[Cite as Goodman v. Medmarc Ins., 2012-Ohio-4061.]


         Court of Appeals of Ohio
                               EIGHTH APPELLATE DISTRICT
                                  COUNTY OF CUYAHOGA


                          JOURNAL ENTRY AND OPINION
                                   No. 97969




                         ALAN I. GOODMAN, ESQ.
                                                           PLAINTIFF-APPELLEE

                                                     vs.

                          MEDMARC INSURANCE
                                                           DEFENDANT-APPELLANT




                                        JUDGMENT:
                                         AFFIRMED


                             Criminal Appeal from the
                       Cuyahoga County Court of Common Pleas
                                Case No. CV-734744

        BEFORE:          Rocco, P.J., E. Gallagher, J., and Kilbane, J.

        RELEASED AND JOURNALIZED:                            September 6, 2012
[Cite as Goodman v. Medmarc Ins., 2012-Ohio-4061.]
ATTORNEY FOR APPELLANT

Brian D. Sullivan
Reminger Co., L.P.A.
101 West Prospect Avenue
Suite 1400
Cleveland, OH 44115

ATTORNEYS FOR APPELLEE

Lynn Sheftel
Daniel J. Nealon
55 Public Square
Suite 1300
Cleveland, OH 44113




KENNETH A. ROCCO, P.J.:
        {¶1} Defendant-appellant Medmarc Insurance (“Medmarc”) appeals the

trial   court’s   decision   granting   plaintiff-appellee   Alan   I.   Goodman’s

(“Goodman”) summary judgment motion and denying Medmarc’s summary

judgment motion. Medmarc asserts that it is not required to defend and/or

indemnify Goodman        for legal malpractice allegations.     Because the trial

court’s final judgment properly concluded that Medmarc is required to

provide Goodman with a legal defense and/or indemnification, we affirm.

        The Underlying Lawsuit

        {¶2}   Goodman represented Jerry Stephens (“Stephens”) in an

employment case against the Veterans Administration. Stephens contends

that Goodman committed malpractice in his representation, including

Goodman’s failure to timely file an appeal.

        {¶3} Stephens received an adverse ruling from the Merit Systems

Protection Board (“MSPB”) and planned to appeal the decision. Due to a

series of events, the brief was not timely filed and the United States Court of

Appeals, D.C. Circuit refused to reinstate the appeal. Goodman contacted

Stephens, advised him of what had occurred, and offered to refund the

retainer Stephens had paid for the appeal.

        {¶4} Goodman and Stephens memorialized the agreement to refund the

money in a document dated June 16, 2009, entitled “Appeal Resolution.” At
this time, Stephens did not express dissatisfaction with Goodman’s

representation nor did he indicate that he planned to sue.

      {¶5} Goodman did not hear from Stephens again until he received a

letter from Attorney Slavin dated February 18, 2010, stating that Stephens

was considering filing a malpractice action against Goodman.        Stephens

avers that he had not contemplated suing Goodman until Stephens consulted

with a bankruptcy attorney in January 2010.         The bankruptcy attorney

advised Stephens to contact another attorney regarding how Goodman had

handled the appeal. On March 8, 2010, Stephens filed a complaint against

Goodman for legal malpractice.

      The Policy

      {¶6} Goodman carried a policy with Medmarc from February 15, 2009,

to February 15, 2010. On February 14, 2010, Goodman completed a claims

made application (“Application”) with Medmarc, requesting the same limits

as in his previous policy.       At the time that Goodman completed the

Application, he had not had contact with Stephens for approximately eight

months. The Application asked whether Goodman was aware of any possible

claims or to any errors or admissions that might reasonably be expected to be

the basis of any claims. Goodman replied “no” to these questions.
[Cite as Goodman v. Medmarc Ins., 2012-Ohio-4061.]
        {¶7} Based on the Application, Medmarc issued the policy in issue

        which provided professional liability coverage, effective at the

        expiration of the earlier policy. Both policies provided coverage based

        on when the claim was made.

