[Cite as UH Rainbow Babies & Children's Hospital v. Caresource, 2018-Ohio-2839.]
Court of Appeals of Ohio EIGHTH APPELLATE DISTRICT COUNTY OF CUYAHOGA
JOURNAL ENTRY AND OPINION No. 106151
UH RAINBOW BABIES & CHILDREN’S HOSPITAL
PLAINTIFF-APPELLEE
vs.
CARESOURCE
[Appeal By United Healthcare Insurance Company]
DEFENDANT-APPELLEE
JUDGMENT: AFFIRMED
Civil Appeal from the Cuyahoga County Court of Common Pleas Case No. CV-16-867735
BEFORE: Keough, J., E.A. Gallagher, A.J., and Boyle, J.
RELEASED AND JOURNALIZED: July 19, 2018 ATTORNEYS FOR APPELLANT
Brent S. Silverman Robert A. West Ciano & Goldwasser, L.L.P. 1610 Midland Building 101 Prospect Avenue, West, Suite 1610 Cleveland, Ohio 44115
Donald T. Campbell Aalook K. Sharma 150 South Fifth Street, Suite 2300 Minneapolis, Minnesota 55402
ATTORNEYS FOR APPELLEE
FOR UNIVERSITY HOSPITALS RAINBOW BABIES & CHILDREN’S HOSPITAL
John F. Garswood Daniel W. Dreyfuss 1801 East Ninth Street, Suite 1110 Cleveland, Ohio 44114
FOR CARESOURCE
Katrina M. English CareSource 230 North Main Street Dayton, Ohio 45402
Matthew C. O’Connell Sutter O’Connell Co. 3600 Erieview Tower 1301 East Ninth Street Cleveland, Ohio 44114 KATHLEEN ANN KEOUGH, J.:
{¶1} Third-party defendant-appellant, UnitedHealthcare Insurance Company (“United”)
appeals from the trial court’s decision denying its motion to stay the proceedings, compel
arbitration, and dismiss with prejudice. For the reasons that follow, we affirm.
{¶2} In February 2014, mother-insured gave birth to multiple children at Rainbow Babies
& Children’s Hospital, a medical facility operated by University Hospitals (“UH”). At the time
of the births, mother had employer-sponsored health insurance provided by United. It is
undisputed that United provided medical coverage from the children’s birth until at least
February 28, 2014. On March 1, 2014, mother enrolled in Caresource, a Medicaid-managed
care plan, that continued to provide medical coverage to the children until they were discharged
from UH in April 2014.
{¶3} UH billed both United and Caresource for services rendered to the children.
Caresource initially paid the claim for one of the children, but denied the other claim. However,
about a month later, Caresource reversed the payment and denied both claims until it could verify
coverage through mother’s coordination of benefits.
{¶4} In August 2016, UH filed a breach of contract action against Caresource for failure
to pay the medical bills of its insured. UH did not bring an action against United. Caresource
filed its answer, denying liability and asserting that United is the sole responsible party for the
payment of the medical bills.
{¶5} In March 2017, without objection, the trial court granted Caresource leave to file a
third-party complaint and a counterclaim against UH. Count 1 of the third-party complaint
sought indemnification and contribution against United. Count 2 requested declaratory relief against United and UH, requesting that the trial court declare that United is the primary insurer
and responsible party to UH, and that Caresource is the secondary insurer and not responsible for
the medical bills.1
{¶6} In response, United admitted that a justiciable controversy existed but asserted that
Caresource is liable for the payments to UH. Accordingly, United raised as an affirmative
defense that the trial court lacked jurisdiction over the declaratory judgment action, claiming that
the matter was subject to arbitration because United’s Facility Participation Agreement (“FPA”)
with UH contains an arbitration provision that requires the parties to arbitrate “any and all
disputes” covered under the FPA. Subsequently, pursuant to R.C. 2701.01, United moved to
stay the proceedings, compel arbitration, and dismiss the case with prejudice. United
maintained that because Caresource was seeking the benefit of United paying UH’s claims, it
was subject to the arbitration agreement between United and UH.
