[Cite as Davala v. Ferraro, 2012-Ohio-446.]
COURT OF APPEALS
STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
JOHN AND MARY DAVALA
Plaintiffs-Appellees
and
STARK COUNTY SCHOOLS COUNCIL OF GOVERNMENTS
Intervening Plaintiff-Appellant
-vs-
KAREN FERRARO
Defendant
JUDGES:
Hon. William B. Hoffman, P.J.
Hon. Sheila G. Farmer, J.
Hon. Julie A. Edwards, J.
Case No. 2011CA00135
OPINION
CHARACTER OF PROCEEDING: Appeal from the Court of Common Pleas,
Case No. 2010CV03491
JUDGMENT: Reversed and Remanded
DATE OF JUDGMENT ENTRY: February 6, 2012
APPEARANCES:
For Plaintiffs-Appellees For Intervening Plaintiff-Appellant
DAVID E. BUTZ JOHN B. WIRTZ
JOHN A. BURNWORTH 220 Market Avenue, South
4775 Munson Street, NW Canton, OH 44802
P.O. Box 36963
Canton, OH 44735-6963 For Defendant Karen Ferraro
JUDE STREB
Millennium Centre, Suite 300
200 Market Avenue North
P.O. Box 24213
Canton, OH 44701-4213
Farmer, J.
{¶1} On July 17, 2010, appellee, John Davala, suffered serious injuries as a
result of a motor vehicle accident caused by defendant, Karen Ferraro. On September
22, 2010, appellee, together with his wife, Mary Davala, filed a complaint against Ms.
Ferraro claiming negligence and loss of consortium.
{¶2} Mary Davala is employed by Clarendon Elementary and is covered under
a Health Benefits Plan provided by appellant, Stark County Schools Counsel of
Government, a self-funded insurer. As Mary's husband, appellee is covered under the
plan as well.
{¶3} On December 14, 2010, appellant intervened in the case and sought
subrogation/reimbursement from appellees for medical benefits paid in the amount of
$83,117.93.
{¶4} Following mediation between appellees and Ms. Ferraro, Ms. Ferraro's
insurance company tendered its policy limit of $100,000.00. See, Report of Mediation
filed February 8, 2011.
{¶5} On March 28, 2011, appellees filed a brief in support of the make-whole
doctrine and allocation of settlement proceeds. Appellant filed a response on April 11,
2011. By judgment entry filed May 17, 2011, the trial court found in favor of appellees,
finding the language in the plan was ambiguous and therefore the make-whole doctrine
applied, precluding appellant's right to reimbursement.
{¶6} Appellant filed an appeal and this matter is now before this court for
consideration. Assignment of error is as follows:
I
{¶7} "THE TRIAL COURT ERRED WHEN IT FOUND THAT THE 'MAKE-
WHOLE DOCTRINE' PRECLUDED THE APPELLANT FROM REIMBURSEMENT FOR
THE AMOUNTS IT PAID ON APPELLEES' BEHALF FOR APPELLEE JOHN
DAVALA'S MEDICAL EXPENSES."
I
{¶8} Appellant claims the trial court erred in finding the make-whole doctrine
precluded it from reimbursement for medical expenses paid on behalf of appellee John
Davala. Appellant claims the language of the Health Benefits Plan specifically avoids
the application of the make-whole doctrine. We agree.
{¶9} In Northern Buckeye Education Council Group Health Benefits Plan v.
Lawson, 103 Ohio St.3d 188, 2004-Ohio-4886, the Supreme Court held the following at
syllabus:
{¶10} "A provider of health-insurance benefits and an insured who has been
injured by an act of a third party may agree prior to payment of medical benefits that the
insured will reimburse the insurer for any amounts later recovered from that third party,
third party's insurer, or any other person through settlement or satisfaction of judgment
upon any claims arising from the third party's act. A clear and unambiguous agreement
so providing is not unenforceable as against public policy, irrespective of whether the
settlement or judgment provides full compensation for the insured's total damages.
{¶11} "A reimbursement agreement between an insured and a health-benefits
provider clearly and unambiguously avoids the make-whole doctrine if the agreement
establishes both (1) that the insurer has a right to a full or partial recovery of amounts
paid by it on the insured's behalf and (2) that the insurer will be accorded priority over
the insured as to any funds recovered."
{¶12} It is appellees' position that because "Plan Member" is not defined in the
contract, the contract is ambiguous and therefore the right to
reimbursement/subrogation is negated by the make-whole doctrine. The plan provides
the following in pertinent part:
{¶13} "Right of Subrogation
{¶14} "***Accepting benefits under this Plan for those incurred medical or dental
expenses automatically assigns to the Plan any rights the Covered Person may have to
recover payments from any third party or insurer. As a condition to the Plan making
payments for any medical or dental charges, the Plan Member must assign to the Plan
his or her rights to any recovery arising out of or related to any act or omission that
caused or contributed to the Injury or Sickness for which such benefits are to be paid.
Any amounts so recovered, however designated, shall be apportioned as follows: this
Plan shall be fully reimbursed to the extent of its payments under this plan of health
coverage. This Plan shall have priority over the Plan Member to the funds recovered
and this Plan shall have priority over the Plan Member to any full or partial recovery. If
any balance then remains from such recovery, it shall be applied to reimburse the Plan
Member and any other policy providing benefits to the Plan Member as their interest
may appear.
