[Cite as Ohio Bur. of Workers’ Comp. v. McKinley, 130 Ohio St.3d 156, 2011-Ohio-4432.]
OHIO BUREAU OF WORKERS’ COMPENSATION, APPELLEE, v. MCKINLEY
ET AL.; HERITAGE-WTI, INC., APPELLANT.
[Cite as Ohio Bur. of Workers’ Comp. v. McKinley,
130 Ohio St.3d 156, 2011-Ohio-4432.]
Workers’ compensation—R.C. 4123.931—A claim brought by a statutory
subrogee pursuant to R.C. 4123.931(G) to recover its subrogation interest
is a claim “upon a liability created by statute” and is therefore subject to
the six-year statute of limitations of R.C. 2305.07.
(No. 2010-0720—Submitted March 2, 2011—Decided September 7, 2011.)
APPEAL from the Court of Appeals for Columbiana County,
No. 09CO3, 2010-Ohio-1006.
__________________
SYLLABUS OF THE COURT
A claim brought by a statutory subrogee pursuant to R.C. 4123.931(G) to recover
its subrogation interest is a claim “upon a liability created by statute” and
is therefore subject to the six-year statute of limitations of R.C. 2305.07.
__________________
CUPP, J.
{¶ 1} This case arises because the settlement of a personal-injury suit
brought by a recipient of workers’ compensation benefits against a third-party
tortfeasor did not make any provision to repay the statutory subrogee, plaintiff-
appellee, the Ohio Bureau of Workers’ Compensation. The bureau brought suit
against both the recipient of workers’ compensation benefits and the third-party
tortfeasor under R.C. 4123.931(G) to recover the full amount of its subrogation
interest. The third-party tortfeasor raised a statute-of-limitations defense. The
trial court held that a two-year limitations period applied and that it had expired.
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The court of appeals reversed and held that a six-year limitations period applied
and that it had not yet run out.
{¶ 2} R.C. 4123.931(G) provides that if a settlement or compromise
between a workers’ compensation “claimant” (as defined in R.C. 4123.93(A)) and
a “third party” (as defined in R.C. 4123.93(C)) excludes any amount paid by a
“statutory subrogee” (as defined in R.C. 4123.93(B)), “the third party and the
claimant shall be jointly and severally liable to pay the statutory subrogee the full
amount of the subrogation interest.”
{¶ 3} The issue presented is whether a claim under R.C. 4123.931(G)
brought by a statutory subrogee to recover its subrogation interest is subject to a
two-year statute of limitations (the same limitations period applicable to the
injured worker’s personal-injury suit against the third party) or to a six-year
statute of limitations for an action on “a liability created by statute,” R.C.
2305.07. For the reasons that follow, we hold that the claim in this case is an
action upon a liability created by statute and that the statute of limitations is six
years. We accordingly affirm the judgment of the court of appeals.
I. Facts and Procedural History
{¶ 4} Because the trial court dismissed the complaint in this case for
failure to state a claim upon which relief could be granted, we construe the
material allegations in the complaint as true for purposes of this appeal. Jeffrey
McKinley was severely injured on July 13, 2003, while in the course of his
employment at a work site in East Liverpool, Ohio. The bureau allowed
McKinley’s claim for workers’ compensation benefits.
{¶ 5} McKinley filed an action against his employer and a third party,
defendant-appellant, Heritage-WTI, Inc., the owner of the premises where the
accident occurred. McKinley’s suit against his employer was later dismissed.
After McKinley provided notice to the bureau and to the Ohio attorney general in
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2004 that he was in settlement negotiations with Heritage, he and Heritage settled
for an undisclosed amount.1
{¶ 6} On November 4, 2008, the bureau filed suit in Columbiana County
Common Pleas Court against McKinley and Heritage, asserting that they were
jointly and severally liable under R.C. 4123.93 and 4123.931 for failing to honor
the bureau’s subrogation lien in the settlement that had been reached. The bureau
asserted that on the date of the complaint’s filing, it had paid more than $460,000
in medical bills and compensation on McKinley’s workers’ compensation claim
and that additional future payments were expected to be made.