{¶7} Caresource opposed the motion to compel, contending that the action is not subject
to arbitration because (1) Caresource is not a party or signatory to the FPA containing the
arbitration provision; (2) there is no dispute between United and UH; rather the dispute is
between United and Caresource, and (3) the controlling contract is mother-insured’s certificate of
coverage (“COC”) issued by United. In support, Caresource attached to its brief in opposition
mother’s health insurance policy, which is titled, “UnitedHealthcare Insurance Company;
UnitedHealthcare Choice Plus; Certificate of Coverage, Riders, Amendments, and Notices for
[mother’s employer].” The lengthy document identifies the eligible individuals under the policy,
1 Whether Caresource’s use of Civ.R. 14 to bring a declaratory judgment action against United was proper was not an issue that was raised with the trial court or with this court. We further note that United did not object and specifically admitted that a justiciable controversy existed between it and Caresource. when coverage begins, and when that coverage ends. Caresource maintained that these
provisions determine whether the children were covered by United or Caresource during the
disputed time period. Caresource noted that the document does not contain an arbitration
clause.
{¶8} Following a hearing, the trial court denied United’s motion to compel, finding:
The court is not persuaded that equity demands defendant Caresource be compelled to arbitrate as a nonsignatory to the agreement. In the case law cited by third party defendant United, it is clear that the nonsignatory parties in those cases benefitted from the contract that contained the arbitration clause. In the case before the court, Caresource has not benefitted in any respect from the contract between United and UH Rainbow Babies and Children’s Hospital.
{¶9} United now appeals, raising as its sole assignment of error the trial court abused its
discretion in denying its motion to compel arbitration. United maintains that even though
Caresource is not a signatory to the FPA between United and UH, Caresource is seeking to
benefit from the FPA and thus, it should be estopped from denying a corresponding obligation to
arbitrate.
{¶10} United maintains that Caresource’s entire theory in its third-party complaint
depends entirely upon the terms of the FPA, which governs United and UH’s arrangement for
UH to be an in-network provider to United’s customers. According to United, the FPA dictates,
among other things, how claims are paid. United asserts that the only way it can be held liable
for payment of UH’s claims in this matter rests exclusively through the FPA. And because the
FPA contains a mandatory arbitration provision requiring any and all disputes between United
and UH to be resolved by arbitration, Caresource must be compelled to arbitrate, even though it
is not a signatory to the FPA.
{¶11} Caresource, on the other hand, contends that the FPA is irrelevant to the
declaratory judgment action on the issue of who provides primary coverage for the newborn children (which according to Caresource must be determined before the issue of indemnification
and contribution is resolved). Caresource maintains that United’s COC issued to the insureds
will determine whether it provides coverage for the medical services received by newborn
children. Additionally, it contends that both the COC and R.C. 3923.26 (coverage for newly
born children) will resolve the issue of the duration of time that United must pay for covered
health services in this case. Accordingly, because the FPA does not dictate whether United’s
coverage is primary, Caresource contends that the FPA is not relevant, and the issue of whether
United provides primary coverage would still exist even if United had not entered into a FPA
with UH.
{¶12} We conclude that the COC and R.C. 3923.26 determine if United’s coverage is
primary, meaning United must pay claims before they are submitted to Caresource. And
because the COC does not contain an arbitration provision, the trial court did not err in denying
United’s motion to compel arbitration.
