[Cite as Andrews v. Nationwide Mut. Ins. Co., 2012-Ohio-4935.]
Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION No. 97891
STANLEY ANDREWS, ET AL. PLAINTIFFS-APPELLANTS
vs.
NATIONWIDE MUTUAL INSURANCE CO., ET AL. DEFENDANTS-APPELLEES
JUDGMENT: AFFIRMED
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-756463
BEFORE: Celebrezze, J., Blackmon, A.J., and Sweeney, J.
RELEASED AND JOURNALIZED: October 25, 2012 ATTORNEYS FOR APPELLANTS
James M. Kelley, III Arthur M. Elk David J. Elk Peter D. Traska Elk & Elk Co., L.P.A. 6105 Parkland Boulevard Suite 100 Mayfield Heights, Ohio 44125
Donna A. Evans Dennis E. Murray, Jr. Florence J. Murray John T. Murray Leslie O. Murray Margaret M. Murray Dennis E. Murray, Sr. Patrick G. O’Connor Murray & Murray Co., L.P.A. 111 E. Shoreline Drive Sandusky, Ohio 44870
ATTORNEYS FOR APPELLEES
Robert S. Faxon Katie M. McVoy Jones Day North Point 901 Lakeside Avenue Cleveland, Ohio 44114
Daniel F. Attridge, P.C. Thomas A. Clare, P.C. Rebecca A. Koch Kirkland & Ellis, L.L.P. 655 Fifteenth Street, N.W. Suite 1200 Washington, DC 20005 -continued- ATTORNEYS FOR AMICUS CURIAE ASSOCIATION OF OHIO LIFE INSURANCE COMPANIES
Anne Marie Sferra Faith M. Williams Bricker & Eckler, L.L.P. 100 South Third Street Columbus, Ohio 43215 FRANK D. CELEBREZZE, JR., J.:
{¶1} Plaintiffs-appellants, Stanley Andrews and Donald C. Clark (collectively
“appellants”), appeal the judgment of the Cuyahoga County Court of Common Pleas
granting the Civ.R. 12(B)(6) motion to dismiss of defendants-appellees, Nationwide
Mutual Insurance Company and Nationwide Life Insurance Company (collectively
“Nationwide”). After careful review of the record and relevant case law, we affirm the
judgment of the trial court.
{¶2} In 1992 and 1947, respectively, appellants Andrews and Clark entered into
written life insurance contracts with Nationwide. On their face, appellants’ insurance
contracts expressly provide that Nationwide is required to pay death proceeds to the
beneficiary of the policy on receiving “due” or “satisfactory” proof of the insured’s
death.1 In addition to these provisions requiring “receipt” of proof of death, appellants’
insurance contracts contain terms permitting Nationwide to investigate the insured’s death
before paying death benefit proceeds. Specifically, the insurance contracts allow
Nationwide to investigate, among other things, whether the insured committed suicide,
whether the death benefit must be reduced by unpaid premiums or indebtedness, and
whether there has been any misrepresentation of the insured’s age or sex. These
provisions are specifically designed to avoid fraud.
In Ohio, all life insurance policies are required to include a provision stating that “when a 1
policy becomes a claim by the death of the insured, settlement shall be made upon receipt of due proof of death, or not later than two months after receipt of such proof.” R.C. 3915.05(K). Thus, payment is not due merely on the death of an insured, but, rather, on “receipt of proof of death.” {¶3} When claims on a life insurance policy can be brought due to an insured’s
death and satisfaction of other policy requirements, some unaware beneficiaries fail to file
claims, resulting in benefit proceeds going unpaid.
{¶4} Appellants filed this class action complaint against Nationwide on May 31,
2011, seeking injunctive and declaratory relief. Their complaint alleges that Nationwide
has breached its duty of good faith and fair dealing by failing to make reasonable attempts
to determine when the beneficiaries of a life insurance policy are entitled to death benefit
proceeds.2 As a result, appellants now seek to force Nationwide to search the Death
Master File3 (hereinafter referred to as “the DMF”) and independently determine on an
annual basis whether members of the purported class have died prior to Nationwide
receiving proof of death from beneficiaries or claimants. Appellants contend that by
doing this, Nationwide will be meeting their duties of good faith and fair dealing by
determining which of its policy holders are deceased, and thereby determining when
Appellants’ purported class is defined as: “Policy holders of life insurance policies, which 1) 2
are currently in force or have been wrongfully cancelled by [Nationwide] prior to the payment of death benefits, 2) were held within the period that commenced 15 years prior to the filing of this action, 3) were issued by [Nationwide], 4) where the premiums were either a) paid up, or b) the accumulated cash value of the policy was used to make ongoing premium payments, and 5) where the insureds’ age at any time during which the policies were in force actuarially indicated a 70% probability of death, or such lesser probability of death as the Court should order.”