{¶ 7} Heritage shortly thereafter moved the trial court under Civ.R.
12(B)(6) to dismiss the complaint for failure to state a claim, arguing that the
bureau’s subrogation claim was derivative of McKinley’s right to recover against
Heritage and that the two-year statute of limitations applicable to McKinley’s
personal-injury claim against Heritage also applied to the bureau’s claim.
Heritage additionally asserted that the bureau sought a “typical,” or traditional,
subrogation recovery.
{¶ 8} In its response to the motion to dismiss, the bureau argued that R.C.
4123.931 creates an independent right of recovery for a statutory subrogee, in that
the bureau’s subrogation claim arose from that statute, and that the six-year
1. After McKinley settled with Heritage, he sought a declaratory judgment in Washington County
Common Pleas Court that R.C. 4123.93 and 4123.931 are unconstitutional, in an effort to prevent
the bureau from proceeding under those statutes to recover a share of the settlement. In the event
that the statutes were upheld as constitutional, McKinley asked the court to declare the amount of
the bureau’s recovery under R.C. 4123.931. The trial court held the statutes unconstitutional, but
the Fourth District Court of Appeals reversed and upheld the facial constitutionality of R.C.
4123.93 and 4123.931. See McKinley v. Ohio Bur. of Workers’ Comp., 170 Ohio App.3d 161,
2006-Ohio-5271, 866 N.E.2d 527, ¶ 1-4. McKinley appealed that decision to this court, and we
accepted his discretionary appeal and stayed the briefing schedule. 112 Ohio St.3d 1489, 2007-
Ohio-724, 862 N.E.2d 116. In McKinley v. Ohio Bur. of Workers’ Comp., 117 Ohio St.3d 538,
2008-Ohio-1736, 885 N.E.2d 242, this court summarily affirmed the judgment of the court of
appeals on authority of Groch v. Gen. Motors Corp., 117 Ohio St.3d 192, 2008-Ohio-546, 883
N.E.2d 377. Upon remand to the trial court in the wake of that affirmance, McKinley apparently
voluntarily dismissed his complaint under Civ.R. 41(A).
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statute of limitations of R.C. 2305.07 for an action on “a liability created by
statute” is the one that applies to claims brought pursuant to R.C. 4123.931(G).
{¶ 9} The trial court granted Heritage’s motion to dismiss. It reasoned
that the bureau’s claim was derivative of McKinley’s claim against Heritage and
that the same two-year statute of limitations that applied to McKinley’s claim
against Heritage also applied to the bureau’s claim, thus rendering the bureau’s
claim untimely. The trial court also dismissed as untimely the bureau’s claim
against McKinley.
{¶ 10} Upon the bureau’s appeal, the Seventh District Court of Appeals
reversed the trial court’s order of dismissal and remanded for further proceedings.
Ohio Bur. of Workers’ Comp. v. McKinley, 7th. Dist. No. 09CO3, 2010-Ohio-
1006, ¶ 63. The appellate court rejected Heritage’s arguments that R.C. 4123.931
is a typical derivative subrogation statute, and instead held that R.C. 4123.931
“creates an independent right of recovery for the statutory subrogee” so that R.C.
2305.07’s six-year statute of limitations applies. Id. at ¶ 55. Accordingly, the
appellate court held that the bureau’s complaint was timely because it was filed
within six years of McKinley’s injury. Id.
{¶ 11} We accepted Heritage’s appeal under our discretionary jurisdiction
for review of a single proposition of law presented: “Ohio Revised Code Section
4123.931 is a typical subrogation statute and does not provide the Ohio Bureau of
Workers’ Compensation an independent right of recovery and therefore, claims
brought under R.C. 4123.931 are subject to the same statute of limitations that
governs the claimant’s underlying cause of action.” See 126 Ohio St.3d 1512,
2010-Ohio-3331, 930 N.E.2d 331.
II. Analysis
{¶ 12} In order for a trial court to dismiss a complaint under Civ.R.
