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What's Hot in Workers' Comp

An award of specific loss benefits payable to claimant that became part of her estate after her death from non-work-related causes are subject to the employer’s subrogation lien upon the proceedings of a third party settlement for claimant’s work injuries

Richard G. Kinzler, Trustee of a Trust for the Benefit of Kyra Kinzler v. WCAB (Association for Vascular Access and Twin City Fire Insurance Company); No. 165 C.D. 2020; filed Jan. 6, 2021; Judge Fizzano Cannon

February 1, 2021

by Francis X. Wickersham

The claimant was at a work-related restaurant event when she fell from a high stool and landed on her back. The employer acknowledged the injury by issuing a Notice of Compensation Payable and made benefits payments to the claimant. Later, she filed a review petition to expand the description of the injury and filed a civil complaint against the restaurant. The civil lawsuit resulted in a settlement of $4,375,000.

The parties then completed a Third Party Settlement Agreement, which entitled the employer to a net lien amount from the civil settlement and 41% of ongoing weekly payments to satisfy its obligation to reimburse its pro-rata share of the claimant’s fees and expenses until the subrogation interest was exhausted. The claimant set up a special needs trust for the third party settlement funds for herself during her lifetime and named her brother as trustee and her daughter as the beneficiary after her death. The claimant’s condition worsened, and ultimately, her lower right leg below the knee was amputated. The claimant filed a petition seeking specific loss benefits for the loss of the leg, but she died the following day. The Workers’ Compensation Judge granted the petition and awarded 350 weeks of specific loss benefits under § 306(c)(5) of the Act, but reduced the amount of those benefits pursuant to the employer’s subrogation rights and interests. The trustee appealed to the Appeal Board, which affirmed the judge.

On appeal to the Commonwealth Court, the trustee argued that the specific loss benefits awarded by the Workers’ Compensation Judge were payable for the original, full temporary total disability rate, not the subrogation rate. According to the court, the issue hinged on whether there was “equatability” between the claimant’s pending specific loss benefits and her third party recovery funds. If so, the employer’s subrogation interests would be retained. The court pointed out that where, after a claimant’s death, surviving children become eligible for fatal claim benefits in their own right, rather than derivatively, the equatability that supports an employer’s right to post-mortem subrogation is broken.

The court rejected the trustee’s argument that any equatability ended with the claimant’s death because, although she was eligible for specific loss benefits, she was unable to personally receive those benefits. The court also dismissed the trustee’s argument that in instances such as this one, specific loss benefits become analogous to fatal claim survivor benefits and are, therefore, not subject to subrogation. The court pointed out that under § 306(g) of the Act, when a claimant dies of a cause not related to her work injury, any specific loss benefits to which she was already entitled, but did not collect, are heritable and, thus, subject to subrogation. The court affirmed the Workers’ Compensation Judge and the Appeal Board and dismissed the trustee’s appeal.

 

What’s Hot in Workers’ Comp is prepared by Marshall Dennehey Warner Coleman & Goggin to provide information on recent legal developments of interest to our readers. This publication is not intended to provide legal advice for a specific situation or to create an attorney-client relationship. We would be pleased to provide such legal assistance as you require on these and other subjects when called upon. ATTORNEY ADVERTISING pursuant to New York RPC 7.1 Copyright © 2021 Marshall Dennehey Warner Coleman & Goggin, all rights reserved. No part of this publication may be reprinted without the express written permission of our firm. For reprints or inquiries, or if you wish to be removed from this mailing list, contact tamontemuro@mdwcg.com.

