Harborside of Dayton Ltd. P'ship v. Safety Nat'l Cas. Corp.

• Docket Number: C. A. 29621
• Decision Date: 15 December 2023
• Parties: HARBORSIDE OF DAYTON LIMITED PARTNERSHIP et al. Appellants v. SAFETY NATIONAL CASUALTY CORPORATION et al. Appellees
• Court: Ohio Court of Appeals

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2023-Ohio-4562

HARBORSIDE OF DAYTON LIMITED PARTNERSHIP et al. Appellants
v.
SAFETY NATIONAL CASUALTY CORPORATION et al. Appellees

C. A. No. 29621

Court of Appeals of Ohio, Second District, Montgomery

December 15, 2023

(Civil Appeal from Common Pleas Court Trial Court Case No. 2019 CV 05584)

QUINTIN F. LINDSMITH, JENNIFER G. COOPER & ANDREW ROACH, Attorneys for Appellee

MARK J. KESSLER, LAWRENCE BLUESTONE, & LAUREN GERSHUNY, Attorneys for Appellant

OPINION

LEWIS, J.

{¶ 1} Plaintiffs-Appellants Harborside of Dayton Limited Partnership ("Harborside"), Sun Healthcare Group, Inc. ("Sun"), and Genesis Healthcare LLC ("Genesis") (collectively, "the Plaintiffs") appeal from an order of the Montgomery County

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Common Pleas Court granting summary judgment to Defendant-Appellee Broadspire Services, Inc. ("BSI"). For the following reasons, we will affirm the judgment of the trial court.

I. Facts and Course of Proceedings

{¶ 2} This appeal involves the handling of a worker's compensation claim by self-insured employers, their third-party administrators, and their excess insurance carrier. In 2006, Harborside operated a long-term care facility in Dayton known as Forest View Care and Rehabilitation Center. A.C.W. was hired by Harborside as a director of nursing.^[1]On August 8, 2006, A.C.W. was injured when she tripped and fell at Harborside's facility while in the scope of her employment. A.C.W. filed a workers' compensation claim and was granted temporary disability benefits.

{¶ 3} At the time A.C.W. was injured, Harborside had a contract with Corvel, a third-party administrator, to assist it with handling its workers' compensation claims. As a self-insured employer, Harborside had procured an excess insurance policy with Safety National Casualty Corporation ("Safety National"), which was in effect for the period during which A.C.W. was injured. The insurance policy provided that Safety National would be obligated to pay for the costs of a workers' compensation claim that exceeded Harborside's self-insured retention ("SIR") amount of $500,000 and Harborside would be responsible for paying any costs up to $500,000. Further, Harborside was required to provide prompt notice of a claim to Safety National when the claim had exceeded or was

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likely to exceed 50% of the SIR (i.e., $250,000) or when the injured employee's disability exceeded one year in duration or appeared reasonably likely to exceed one year in duration.

{¶ 4} In October 2006, Sun acquired Harborside. At that time, Sun was insured under an excess policy issued by a subsidiary of AIG for the policy term of April 1, 1998 through December 31, 2009. The SIR amount under the AIG policy was $1,000,000. Therefore, under the AIG policy, Sun would be responsible for paying the first $1,000,000 on any claim covered by the excess policy, and AIG would take over financial responsibility for any amounts exceeding that threshold.

{¶ 5} The cost of A.C.W.'s claim increased over time as A.C.W.'s condition worsened. For example, A.C.W. was granted an allowable condition of a lumbar strain with sciatica on December 15, 2006, was granted temporary total benefits effective March 6, 2007, and underwent a neurosurgery evaluation in February 2009. As of February 2009, the total amount paid on A.C.W.'s claim was $126,523, and there was the possibility that future spinal surgery would be necessary.

{¶ 6} Corvel initially provided information to Safety National about the A.C.W. claim and its increasing costs. But Safety National typically did not set up its own claim file until the costs of the claim reached at least one-half the SIR amount under the excess policy. On June 1, 2009, BSI took over for Corvel as the third-party administrator for Sun's workers' compensation claims, including A.C.W.'s claim. Angela Love, an employee of Safety National during the relevant period, stated that Safety National received the last loss-run report from Corvel in March 2009 but did not reach out to Corvel

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again for further information on the A.C.W. claim until September 2011. At that time, Safety National first became aware of the change in Sun's third-party administrators from Corvel to BSI. According to Janice Burnap, the Director of Risk and Insurance Services for Sun (and later, Genesis), it was Sun's responsibility to notify Safety National about any change in Sun's third-party administrator.