12(B)(6) for failure to state a claim upon which relief can be granted, it must
appear beyond doubt that the plaintiff can prove no set of facts in support of the
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claim that would entitle the plaintiff to the relief sought. O’Brien v. Univ.
Community Tenants Union, Inc. (1975), 42 Ohio St.2d 242, 245, 71 O.O.2d 223,
327 N.E.2d 753; LeRoy v. Allen, Yurasek & Merklin, 114 Ohio St.3d 323, 2007-
Ohio-3608, 872 N.E.2d 254, ¶ 14. The allegations of the complaint must be taken
as true, and those allegations and any reasonable inferences drawn from them
must be construed in the nonmoving party’s favor. Id. Appellate review of a trial
court’s decision to dismiss a complaint pursuant to Civ.R. 12(B)(6) is de novo.
Perrysburg Twp. v. Rossford, 103 Ohio St.3d 79, 2004-Ohio-4362, 814 N.E.2d
44, ¶ 5.
{¶ 13} A complaint may be dismissed under Civ.R. 12(B)(6) for failing to
comply with the applicable statute of limitations when the complaint on its face
conclusively indicates that the action is time-barred. Doe v. Archdiocese of
Cincinnati, 109 Ohio St.3d 491, 2006-Ohio-2625, 849 N.E.2d 268, ¶ 11.
{¶ 14} As we observed in Groch v. Gen. Motors Corp., 117 Ohio St.3d
192, 2008-Ohio-546, 883 N.E.2d 377, ¶ 48, R.C. 4123.931 sets forth the statutory
subrogee’s right of subrogation and details how that right is implemented, while
R.C. 4123.93 is a definitional section that explains the meaning of terms
appearing in R.C. 4123.931. Neither of those statutes specifically supplies a
limitations period applicable to a subrogation claim brought by a statutory
subrogee pursuant to R.C. 4123.931. In Groch, at paragraph one of the syllabus,
we upheld the facial constitutionality of the workers’ compensation subrogation
statutes, but no statute-of-limitations issue was presented in that case.
{¶ 15} The key issue of law in this case, as framed by Heritage’s
arguments based on case law interpreting subrogation statutes in contexts
different from that we explore here, is whether R.C. 4123.931(G) creates an
independent right of recovery for a statutory subrogee. If it does, then the
recovery by the statutory subrogee is not a “typical” derivative subrogation
recovery, and the six-year statute of limitations for an action “upon a liability
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created by statute” of R.C. 2305.07 applies to a workers’ compensation
subrogation claim. See McAuliffe v. W. States Import Co., Inc. (1995), 72 Ohio
St.3d 534, 538, 651 N.E.2d 957 (R.C. 2305.07’s six-year limitations period
applies when no statute of limitations is legislatively specified and an action
would not exist “but for” the statute creating it). If a six-year statute of limitations
applies, the trial court erred in dismissing the bureau’s complaint.
{¶ 16} Alternatively, if R.C. 4123.931(G) is a typical subrogation statute
that allows a subrogation recovery that is derivative of a claimant’s ability to
recover from a third party, then the same two-year personal-injury statute of
limitations of R.C. 2305.10 that applies to a claimant’s personal-injury action also
applies to a statutory subrogee’s claim under R.C. 4123.931(G). See Chemtrol
Adhesives Inc. v. Am. Mfrs. Mut. Ins. Co. (1989), 42 Ohio St.3d 40, 42, 537
N.E.2d 624 (in insurance subrogation, a subrogee cannot have greater rights than
those possessed by its insured). If a two-year statute of limitations applies, the
trial court did not err in dismissing the complaint.
{¶ 17} An important point of dispute is R.C. 4123.931(A), which
provides, “The payment of compensation or benefits pursuant to this chapter * * *
creates a right of recovery in favor of a statutory subrogee against a third party,
and the statutory subrogee is subrogated to the rights of a claimant against that
third party. The net amount recovered is subject to a statutory subrogee’s right of
recovery.” (“Net amount recovered” is defined in R.C. 4123.93(E).)