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Two Tracks, No Preclusion: Ohio Supreme Court Preserves Separate Damages Claims After Chapter 2506 Appeals

The Supreme Court of Ohio has clarified that an administrative appeal under Ohio Revised Code Chapter 2506 does not bar a separate action for damages and declaratory relief that could not have been pursued in the administrative appeal. The Ohio Supreme Court considered Sheetz, Inc. v. Centerville (2026-Ohio-3531) as a result of a certified question from the Southern District of Ohio. The question was whether Sheetz, the gas station/convenience store brand, was barred from seeking damages in a separate action since damages were not sought in their administrative appeal. Ultimately, the Ohio Supreme Court ruled that res judicata does not bar a separate action for damages after ruling on an administrative appeal because R.C. Chapter 2506 is limited to judicial review and cannot grant affirmative relief. The case arose after Centerville’s city council rejected a site plan proposed by Sheetz, Inc. that had received unanimous approval from the City’s planning commission. Sheetz filed an administrative appeal pursuant to R.C. 2506 in the Montgomery County Court of Common Pleas, and two months later filed a complaint for damages and declaratory relief under 42 USC § 1983 as a takings action with the city, city council, and other objectors as improper takings and a violation of due process, as well as interference with business and contractual relationship. The city and city council removed the § 1983 action for damages to federal court. Montgomery County Court of Common Pleas reversed the city council’s denial, and allowed the Sheetz project to move forward. Upon that ruling, the federal court issued a show-cause order questioning whether the § 1983 action was barred by the doctrine of res judicata via claim preclusion (which includes all theories of recovery).  Sheetz argued that Ohio courts of common pleas do not have authority to award damages or declaratory relief as party of the R.C. Ch. 2506 appeal, therefore res judicata could not be triggered to apply to the § 1983 action. Additionally, Sheetz moved to certify the issue to the Ohio Supreme Court, citing differing results between the second and sixth districts on this same issue. Centerville approached the question, not from a claim preclusion standpoint, but from the holding in Grava v. Parkman, Twp which states that a final judgment rendered on the merits bars all subsequent action based on the same transaction or occurrence.  In yet another approach, an objector argued that claim preclusion was satisfied because Sheetz could have raised its damages claims in the administrative appeal – Sheetz disagrees. In their analysis, the Supreme Court of Ohio broke down the elements of a claim preclusion analysis: 1) a prior final, valid decision on the merits by a court of competent jurisdiction; (2) a second action involving the same parties, or their privies, as the first; (3) a second action raising claims that were or could have been litigated in the first action; and (4) a second action arising out of the transaction or occurrence that was the subject matter of the previous action. The Court held that R.C. Ch. 2506 does not permit a party to argue damages as R.C. Ch. 2506 limits the common pleas jurisdiction as if it were sitting on appeal, and therefore can only affirm, reverse, vacate, or modify the appealed order, or can remand the case to the administrative body. Further, the Court held that Grava’s conclusion that a final judgment precludes additional litigation for different relief is inapplicable under this fact pattern because it was meant only to apply to those matters in which the plaintiff brings the exact same case twice, but for new relief. The Court found Grava was inapplicable because Sheetz could have requested damages or declaratory relief in the R.C. 2506 appeal. Therefore, Grava would be nothing more than dicta if it even did apply. Going further, the Ohio Supreme Court disavowed Sixth Circuit precedent which, in reliance on Grava and other district court decisions, permitted an owner to seeking relief under 42 U.S.C. § 1983 alongside an administrative appeal. See Moore v Hiram Twp., 988 F.3d 353 (6th Cir.2021). The Ohio Supreme Court found that the Sixth Circuit had disregarded a critical decision in Community Concerned Citizens, Inc. v. Union Twp. Bd. of Zoning Appeals, 1993-Ohio-115, which clearly held that a R.C. Ch. 2506 appeal cannot be combined with a complaint seeking other claims for relief. Id. at ¶ 11. To that end, the Ohio Supreme Court has determined that the decisions Moore relied on (outside of Grava) are no longer good law, and that Moore was wrongly decided. The decision draws a clear procedural boundary: Chapter 2506 provides judicial review of an administrative decision, not a forum for independent claims seeking affirmative relief. Although Grava may place claims arising from a single transaction within the potential scope of claim preclusion, those claims are not barred unless the complete claim-preclusion test is satisfied. Because Sheetz could not have pursued damages or declaratory relief in its Chapter 2506 appeal, the separate action was not precluded. 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