Spectrum Benefit Options, Inc. v. Med. Mut.

• Decision Date: 11 October 2007
• Docket Number: No. 06CA20.,No. 06CA19.,06CA19.,06CA20.
• Citation: 880 N.E.2d 926,174 Ohio App.3d 29,2007 Ohio 5562
• Parties: SPECTRUM BENEFIT OPTIONS, INC. et al., Appellants, v. MEDICAL MUTUAL OF OHIO, Appellee.
• Court: Ohio Court of Appeals

880 N.E.2d 926

174 Ohio App.3d 29

2007-Ohio-5562

SPECTRUM BENEFIT OPTIONS, INC. et al., Appellants, v. MEDICAL MUTUAL OF OHIO, Appellee.

No. 06CA19.

No. 06CA20.

Court of Appeals of Ohio, Fourth District, Athens County.

Decided October 11, 2007.

David J. Winkelmann, Athens, for appellants.

Michael E. Smith and Mark L. Rodio, Cleveland, for appellees.

PER CURIAM.

{¶ 1} This is an appeal from an Athens County Common Pleas Court summary judgment in favor of Medical Mutual of Ohio ("MMO"), defendant below and appellee herein. Spectrum Benefits Options, Inc. ("SBO" or "Cowden")¹ and Council of Governments-Southeast Ohio Voluntary Education Cooperative ("SEOVEC"), plaintiffs below and appellants herein, assign the following errors for review:

First Assignment of Error:

The trial court erred in finding there was no written contract between MMO, SBO and SEOVEC.

Second Assignment of Error:

MMO is barred by the doctrine of promissory estoppel from asserting a statute of frauds defense.

{¶ 2} This case involves the breach of an alleged agreement to provide medical insurance to a consortium of schools, known as SEOVEC. In early 2001, SBO, a benefits-consulting company, began to explore the possibility of forming a medical-insurance consortium with SEOVEC. SBO contacted MMO to see whether it would be interested in insuring members of the consortium at reduced rates. MMO expressed an interest in the proposed consortium,

{¶ 3} In July 2001, David Chiappino of SBO sent to MMO's chief underwriter and vice-president of educational sales and service, George Stadtlander, an "outline for the SEOVEC Medical Consortium project" as "a starting point." In August 2001, SEOVEC issued a "Vendor Endorsement" and stated that it would use MMO as the exclusive insurer. In November 2001, MMO issued a quote to a member of SEOVEC. SBO advised MMO that it needed to "hold off," because the "infrastructure [was] not in place," and the parties needed to agree upon premium rating.

{¶ 4} On February 23, 2002, SBO prepared a "Draft Summary of Proposed SEOVEC Health Plan Alliance, Inc., Cowden & Associates, and Medical Mutual of Ohio" and outlined the "background, roles, and compensation." The document stated that the "SEOVEC Health Plan Alliance, Inc. (the `Alliance') based on the recommendation of Spectrum Benefit Options, Inc. d/b/a Cowden & Associates (C & A) has decided to sponsor a medical insurance purchasing cooperative." It explained that Cowden, "under an exclusive arrangement with the Alliance has: (1) Contacted member schools to determine the level of interest in a medical purchasing alliance; (2) Determined that an adequate level of intent exists to seriously pursue such an alliance; (3) Determined that based on geography and level of interest, the best insurance partner was Medical Mutual of Ohio (MMO); (4) Negotiated with MMO for favorable terms of offering; [and] (5) Worked with legal counsel retained by C & A to create a legal framework for consideration by the Alliance and it's [sic] legal counsel." The document also outlined program objectives and the "key roles" of the "key organizations," including the following roles for MMO "(or other carrier selected)": (1) assumption of risk, (2) claims administration, (3) network management, (4) calculating global rate adjustments— initial and renewal, (5) distributing compensation as agreed upon to brokers and Cowden, (6) distributing monthly overall computerized billing eligibility lists to Cowden or directly to the schools, (7) preparing necessary utilization and usage-pattern reports as reasonably requested by Cowden, and (8) providing agreed-upon monthly experience data to Cowden.

{¶ 5} The document also stated that "C & A and MMO will be retained on an exclusive basis for a minimum of two (2) years from the date of the first official offering, anticipated to be May 1, 2002." Regarding Cowden's compensation, the document stated, "It is understood that C & A has expended hundreds of hours of effort in preliminary analysis, communications, negotiations, legal work and implementation of the program and that C & A will take a minimum of four (4) years to recoup these expenses. In partial recognition of those efforts, SEOVEC during the development phase of this offering, committed to a two year minimum for C & A services. As the further development has required very significant additional time and expense, it is understood that except for failure to provide a reasonable level of service, C & A will remain as the primary consultant for five (5) years." The document contained signature lines for representatives of the three parties, but no one signed the document.