{¶ 7} The amount of A.C.W.'s claim continued to grow, and attempts to settle the claim proved unsuccessful. By October 2010, the A.C.W. claim exceeded 50% of the $500,000 SIR under the Safety National excess insurance policy. Just a year later, on October 6, 2011, the incurred amount on the A.C.W. claim exceeded $500,000.

{¶ 8} On February 17, 2012, Maggie Smith, Senior Claims Analyst for Safety National, sent a letter to BSI asking it to complete and return an attached first report form relating to A.C.W. The letter noted that "[a] review of the most recent 2012 workers' compensation loss experience report" for the A.C.W. claim showed that the claim needed to be reported to Safety National, because the total incurred "exceeded 50% of the Self-Insured Retention Level." According to the letter, "the total incurred shown is $521,177 the S.I.R. is $500,000." On April 2, 2012, Linda Mullans, an employee of Safety National, sent an email to Vicky Hardie at BSI requesting the first report update. Hardie emailed the first report and supporting documentation to Linda Mullans on April 6, 2012.

{¶ 9} Maggie Smith, on behalf of Safety National, then authored an August 30, 2012 Reservation of Rights ("ROR") letter addressed to Hardie at BSI. In the letter, Smith acknowledged receipt of the initial report relating to the A.C.W. claim. Smith then referred to the language in the excess insurance policy. Smith explained, in part:

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The file should have been reported to us previously based on the fact the lost time exceeded one year and the total incurred exceeded 50% of the self insured retention. The late report is in violation of Section I of the Insurance Agreement.

Failure to report the claim to Safety National on a timely basis also denied us the opportunity to participate in the defense of this claim, which is provided under Section J of the Insurance Agreement.

The claimant underwent surgery in November of 2010. Per the information received it appears her surgery was not litigated. * * * This is a potential violation of Section K of the Insurance Agreement.

* * * Failure to reasonable [sic] attempt to settle this claim is another potential violation of Section K of the Insurance Agreement.

Lastly, Section U states, in part, that full compliance by the Employer with all terms of this agreement is a condition precedent to the Corporation's liability hereunder. As noted above there are violations to this agreement, which in turn would be a violation of this section of the agreement.

{¶ 10} Smith then concluded her letter with the following reservation of rights language:

Safety National is accepting notice of this loss subject to a full Reservation of Rights under the Insurance Agreement. We will need additional information from you in order to determine whether we will provide coverage for this claim, but there shall be no waiver of our rights by

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our continued investigation. We also acknowledge that the Harborside Healthcare Corporation does not waive any of its rights under the Agreement. We also wish to reserve our right to amend this reservation based on new information revealed during the course of our investigation. In regard to our investigation, please provide us with a complete copy of your file, file notes, and anything else you believe is pertinent to the coverage issues cited in this letter that may not have already been sent. Upon receipt and review of all file materials, we will contact you regarding our position concerning coverage of this claim.

{¶ 11} Despite Safety National's communications to BSI identifying itself as the excess carrier for the A.C.W. claim, Kelly Dickens, the sole employee in BSI's Excess Reimbursement Department, ultimately identified AIG as the excess insurer that was responsible for covering the A.C.W. claim. In a February 8, 2012 email, Vicky Hardie asked Dickens whether she had any contact information for the excess insurer. Hardie stated that the claim needed to be reported and the carrier was a subsidiary of AIG. Later that day, Dickens sent a response email to Hardie and carbon copied Janice Burnap, an employee of Sun, on the email. Dickens stated "Hi Vicky, I do not show that this claim has any excess coverage. I could not find coverage for this * * * claim out of the State of Ohio. The below policy only shows coverage for claims in the state of Washington. Please see the below print screens." The email then contained screen shots presumably from BSI's claims system. Dickens then concluded the email by stating: "Again I only show coverage for the state of WA, not Ohio. And this claim does not have any location

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codes tied to the excess policy. Therefore there is no excess I can offer. I am carbon copying Janice Burnap, just in case she may have any conflicting information." On October 8, 2012, Dickens sent another email to Hardie and carbon copied Burnap. She stated, in part: "As stated previously, I do not show this claim has any excess coverage. I had carbon copied the client [Burnap] and there was no dispute to the information that I presented. I will carbon copy again for extra measure." Burnap did not respond to either of these two emails, despite being copied on both.

{¶ 12} On November 8, 2012, Dickens sent an email to Shannon Etter, an employee of BSI, related to the excess insurance coverage for the A.C.W. claim. Dickens also copied three employees of BSI and Burnap on this email. Dickens stated, "Hi Shannon,...