{¶ 18} In defending the trial court’s determination that R.C. 4123.931
involves a derivative recovery, Heritage primarily relies on two Ohio appellate
court decisions in which courts reviewed subrogation statutes other than the one
implicated here and determined that those statutes did not create a right of
recovery in favor of the state. Heritage asserts that the analysis of those decisions
is directly on point and requires that the same conclusion must be reached for
R.C. 4123.931, the statute involved in this case.
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{¶ 19} In Ohio Dept. of Human Servs. v. Kozar (1995), 99 Ohio App.3d
713, 717, 651 N.E.2d 1039, the Eighth Appellate District held that former R.C.
5101.58, a statute governing the Ohio Department of Human Services’ subrogated
recovery against a third party for Medicaid benefits paid, used the term
“subrogation” in its conventional sense and did not give an independent right of
recovery. The court accordingly held that the state’s right of subrogation derived
from the rights of the injured party and was not greater than those rights. Because
the injured party had not recovered from the alleged tortfeasor and could not
recover because the statute of limitations had expired, the court determined that
the state could not recover either. Id. at 716.
{¶ 20} In Montgomery v. John Doe 26 (2000), 141 Ohio App.3d 242, 250,
750 N.E.2d 1149, the Tenth Appellate District held that a former version of R.C.
2743.72(A), which provided for the state’s subrogation recovery against third
parties for reparation payments made from the Crime Victims Fund pursuant to
R.C. 2743.56, used the term “subrogation” in its conventional sense and did not
create a right of recovery for the state. The court held that the same statute of
limitations applicable to the claimants’ ability to seek recovery from the third
parties also applied to the state’s subrogation recovery. Id. at 251.
{¶ 21} However, a consideration of R.C. 4123.931 reveals that the
subrogation right involved in this case is fundamentally different from the
subrogation rights in the statutes at issue in the foregoing cases. In particular,
R.C. 4123.931(A) specifically states that the payment of workers’ compensation
benefits in and of itself “creates a right of recovery in favor of a statutory
subrogee against a third party.” (Emphasis added.) Other sections of R.C.
4123.931 similarly delineate the special nature of the subrogation recovery
involved here. That the statutes considered in Kozar and Montgomery v. John
Doe 26 did not involve subrogation in the workers’ compensation context renders
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those decisions distinguishable. The statutory provisions involved in the case
before us are manifestly not typical subrogation statutes.
{¶ 22} The third phrase of the text of R.C. 4123.931(A), “the statutory
subrogee is subrogated to the rights of a claimant against that third party,” makes
explicit that the scope of the automatic and independent right of recovery in favor
of the statutory subrogee fully encompasses all “rights of a claimant against that
third party.” It is an affirmative grant of a right and not a limitation. As a whole,
then, R.C. 4123.931(A) creates a right of recovery atypical of traditional
subrogation statutes. See Ohio Legislative Service Commission Final Bill
Analysis of 2002 Sub.S.B. No. 227, 149 Ohio Laws, Part II, 3716 (the bill that
enacted current R.C. 4123.93 and 4123.931), explaining that the act “states more
specifically than the previous statute that payment of compensation or benefits
creates a right of recovery, as opposed to the prior law’s ‘right of subrogation,’ of
a statutory subrogee against a third party, and the statutory subrogee is subrogated
to the rights of a claimant against that third party.” (Emphasis added.) Thus, the
trial court erred in relying too heavily on the third phrase of the statutory text and
in failing to accord sufficient meaning to the preceding text whereby the fact of
payment of workers’ compensation benefits “creates a right of recovery in favor
of” the statutory subrogee against a liable third party.
{¶ 23} We conclude that R.C. 4123.931(A) must be interpreted to provide
that the right of the statutory subrogee to recover its subrogation interest is an
independent right, but that the right is subrogated in the sense that the statutory
subrogee can recover from the claimant and/or the third party only if the third
party is liable to the claimant in tort. In this regard, we agree with the court of
appeals’ interpretation of this provision. See 2010-Ohio-1006, at ¶ 41.
