Monday, June 1, 2015

Fee on Recoupment of Over-Payment

An interesting fee case was decided recently in Ohio. An April article in Business Insurance describes the decision in State ex rel Baker v. Industrial Commission of Ohio.

The injured worker in this instance received a measure of temporary indemnity benefits following an accident in 1995. It was later determined that those benefits were overpaid and the State of Ohio sought reimbursement of the over-payment. Ohio is a "monopolistic state" for workers' compensation. That means that the state itself is the insurance carrier for work accidents there. The state alleged that over-payments were made due to to the injured worker being employed during periods for which she also received workers' compensation indemnity benefits.

The amount was substantial, over $60,000, and the injured worker was ordered to pay that amount back. Later, in 2010, she sought benefits for another period of time and she prevailed in that claim. The State was ordered to provide almost $25,000 in additional permanent indemnity benefits. That award was credited against the $60,000 that she had been ordered to pay back to the State. 

In effect, she owed less in repayment, but she received nothing for prevailing on the indemnity claim. Although she prevailed, she did not receive cash in pocket. Owing someone less than you previously owed them is a benefit however. Perhaps not as immediately gratifying as receiving a check for $25,000, but a benefit nonetheless. 

The attorneys that represented her, and successfully litigated to obtain the $25,000 in benefits, asked for attorneys fees of almost $9,000. The Ohio Industrial Commission "denied the law firm's request," concluding that it had no jurisdiction to award the fee. The law firm sought review from the Ohio 10th District Court of Appeals, which held that the State "could withhold payments to a claimant" in order to obtain repayment of "over-payment of benefits." The Court also concluded that the State was not responsible to pay attorneys fees in such an instance. 

Alleging that the District Court had fallen into error, the law firm sought review by the Ohio Supreme Court. Unfortunately for the law firm and the injured worker, the Supreme Court "unanimously upheld the appellate court's ruling." The Court concluded that the state could "use any lawful means to recover compensation that has been paid to a person who was not entitled to the compensation due to fraud."  That is, the over-payment of temporary indemnity that occurred when the injured worker was working. 

The court did not conclude that the firm was not entitled to a fee. The courts concluded that the state did not owe the attorneys a fee. Knowing nothing of Ohio law, I do not know if that ends the matter there or whether the firm can now seek a fee from the injured worker. Having not received any cash from her claim, however, the injured worker might not be in a cash-position to pay the $9,000 fee that the attorneys seek. That amount is not dissimilar to a used car, and could take as long to pay off on a monthly payment schedule. 

An interesting case though from our vantage point well to the south of the Buckeye State. Will attorneys there be reluctant to seek benefits in cases where the result may be a benefit of reduced debt, but no cash payment? Would the outcome here be any different? 

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