Ohio Supreme Court Holds Third Parties Jointly and Severally Liable as to Subrogation Interest on Post Settlement Workers’ Compensation Benefits

CASE ALERT:

The Ohio Supreme Court has issued a decision underscoring the reach of the state’s workers’ compensation automatic subrogation statute.

In Bureau of Workers Compensation v. Verlinger (Slip Opinion No. 2018-Ohio-1481), Ohio’s high court reversed the lower courts, holding that both a claimant and settling third parties are jointly and severally liable for the subrogation lien, including as yet unpaid and future benefit payments. Third parties would include the tortfeasor, its insurance carrier, and the claimant’s underinsured motorist insurer.

In Verlinger, the statutory subrogee (the Bureau) filed suit asserting its subrogation interest naming as defendants the claimant, her insurer and the insurer of the driver alleged to have caused the accident.

The factual setting was interesting given that at the time of the third-party settlements there were no workers’ compensation benefits paid. In fact, the claimant had previously been denied workers’ compensation benefits for failing to demonstrate that the motorcycle crash injury occurred within the course and scope of the driver’s employment. The denial was subsequently reversed on administrative appeal and the claimant was deemed eligible for benefits.

The allowance of benefits occurred after the third-party settlements with the insurers.

The Ohio Supreme Court went further in holding that a potential workers’ compensation recipient remained a “claimant” under the automatic subrogation provision of the statute, at least until the time period for application lapses.

Under the statute a claimant has an obligation to notify a statutory subrogee of the identity of all potential third parties against whom a claimant may have a right of recovery. Statutory subrogees would include the Bureau, the Ohio attorney general (if the claimant is insured through the BWC) or a self-insuring employer.

Although a settling third party does not share the duty of notification with the claimant under the statute, the Court interpreted the law to impose joint and several liability on those third parties for failure of the claimant to protect the subrogation lien. Under Verlinger, the claimant and the insurers who settled with the plaintiff were held jointly and severally liable.

Indemnification language as to the subrogation interest in a release or settlement agreement may help blunt the impact of the Court’s holding on a settling third party. However, given the decision even if the release has indemnity language the statutory subrogee still has a right to assert its subrogation claim against all parties as they remain jointly and severally responsible for the subrogation interest. This is the case even if the benefits are allowed and paid in the future. Although the settling third party may in turn attempt to hold a plaintiff responsible for the lien, the subrogation rights against settling third party remain.

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RMI’s roots run deep in the area of Ohio subrogation workers’ compensation.

RMI has represented self insureds, TPA’s and out of state insurers on Ohio subrogation workers compensation matters throughout the firm’s history. RMI represented the National Association of Subrogation Professionals (NASP) in the organization’s first ever amicus filing – a case before the Ohio Supreme Court on the constitutionality of the subrogation provision of the state’s workers compensation statute.

For your Ohio matters involving a workers compensation subrogation issue, contact RMI partner Tim Ita.