Ohio Supreme Court Finds Bad-Faith Claim Against Insurer is Subject to Arbitration

By Julie Grace VanVliet, Esq.

In a unanimous decision, the Ohio Supreme Court recently held that a claim for bad-faith claim handling was subject to an insurance policy’s arbitration clause. The Court held that the presumption of arbitrability exists, and that a court should only deny a request to compel arbitration if the clause “cannot reasonably be read to cover the dispute in question.” This decision cements the broad scope of arbitration provisions in insurance policies regarding disputes between an insurer and an insured. See U.S. Acute Care Solutions, L.L.C. v. Doctors Co. Risk Retention Group Ins. Co., 2025-Ohio-5010, “Slip Opinion” No. 2025-Ohio-5010.

In the underlying dispute, a patient filed a medical malpractice lawsuit against U.S. Acute Care Solutions, L.L.C. (“USACS”), an emergency care services provider. USACS submitted the claim to their insurer, Doctors Company Risk Retention Group Insurance Company (“TDC”), and TDC hired counsel to defend the lawsuit. Eventually, after USACS and TDC disagreed on the settlement strategy, USACS decided to self-fund the settlement to avoid a potentially larger jury verdict.

Thereafter, USACS sued TDC alleging bad-faith claim handling and seeking to recover the amount they paid for the settlement agreement. TDC filed a motion to stay the case and compel arbitration based on the arbitration provision in the policy issued to USACS. The trial court granted the motion, and USACS appealed to the Fifth District Court of Appeals.

The Fifth District reversed the trial court’s decision, holding that the single bad-faith claim was an extra-contractual matter to which the arbitration endorsement did not apply. TDC appealed, and the Ohio Supreme Court reversed the decision.

TDC’s position was predicated on language in its policy endorsement which provided that “any dispute between you and us relating to this Policy (including any disputes regarding our extra-contractual obligations) will be resolved by binding arbitration . . .” TDC argued that, based on a plain reading of this language, any dispute which related to the policy – even those based on bad-faith claim handling – were subject to arbitration.

In response, USACS argued that deciding the bad-faith claim did not require a fact finder to interpret the policy. Instead, the issue was whether TDC’s conduct in handling the settlement constituted reasonable justification. USACS argued that the dispute did not relate to the policy or an interpretation of the policy, but instead, related to TDC’s conduct. Therefore, USACS argued, the bad-faith claim against TDC did not “relate to” the policy and did not fall under the arbitration provision.

The Court agreed with TDC, reversed the Fifth District’s decision, and held that the bad-faith claim did fall under the arbitration provision of the policy. Relying on the Court’s decision in Academy of Medicine of Cincinnati v. Aetna Health, Inc., 2006-Ohio-657 (2006), the Court reasoned that the policy language was properly construed as a broad arbitration clause “that should not be denied unless it may be said with positive assurance that the arbitration clause is not susceptible of an interpretation that covers the asserted dispute.” Id., ¶ 19.

Because USACS could not overcome the presumption of arbitrability, and because USACS could not identify any evidence demonstrating that the bad-faith claim handling fell outside of policy’s arbitration clause, the Court held that the bad-faith claim was subject to arbitration. The Court also reasoned that the bad-faith claim would not exist outside of the policy or the relationship between TDC as the insurer and USACS the insured.

This opinion clarifies that broad arbitration provisions contained in insurance policies apply to claims which arise out of the relationship between the insurer and insured – not only those which arise out of the interpretation of the policy language itself. If you have any questions regarding this decision or have any questions concerning insurance coverage matters, please contact a member of our Insurance Coverage or Appellate Law Practice Groups.