Ohio Supreme Court Holds That Employers’ Subrogation Interest Vests at the Time of the Injury

Last week, in Bur. Of Workers’ Comp. v. Verlinger, Slip Opinion No. 2018-Ohio-1481, the Supreme Court held that the BWC’s right of subrogation vests at the time of the injury or death that occurred during the course of employment.

This decision is important because, before this decision, injured workers would assert that the employer/BWC’s subrogation interest did not vest until their workers’ compensation claim was allowed. In a contested claim, under that theory, injured workers could enter into insurance settlements prior to their claims being allowed without notifying the employer/BWC, essentially depriving the employer/BWC of their subrogation interest.

In the Verlinger case, Ms. Verlinger was involved in a motor-vehicle accident in the course of her employment.  Eight days after her injury, she filed an application for benefits with the BWC.  The BWC disallowed her claim, and Ms. Verlinger appealed.  While her appeal was pending, she settled with the insurer of the party who caused the accident and with her own insurance company.  The Industrial Commission subsequently allowed her claim.

Ms. Verlinger never notified the BWC of the settlement. The BWC brought an action pursuant to R.C. 4123.931, the subrogation statute, for the amounts it had paid and would pay on Verlinger’s workers’ compensation claim. Ms. Verlinger filed a motion for summary judgment, arguing that because she did not have an allowed workers’ compensation claim at the time of her injury she was not a “claimant” as defined by the statute, and therefore R.C. 4123.931 did not apply to her at the time she settled with the insurance companies.  The trial court granted her motion for summary judgment, and the appellate court affirmed.

The Supreme Court overturned the lower decision. The Court held that at the time of her insurance settlement, Ms. Verlinger was a claimant as defined under the statute and therefore had an obligation to notify the BWC of the settlement.  Because she did not, Ms. Verlinger and the insurers were jointly and severally liable to the BWC for its entire subrogation interest.  Under the subrogation statute, if Ms. Verlinger had notified the BWC of the settlement, the BWC’s recovery would be limited by a rather complicated formula which usually results in a recovery for the employer/BWC which is much less that was actually paid out in the claim.

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