Workers' Compensation Subrogation Constitutional

Groch v. Gen. Motors Corp. (2/21/08), ___ Ohio St.3d ___, 2008-Ohio-546:

Background:  Groch had an allowed workers’ compensation claim. He filed a lawsuit for product liability and intentional tort as a result of the incident which caused his injury. That suit wound up in federal court. 

When a worker suffers an injury in the course of their employment which gives them a right to sue someone in tort (in addition to workers’ compensation), the tort suit is referred to as a “third-party action.” R.C. § 4123.93 and § 4123.931 provide for the Bureau of Workers’ Compensation, or a self-insured employer, to recover money they paid or were expected to pay in the workers’ compensation claim from money the injured worker received as a result of the third-party action. This recovery of money is called “subrogation.” 

Because there were questions about the constitutionality of the workers’ compensation subrogation statutes, the federal court certified questions to the Ohio Supreme Court. The certified questions asked whether Ohio’s workers’ compensation subrogation statutes (R.C. § 4123.93 and § 4123.931) violate Oh. Const. Art. I, Sec. 19 (takings clause), Oh. Const. Art. I, Sec. 16 (due process and remedies clause) or Oh. Const. Art. I, Sec. 2 (equal protection).

Decision:  Supreme Court upholds constitutionality of subrogation law.

Holeton v. Crouse Cartage Co. (2001), 92 Ohio St.3d 115, found a previous workers’ compensation subrogation statute unconstitutional. In response to that decision, the legislature enacted the current version of workers’ compensation subrogation.

One of the constitutional problems found in Holeton was the “taking” caused by the provision for estimating future payments. Under the system found unconstitutional in Holeton, the injured worker would have to pay subrogation based on estimated future payments. If the future payments were less than estimated, the self-insured employer or BWC would keep the amount paid, which resulted in a “taking” from the injured worker.

In response to that decision, the legislature created a trust fund. Estimated future payments are put in the trust fund and the self-insured employer or BWC are reimbursed from the trust fund as payments are made. If there is money remaining in the trust fund when the obligation for workers’ compensation payments ends, the money is returned to the injured worker (or the injured worker’s estate). The Court finds that the trust fund is a valid response to the concerns of Holeton and is not an unconstitutional taking.

Another problem with the statute found unconstitutional in Holeton was the method of determining the amount to be reimbursed. Subrogation can only constitutionally recover money which is found to constitute a “double recovery.” Money recovered from the third-party action which does not compensate for things paid for by workers’ compensation cannot be subject to subrogation. In response to Holeton, the legislature created a new formula for determining the amount of a recovery that is subject to subrogation.

The Court reviews the formula and finds that it permits the injured worker to retain the benefits paid by the BWC or self-insured employer. Although the Court recognizes that the injured worker may have to provide reimbursement from amounts that do not duplicate workers’ compensation benefits, the Court finds this procedure constitutional. The Court finds that where an injury is “undercompensated” (which is what results when the benefits recovered in the third-party action are not sufficient to fully compensate the injured worker) the injured worker and BWC or self-insured employer share the burden of undercompensation. The Court states that it is not inequitable to provide some reimbursement for the BWC or self-insured employer, even though it may result in the injured worker receiving less than full recovery. The Court finds that the new formula significantly reduces the excessive reimbursement that occurred under the previous formula.

The Court finally finds that the statute in the present case, unlike the statute in Holeton, applies the same subrogation formula when the third-party action is settled as it does when the third-party action goes to trial. Therefore, the Court finds that the statute does not violate equal protection.

Editor’s Comment:   There is no basis for the Supreme Court’s finding that the parties should share the risk of “undercompensation.” As the Court recognized in Holeton:

Whether expressed in terms of the right to private property, remedy, or due process, the claimant-plaintiff has a constitutionally protected interest in his or her tort recovery to the extent that it does not duplicate the employer’s or bureau’s compensation outlay. Thus, if R.C. § 4123.931 operates to take more of the claimant’s tort recovery than is duplicative of the statutory subrogee’s workers’ compensation expenditures, then it is at once unreasonable, oppressive upon the claimant, partial, and unrelated to its own purpose.

Nothing in the Ohio Constitution permits taking from the injured worker to prevent “undercompensation” to the BWC or employer.