{¶ 24} The Second Appellate District, in Corn v. Whitmere, 183 Ohio
App.3d 204, 2009-Ohio-2737, 916 N.E.2d 838, ¶ 30, accurately observed that
subrogation in the workers’ compensation context cannot be analogized to
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subrogation arising from contract or equitable principles and concluded that
workers’ compensation subrogation is not the same as typical subrogation, which
often arises in the insurance context.
{¶ 25} Subrogation generally is “[t]he substitution of one party for another
whose debt the party pays, entitling the paying party to rights, remedies, or
securities that would otherwise belong to the debtor.” Black’s Law Dictionary
(9th Ed.2009) 1563-1564. Insurance is the context in which subrogation most
commonly arises. In that context, subrogation is “[t]he principle under which an
insurer that has paid a loss under an insurance policy is entitled to all the rights
and remedies belonging to the insured against a third party with respect to any
loss covered by the policy.” Id. at 1564. In the insurance context, “[a] subrogated
insurer stands in the shoes of the insured-subrugor and has no greater rights than
those of its insured-subrogor. * * * Further, where the insured’s claim against a
tortfeasor is based on negligence, the insurer’s subrogated claim is also
necessarily based on negligence, rather than on the insurance contract. * * *
Consequently, where an insured’s tort claim is subject to a statute of limitations,
so too is the insurer’s subrogation claim.” Nationwide Mut. Ins. Co. v.
Zimmerman, 5th Dist. No. 2004 CA 00007, 2004-Ohio-7115, ¶ 16; see Corn, 183
Ohio App.3d 204, 2009-Ohio-2737, 916 N.E.2d 838, at ¶ 35 (“in the insurance
context, subrogation is derivative in nature, and no new cause of action is
created”).
{¶ 26} However, workers’ compensation subrogation under R.C. 4123.931
is different. In this singular context, a claimant’s ability to receive workers’
compensation benefits is not based on any concept of fault, and a claimant’s
recovery of those benefits is governed by the provisions of the Workers’
Compensation Act. See, e.g., Holeton v. Crouse Cartage Co. (2001), 92 Ohio
St.3d 115, 119, 748 N.E.2d 1111 (workers’ compensation laws are a unique social
bargain in which employees give up their common-law remedy in exchange for
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greater assurance that they will receive reasonable compensation for a work-
related injury, and employers in turn give up common-law defenses but are
protected from unlimited liability); Blankenship v. Cincinnati Milacron Chems.,
Inc. (1982), 69 Ohio St.2d 608, 614, 23 O.O.3d 504, 433 N.E.2d 572. While in
typical insurance subrogation an insurer’s subrogated claim is based on the
negligence of the tortfeasor and is derivative of the insured’s rights, a statutory
subrogee’s R.C. 4123.931 subrogation interest arises from the Workers’
Compensation Act itself.
{¶ 27} The subrogation statutes are designed to permit the statutory
subrogee, who paid the workers’ compensation benefits to the claimant in the first
instance, to be at least partially reimbursed out of any recovery that the claimant
may obtain from the third party responsible for causing the injury. See Corn at
¶ 41. “Far from a modification of a common-law cause of action, [the statutory
subrogee’s] right to reimbursement * * * is nonexistent but for the statute.” Id.
Because workers’ compensation subrogation cannot be analogized to typical
insurance subrogation, the court in Corn recognized that R.C. 4123.931 “provides
for an independent subrogation claim that is in fact a new cause of action.” Id. at
¶ 35. We agree.
{¶ 28} Other aspects of the statutory subrogation recovery considered here
support the conclusion that R.C. 4123.931 is not a typical subrogation statute.
The special term “statutory subrogee” used throughout R.C. 4123.93 and
4123.931 reinforces that the claim for subrogation arises from the statutes
providing for the recovery. The consistent usage of the word “statutory” to
modify “subrogee” indicates that the statutory subrogee is not a subrogee in the
common usage of that word.
