Ohio High Court: Employer not Eligible for Work Comp Benefits Refund

June 17, 2009

The Supreme Court of Ohio has ruled that a double dismissal of a workers’ compensation appeal does not entitle an employer to a refund of compensation benefits from the state.

Specifically, according to the Ohio high court’s information office, the Court ruled in State ex rel. Dillard Dept. Stores v. Ryan, Slip Opinion No. 2009-Ohio-2683 that: When an injured employee’s claim for workers’ compensation benefits has been granted by the state the employee’s self-insured employer has appealed the approval of her claim and the employee has accepted a financial settlement from the employer to voluntarily dismiss her complaint in the appeal case with prejudice, that dismissal does not operate as a “final judicial determination” that the state erred in approving the employee’s claim, and does not entitle the employer to a refund from the state workers’ compensation surplus fund of payments the employer made to the employee.

The 7-0 decision, authored by Chief Justice Thomas J. Moyer, affirmed a ruling by the 10th District Court of Appeals that a self-insured employer was not entitled to a refund from the state for benefits the employer paid to an injured worker.

Under Ohio’s workers’ compensation program, some employers pay premiums into a state-controlled insurance fund while others are self-insured. When an injured employee of a self-insured company is granted an award of benefits by the Bureau of Workers’ Compensation (BWC), the company must immediately pay the claimant’s medical bills and compensate the worker for lost wages from a pool of its own funds set aside for that purpose.

If the employer disputes a BWC order granting benefits to one of its employees, the employer may file an appeal in the local common pleas court. Because of the nature of worker’s compensation benefits, an employer’s appeal is initiated by having the employee file the initial complaint, after which the employer files responsive pleadings disputing BWC’s award of benefits.

If the common pleas court ultimately enters a judgment holding that the BWC erred in granting the employee’s claim for benefits, a self-insured employer is entitled to obtain a refund from a BWC-administered surplus fund for all amounts the employer has paid to or on behalf of the employee based on the BWC’s erroneous grant of benefits.

In this case, BWC awarded benefits to Pamela Scott for a lumbar back injury she suffered in the course of her employment with Dillard Department Stores. Dillard is a self-insured employer. Dillard disputed the bureau’s decision that Scott was entitled to benefits for her back injury.

Accordingly, Scott filed an appeal complaint in the Trumbull County Court of Common Pleas and Dillard filed responsive pleadings seeking reversal of the BWC’s grant of benefits.

Scott later unilaterally dismissed her complaint, terminating the appeal action. She subsequently refiled the appeal complaint, reinstating Dillard’s appeal. While the appeal action remained pending, Scott entered into a settlement agreement with Dillard in which she received $15,000 in exchange for: 1) Stipulating that she was not eligible to receive worker’s compensation benefits for her lumbar back injury and 2) Agreeing to enter a second voluntary dismissal of her appeal complaint. Under Ohio Civil Rule 41(A)(1), a second voluntary dismissal of a civil lawsuit by the plaintiff operates as a “judgment on the merits” in favor of the defendant.

Dillard and Scott submitted a copy of their settlement agreement to the BWC along with an application seeking the bureau’s approval of the agreement. Following the expiration of a statutory 30-day waiting period after which settlement agreements become effective unless rejected by the state, Scott filed with the common pleas court a second notice of voluntary dismissal of her complaint, stating in that notice that the dismissal was “with prejudice.”

Several months later, Dillard’s third-party insurance administrator filed an application seeking reimbursement from the state of all of Dillard’s payments to and on behalf of Scott based on her back injury claim. In its application, Dillard pointed out that Scott had stipulated in the settlement agreement that she was not entitled to benefits for her lumbar injury; and that under the double-dismissal provision of Civil Rule 41(A)(1), Scott’s second voluntary dismissal of her appeal complaint was the equivalent of a “judgment on the merits” by the common pleas court holding that the state had erred in approving Scott’s claim for benefits.

The BWC denied Dillard’s application for reimbursement, holding that the settlement agreement and Scott’s second dismissal of her appeal complaint did not constitute a “judicial determination” that the bureau had erred in awarding benefits for her back injury, and Dillard was therefore not entitled to reimbursement for its outlays arising from her claim. Dillard subsequently filed a mandamus action asking the 10th District Court of Appeals to order BWC to grant its application for reimbursement. The 10th District denied the requested writ. Dillard sought and was granted Supreme Court review of the 10th District’s ruling.

The Supreme Court agreed with the BWC’s and previous courts’ decisions. Chief Justice Moyer wrote: “R.C. 4123.512(H) provides: ‘If, in a final administrative or judicial action, it is determined that payments of compensation or benefits, or both, made to or on behalf of a claimant should not have been made, the amount thereof shall be charged to the surplus fund’ … Dillard is now seeking reimbursement from the state surplus fund for compensation it had paid to Scott for her L4-L5 disc bulge condition prior to reaching a settlement agreement on her entire workers’ compensation claim. Dillard argues that it is entitled to reimbursement because Scott’s second voluntary dismissal of her complaint, pursuant to the settlement, amounted to an adjudication on the merits that she was not entitled to compensation. We disagree.”

The Supreme Court’s decision in Dillard Dept. Stores v. Ryan can be found online at www.supremecourt.ohio.gov/rod/docs/pdf/0/2009/2009-Ohio-2683.pdf.

Source: Ohio Supreme Court, www.supremecourt.ohio.gov

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