        {¶8}      Medmarc denied any obligation to provide coverage to Goodman

for the Stephens’s action. On August 20, 2010, Goodman filed a complaint

for declaratory judgment seeking a declaration that Medmarc was obligated

to defend and/or indemnify Goodman for the allegations asserted against him

by Stephens. Medmarc filed a counterclaim, seeking a declaration that it

was not obligated to provide coverage to Goodman.           Both parties filed

motions for summary judgment. The trial court granted Goodman’s motion

and denied Medmarc’s motion. Medmarc appeals the trial court’s entry of

final judgment and presents three assignments of error for review.

        “I. The trial court incorrectly denied Medmarc’s motion for

summary judgment and in so doing improperly declared that

Medmarc has a duty to defend and/or indemnify Goodman for Mr.

Stephens’ allegations of legal malpractice.

        “II.   The trial court incorrectly granted Goodman’s motion for

summary judgment and in so doing improperly declared that

Medmarc has a duty to defend and/or indemnify Goodman for Mr.

Stephens’ allegations of legal malpractice.
[Cite as Goodman v. Medmarc Ins., 2012-Ohio-4061.]
        “III.    The trial court incorrectly denied Medmarc’s rescission

claim.”

        {¶9} We consider the assignments of error together as the legal analysis

involved is the same. The trial court determined that the Policy required

that Medmarc defend and indemnify Goodman for Stephens’s malpractice

claim. First, the trial court determined that the claim was not made until

March 8, 2010, a date falling within the Policy period. Second, relying on

Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216, 271 N.E.2d 855 (1971), the trial

court determined that Medmarc was not entitled to rescind the Policy.

        {¶10} On appeal, Medmarc contends that the claim was first made at

the time that Goodman and Stephens signed the “Appeal Resolution.”

Because this document was executed prior to the Policy period, Medmarc

argues that it is not required to defend and/or indemnify for this claim.

Alternatively, Medmarc contends that, even if the claim first arose during the

Policy period, Goodman had a reasonable basis to believe that his failure to

prosecute Stephen’s appeal was a breach of a professional duty and could

result in a claim against him. According to Medmarc, this renders the Policy

void ab initio. Neither of these arguments is well taken and so we overrule

the first and second assignments of error.
[Cite as Goodman v. Medmarc Ins., 2012-Ohio-4061.]
        {¶11} We review summary judgment rulings de novo. Grafton v. Ohio

Edison Co., 77 Ohio St.3d 102, 105, 671 N.E.2d 241 (1996).                Summary judgment

is appropriate when there is no genuine issue as to any material fact; (2) the moving party is

entitled to judgment as a matter of law; and (3) reasonable minds can come to but one

conclusion, and that conclusion is adverse to the party against whom the motion for summary

judgment is made, who is entitled to have the evidence construed most strongly in his favor.

Civ.R. 56(C); Gilbert v. Summit Cty., 104 Ohio St.3d 660, 2004-Ohio-7108, 821 N.E.2d 564,

¶ 6.

        {¶12} The crux of this appeal involves two questions on the Application

and Goodman’s answers to those questions:

        4.      After inquiry of all lawyers and employees of the law firm,
                including independent contractors, Of Counsel and any
                other affiliated lawyers, is any such person aware of:
                A professional liability claim made in the past 5 years
                (either still open or closed)? ... Yes X No
                An act or omission that might reasonably be expected to be
                the basis of a claim? ... Yes X No

Medmarc makes a number of arguments contending that Goodman’s “no”

answers rendered the Policy void ab initio.               We first address Medmarc’s

argument that the “Appeal Resolution” that was executed before the Policy

went into effect constituted a “claim.” The Policy covered only those claims

that were made during the Policy period.                  According to Medmarc, the