The Death Master File is a computer database file made available by the United States 3
Social Security Administration. The file contains information about persons who had Social Security numbers and whose deaths were reported to the Social Security Administration from 1962 to the present. beneficiaries of the appellants and other class members are rightfully entitled to death
benefit proceeds.
{¶5} On July 13 2011, Nationwide moved to dismiss on four grounds:
(1) appellants’ lack of standing; (2) appellants’ failure to state a legally cognizable claim
under the plain terms of their insurance contracts and Ohio law; (3) appellants are
inadequate representatives of the class because they lack the requisite element of common
interest and injury; and (4) appellants’ complaint failed to allege facts in support of
material elements of each alleged cause of action.
{¶6} By order entered on January 23, 2012, the trial court granted Nationwide’s
motion to dismiss, finding that (1) appellants lacked the requisite standing to file this
action, and (2) the claims alleged in appellants’ complaint were barred by the plain
language of their insurance policies.
{¶7} Appellants appeal the judgment of the trial court, raising three assignments of
error for review:
I. The trial court erred in concluding that the terms of plaintiffs’ life insurance contracts create a clear and unambiguous condition precedent which precludes the use of readily available electronic databases.
II. The trial court erred in concluding that plaintiffs lack standing to seek declaratory and injunctive relief as to Nationwide’s refusal to make the same inquiry of its life insureds as it does for the payees of its annuities.
III. The trial court should have allowed for a complete development of the record.
Law and Analysis {¶8} In challenging the trial court’s dismissal pursuant to Civ.R. 12(B)(6),
appellants argue that the court erred in concluding that the terms of their life insurance
contracts create a clear and unambiguous condition precedent. Further, appellants contend
that the trial court erred in concluding that they lack standing to seek declaratory and
injunctive relief as to Nationwide’s refusal to utilize the DMF.
{¶9} Assuming, without finding, that appellants have standing to bring this class
action, we find that the trial court did not err in granting Nationwide’s motion to dismiss
based on the express terms of appellants’ life insurance contracts.
Standard of Review
{¶10} A Civ.R. 12(B)(6) motion to dismiss for failure to state a claim on which
relief can be granted “is procedural and tests the sufficiency of the complaint.” State ex
rel. Hanson v. Guernsey Cty. Bd. of Commrs., 65 Ohio St.3d 545, 548, 1992-Ohio-73,
605 N.E.2d 378, citing Assn. for Defense of Washington Local School Dist. v. Kiger, 42
Ohio St.3d 116, 117, 537 N.E.2d 1292 (1989). In order for a trial court to grant a motion
to dismiss for failure to state a claim on which relief can be granted, it must appear
“beyond doubt from the complaint that the plaintiff can prove no set of facts entitling her
to relief.” Grey v. Walgreen Co., 1970 Ohio App.3d 418, 2011-Ohio-6167, 967 N.E.2d
1249, ¶ 3 (8th Dist.), citing LeRoy v. Allen, Yurasek & Merklin, 114 Ohio St.3d 323,
2007-Ohio-3608, 872 N.E.2d 254, ¶ 14.
{¶11} In ruling on a Civ.R. 12(B)(6) motion, a trial court “‘cannot resort to
evidence outside the complaint to support dismissal [except] where certain written instruments are attached to the complaint.’” Brisk v. Draf Indus., 10th Dist. No.
11AP-233, 2012-Ohio-1311, ¶ 10, quoting Park v. Acierno, 160 Ohio App.3d 117,
2005-Ohio-1332, 826 N.E.2d 324, ¶ 29 (7th Dist.). Rather, “[i]f a Civ.R. 12(B)(6)
movant relies on evidence outside of the complaint and its attachments, then Civ.R. 12(B)
specifies that the motion must either be denied or converted to a summary judgment
motion, which would proceed under Civ.R. 56.” Id. at ¶ 30, citing Petrey v. Simon, 4
Ohio St.3d 154, 156, 447 N.E.2d 1285 (1983).
