Marshall v. Colonial Ins. Co.
2016 Ohio 8155
Ohio Ct. App.2016Background
- In 1997 Thomas Marshall was injured in a motor vehicle collision and later (1998) underwent cervical surgery; medical records showed preexisting cervical spondylosis and prior neck complaints.
- Marshall held $100,000 in UIM coverage with Colonial; tortfeasor’s insurer paid $15,000; Colonial eventually paid $50,000 after an arbitration award of $65,000 (setoff applied).
- Litigation over whether employer coverage (Kemper) applied (Scott‑Pontzer/Galatis issues) produced pro‑rata litigation and appeals that affected Colonial’s evaluation of exposure.
- Colonial delayed substantive medical review and did not obtain an independent physician review until August 2005 (shortly before November 2005 arbitration); earlier reviews were by company nurses and adjusters.
- Marshall sued Colonial for bad faith (filed in 2005; refiled 2009). Trial court granted summary judgment for Colonial; on appeal the Seventh District reversed and remanded, finding triable issues of fact.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether Colonial’s claims handling constituted bad faith (delay/low offer/foot‑dragging) | Marshall: delays in arbitration response, reliance on nurse reviews, late physician review, low $15,000 offer and failure to investigate causation created triable issue | Colonial: conduct was reasonably justified by pro‑rata coverage uncertainty, factual dispute over causation, cooperation issues (authorizations, arbitrator selection) and no duty to immediately obtain IME | Reversed: reasonable minds could find Colonial lacked reasonable justification on some handling aspects; summary judgment improper |
| Relevance of insurer’s claims handling (depositions/medical releases) to UIM arbitration/discovery | Marshall: adjuster and nurse depositions and limited medical releases were proper and relevant to both arbitration and potential bad faith | Colonial: such discovery irrelevant to arbitration on causation/damages and potentially aimed at later bad faith suit; policy required broad cooperation/authorizations | Held for Marshall on triability: although resolved disputes existed, totality of circumstances (including discovery refusals) raised factual questions for trial |
| Whether reliance on company nurses and adjuster assessments (instead of early physician IME) was reasonable | Marshall: insurer’s long reliance on non‑physician reviews without testing surgeon testimony was unreasonable | Colonial: IME not always required; insurer could rely on available records and pro‑rata issues justified pacing | Held: failure to obtain a timely physician review and to clarify surgeon’s position contributed to factual dispute whether insurer reasonably investigated |
| Effect of "fairly debatable" standard (insurer’s right to refuse) | Marshall: even if some issues were debatable, insurer must reasonably justify refusals and investigations | Colonial: claim was fairly debatable given preexisting condition and pro‑rata uncertainty, so denial/delay was justified | Held: "fairly debatable" does not shield insurer if refusal rests on inadequate investigation; triable issues remain |
Key Cases Cited
- Hoskins v. Aetna Life Ins. Co., 6 Ohio St.3d 272 (insurer owes duty of good faith to insured)
- Zoppo v. Homestead Ins. Co., 71 Ohio St.3d 552 (bad faith judged by whether insurer had reasonable justification; inadequate investigation may support bad faith)
- Hart v. Republic Mut. Ins. Co., 152 Ohio St. 185 (insurer’s belief in nonliability must be reasonable, not arbitrary or capricious)
- Motorists Mut. Ins. Co. v. Said, 63 Ohio St.3d 690 (insurer entitled to refuse where claim is genuinely debatable as to law or facts)
- Tokles & Son, Inc. v. Midwestern Indem. Co., 65 Ohio St.3d 621 (discussion of bad faith standards and insurer defenses)