{¶ 29} Black’s Law Dictionary (9th Ed.2009) 1564 defines a subrogee as
“[o]ne who is substituted for another in having a right, duty, or claim; esp., the
person or entity that assumes the right to attempt to collect on another’s claim
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against a third party by paying the other’s claim-related debts or expenses.” But a
concurrent right of recovery against a claimant, as the bureau has here under R.C.
4123.931(G), which makes the claimant and the third party “jointly and severally
liable to pay the statutory subrogee” for the full subrogation amount, is
inconsistent with the usual process by which a typical subrogee seeks recovery
against a third-party tortfeasor by pursuing a derivative claim. See also R.C.
4123.931(H), stating that “the right of subrogation * * * is automatic,” which is
also not a feature of a typical attempted subrogation recovery.
{¶ 30} In light of the above considerations, a statutory subrogee that
pursues recovery of its subrogation interest under R.C. 4123.931(G) clearly does
much more than merely substitute for and “stand in the shoes of” a claimant.
These subrogation statutes set forth an overall scenario in which the claimant, the
third party, and the statutory subrogee are three independent actors playing
discrete and delineated roles. The statutory subrogee pursues an independent
recovery in its own right under R.C. 4123.931(G) as a separate and distinct actor.
{¶ 31} In Santos v. Ohio Bur. of Workers’ Comp., 101 Ohio St.3d 74,
2004-Ohio-28, 801 N.E.2d 441, ¶ 5, the bureau acknowledged that when this
court in Holeton, 92 Ohio St.3d at 135, 748 N.E.2d 1111, held the former
subrogation statute unconstitutional, the bureau “could no longer assert
subrogation rights.” Consistent with that concession, this court in Santos stated
that after the decision in Holeton, “any collection or retention of moneys collected
under the statute by the [bureau] was wrongful.” Id. at ¶ 17. This court therefore
recognized that in the absence of a constitutional workers’ compensation
subrogation statute, a statutory subrogee has no basis to pursue any portion of a
claimant’s personal-injury award from a third party as reimbursement for
workers’ compensation benefits paid to the claimant. See also Modzelewski v.
Yellow Freight Sys., Inc., 151 Ohio App.3d 666, 2003-Ohio-827, 785 N.E.2d 501,
¶ 27 (self-insured statutory subrogee had no subrogation right under predecessor
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statute to the statute held unconstitutional in Holeton, in that the predecessor
statute was also unconstitutional), judgment of unconstitutionality affirmed by
Modzelewski v. Yellow Freight Sys., Inc., 102 Ohio St.3d 192, 2004-Ohio-2365,
808 N.E.2d 381.
{¶ 32} Workers’ compensation subrogation recovery would not exist “but
for” R.C. 4123.93 and 4123.931. See McAuliffe, 72 Ohio St.3d at 538, 651
N.E.2d 957. Because R.C. 4123.931 creates an independent right of recovery that
would not otherwise exist, we conclude that a statutory subrogee’s claim under
R.C. 4123.931(G) to recover its subrogation interest is governed by the six-year
statute of limitations of R.C. 2307.05 for a liability created by statute. See Corn,
183 Ohio App.3d 204, 2009-Ohio-2737, 916 N.E.2d 838, at ¶ 41.
{¶ 33} Heritage lists a number of reasons why the bureau should not be
able to recover its subrogation interest in this case, including reasons based on the
bureau’s notice of the settlement and on public policy. The bureau counters with
its view of why recovery should be available here and justifies the manner in
which it has pursued that recovery.
{¶ 34} As to Heritage’s arguments based on the bureau’s notice of the
settlement, we observe that R.C. 4123.931(G) explicitly makes the third party and
the claimant jointly and severally liable to pay the subrogation interest if a
claimant does not give notice of the claimant’s actual or potential right of
recovery “or if a settlement or compromise excludes any amount paid by the
statutory subrogee.” (Emphasis added.) Moreover, the trial court’s dismissal of
the complaint in the early stages of this case was based solely on its conclusion
that a two-year statute of limitations applied and that it had expired. Therefore,
the only issue presented to this court is which statute of limitations applies.