{¶12} An appellate court employs “a de novo standard of review for motions to
dismiss filed pursuant to Civ.R. 12(B)(6).” Grey at ¶ 3, citing Greeley v. Miami Valley
Maint. Contrs., Inc., 49 Ohio St.3d 228, 551 N.E.2d 981 (1990). Under de novo
analysis, we are required to “accept all factual allegations of the complaint as true and
draw all reasonable inferences in favor of the nonmoving party.” Grey at ¶ 3, citing Byrd
v. Faber, 57 Ohio St.3d 56, 565 N.E.2d 584 (1991).
{¶13} Here, the trial court granted Nationwide’s motion to dismiss based on the
language in the life insurance contracts underlying appellants’ claims. The life insurance
contracts are attached to appellants’ complaint and, therefore, could be considered by the
trial court for purposes of Nationwide’s Civ.R. 12(B)(6) motion. Brisk; Miller v. Cass,
3d Dist. No. 3-09-15, 2010-Ohio-1930 (a copy of a written instrument attached to a
pleading is a part of the pleading for all purposes and thus can be considered for purposes
of a motion to dismiss); Adlaka v. Giannini, 7th Dist. No. 05 MA 105, 2006-Ohio-4611, ¶
34 (“If the plaintiff decides to attach documents to his complaint, which he claims establish his case, such documents can be used to his detriment to dismiss the case if they
along with the complaint itself establish a failure to state a claim”). Thus, to the extent
the language in the purported life insurance contracts clearly foreclose appellants’ claims
against Nationwide, the trial court could properly dismiss those claims under Civ.R.
12(B)(6). Denlinger v. Columbus, 10th Dist. No. 00AP-315, 2000 Ohio App. LEXIS
5679 (Dec. 7, 2000). See Allstate Ins. Co. v. Blaum, 4th Dist No. 1490, 1988 Ohio App.
LEXIS 4800 (Dec. 2, 1988) (“if a written instrument is attached to the complaint, it
should be construed together with the averments of the complaint in determining whether
there is any possible set of facts which would entitle the plaintiff to relief”).
Appellants’ Life Insurance Contracts
{¶14} An insurance policy is a contract, and the relationship between the insurer
and the insured is purely contractual in nature. Nationwide Mut. Ins. Co. v. Marsh, 15
Ohio St.3d 107, 109, 472 N.E.2d 1061 (1984). The interpretation and construction of
insurance policies is a matter of law to be determined by the court using rules of
construction and interpretation applicable to contracts generally. Gomolka v. State Auto.
Mut. Ins. Co., 70 Ohio St.2d 166, 167-168, 436 N.E.2d 1347 (1982); Value City, Inc. v.
Integrity Ins. Co., 30 Ohio App.3d 274, 276, 508 N.E.2d 184 (10th Dist.1986).
{¶15} In insurance policies, as in other contracts, words and phrases are to be
given their plain and ordinary meaning unless there is something in the contract that
would indicate a contrary intention. Olmstead v. Lumbermens Mut. Ins. Co., 22 Ohio
St.2d 212, 216, 259 N.E.2d 123 (1970). Where the provisions of an insurance policy are clear and unambiguous, courts may not indulge themselves in enlarging the contract by
implication in order to embrace an object distinct from that contemplated by the parties.
Gomolka at 168.
{¶16} However, where the provisions of a contract of insurance are reasonably
susceptible to more than one interpretation, they will be construed strictly against the
insurer and liberally in favor of the insured. King v. Nationwide Ins. Co., 35 Ohio St.3d
208, 519 N.E.2d 1380 (1988), paragraph one of the syllabus.
{¶17} In the case at hand, appellants argue that the trial court erred in concluding
that they were “foreclosed from pursuing this class action based on the express terms of
the parties’ life insurance contracts and Ohio law.” Specifically, appellants contend that
their insurance policies fail to identify who is required to provide “proof of death” and are
thereby ambiguous. Thus, appellants submit that the trial court was required to look
beyond the four corners of the complaint to determine the plain meaning of the disputed
life insurance provision, a procedure improper in determining a Civ.R. 12(B)(6) motion.
