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Ohio Supreme Court Decision on Workers' Compensation Subrogation is Favorable for Self-Insured Employers but Creates Potential Problems for Insurance Carriers

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By Kenton Steele and Mick Proxmire

June 6, 2018

Under Ohio Revised Code section 4123.931 a statutory right of subrogation exists for Ohio’s self-insured employers and the Ohio BWC for employers in the State Fund.  This right of subrogation is for the recovery of money paid out by either a self-insured employer or the Ohio BWC when a worker’s compensation claim was caused by the negligence of a third-party who was not a co-worker of the injured worker.  The law in Ohio was previously unsettled on the issue of what happened when a person injured at work by the negligence of a third-party settled a separate personal injury claim before filing for workers’ compensation benefits or while the denial of a benefits claim was still appealable. This issue was resolved by the Ohio Supreme Court in the recent decision in Bureau of Workers’ Comp. v. Verlinger. Slip Op. No. 2018-Ohio-1481.

In Verlinger, Ms. Verlinger was injured in a car accident while at work.  While she was appealing the initial denial of her underlying workers’ compensation claim, Ms. Verlinger settled her separate negligence claim with the party responsible for causing the accident. This settlement did not set aside monies for the subrogation rights of the Ohio BWC (her employer was State Funded).  After the settlement of the negligence action, Ms. Verlinger’s worker’s compensation claim was allowed. The BWC then brought an action against Ms. Verlinger and the insurance carrier who paid the settlement. The BWC argued it was entitled to recover a portion of the benefits it had paid to Ms. Verligner from the proceeds of her third-party settlement. The trial court determined that because the settlement occurred after Ms. Verlinger’s claim had been denied and before it was ultimately allowed, Ms. Verlinger was not a “claimant” at the time the settlement was reached. Thus, the lower court held BWC had no subrogation rights in the proceeds of the settlement. The 9th District Court of Appeals affirmed the decision.

The Supreme Court of Ohio reversed the decisions of the lower courts and issued a ruling clarifying the rights of self-insured employers and the BWC with respect to settlements between injured workers and third parties. The Court simplified who is a “claimant” under Ohio’s worker’s compensation subrogation statute and determined that a “claimant” is anyone who is eligible to receive compensation, medical benefits, or death benefits under Ohio’s worker’s compensation laws.  Furthermore, the person is considered a “claimant” unless and until a final determination has been made denying the worker’s compensation claim and all appeals have been exhausted, or if no worker’s compensation claim was filed, until the statute of limitations has run for filing a claim.

This decision is favorable to self-insured employers and the BWC because it is now clear that they will always have a right of subrogation to any settlement between an injured worker and an at-fault third-party regardless of when the worker’s compensation claim is filed or allowed.

This decision is less favorable to insurers or other entities responsible for paying these third-party claims. This is because the Verlinger Court also held that under the plain language of the relevant statute, both the claimant and a responsible third-party are liable for reimbursing the party who pays a benefits claim. This responsibility applies even when the party paying the settlement is not aware of the benefits claim.

In light of this decision, it is imperative for insurance carriers settling injury claims to determine whether the injured party has sought or may still seek workers’ compensation benefits.  Proceeding with the third-party settlement without allowing the BWC or self-insuring employer the right to assert their lien, may result in an insurer paying not only the third-party settlement, but also being responsible for paying the BWC’s or self-insuring employer’s subrogation lien. In order to avoid this possibility, insurers should be cognizant of the potential for the filing or continued pursuit of a worker’s compensation claim by the injured claimant.

Should you be a self-insured employer or an insurance carrier and have questions related to the implications of the Verlinger decision, please contact one of our Workers’ Compensation Practice Group members.

This has been prepared for informational purposes only. It does not contain legal advice or legal opinion and should not be relied upon for individual situations. Nothing herein creates an attorney-client relationship between the Reader and Reminger. The information in this document is subject to change and the Reader should not rely on the statements in this document without first consulting legal counsel.

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