Appeals Court Splits Hairs to Bar Workers' Comp Subrogation
Monday, June 9, 2014 | 0
Trial lawyers have a stranglehold on Ohio subrogation. Workers’ compensation subrogation in Ohio has gone through major transformations since it was ruled unconstitutional in 2001. Although subrogation is currently a statutory right of carriers and self-insured employers, it has been a bumpy road. The moment the statute became unconstitutional, the earlier version (1993) of the statute became effective. To nobody’s surprise, the earlier version of the statute was also quickly declared unconstitutional. Modzelewski v. Yellow Freight Systems, Inc., 808 N.E.2d 381 (Ohio 2004).
On April 9, 2003, a new workers’ compensation subrogation statute was enacted by the Ohio legislature that returns the right of subrogation to Ohio workers’ compensation carriers and self-insured employers. Senate Bill 227 (amending Ohio Rev. Code Ann. § 4123.931), passed the General Assembly and was signed into law by Gov. Robert Taft. The newly-enacted § 4123.931 addressed several of the previous criticisms leveled by the Ohio Supreme Court and trial lawyers. As a result of the completely-revamped statute, Ohio courts had to go back to the drawing board in compiling case law which interpreted and clarified workers’ compensation rights. This is certainly the case involving third-party actions against political subdivisions.
Section 4123.931(I)(2) clearly provides that the carrier is subrogated to any amounts that a claimant would be entitled to recover from a political subdivision, as well as any amounts recoverable from an intentional tort action. Ohio Rev. Code Ann. § 4123.931(I)(2)(3). The statute is clear that a workers’ compensation carrier’s subrogation rights apply to:
(2) Amounts that a claimant would be entitled to recover from a political subdivision, notwithstanding any limitations contained in Chapter 2744 of the Revised Code.
You can’t get much clearer than that, right? Well, apparently you can. The above-quoted section regarding claims against a political subdivision claim appears on its face to be in conflict with § 2744.05, which specifically negates any subrogation claims against a political subdivision. Section 2744.05 provides, in part, as follows:
Notwithstanding any other provisions of the Revised Code or rules of a court to the contrary, in an action against a political subdivision to recover damages for injury, death, or loss to person or property caused by an act or omission in connection with a governmental or proprietary function:
(A) Punitive or exemplary damages shall not be awarded.
(B)(1) If a claimant receives or is entitled to receive benefits for injuries or loss allegedly incurred from a policy or policies of insurance or any other source, the benefits shall be disclosed to the court, and the amount of the benefits shall be deducted from any award against a political subdivision recovered by that claimant. No insurer or other person is entitled to bring an action under a subrogation provision in an insurance or other contract against a political subdivision with respect to those benefits. The amount of the benefits shall be deducted from an award against a political subdivision under division (B)(1) of this section regardless of whether the claimant may be under an obligation to pay back the benefits upon recovery, in whole or in part, for the claim. A claimant whose benefits have been deducted from an award under division (B)(1) of this section is not considered fully compensated and shall not be required to reimburse a subrogated claim for benefits deducted from an award pursuant to division (B)(1) of this section. Ohio Rev. Code Ann. § 2744.05.
Thankfully, the Ohio Court of Appeals has declared that the workers’ compensation subrogation statute actually carves out an exception to § 2744.05, allowing a workers’ compensation carrier subrogation rights against a political subdivision. Jones v. City of Xenia, 2011 WL 5137208 (Ohio App. 2011). In Jones v. City of Xenia, the Ohio Court of Appeals Second District noted that while § 2744.05 controls in cases involving generic subrogation claims against political subdivisions in relation to all lines of insurance, the plain language of § 4123.931 mandates a specific exception with respect to a subrogation claim brought by the Ohio Bureau of Workers’ Compensation (BWC) against a political subdivision. Id. Notwithstanding this clear exception confirmed by the Court of Appeals’ Second District, the Tenth District apparently wasn’t convinced.
In Ohio Bureau of Workers’ Comp. v. Shaffer, 2013 WL 5636299 (Ohio App. 2013), the Ohio Court of Appeals’ Tenth District held that § 2744.05 immunizes any political subdivision employee unless the employee’s actions are outside the scope of employment, malicious, in bad faith, or wanton and reckless. It stated that BWC’s workers’ compensation subrogation rights under § 4123.931 apply to amounts the injured employee would be entitled to recover from a political subdivision. In an example of tortured logic and anti-subrogation bias, the Shaffer Court stated that § 4123.931 grants exception to immunity only when recovery is sought from a political subdivision, not when recovery is sought from an employee of a political subdivision. The political subdivision was also named in the subrogation complaint as a defendant liable under the doctrine of respondeat superior, yet the court held that a political subdivision employee, such as Shaffer, is immune from liability unless his negligent actions are manifestly outside the scope of employment or the employee’s official responsibilities were malicious, were in bad faith, were wanton or reckless, or liability is expressly imposed upon the employee by a section of the Ohio Revised Code. Id.
It seems that the Court of Appeals is willing to split even the thinnest of hairs in order to make subrogation in Ohio more difficult. That the legislature would authorize a third-party action against a political subdivision, but not one of its employees acting in the course and scope of employment, defies centuries of common law. However, until the legislature amends § 4123.931(I)(2) to add the words “…or its employees” after “political subdivision”, subrogated workers’ compensation carriers will have to be satisfied with simply naming the political subdivision as a third party.
Gary Wickert is a partner with Matthiesen, Wickert & Lehrer in Hartford, Wisconsin. This column was reprinted with his permission from the firm's MWL-Law Blog.
Comments