For the following reasons, we disagree.
{¶18} The operative contract provisions, in this case, between Nationwide and
appellants are expressly contained in the parties’ insurance contracts. Andrews’s
insurance contract states, in relevant part:
We agree to pay the Death Proceeds to the Beneficiary upon receiving proof that the Insured has died while this Policy is in force and before the Maturity Date.
*** [Nationwide] will pay the Death proceeds to the Beneficiary after we receive at our Home Office proof of death satisfactory to us and such other information as we may reasonably require. (Emphasis added).
Similarly, Clark’s contract provides, in relevant part:
Insurance Company Columbus, Ohio AGREES TO PAY the sum of ONE
THOUSAND (1,000) Dollars Less any unpaid premium or premiums to the
end of the then current policy year, and less any indebtness on or secured by
this Policy To ELLEN FISHER CLARK, Mother, if living; Otherwise to
JOHN LAWRENCE CLARK, Father, the Beneficiary, at its Home Office,
immediately upon receipt of due proof of death of DONALD CHARLES
CLARK, the Insured, during the continuance of this Policy. (Emphasis
added).
{¶19} After review of the pertinent contract provisions, we find no merit in
appellants’ assertion that their life insurance contracts are ambiguous because the
contracts “are silent as to the party upon whom the responsibility for providing proof
falls.” The terms “receipt” and “receiving” demonstrate Nationwide’s passive role in
establishing an insured party’s proof of death; they do not connote an obligation to
procure such information. Webster’s New Collegiate Dictionary 964 (1990) (“Receipt”
is defined as “the act or process of receiving”). Thus, a finding obligating Nationwide to
solicit or gather information pertaining to an insured’s death would be contrary to the
terms contained in the insurance policy. {¶20} Moreover, Ohio law indicates that the burden of furnishing proof of death
lies with appellants’ beneficiaries or claimants. In a related case dealing with automobile
insurance, the court held that “the policyholder who believes that he or she is entitled to
reimbursement must make the insurance company aware of the claim and give it the
opportunity to pay.” Kincaid v. Erie Ins. Co., 128 Ohio St.3d 322, 2010-Ohio-6036, 944
N.E.2d 207. Similarly, the Sixth Circuit has observed that, “[u]nder traditional principles
of contract law * * * the notice provision of an insurance policy creates a condition
precedent, non-compliance with which precludes recovery by the insured.” Am. Emps.
Ins. Co. v. Metro Regional Transit Auth., 12 F.3d 591, 592 (6th Cir.1993), citing
Kornhauser v. Natl. Sur. Co., 114 Ohio St. 24, 150 N.E. 921 (1926).
{¶21} In evaluating the “proof of death” provision in appellants’ insurance
contracts, the trial court relied on Natl. Acc. & Health Ins. Co. v. Edrez, 19 Ohio Law
Abs. 202, 1935 Ohio Misc. LEXIS 1321 (9th Dist.1935). In Edrez, the court dealt with a
similar complaint based on a similar insurance contract provision. In Edrez, the plaintiff
failed to submit proof of death according to the requirements of his accidental death
insurance policy. As a result, the defendants did not pay out benefits on the policy.
Like the present case, the plaintiff argued that it was not necessary for him to file a proof
of death under the accident provision of the policy. The Edrez court relied on the life
insurance contract, which provided, in relevant part:
4. Written notice of injury or of sickness on which claim may be based must be given to the company within twenty days after the date of the accident causing such injury or within ten days after the commencement of disability from such sickness. In event of accidental death immediate notice thereof must be given to the company.
{¶22} The Edrez court found that this provision of the life insurance contract
required the beneficiary to provide proof of death to the insurer as a condition precedent
for the claim to be honored. Because the plaintiff did not comply with this condition
precedent, the court entered final judgment in favor of the defendants.
{¶23} In challenging the application of Kincaid and Edrez to the case at hand,
appellants contend that life insurance policies are distinguishable from other forms of
insurance policies because, unlike automobile or accidental death insurance policies
where the triggering event is not certain to occur, the death of a party with a life insurance
policy is certain to occur. While we understand that the death of an insured party is an
inevitable fact, we are not persuaded that such certainty places an additional duty on
Nationwide beyond what is expressed in the life insurance contracts, and appellants
provide no case law to support such a proposition. See DeHart v. Aetna Life Ins. Co., 8th
Dist. No. 42932, 1982 Ohio App. LEXIS 13478 ( July 15, 1982) (finding the insurer had
no implied duty to inform insureds on reaching an age where they were likely disabled
that the insureds had a right to stop making premium payments if disabled).