“Appeal Resolution” was the initiation of the claim, and because the “Appeal
Resolution” occurred prior to the Policy’s effective date, Medmarc is not

required to defend or indemnify Goodman for this claim. The Policy defines

a “Claim” as follows:

      a demand for money or services made against any “Insured”,
      including service of a suit, arbitration proceedings or a motion
      against any “Insured”, alleging negligent acts or negligent
      omissions, or alleging “Personal Injury”, resulting from the
      performance of or failure to perform “Professional Services” by
      any “Insured.” A “Claim” includes any complaint, grievance or
      other allegation of wrongdoing made against any “Insured” to any
      disciplinary agency or board. A “Claim” is deemed “made”
      against any “Insured” when any “Insured” first receives notice,
      either oral or written, of such “Claim.”

Policy § II.B.

      {¶13} The uncontroverted affidavits from Goodman and Stephens

establish that, at the time the “Appeal Resolution” was executed, there was

no demand for money or services made against Goodman, nor any suit,

arbitration proceeding, motion, complaint, grievance, or other allegation of

wrongdoing.      Rather, the affidavits establish that Goodman informed

Stephens that he had not filed the appeal; that Goodman agreed to return the

$6,000.00 Stephens had given him to file the appeal; and that at that time

neither party contemplated any further action.   Stephens indicated in his

affidavit that he was not displeased with Goodman’s representation and did

not intend to sue Goodman at the time that they executed the “Appeal

Resolution.”
[Cite as Goodman v. Medmarc Ins., 2012-Ohio-4061.]
        {¶14} Stephens did not communicate any intention to file a claim

against Goodman until he sent Goodman a letter, dated February 18, 2010.

The complaint was not filed until March 8, 2010. As the policy period was

from February 15, 2010 to February 10, 2011, the claim was made during the

policy period.

        {¶15} Medmarc next argues that the Policy provides coverage only if

Goodman had no reasonable basis to believe that he committed acts or

omissions that could result in a claim against him.      On the Application,

Goodman answered “no” to the question of whether he was aware of an act or

omission that might reasonably be expected to be the basis of a claim.

According to Medmarc, Goodman’s “no” answer constituted a warranty,

Goodman breached that warranty, and, therefore, the Policy was void ab

initio. We disagree.

        {¶16} In Allstate Ins. Co. v. Boggs, 27 Ohio St.2d 216, 271 N.E.2d 855

(1971), the Ohio Supreme Court explained the difference between a warranty

and a representation when an insured is applying for insurance.            The

difference is important because if a misstatement on an insurance application

constitutes a warranty, the policy is void ab initio. A statement “does not

constitute a warranty unless the language of the policy, construed strictly

against the insurer, requires such an interpretation.”     Id. at   219.   The

Court explained that “[i]f it is [the insurer’s] purpose to provide that a
misstatement by the insured shall render the policy void ab initio, such facts

must appear clearly and unambiguously from the terms of the policy.” Id.

If the misstatement constitutes a representation, the policy is voidable if the

misstatement is made fraudulently and the fact is material to the risk.   But the policy is not

void ab initio. Id. at 218-219.

       {¶17} Boggs established a two-pronged test for determining whether a

misstatement qualifies as a warranty. Am. Family Ins. Co. v. Johnson, 8th

Dist. No. 93022, 2010-Ohio-1855, ¶16.              The first prong requires that the

“representation [] plainly appear on the policy [] or be plainly incorporated

into the policy * * *.” Id. Under the second prong, the policy must plainly

warn that a misstatement or misrepresentation renders the policy void from

its inception. Id.

       {¶18} In Med. Protective Co. v. Fragatos, 190 Ohio App.3d 114,

2010-Ohio-4487, 940 N.E.2d 1011 (8th Dist.), we concluded that the

statements set forth in the insurance application were incorporated into the

policy and constituted warranties. In Fragatos, the policy in issue stated:

“It is understood and agreed that the statements made in the insurance

application are incorporated into, and shall form part of, this policy * * *.”