{¶13} Succinctly, it is undisputed that United provided medical coverage from the
children’s birth until at least February 28, 2014. The dispute between Caresource and United is
which insurer must provide primary coverage for the 31 days of care that the infants received
during March 2014. Caresource claims that United provides primary coverage for 31 days from
their births pursuant to the COC and R.C. 3923.26. United maintains that Caresource provided
primary coverage as of March 1, 2014. Thus, the issue to be resolved by the trier of fact is
whether United provides coverage for 31 days, as Caresource argues, or only for the 8 days as
United maintains. The sole issue on appeal, however, is whether Caresource should be
compelled to arbitrate its claim against United. {¶14} Denials of motions to dismiss or stay proceedings pending arbitration are generally
reviewed for an abuse of discretion. See generally McCaskey v. Sanford-Brown College, 8th
Dist. Cuyahoga No. 97261, 2012-Ohio-1543. However, deciding whether the claims arise from
the agreement containing the arbitration clause involves an interpretation of the contract, which
is a question of law subject to de novo review. Cleveland-Akron-Canton Advertising Coop. v.
Physician’s Weight Loss Ctrs. of Am., 184 Ohio App.3d 805, 2009-Ohio-5699, 922 N.E.2d 1012
(8th Dist.). However, whether the parties can be compelled to arbitrate requires a trial court to
make factual findings, which “must be accorded appropriate deference.” Taylor Bldg. Corp. of
Am. v. Benfield, 117 Ohio St.3d 352, 2008-Ohio-938, 884 N.E.2d 12, ¶ 2. Accordingly, a
reviewing court accepts the trial court’s findings of fact that are not “clearly erroneous,” but
decides questions of law de novo. Ghanem v. Am. Greetings Corp., 8th Dist. Cuyahoga No.
82316, 2003-Ohio-5935, ¶ 11.
{¶15} The Ohio Supreme Court has held: “‘“[A]rbitration is a matter of contract and a
party cannot be required to submit to arbitration any dispute which [it] has not agreed so to
submit.” * * * This axiom recognizes the fact that arbitrators derive their authority to resolve
disputes only because the parties have agreed to submit such grievances to arbitration.’”
Council of Smaller Ents. v. Gates, McDonald & Co., 80 Ohio St.3d 661, 665, 687 N.E.2d 1352
(1998), quoting AT&T Technologies, Inc. v. Communications Workers of Am., 475 U.S. 643,
648-649, 106 S.Ct. 1415, 89 L.Ed.2d 648 (1986), quoting United Steel Workers of Am. v.
Warrior & Gulf Navigation Co., 363 U.S. 574, 582, 80 S.Ct. 1347, 4 L.Ed.2d 1409 (1960);
Taylor v. Ernst & Young, L.L.P., 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d 1203, ¶ 20.
Accordingly, when deciding motions to compel arbitration, the proper focus is whether the parties actually agreed to arbitrate the issue, i.e., the scope of the arbitration clause, not the
general policies of the arbitration statutes. Waffle House, 534 U.S. at 294.
{¶16} Ohio courts recognize a presumption in favor of arbitration when a claim falls
within the scope of an arbitration provision. Williams v. Aetna Fin. Co., 83 Ohio St.3d 464,
471, 700 N.E.2d 859 (1998). But significantly, there is a counter-weighing presumption against
arbitration when a party seeks to invoke an arbitration provision against a nonsignatory. Council
of Smaller Ents., at 667, citing First Options of Chicago, Inc. v. Kaplan, 514 U.S. 938, 945, 115
S.Ct. 1920, 131 L.Ed.2d 985 (1995). In the latter instance, “there is serious doubt that the party
resisting arbitration has empowered the arbitrator to decide anything * * *.” Id.
{¶17} Generally, parties who have not agreed to arbitrate their disputes cannot be forced
to forego judicial remedies. Physician’s Weight Loss, at ¶ 14, citing Moore v. Houses on the
Move, Inc., 177 Ohio App.3d 585, 2008-Ohio-3552, 895 N.E.2d 579 (8th Dist.). There are
instances, however, “where equity demands that parties who have not agreed to arbitrate their
disputes may be forced to do so when ‘ordinary principles of contract and agency’ require.”
