Hurt at Work by Someone Else? Why the BWC Lien Can Follow You for Six Years

Published September 15, 2011 · Ohio Supreme Court

Picture a delivery driver on Route 35 who gets rear-ended by a semi. Workers' compensation pays his medical bills and part of his lost wages, because he was on the job. He also has a claim against the trucking company, because the truck driver was careless. Two years later that claim settles, the money is paid, and the driver moves on with his life.

Then, three or four years after that, a letter arrives from the Ohio Bureau of Workers' Compensation demanding repayment of everything it spent on his claim. Can it do that? As of last week, the answer from the Supreme Court of Ohio is yes.

The decision: BWC v. McKinley

In Ohio Bur. of Workers' Comp. v. McKinley, 130 Ohio St.3d 156, 2011-Ohio-4432, decided September 7, 2011, the court addressed how long the Bureau has to go after a settlement that left it out.

Jeffrey McKinley was severely injured on July 13, 2003, at a work site in East Liverpool. The Bureau allowed his workers' compensation claim and, by the time of the lawsuit, had paid more than $460,000 in medical bills and compensation. Mr. McKinley sued the owner of the premises, Heritage-WTI, Inc., and, after notifying the Bureau and the Attorney General in 2004 that he was negotiating, settled for an undisclosed amount.

The settlement made no provision to repay the Bureau. On November 4, 2008, more than five years after the injury, the Bureau sued both Mr. McKinley and Heritage, claiming they were jointly and severally liable for the full amount it had paid. Heritage argued that the Bureau's claim died when the worker's own two-year deadline passed.

The Supreme Court disagreed. It held that the Bureau's right of recovery is created by statute, R.C. 4123.931, and is independent of the worker's negligence claim. A claim "upon a liability created by statute" is governed by R.C. 2305.07, which allows six years. The Bureau's suit was timely.

How the workers' comp subrogation statute works

The word for all this is subrogation: the right of someone who paid a loss to recover that payment from the person who caused it. In the workers' compensation setting, Ohio spells the right out in R.C. 4123.931, and the statute is unusually aggressive. Its key provisions, as the court described them:

• Payment creates the right. The moment workers' comp pays compensation or benefits, the Bureau (or a self-insured employer) acquires a right of recovery against the third party who caused the injury. R.C. 4123.931(A).
• The right is automatic. It exists whether or not the Bureau is named in the injured worker's lawsuit. R.C. 4123.931(H).
• The worker must give notice. The injured worker must tell the Bureau and the Attorney General the identity of everyone who may be liable. No settlement or judgment is final until the Bureau has had notice and a reasonable chance to assert its interest. R.C. 4123.931(G).
• A settlement that leaves the Bureau out makes everyone liable for all of it. If the Bureau is not given notice, or if a settlement "excludes any amount paid by the statutory subrogee," the third party and the injured worker are jointly and severally liable to pay the Bureau the full subrogation interest. R.C. 4123.931(G).

That last point deserves emphasis. When the Bureau is properly included, the statute contains a formula under division (B) that divides the net recovery between the worker and the Bureau in proportion to the worker's uncompensated damages and the Bureau's payments, or lets the two sides agree to a fairer split. The Bureau typically gets only a fraction of what it paid. When the Bureau is left out, that formula disappears and the Bureau can demand every dollar, from the worker, from the defendant, or from both.

Who this affects

Any worker injured on the job by someone other than the employer or a co-worker has two claims, not one. Workers' compensation covers medical bills and part of lost wages without regard to fault, but it pays nothing for pain and suffering and does not replace full wages. The claim against the third party, a careless driver, a negligent contractor, a property owner, a product manufacturer, is where the rest of the loss is recovered. Common examples in the Dayton area:

• Delivery drivers, sales representatives, home health aides, and anyone else who drives for work and is hit by a negligent motorist. Our car accident and truck accident pages cover those claims.
• Construction workers injured by a subcontractor's crew or a defective piece of equipment.
• Employees hurt on a customer's premises because of a dangerous condition.

In each of these, the Bureau's lien is part of the case from day one. (Claims against the employer itself are a different matter governed by the intentional-tort statute, which we discussed when the Supreme Court upheld that law last year.)

The practical danger McKinley creates

Before this decision, defendants argued, and some trial courts agreed, that the Bureau had only two years from the injury to assert its claim. That gave injured workers and their lawyers a false sense of security: settle, wait out the two years, and the lien problem goes away. McKinley ends that. The Bureau now has six years, and the court left open the possibility that the clock does not even start until the Bureau learns the settlement excluded it.

For a worker who settled without addressing the lien, the exposure is not a share of the settlement. It is the whole subrogation interest, potentially far more than the settlement itself, and the worker is personally liable along with the defendant.

How the lien should be handled

The right way to deal with the Bureau is to make it part of the settlement rather than an afterthought. In practice that means:

1. Notify the Bureau and the Attorney General of the third-party claim early and in writing, as the statute requires.
2. Get a current, itemized statement of what the Bureau has paid and what it projects paying in the future.
3. Negotiate the Bureau's share. The statutory formula is the starting point, but the statute expressly allows a "more fair and reasonable" division by agreement, and the Bureau will often reduce its claim when the facts justify it, especially in cases with comparative fault, limited insurance, or large uncompensated losses.
4. Document the allocation in the settlement papers so no one can later say the Bureau was "excluded," and address the portion of the lien that represents estimated future payments.

Lien negotiation is one of the places a lawyer earns the contingency fee, and we explained how that fee works in our July post. A reduction of even a modest percentage on a six-figure lien is real money in the injured worker's pocket, and a properly documented settlement closes the door that McKinley otherwise leaves open for six years.

What this means for you

If you were hurt on the job because of someone outside your company, do not settle the third-party claim without resolving the Bureau's lien. If you already settled and the lien was never addressed, the Bureau may still have years to come after you; talk to a lawyer about your options before a demand letter arrives. And if you are early in the process, the best time to get the lien under control is before the first settlement offer, not after.