Resolution of that issue is wholly a question of law. Any of the parties’
arguments based on the specific details of the attempted recovery here or on
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public policy (which is generally implemented by the legislature and not by the
courts) are outside the scope of this appeal.
{¶ 35} The bureau asserts that no statute of limitations should be
applicable to its attempts to collect on its excluded statutory subrogation interest,
under Ohio Dept. of Transp. v. Sullivan (1988), 38 Ohio St.3d 137, 527 N.E.2d
798, in which this court held at the syllabus that “[t]he state, absent express
statutory provision to the contrary, is exempt from the operation of a generally
worded statute of limitations.” We decline to consider applying Sullivan for two
independent reasons.
{¶ 36} First, the bureau did not raise this argument in the trial court.
Rather, it specifically urged the trial court to find the six-year statute of
limitations of R.C. 2305.07 applicable to its statutory subrogation claim. The
bureau therefore did not ask the trial court to distinguish it from a
nongovernmental statutory subrogee and to afford it special treatment as an arm
of the state. See, e.g., R.C. 4123.93(B) and 4123.93(D), establishing that other
parties besides the bureau can be statutory subrogees for purposes of these
statutes. To the extent that the bureau now argues that no statute of limitations
should apply, it has waived or forfeited that argument in this case by failing to
assert it in the trial court. Moreover, because we hold that a six-year statute of
limitations applies to a statutory subrogee’s claim to recover its subrogation
interest under R.C. 4123.931(G), the bureau’s claim in this case is timely
regardless of whether the statute of limitations applies to it or not. Accordingly,
there is also no need to address this question in this case.2
{¶ 37} Finally, the bureau asserts that the limitations period for recovery
of its subrogation interest under R.C. 4123.931(G) should not begin to run (i.e.,
2. We acknowledge that the bureau did raise an argument based on Sullivan in the court of
appeals. The appellate court did not address the argument in its opinion, likely for reasons similar
to those supporting our decision not to consider applying Sullivan.
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that the statutory subrogee’s claim does not accrue) until the statutory subrogee
has actual knowledge that a settlement between a claimant and a third-party
tortfeasor has occurred that excluded the subrogation interest. Because the claim
in this case would have been timely filed under the six-year statute of limitations
even if the claim accrued at some point later than the date of the injury, we need
not address this issue here.
III. Conclusion
{¶ 38} For all the foregoing reasons, we hold that a claim brought by a
statutory subrogee pursuant to R.C. 4123.931(G) to recover its subrogation
interest is a claim “upon a liability created by statute” and is therefore subject to
the six-year statute of limitations of R.C. 2305.07.
{¶ 39} Because the bureau’s complaint in this case was timely filed, the
trial court erred in dismissing the complaint. We affirm the judgment of the court
of appeals.
Judgment affirmed.
O’CONNOR, C.J., and MOORE, O’DONNELL, LANZINGER, and MCGEE
BROWN, JJ., concur.
PFEIFER, J., concurs in judgment.
CARLA D. MOORE, J., of the Ninth Appellate District, sitting for
LUNDBERG STRATTON, J.
_________________
PFEIFER, J., concurring.
{¶ 40} R.C. 4123.931 grants the Bureau of Worker’s Compensation
(“BWC”) and self-insured employers several ways to recoup workers’
compensation benefits paid out to an injured employee. I write separately to note
that not all causes of action arising from R.C. 4123.931 have a six-year statute of
limitations. I concur because the BWC theoretically has a cause of action against
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defendant-appellant, Heritage WTI, Inc. (“Heritage”), under R.C. 4123.931(G),
which does have a six-year statute of limitations.
{¶ 41} R.C. 4123.931(A) establishes that the payment of workers’
compensation benefits “creates a right of recovery in favor of a statutory subrogee
against a third party, and the statutory subrogee is subrogated to the rights of a
claimant against that third party. The net amount recovered is subject to a
statutory subrogee’s right of recovery.”
{¶ 42} Thus, pursuant to R.C. 4123.931(A), any payments made by the
third party to the claimant are subject to being dispersed to the statutory subrogee.
