Hurt in a Car Crash on the Job? Settle Wrong and the BWC Can Claw It Back (Verlinger)

Published May 1, 2018 · Ohio Supreme Court

Imagine you are hurt in a car crash while driving for work. You apply for workers' compensation and the Bureau of Workers' Compensation turns you down. You appeal, but in the meantime the bills pile up, so you settle with the other driver's insurance company and your own. A week later, your comp claim is approved.

You might think the BWC has no business asking for any of your settlement money, since it had denied your claim when you settled. On April 19, 2018, a unanimous Ohio Supreme Court said otherwise, and the consequences were severe. Bur. of Workers' Comp. v. Verlinger, Slip Opinion No. 2018-Ohio-1481.

What happened to Loretta Verlinger

The facts were undisputed. Ms. Verlinger was seriously injured in a crash on August 1, 2011. She applied for workers' compensation benefits on August 17. On September 6, the BWC disallowed the claim, and she appealed to the Industrial Commission.

While that appeal was pending, she and her husband settled with Metropolitan, the insurer of the driver who caused the crash, and with Foremost, her own insurer. Those settlements were finalized on December 15, 2011. Eight days later, on December 23, the Industrial Commission allowed her claim, finding she was injured in the course of her employment, and the BWC began paying benefits.

The BWC then sued Ms. Verlinger and both insurance companies to recover what it had paid and would pay on her claim. The trial court and the Ninth District Court of Appeals ruled for Ms. Verlinger, reasoning that she was not a "claimant" when she settled because her claim had been denied. The Supreme Court reversed.

What the Court decided

Ohio's workers' compensation subrogation statute, R.C. 4123.931, gives the BWC (and self-insuring employers) the right to be repaid from any recovery an injured worker obtains from a third party, such as an at-fault driver. Division (G) of the statute sets a strict notice rule: a claimant must notify the BWC, and in most cases the Ohio Attorney General, of every third party who may be responsible, and no settlement is final until the BWC has had prior notice and a reasonable opportunity to assert its rights. If that notice is not given, the claimant and the third party become jointly and severally liable, meaning each of them can be made to pay the full subrogation interest.

The Court held that a "claimant" is anyone eligible to receive workers' compensation benefits, and that eligibility begins at the moment of the work injury. It continues until a denial becomes final, meaning all appeals are over or the time to appeal has run, or, if no claim is ever filed, until the filing deadline passes. Because Ms. Verlinger's denial was on appeal, she was still a claimant when she settled.

The Court also rejected the argument that the BWC had no subrogation rights because it had not paid anything yet. Under R.C. 4123.931(H), the right of subrogation is automatic; it does not wait for the first check.

The result: Ms. Verlinger and both insurance companies are jointly and severally liable to the BWC for the full amount of its subrogation interest. Foremost argued it was unfair to hold an insurer liable when it did not know about the comp claim. The Court acknowledged the argument but said it was "a policy argument best made to the General Assembly."

Why this is a harsh result, and who it hurts

This decision is bad news for injured workers, and I want to be direct about why. Ordinarily the subrogation statute allows a recovery to be divided between the worker and the BWC by formula or negotiated agreement, and the BWC's share can often be reduced substantially. A worker who follows the notice rules has room to negotiate. A worker who does not can lose that room entirely and face a demand for the BWC's full interest, which can include an estimate of future benefits, not just what has already been paid.

The workers hit hardest are exactly those in Ms. Verlinger's position: people whose comp claims were denied, who reasonably believed comp was out of the picture, and who needed money while they fought the denial. Under Verlinger, a denial on appeal does not take the BWC out of the case.

The paths that remain

Nothing in Verlinger limits your right to pursue the at-fault driver and your own uninsured and underinsured motorist coverage. Those claims are often where most of the compensation comes from in a work-related crash. The decision simply makes the order of operations critical:

• Give notice early and in writing. If you were hurt while working, notify the BWC (or your self-insured employer) and the Attorney General about every third party before any settlement. Keep proof.
• Treat a denied comp claim as live until all appeals are finished.
• Negotiate the lien before you sign. The statute allows the BWC's share to be worked out by agreement. That negotiation is far easier before the settlement than after.
• Remember the other lienholders. Medicaid, Medicare, and health plans may also have repayment rights, each with its own rules. I discussed health-plan subrogation in a post on the make-whole rule.

Why this matters even more now

Insurance adjusters are eager to close claims quickly, and they will not always ask whether you were working when you were hurt. After Verlinger, the insurer that pays you without accounting for the BWC also faces liability, so expect adjusters to ask more questions. But the burden of giving notice falls on the injured worker, and the worker is the one who stands to lose the most.

I have written before about how workers' comp and a third-party claim run on two tracks and about crashes in a work vehicle. Verlinger is the clearest warning yet that the two tracks must be coordinated by someone who knows the rules.

What this means for you

If you were in a crash while on the clock, driving between job sites, making deliveries, or running an errand for your employer, do not settle any part of your injury claim until the BWC's rights have been addressed, even if your comp claim was denied. A settlement that seems final may not be, and a mistake can make you personally responsible for the BWC's entire lien. Our car accident practice handles these coordinated claims regularly.