A (Not-So) Significant Change in Ohio Subrogation Law

By Matthew Hamm, Esq.*


Key Points:

  • O.R.C. § 2323.44 went into effect on September 28, 2015.
  • The statute codifies the “Made Whole” doctrine in Ohio and applies regardless of policy language to the contrary.
  • Be aware of attempts by those who seek to overstate the implications of this statute during settlement negotiations.


For those practicing in the realm of personal injury litigation, dealing with subrogation interests is simply a fact of life. Accordingly, changes in this area of law should be closely monitored and understood by both counsel defending injury claims as well as claims professionals adjusting and settling such claims.

On September 28, 2015, O.R.C. § 2323.44 went into effect in Ohio. Many have suggested this statute reflects a substantial change in long-standing Ohio subrogation law. In essence, the statute codifies the “Made Whole” doctrine in Ohio. The position of this article is to suggest that the statute will ultimately have little practical effect upon the litigation and settlement of personal injury claims within Ohio.

Legislative Background

This new law was included as an amendment to a state budget bill. There has been some criticism as to how this amendment was included within the bill, as it was introduced at the eleventh hour and just before the bill was set to be approved. It is anticipated there may be challenges to the statute’s constitutionality.

Governor John Kasich used his line-item veto to eliminate various provisions within the original amendment. Notably, his veto struck provisions that would have codified the “common fund” rule, which requires insurers to share in a portion of the fees, expenses and court costs incurred by the injured party and their attorney in pursuing a claim. The veto also struck language that would have provided that the “tort action and any settlement of the tort action shall be controlled solely by the injured party.” These clearly plaintiff-orientated provisions were stricken, and the statute was stripped of some of its reach via the Governor’s veto.

Important Statutory Provisions

In relevant part, O.R.C. § 2323.44 provides: “Notwithstanding any contract or statutory provision to the contrary, the rights of a subrogee * * * shall be subject to” additional enumerated conditions. O.R.C. § 2323.44(B)(1) states that, if less than the full value of the tort action is recovered, the subrogee’s claim “shall be diminished in the same proportion as the injured party’s interest is diminished.”

Additionally, O.R.C. § 2323.44(B)(2) provides that “[i]f a dispute regarding the distribution of the recovery in the tort action arises, either party may file an action * * * to resolve the issue of the distribution of the recovery.” This provision expressly includes a right of action in the event the parties cannot agree upon the distribution of funds recovered in the action.

Brief History of Ohio Subrogation Law

Ohio courts have long enforced the “Made Whole” doctrine, see, Newcomb v. Cincinnati Ins. Co., 22 Ohio St. 382 (Ohio 1872); Peterson v. Ohio Farmers Ins. Co., 191 N.E.2d 157 (Ohio 1963), which provides that an insurer’s subrogation interest will not be given priority where doing so will result in less than a full recovery to the insured. Also known as the “Full Compensation Rule” or the “Make Whole Rule,” the doctrine only applies to an “insured” who has not been made whole. Allen v. Binckett, 5th Dist. Muskingum No. CT2008-0027, 2009-Ohio-2969; Burris v. State Farm Fire & Cas. Co., 10th Dist. Franklin No. 08AP-1113, 2009-Ohio-5123 (explaining if the insured signs a release with the tortfeasor and settles its case for less than policy limits, Ohio courts view this as some evidence tending to prove the insured was fully compensated for its damages.).

Historically, the “Made Whole” doctrine could be disclaimed by insurance policy or plan language. N. Buckeye Edn. Council Group Health Benefits Plan v. Lawson, 814 N.E.2d 1210 (Ohio 2004). In the case of a clear and unambiguous contractual provision, an insurer was able to enforce its right of subrogation even if the claimant may not receive full compensation to cover his or her losses.

Likely Outcomes

In effect, this new law provides that if a claimant receives less than the full value of his or her claim, a subrogated entity’s interest will be reduced by the same proportional amount, irrespective of contractual language. The statute will impact both health insurance carriers and insurers offering medical payments coverage under automobile and/or homeowner’s policies.

As many who practice in this area are well aware, insurers are often willing to negotiate down their health insurance and med-pay interests. This is a common practice in light of the economic realities implicit in settling many personal injury claims. This new statute will now require insurers to reduce their interests if the claimant does not receive the full value of his or her claim.

This begs the question as to what constitutes the full value of a claim. A determination in this regard is far from an exact science and is rarely ascertained unless a lawsuit proceeds to trial. In that instance, the jury’s award will be the full value of the claim. If the claimant receives less than the award rendered by the jury due to his or her own comparative negligence, joint liability of other parties or the inability to collect from a party, the subrogated carrier’s health insurance or med-pay interest will be reduced by the same proportional amount.

In most cases, the practical implication of this new law will be that it will merely serve as a negotiation tool for claimants and their attorneys. For claims that are either pre-suit or in litigation (but before trial), the statute will likely be used as a tactic to convince subrogated carriers to reduce or waive their claims.

Again, O.R.C. § 2323.44(B) took effect on September 28, 2015. The statute does not state whether it applies to cases filed after that date, claims arising after that date or to cases not settled as of that date. It is anticipated, however, that Ohio courts will apply the statute to all subrogation claims in which payment was made on or after September 28, 2015.

In sum, attorneys and claims professionals working on personal injury claims in Ohio should be aware of this new law and what it means to the claims they are handling. Knowledge of the statute’s implications—and its limitations—will prevent claimants and/or their attorneys from using the law to gain an unwarranted advantage in settlement negotiations.

*Matt is an associate in our Cincinnati, Ohio office. He can be reached at 513.372.6816 or mdhamm@mdwcg.com.

Defense Digest, Vol 21, No. 4, December 2015

Defense Digest 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. ATTORNEY ADVERTISING pursuant to New York RPC 7.1. © 2015 Marshall Dennehey Warner Coleman & Goggin. All Rights Reserved. This article may not be reprinted without the express written permission of our firm. For reprints, contact tamontemuro@mdwcg.com.