Id. at ¶31. Further, the application contained a “warning that any material

misrepresentation would render the policy ‘null and without effect,’ [which
was] equivalent to warning that the policy is void ab initio.”     Id. at ¶33.

When viewed together, the policy and application language satisfied both

prongs of the Boggs test and the statements constituted warranties.

      {¶19} Conversely, in Johnson we concluded that the statements

constituted only representations. In that case, the insurance policy stated:

      * * * We will provide this insurance to you in reliance on the
      statements you have given us in your application of insurance.
      You warrant the statements in your application to be true and
      this policy is conditioned upon the truth of your statements. We
      may void this policy if the statements you have given us are false
      and we have relied on them.

Johnson, 2010-Ohio-1855, ¶16.        We concluded that “the policy merely

mentions the application; it does not state that the application is part of the

policy.”   Id. ¶18.   Further, the policy failed to “specifically state that a

misrepresentation as to prior claims would render the policy void ab initio.

Instead, it generally states that the false statements on the application may

void the policy.” Id.          {¶20} Similarly, in James v. Safeco Ins. Co. of

Illinois, 195 Ohio App.3d 265, 2011-Ohio-4241, 959 N.E.2d 599 (8th Dist.), we

determined that the application statements constituted representations as

opposed to warranties. In James we concluded that language stating “‘we

may void this policy * * *,’ is not a clear warning to the insured that a

misstatement shall render the policy void.” Id. at ¶25, emphasis in original.

Such language is only “a general statement reflecting the long-standing point
                                       11

of law that a ‘contract induced by fraud is not void, but is voidable at the

election of the one defrauded.’” Id., quoting RR. Co. v. Steinfeld, 42 Ohio St.

449, 455 (1884).

      {¶21} In applying the two-part Boggs test and our prior case law, we

conclude that the statements made by Goodman on the Application constitute

representations, not warranties. The Policy states as follows:

      K. Application

      By acceptance of this Policy, the “Insureds” agree that: 1) the
      statements in the application and in all additional materials
      submitted by any “Insured” for this Policy or for any prior
      Policies issued by this Company, which are made a part of this
      Policy, are personal representations, that they shall be deemed
      material and that this Policy is issued in reliance upon the truth
      of such representations; ***.”

Policy § IV.K, emphasis in original.

      {¶22} While the Policy does make explicit that Goodman’s answers to

the Application questions are incorporated into the Policy, the Policy fails

under prong two of the Boggs test, because it fails to plainly warn that a

misrepresentation about potential claims renders the policy void ab initio.

Accordingly, under our prior case law, Goodman’s “no” answers on the

Application do not constitute warranties under the Boggs test.

      {¶23} Because the answers were representations and not warranties,
even if misrepresentations1 were made, they did not render the policy void ab

initio. Although an insurer may cancel a voidable policy, a representation

“may not be used to avoid liability arising under the policy after such liability

has been incurred.” Boggs, at paragraph one of the syllabus. Medmarc was

not entitled to cancel the Policy after Stephens filed the malpractice lawsuit

against Goodman. Under the terms of the Policy, Medmarc had a duty to

defend and/or indemnify Goodman for Stephens’s allegations of legal

malpractice.     The trial court           properly denied Medmarc’s motion for

summary judgment and granted Goodman’s motion for summary judgment.

The trial court properly declared that Medmarc has the legal duty to defend

and indemnify Goodman with respect to the Stephens’s claim. Accordingly,

we overrule Medmarc’s assignments of error.

      {¶24} The trial court’s order is affirmed.

      It is ordered that appellee recover from appellant costs herein taxed.

      The court finds there were reasonable grounds for this appeal.

      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.


      The parties vigorously dispute whether the “no” answers constitute misrepresentations.
      1
__________________________________________
KENNETH A. ROCCO, PRESIDING JUDGE

EILEEN A. GALLAGHER, J., and
MARY EILEEN KILBANE, J., CONCUR
