Ohio Supreme Court Determines that Subrogation Applies to Third-Party Settlements Prior to WC Claim Allowance

On April 19, 2018, the Ohio Supreme Court determined in Bureau of Workers’ Compensation v. Verlinger (2018-Ohio-1481) that the provisions of Ohio Revised Code § 4123.931 (the subrogation statute) applied to third-party lawsuits prior to the actual establishment of the workers’ compensation claim.  The court held a claimant becomes eligible to receive workers’ compensation benefits at the time of the injury (or death) and remains eligible unless and until a final determination has been made that the claimant is not entitled to benefits or until the time allowed for filing a claim has elapsed. 

In Verlinger, the claimant filed a claim application that was initially denied by the BWC due to lack of evidence.  The claimant then appealed the BWC denial.  Prior to the hearing on the merits, the claimant settled her liability claims against the third-party tortfeasor.  The worker’s compensation claim was subsequently allowed through the administrative process.  The BWC then filed a complaint asserting its subrogation rights under Ohio Revised Code § 4123.931 for the amounts it had paid on the workers’ compensation claim.  The trial court granted summary judgment on the claimant’s behalf, ruling she was not a claimant at the time of her third-party settlement.  The appellate court affirmed, but the Supreme Court reversed based on the fact the BWC’s determination that the claim should be denied was not a final determination.  In fact, the workers’ compensation claim was allowed a mere eight days after the settlement.

The practical implication of this case is that even if a workers’ compensation claim is denied at some stage of the administrative process, the claimant still is required to put the employer on notice of a potential subrogation interest or he/she risks (along with the tortfeasor) being held jointly and severally liable for the entire sum of payments made under the claim.  Regardless of the timing of the settlement, the employer still retains a right of subrogation if the claim is eventually allowed.