{¶24} Accordingly, we find that, as in Kincaid and Edrez, appellants’ life
insurance contracts create a clear and unambiguous condition precedent, in accordance
with Ohio law, that requires, among other things, that appellants provide Nationwide with
proof of death for their life insurance claims to be honored. It is clear from the contracts,
as well as from the case law, that the standard language used places the burden on the claimant or the beneficiary to produce the proof of death. In the absence of legislative or
administrative regulatory action, we will not import additional unspoken duties and
obligations onto Nationwide that will conflict with the parties’ contracted terms.
The Duty of Good Faith and Fair Dealing
{¶25} We further find no validity to appellants’ allegations that Nationwide has
breached the implied covenant of good faith and fair dealing by failing to utilize the DMF
for the benefit of its life insureds.
{¶26} Under Ohio law, because a fiduciary relationship exists in the context of
insurance contracts, the insurer has a duty to act in good faith in handling the claims of
the insured. Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272, 275, 452 N.E.2d 1315
(1983). Such duty is grounded on the fundamental principle that in every contract there
is an implied covenant “that neither party shall commit any act that shall destroy or injure
the rights of the other party to enjoy the fruits of the contract.” Anthony’s Pier Four, Inc.
v. HBC Assoc., 411 Mass. 451, 471, 583 N.E.2d 806 (1991), quoting Druker v. Roland
Wm. Jutras Assoc., Inc., 370 Mass. 383, 385, 348 N.E.2d 763 (1976).
{¶27} A violation of this covenant usually requires more than a simple breach of
contract. Targus Group Internatl., Inc. v. Sherman, 76 Mass.App.Ct. 421, 435, 922
N.E.2d 841 (2010). Usually, a breach of the covenant involves bad-faith conduct
“implicating a dishonest purpose, consciousness of wrong, or ill will in the nature of
fraud.” Id., quoting Equip. & Sys. for Indus., Inc. v. Northmeadows Constr. Co., 59
Mass.App.Ct. 931, 932-933, 798 N.E.2d 571 (2003). However, the covenant is limited in scope and cannot create rights and duties not otherwise provided for in the contract.
Lawarre v. Fifth Third Secs., 1st Dist. No. C-110302, 2012-Ohio-4016, ¶ 35, citing Uno
Restaurants, Inc. v. Boston Kenmore Realty Corp., 441 Mass. 376, 385, 805 N.E.2d 957
(2004).
{¶28} As discussed, the provisions contained in appellants’ life insurance contracts
with Nationwide expressly require “receipt” of “proof of death,” in compliance with R.C.
3915.05(K). Importantly, the contracts do not impose a duty on Nationwide to search the
DMF to determine whether their insureds are deceased. Accordingly, we are unable to
conclude that Nationwide has breached its duty of good faith and fair dealing by failing to
incorporate the DMF into its account servicing practices when it is not contractually or
legally obligated to do so.
{¶29} Based on the foregoing, we find that the trial court did not err in granting
Nationwide’s motion to dismiss. Appellants’ first assignment of error is overruled.
Therefore, the issue raised in appellants’ second assignment of error regarding their
standing to bring this action is rendered moot.
Discovery
{¶30} Finally, appellants argue that the trial court erred in preventing the complete
development of the record in this matter. We disagree. As stated, the trial court did not
err in granting Nationwide’s motion to dismiss. Therefore, appellants were not entitled
to develop the record through discovery.
{¶31} Appellants’ third assignment of error is overruled. {¶32} Judgment affirmed.
It is ordered that appellees recover from appellants costs herein taxed.
The court finds there were reasonable grounds for this appeal.
It is ordered that a special mandate be sent to said court to carry this judgment into
execution.
A certified copy of this entry shall constitute the mandate pursuant to Rule 27 of
the Rules of Appellate Procedure.
FRANK D. CELEBREZZE, JR., JUDGE
PATRICIA A. BLACKMON, A.J., and JAMES J. SWEENEY, J., CONCUR