OH Employer Not Eligible For WC Benefits Refund

Columbus, OH (CompNewsNetwork) - In a decision announced today, the Supreme Court of Ohio held 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.

Today's 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.

In today's decision, 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."

To be eligible for surplus-fund reimbursement, the Chief Justice wrote, "an employer must have obtained a final judicial determination that compensation should not have been paid. ... There has been no such determination in this case.  Dillard is correct that Scott's second voluntary dismissal of her complaint under Civ.R. 41(A)(1)(a) amounts to an ‘adjudication upon the merits.'  This is known as the ‘double-dismissal rule.' ... The problem, however, is that the circumstances here are substantially different from those of a typical case involving the double-dismissal rule. This case does not involve a plaintiff repeatedly filing and voluntarily dismissing a complaint, thereby prolonging litigation. Scott instead voluntarily dismissed her complaint for the second time only because a settlement had been reached.  ... Although Scott's second dismissal was with prejudice, this does not mean there has been a final judicial determination that the payments to Scott related to her L4-L5 disc bulge condition should not have been made.  No court has issued any judgment with such a finding."

While Dillard attempted to create a final judicial determination that compensation payments should not have been made by placing such language in its settlement agreement with Scott, Chief Justice Moyer cited with approval the 10th District's finding that inclusion of language in a dismissal entry "‘does not turn that dismissal into something it is not.' ... The settlement agreement between Dillard and Scott cannot bind the BWC to reimburse Dillard."

"The Tenth District was also apt to point out the practical implications of allowing an employer to obtain reimbursement in these circumstances.  ... Employers would be encouraged to pursue even meritless appeals if they thought they could then reach a settlement with the employee and subsequently obtain reimbursement from the surplus fund for all past compensation by simply inserting language into the settlement and dismissal stating that the employee is not entitled to participate.  The employee would have little reason to contest such language because the settlement would likely also include a release of claims.  Although the employer could not obtain reimbursement for the settlement itself under R.C. 4123.512(H), it could receive reimbursement for compensation already paid. Such a system would quickly deplete surplus fund resources, leaving nothing for employers that deserve reimbursement."

"We hereby affirm the court of appeals judgment denying the writ of mandamus sought by Dillard," Chief Justice Moyer concluded. "In the specific circumstances of this case, there has been no final judicial or administrative determination, pursuant to R.C. 4123.512(H), that payments made to Scott for her claimed L4-L5 disc bulge condition should not have been made. Dillard is not entitled to reimbursement from the workers' compensation surplus fund."

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