Code, include terms and conditions to the effect that all claims resulting from or arising out of any one person’s bodily injury, including death, shall collectively be subject to the limit of the policy applicable to bodily injury, including death, sustained by one person, and, for the purpose of such policy limit shall constitute a single claim. Any such policy limit shall be enforceable regardless of the number of insureds, claims made, vehicles or premiums 8 shown in the declarations or policy, or vehicles involved in the accident.” 145 Ohio Laws, Part I, 204, 210. [2] State Farm Auto. Ins. Co. v. Rose (1991), 61 Ohio St.3d 528, 575 N.E.2d 459; Burris v. Grange Mut. Cos. (1989), 46 Ohio St.3d 84, 545 N.E.2d 83; Wood v. Shepard (1988), 38 Ohio St.3d 86, 526 N.E.2d 1089; Hower v. Motorists Mut. Ins. Co. (1992), 65 Ohio St.3d 442, 605 N.E.2d 15; Karabin v. State Auto. Mut. Ins. Co. (1984), 10 Ohio St.3d 163, 10 OBR 497, 462 N.E.2d 403; Dues v. Hodge (1988), 36 Ohio St.3d 46, 521 N.E.2d 789; Hill v. Allstate Ins. Co. (1990), 50 Ohio St.3d 243, 553 N.E.2d 658.