Employer not entitled to reimbursement on second voluntary dismissal

If a self-insured employer and an employee settle and dismiss a claim, the employer is not entitled to reimbursement even if the settlement stipulates the claim was not compensable.

Case name: State ex rel. Dillard Department Stores v. Ryan, No. 2009-Ohio-2683 (Ohio 06/15/09).

Ruling: The Ohio Supreme Court held that a self-insured employer was not entitled to reimbursement from the state surplus fund for workers' compensation benefits paid to an injured employee.

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What it means: In Ohio, a self-insured employer can generally obtain reimbursement for workers' compensation payments made to an employee when those payments are subsequently found to have been unwarranted through administrative or judicial proceedings. However, if the self-insured employer and the employee settle and dismiss the claim, the employer is not entitled to the reimbursement even if the settlement stipulates the claim was not compensable.

Summary: An employee suffered a compensable back injury at work. She was later awarded an additional allowance for a lumbar spine disc bulge, which the employer disputed. In a settlement agreement, the employee agreed to voluntarily dismiss all claims related to the accident in exchange for $15,000. This was the employee's second dismissal of her claim. The employer applied for reimbursement from the state surplus fund for the disc bulge allowance. The Ohio Supreme Court explained that self-insured employers have a right to reimbursement from the state surplus fund in "final judicial determinations." However, the court pointed out that the circumstances were substantially different than those of a typical double-dismissal case. It noted that even though the employer and employee agreed to dismiss the claim, there was no judicial decision finding she was not entitled to benefits that would have made the dismissal a final determination.

The Supreme Court noted that, generally, a second dismissal operates as a final determination so that workers refrain from filing and refiling, thereby prolonging litigation. It reasoned that employers would be encouraged to pursue meritless appeals if they thought they could reach a settlement with the employee and later get reimbursed from the state surplus fund.

The court also noted that it will not read an agreement to be contractually binding on a third party, in this case the state surplus fund. Thus, the state surplus fund was not bound to reimburse the employer based on the agreement between the employer and employee.

July 13, 2009

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