{¶15} "Reimbursement
{¶16} "If the Plan Member recovers damages from any party or through any
coverage named above, he must hold in trust for the Plan the proceeds of the recovery,
and must reimburse the Plan to the extent of payment made. The Plan is entitled to be
completely compensated for any and all funds expended as a result of the Plan
Member’s sickness or injury regardless if the Plan Member is fully or only partially
compensated. The Plan takes priority over the Plan Member of both full and partial
recovery.
{¶17} "The Plan maintains both a contractual right of reimbursement and a
separate right of subrogation to any funds recovered by you. You acknowledge that the
Plan's subrogation and reimbursement rights shall be considered the first priority claim
against any third party or your own automobile or liability carrier, to be paid before any
other claims which may exist are paid, including claims by you for general damages or
attorney fees or other costs." See, Health Benefits Plan, attached to Plaintiffs' March
28, 2011 Brief in Support of the Application of the Make-Whole Doctrine as Exhibit C.
(¶1) The contract does not define "Plan" or "Plan Member." A "Covered
Person" is defined as, "An employee and/or dependent who enrolls and becomes
covered under the Plan." "Dependents" are defined to include, "a) spouse of the
employee not divorced or legally separated." Thus, under the definitions of the plan,
appellee John Davala as a dependent of Mary Davala, was a "Covered Person" under
the plan. The issue is whether appellee John Davala is a "Plan Member" under the
Reimbursment provisions as "Plan Member" is not defined anywhere in the plan.
{¶18} Insurance contracts are to be read and interpreted in the context of the
entire policy. From a simple straightforward reading of the contract, the "Plan" is
undoubtedly the health coverage and a "Plan Member" can be but one interpretation: a
covered person or a dependent. Whether it is "Plan Member" or "Insured/Covered
Person" there can be but one interpretation of the person who is affected by the
reimbursement/subrogation sections and that is the insured i.e., appellees sub judice.
{¶19} Upon review, we find the trial court erred in finding the make-whole
doctrine applied and appellant was not entitled to reimbursement for medical expenses
paid on behalf of appellee John Davala.
{¶20} The sole assignment of error is granted.
{¶21} The judgment of the Court of Common Pleas of Stark County, Ohio is
hereby reversed.
By Farmer, J.
Edwards, J. concurs and Hoffman, P.J. dissents.
s/ Sheila G. Farmer__________________
s/ Julie A. Edwards_________________
___________________________________
JUDGES
Hoffman, P.J.
(¶22) I respectfully dissent from the majority opinion.
(¶23) On its face, the Plan’s reimbursement agreement avoids the make-whole
doctrine, and provides for the insured to reimburse the insurer for any amounts
recovered from a third party. However, I find an ambiguity arises as to the term “Plan
Member.”
(¶24) The Plan does not define “Plan Member.” However, the policy does
define a “Covered Person” as “An employee and/or dependent who enrolls and
becomes covered under the Plan.” “Dependents” are defined to include, “a) spouse of
the employee not divorced or legally separated;” Thus, under the definitions of the
Plan, John Davala as a dependent of Mary Davala, was a Covered Person under the
Plan. However, it is unclear whether John Davala is a “Plan Member” under the
Reimbursement provisions of the plan as “Plan Member” is not defined anywhere in the
plan.
(¶25) The term Plan Member is reasonably susceptible to more than one
interpretation. Accordingly, the provisions governing subrogation and reimbursement
are not clear and unambiguous; therefore, the Plan does not avoid the make-whole
doctrine. Plan Member may mean the SCOG, or it may mean Mary Davala, as a
covered employee.1 Where the language of an insurance policy is ambiguous, it will be
1
I find it unnecessary to reach the issue as to whether Mary, as the employee covered
member under the facts of this case would more logically be obligated under the
reimbursement provisions of the Plan as I find the Plan is ambiguous as to John’s status
under the Plan as a dependent.
liberally construed in favor of the insured and strictly against the insurer drafting the
policy. Derr v. Westfield Companies (1992), 63 Ohio St.3d 537.
(¶26) In light of the above, I would conclude the trial court did not err in finding
Appellant SCOG was not entitled to reimbursement.
s /William B. Hoffman____________
HON. WILLIAM B. HOFFMAN
IN THE COURT OF APPEALS FOR STARK COUNTY, OHIO
FIFTH APPELLATE DISTRICT
JOHN AND MARY DAVALA :
:
Plaintiffs-Appellees :
:
and :
:
STARK COUNTY SCHOOLS COUNCIL : JUDGMENT ENTRY
OF GOVERNMENTS :
:
Intervening Plaintiff-Appellant :
:
-vs- :
:
KAREN FERRARO :
:
Defendant : CASE NO. 2011CA00135
For the reasons stated in our accompanying Memorandum-Opinion, the
judgment of the Court of Common Pleas of Stark County, Ohio is reversed, and the
matter is remanded to said court for further proceedings consistent with this opinion.
Costs to appellees.
s/ Sheila G. Farmer__________________
s/ Julie A. Edwards__________________
___________________________________
JUDGES