Allegation of bad faith insurance claim must go to arbitration

A dispute between a Canton-based physicians' group and its medical malpractice insurer must be resolved through arbitration, the Supreme Court of Ohio ruled.

In a unanimous decision, the Supreme Court reversed a ruling by the Fifth District Court of Appeals that allowed a trial court to consider a lawsuit alleging bad faith in handling an insurance claim. The Supreme Court found the broadly worded arbitration clause in the insurance policy required the parties to resolve the matter through arbitration.

Writing for the Court, Justice Daniel R. Hawkins explained that typically when there is doubt about whether an arbitration clause applies to a dispute, the matter should be submitted to arbitration, unless the claim is expressly excluded. Because the physician group could not point to a clear exclusion in the policy or provide "forceful evidence" that its bad faith claim handling charge was not subject to arbitration, the parties are required to arbitrate the issue, he wrote.

Doctors Dispute Insurer's Claim Handling Strategy

U.S. Acute Care Solutions is a Canton-based provider of emergency care services to healthcare systems throughout the United States. In 2020, a patient filed a medical malpractice lawsuit against an Acute Care doctor practicing in a Connecticut hospital.

Acute Care submitted a claim to its insurer, The Doctors Company Risk Retention Group Insurance Company (TDC). TDC hired a lawyer to represent the Acute Care doctor. TDC and Acute Care disagreed on a settlement strategy as the litigation progressed. In December 2022, Acute Care agreed to use its own funds to settle with the patient in an effort to avoid the potential risk of a jury verdict that would award the patient more than the coverage limits of Acute Care's policy with TDC.

Acute Care then filed a lawsuit in March 2023 in Stark County Common Pleas Court against TDC, alleging bad faith insurance claim handling and seeking to recover the amount it paid to settle the patient's lawsuit, along with additional costs and fees.

TDC requested that the trial court stay the case and direct the parties to arbitrate the matter. TDC and Acute Care debated the meaning of the arbitration clause in the policy. The arbitration provision stated that any dispute, including those regarding "contractual obligations," must be arbitrated.

Acute Care argued that an allegation of bad faith claim handling is a tort lawsuit and does not involve any contractual obligation. Since it was not a contractual obligation, it was not subject to arbitration and could proceed in the trial court, the physician group maintained. The trial court rejected Acute Care's argument and directed the matter to arbitration.

Acute Care appealed to the Fifth District Court of Appeals, which reversed the trial court's decision. TDC appealed the matter to the Supreme Court.

Supreme Court Analyzed Contract Provisions

Justice Hawkins described the arbitration clause as a "contract within a contract," and noted the Court has ruled previously that it presumes the intent of the parties making a contract is reflected in the contract's plain language.

The opinion also stated that the Court examines the arbitration clauses in insurance policies to determine whether they are broad or narrow. A clause that contained the phrase "any claim or controversy arising out of or relating to the agreement" is considered a broad clause. The Court found the TDC policy had a broad arbitration agreement.

Ohio has adopted rulings by federal courts, which have found that a matter should be sent to arbitration unless an issue is explicitly exempted or there is compelling evidence that the policy's arbitration clause does not cover the dispute. Because the policy indicated that arbitration covered any dispute relating to the policy, the Court stated that a lawsuit covering bad faith claims handling is also covered.

Before concluding that an arbitration clause applies to a matter, the Court also considered whether the lawsuit could be pursued without reference to the policy or the relationship between TDC and Acute Care. In this case, Acute Care cannot argue that TDC mishandled the attempt to settle an insurance claim without referring to the policy, the Court concluded.

The case is cited 2024-0450. U.S. Acute Care Solutions LLC v. Doctors Co. Risk Retention Group, Slip Opinion No. 2025-Ohio-5010.