This is a standard subrogation arrangement, and the rights of the statutory
subrogee are limited to the rights of the claimant. Since the claimant has no rights
against a third party once the statute of limitations has passed, neither does the
statutory subrogee. Thus, the statutory subrogee is limited to the two-year statute
of limitations for personal injury.
{¶ 43} A statutory subrogee has another method to recover benefits.
Pursuant to R.C. 4123.931(H), the statutory subrogee may itself bring an action
against the third-party tortfeasor:
{¶ 44} “A statutory subrogee may institute and pursue legal proceedings
against a third party either by itself or in conjunction with a claimant. If a
statutory subrogee institutes legal proceedings against a third party, the statutory
subrogee shall provide notice of that fact to the claimant. If the statutory
subrogee joins the claimant as a necessary party, or if the claimant elects to
participate in the proceedings as a party, the claimant may present the claimant’s
case first if the matter proceeds to trial. If a claimant disputes the validity or
amount of an asserted subrogation interest, the claimant shall join the statutory
subrogee as a necessary party to the action against the third party.”
{¶ 45} Again in R.C. 4123.931(H), the statutory subrogee’s cause of
action is derivative, arising directly from the injury to the claimant. Thus, the
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rights of the statutory subrogee are limited to those of the claimant, including
being subject to a two-year statute of limitations on a personal-injury action.
{¶ 46} The BWC’s claim here is brought pursuant to R.C. 4123.931(G),
which provides something completely different to the statutory subrogee; it is a
cause of action belonging exclusively to the statutory subrogee. R.C.
4123.931(G) makes the statutory subrogee a mandatory player in settlement
discussions between the claimant and the third party. It provides that if the
statutory subrogee is not given notice of settlement negotiations—which has not
been alleged in this case—or “if a settlement or compromise excludes any amount
paid by the statutory subrogee,” then “the third party and the claimant shall be
jointly and severally liable to pay the statutory subrogee the full amount of the
subrogation interest.” Thus, if the amount set forth in the settlement agreement
between the claimant and the third party does not address the payments made by
the statutory subrogee, the claimant and third party are liable to repay the
statutory subrogee in full. This is significant, because in the normal course under
R.C. 4123.931(B), the statutory subrogee receives from the settlement proceeds
only a certain ratio of what it had paid out.
{¶ 47} A claim brought under R.C. 4123.931(G) is not a subrogation
claim. It is a unique claim created by statute that punishes claimants and third
parties for failing to include statutory subrogees in settlement negotiations. As
“an action * * * upon a liability created by statute,” an R.C. 4123.931(G) action
has a six-year statute of limitations pursuant to R.C. 2305.07.
{¶ 48} This appeal concerns only Heritage. Any battles between
McKinley and the BWC over the distribution of the settlement amount subject to
the BWC’s rights under R.C. 4123.931(B) do not concern Heritage. Any claim
that the BWC might have brought under R.C. 4123.931(H) was subject to the
two-year statute of limitations. A claim brought under R.C. 4123.931(G) against
Heritage does have a six-year statute of limitations. Whether such a claim under
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January Term, 2011
R.C. 4123.931(G) has any basis in fact is up to the trial court. The BWC has not
alleged that it did not receive notice of settlement negotiations. The BWC’s only
hope for recovery from Heritage would be a provision in the settlement agreement
that specifically excludes payments made by the BWC. The trial court should
proceed on the BWC’s case against Heritage on that limited basis.
___________________
Michael DeWine, Attorney General, Alexandra T. Schimmer, Chief
Deputy Solicitor General, Stephen P. Carney, Deputy Solicitor, and Mia M.
Yaniko, Assistant Solicitor; and Lee M. Smith & Associates Co., L.P.A., Lee M.
Smith, and Benjamin W. Crider, for appellee.
Reminger Co., L.P.A., Gregory D. Brunton, Melvin J. Davis, and Patrick
Kasson, for appellant.
Law Office of Russell Gerney and Russell Gerney, urging reversal for
amicus curiae, Ohio Association for Justice.
______________________
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