Physician’s Weight Loss at id., quoting McAllister Bros., Inc. v. A & S Transp. Co., 621 F.2d
519, 524 (2d Cir.1980). One such instance where a nonsignatory will be bound to an arbitration
agreement is under an estoppel theory. See Thomson-CSF, S.A. v. Am. Arbitration Assn., 64
F.3d 773 (2d Cir.1995).
{¶18} Estoppel applies where “a nonsignatory who knowingly accepts the benefits of an
agreement is estopped from denying a corresponding obligation to arbitrate.” I Sports v. IMG
Worldwide, Inc., 157 Ohio App.3d 593, 2004-Ohio-3631, 813 N.E.2d 4, ¶ 13 (8th Dist.), citing
Thomson-CSF at 778 (estoppel analysis depends on whether the nonsignatory derived a direct
benefit from the contract containing the arbitration clause such that acceptance of the benefit would also require acceptance of a contractual obligation). “This doctrine ‘precludes a party
from enjoying rights and benefits under a contract while at the same time avoiding its burdens
and obligations.’” Physician’s Weight Loss, 184 Ohio App.3d 805, 2009-Ohio-5699, 922
N.E.2d 1012, at ¶ 15, quoting InterGen N.V. v. Grina, 344 F.3d 134, 145 (1st Dist.2003).
{¶19} In this case, United contends that because the FPA contains mandatory arbitration
of any and all disputes between United and UH, Caresource must be compelled to arbitrate, even
though it is not a signatory to the FPA, because Caresource seeks the benefit of the FPA,
specifically that United pay UH’s claims. In support, United relies on Gerig v. Kahn, 95 Ohio
St.3d 478, 2002-Ohio-2581, 769 N.E.2d 381.
{¶20} In Gerig, the Ohio Supreme Court addressed whether an issue of insurance
coverage was subject to arbitration in accordance with an agreement between the physician and
the hospital. While under the care of the physician, mother gave birth to twins at a local
hospital. At the time of the deliveries, the physician was working at the hospital under an
affiliation agreement, which contained an arbitration provision, that required the hospital to
insure him against medical-malpractice claims. The Gerigs filed suit against the physician and
alleged that he caused birth defects to one of the twins by malpractice during the delivery. At
the time the suit was filed, the hospital provided malpractice insurance to the physician through
an insurance company with liability limits up to $4 million. In addition, the hospital funded a
self-insurance plan to pay malpractice claims.
{¶21} Thereafter, the insurance company became insolvent and was forced into
liquidation. The Ohio Insurance Guaranty Association (“OIGA”) became involved in the case to
pay any covered claims brought by consumers against the insolvent insurance company. {¶22} Because the statutory limit for OIGA claims was $300,000 and because OIGA
pays claims only after a claimant has exhausted her rights under all other insurance policies, the
Gerigs, the physician, and OIGA sought judicial clarification on the issue of insurance coverage,
in light of the insurance company’s insolvency. The Gerigs and the physician sought a
declaration that by virtue of the affiliation agreement, the hospital was responsible for any
judgment up to $4 million. The OIGA sought a declaration that under the affiliation agreement,
the hospital was required to pay any judgment to the Gerigs under its self-insurance fund thus,
OIGA was not obligated to pay any damages unless the Gerigs exhausted that fund. Therefore,
the hospital sought an order compelling arbitration of the dispute regarding whether the hospital
was legally required, pursuant to the agreement, to insure the physician through its self-insurance
plan. The physician, who was the only other signatory to the affiliation agreement, did not
oppose the hospital’s motion.
{¶23} In deciding the issue, the court noted that the Gerigs and OIGA sought a
declaration of the hospital’s rights and obligations to the physician under the affiliation
agreement, even though they did not have a direct dispute with the hospital. Id. at ¶ 12. The
court held that “it would be inequitable to allow an interested nonsignatory to determine the
forum in which an agreement is to be interpreted when the signatories previously agreed in
writing to arbitrate any controversy relating to the agreement.” Id. at ¶ 19. Accordingly, based
on the principle of equitable estoppel, the court found the arbitration agreement to be enforceable
against the interested nonsignatories. Id.