{¶ 6} On February 25, 2002, Jere L. Cowden of SBO sent an e-mail to Stadtlander, explaining that he would send the above document. The e-mail reads: "This draft document will contain signature lines for SEOVEC, MMO and C & A; obviously there will, be discussion & some clarifications before any signatures are possible and I am not sure this will be feasible from MMO's viewpoint * * [W]e are trying to tie up some loose ends * * * to make sure we are not out of line when we hold a broker meeting early next month to kick the offering off. I hope to talk with you latter [sic] this week to review the status of this offering and to get your reaction to the above mentioned summary of roles and responsibilities."

{¶ 7} On that same date, Cowden sent Ronald Smith of SEOVEC and Stadtlander a letter explaining that within the draft summary, he "attempted to capture the essence of prior written and verbal agreements." He further stated that the "concept is for each organization to review and after final changes are made to have the document signed by the appropriate executive of each entity."

{¶ 8} Cowden stated in his deposition that no one at MMO commented on the draft summary and that he did not really expect anyone at MMO to sign the document.

{¶ 9} On March 11, 2002, MMO sales consultant Carolyn. Thomas sent Chiappino a copy of the letter that MMO would be sending to the brokers. The letter reads: "[SEOVEC] appointed [MMO] as the exclusive medical insurance carrier for those school districts participating in the SEOVEC Medical. Consortium. Since that time, we have been working with SEOVEC and their Consultant, Cowden & Associates, on the Underwriting, Marketing and Trust Agreement for the consortium. * * * We are finally ready to offer the SEOVEC Medical Consortium to your groups, but we realize you probably have many questions. Although we initially thought a kick-off meeting would be held, conflicts in many schedules prevented this. SEOVEC's consultant, however, is available * * *."

{¶ 10} Apparently, in spring or early summer 2002, MMO began to have concerns about the consortium. On May 14, 2002, MMO underwriter Steve Attaway sent an e-mail to MMO chief marketing officer Errol Brick explaining that he "was waiting on Legal approval of the agreement and then planning to share it with Jan Persinger and Chuck Braschwitz. If you have a problem with `political' type issues with other producers or customers I guess I need to know that so we can address those with Cowden. * * * We have nothing in it now and they are not beating down our doors."

{¶ 11} On June 17, 2002, Thomas sent a letter to Chiappino, stating that she had a meeting with Brick, Stadtlander, and Attaway to discuss SEOVEC and decided that 1,000 new contracts must be enrolled into SEOVEC by July 1, 2003. If less than 1,000 new contracts are enrolled by that time the rating factors will, be reevaluated."

{¶ 12} In a June 24, 2002 letter, Chiappino responded:

I have received your letter dated June 17, 2002, in which you outline the changes that had been made to the agreement between Cowden & Associates and MMO. While I am, concerned that we were not included in the discussion regarding the changes, I am more concerned that at least 2 superintendents and one broker knew of a "problem" and questioned the viability of The Alliance.

Clearly there is no problem, and we are pleased to have MMO as our partner in this project. In an effort to minimize any communication issues in the future I would like to ask for your help in setting up a meeting with Errol Brick.

{¶ 13} In a July 30, 2002 e-mail, Thomas inquired of a Patricia Decensi whether SEOVEC ever sent MMO a contract. Decensi responded that she had never received anything and that Brick told her not to sign anything with that organization. In July or August 2002, MMO stopped issuing quotes to SEOVEC members. On August 23, 2002, Cowden sent Brick a letter to address MMO's refusal to issue further quotes. Cowden wrote:

Under our agreement, MMO is required to issue discounted quotes to qualifying SEOVEC members upon the agreed terms for the minimum two (2) year period.

MMO initially issued a number of quotes, per the terms of our agreement, to qualifying members. Recently, however, MMO has refused to issue proposals to qualifying members who have submitted requests. This is a breech [sic] of the agreement.

{¶ 14} On October 30, 2003, SBO and SEOVEC filed a complaint against MMO and alleged that MMO had breached (1) the express terms of the "Alliance Agreement," (2) an oral contract implied in fact, and (3) an implied contract. Appellants further asserted claims for a breach of the covenant of good faith and fair dealing and fraudulent inducement. Appellants attached to their complaint the so-called "Alliance Agreement," which was titled "Summary of Proposed Spectrum Benefit Options/Medical Mutual of Ohio Partnership Offering to Southeast Ohio Voluntary Educational Cooperative." The proposal stated that Spectrum recommended to form a partnership with MMO. They also attached a "Draft Summary of Proposed SEOVEC Health Plan Alliance, Inc.," prepared February 23, 2002.

{¶ 15} Appellee requested summary judgment regarding appellants' claims for breach of written contract, breach of oral contract, and breach of...