Where Notice of Settlement Given, Third Party NotResponsible for Subrogation

Where Notice of Settlement Given, Third Party Not Responsible for Subrogation

Posted: August, 2015

Ohio Bur. of Workers’ Comp. v. McKinley, 7th Dist. No. 12CO-41, 2014-Ohio-1397 (3/31/14); appeal dismissed as improvidently granted ___ Ohio St.3d ___, 2015-Ohio-2927.

Issue: Can a third party that settled with an injured worker be held responsible for the BWC’s subrogation interest when the BWC had notice of the settlement proceedings and the settlement agreement did not reference the BWC’s subrogation right?

Background: McKinley was injured in his employment and received workers’ compensation.  In 2003, McKinley filed a lawsuit against a third party.

In 2004, McKinley notified the BWC and the Ohio Attorney General that he was engaged in settlement negotiations with the third party.  Later in 2004 McKinley settled the case with the third party.  The settlement agreement did not reference the BWC’s subrogation interest.

In 2005, a designee of the BWC held a conference and determined the BWC’s subrogation interest (based on past and expected future workers’ compensation payments).

McKinley did not pay the subrogation amount but, instead, filed a lawsuit seeking a declaratory judgment that the subrogation statute was unconstitutional.  That lawsuit resulted in a decision upholding the constitutionality of the subrogation statute.

The BWC then filed a lawsuit against both McKinley and the third party, claiming that they were each independently liable for the subrogation amount for failing to follow the statutory procedure for keeping the BWC notified of the settlement.

The trial court granted summary judgment in favor of the employer against the BWC, finding that there was no evidence that the settlement negotiations failed to comply with the subrogation statute. The BWC appealed.

Decision: Court of Appeals affirms.

Under R.C. 4123.931(G),

If a statutory subrogee and, when required, the attorney general are not given that notice, or if a settlement or compromise excludes any amount paid by the statutory subrogee, the third party and the claimant shall be jointly and severally liable to pay the statutory subrogee the full amount of the subrogation interest

The evidence includes letters to and from the BWC referencing the settlement negotiations.  Because of this, the third party demonstrated that the required notice had been given.

The other question is whether the settlement “excludes any amount paid” by the BWC.  The BWC argues that this provision requires the settlement to “specifically mention and deal with” the repayment to the BWC.

The Court rejects this argument, pointing out that the statute only refers to situations where the settlement excludes the amount owed the BWC.  The Court states that

The statute does not require the parties to identify the agreement, the extent of BWC’s participation in the settlement, how BWC is to be paid from the settlement, the timing of the settlement payments, or any of a dozen other terms that BWC might prefer to have included in the final settlement.

Editor’s Comment: The Supreme Court initially accepted the BWC’s appeal from the Court of Appeals decision, but later dismissed the appeal as improvidently granted. As a result, the Court of Appeals decision becomes the final decision in the case.

Information courtesy of the Ohio Workers’ Compensation Bulletin. Subscribe to the Ohio Workers’ Compensation Bulletin to keep informed about the Ohio workers’ compensation system.