{¶24} The court’s holding in Gerig only applies when a nonsignatory is seeking a
declaration of the signatories’ rights and obligations under the contract. The test is whether a
nonsignatory has asserted claims that arise from the contract containing the arbitration clause. Taylor, 130 Ohio St.3d 411, 2011-Ohio-5262, 958 N.E.2d 1203 at ¶ 33, citing Gerig, 95 Ohio
St.3d 478, 2002-Ohio-2581, 769 N.E.2d 381 at ¶ 19. In the Gerig case, the nonsignatories’
entire claim against the signatory seeking to compel arbitration hinged on the interpretation of the
agreement containing the arbitration provision. Therefore, the court held that the nonsignatories
each sought to benefit from the agreement — that the hospital would be required to pay the
claims first. Accordingly, it was determined that the nonsignatories were subject to the
arbitration clause.
{¶25} In this case, however, the claims raised by Caresource do not arise from the
contract containing the arbitration clause and thus, Gerig is factually distinguishable.
Caresource’s entire claim against United rests entirely on coverage of the insureds — not how or
if United will pay UH once it is determined that United is the responsible party to cover the
expenses incurred from the services rendered by UH. Therefore, the nonsignatory’s claim does
not hinge on the interpretation of the FPA that contains the arbitration provision.
{¶26} Moreover, Caresource contends that the coverage of the FPA is unknown because
United has only offered a redacted version of the FPA — only the portion containing the
arbitration agreement was provided. The party seeking to compel arbitration with a
nonsignatory bears the burden of establishing that the nonsignatory seeks to receive a benefit
under the contract and that the contract governs the nonsignatories’ claims. See, e.g., Fifth Third
Bank v. Senvisky, 8th Dist. Cuyahoga Nos. 100030 and 100571, 2014-Ohio-1233, ¶ 11 (party
seeking to compel arbitration bears the burden of establishing the existence of an enforceable
arbitration agreement between it and the compelled party). Because only a redacted copy of the
FPA was provided, this court agrees with Caresource that it is uncertain exactly what the FPA
covers. The FPA appears to be the agreement memorializing that UH would be an in-network provider to United’s customers. It seems unreasonable to conclude that whether a specific
individual is covered as an insured with United would be found in the FPA.
{¶27} United maintains that the issue is not a “coverage dispute” but merely a payment
dispute. In its appellate brief, United contends that if it “has any obligation to pay UH for
in-network services, it exists only through the [FPA] it has with UH to provide those services.”
And that “[i]nstead the present dispute is a payment dispute seeking reimbursement that would
be controlled by certain rates and methods dictated by the FPA.” We disagree.
{¶28} Our review of Caresource’s claims, the provided unredacted portion of the FPA,
and the COC demonstrates that this matter is a coverage dispute that must be determined using
the COC. Caresource is purely seeking a judicial declaration that United is the primary
insurance company required to pay UH’s claims. Whether or how United actually pays the
claims in accordance with the FPA is not an issue with Caresource and is not an issue in the
declaratory judgment action.
{¶29} Who covers these children during this 31-day time period? This issue does not
involve whether the UH is an in-network provider to United’s customers. This is not in dispute.
Furthermore, this issue does not involve whether the children were insured. It is undisputed
that they were insured. The question is who covers these children during a specific and
relatively small timeframe. That is a legal question based on contract interpretation, i.e. through
the COC and relevant Ohio law. Because the COC does not contain an arbitration provision,
Caresource cannot be compelled to arbitrate its claims against United.
{¶30} Accordingly, the trial court did not abuse its discretion in denying United’s motion
to stay the proceedings and compel arbitration. The assignment of error is overruled.
{¶31} Judgment affirmed. It is order that appellee recover of appellant its costs herein taxed.
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.
KATHLEEN ANN KEOUGH, JUDGE
EILEEN A. GALLAGHER, A.J., and MARY J. BOYLE, J., CONCUR