Every subrogation professional is familiar with the dreaded reduce-your-claim conversation: an injured party’s counsel calls you to notify you their client is not being fully recompensed for their losses, so you should reduce the amount of the subrogation claim. In Ohio, protecting the right to maximum recovery can become particularly difficult, confusing, and subject to different interpretations under ORC § 2323.44. What is this statute, and how does it affect maximum recovery in a subrogation claim?
In the episode of On Subrogation: Ohio’s Diminishment of Subrogated Claims Statute below, Mark Demian unpacks this law and discusses the best strategies for Ohio subrogation lawyers and adjusters navigating this proportionate sharing statute.
Enacted in 2015, ORC § 2323.44 governs when a subrogated carrier’s claim may be proportionately reduced. Although it is intended to encourage equitable subrogation, there is a critical gap between the statute’s intentions – to create fairness when the injured party does not fully recover – and the statute’s wording, which is murky at best. The statute is sometimes referred to as Ohio’s proportionate sharing law because it requires a subrogation claim to be diminished proportionally to which the injured party’s recovery is reduced.
The broad language creates ambiguity that continues to affect subrogation negotiations, settlements, and recovery efforts throughout the state. In practice, Ohio subrogation professionals and insurance carriers must carefully analyze these reduction requests rather than accepting a general made-whole-type argument and accompanying assertion that a reduction under ORC § 2323.44 is automatically permitted.
What Ohio’s Subrogation Statute Does & Doesn’t Say
Ohio Revised Code § 2323.44 states that when an injured party recovers less than the full value of a claim due to certain circumstances, the subrogating party’s recovery must be reduced proportionally. The statute provides “three” situations where this can occur:
- Comparative negligence of the insured
- Decoded: The injured party shares fault for the accident or loss.
- Decoded: The injured party shares fault for the accident or loss.
- Limited insurance coverage is available from the tortfeasor
- Decoded: The insurance policy coverage falls short of the total amount of the loss.
- Decoded: The insurance policy coverage falls short of the total amount of the loss.
- “Any other cause”
- Decoded: … what doesn’t this mean?
The first two categories are relatively straightforward. (1) If the insured bears partial responsibility, their overall recovery may be reduced accordingly. (2) Limited insurance coverage can prevent an injured party from recovering the full value of damages when the at-fault party lacks sufficient policy coverage or assets.
Learn more about subrogating underinsured motorist claims: Limits vs. Excess: Strategies for Successfully Subrogating Against an Underinsured Tortfeasor
(3) This is where the statute becomes controversial. By including the phrase “any other cause,” the law introduces an expansive and largely undefined standard that potentially encompasses nearly any reason a settlement is less than the injuredparty’s asserted damages. Critics argue the vague language undermines the clarity provided by the first two categories because it creates a catch-all that renders specifics null. Under this third category, virtually any subrogation settlement that is not satisfactory to an injured party could be “any other cause,” invoking the statute.
Many carriers and subrogation lawyers view this statute as poorly written because… well, it is. Statutes are meant to create certainty in complex legal matters, but ORC § 2323.44 does the opposite. When a proportionate diminishment is truly justified is open to interpretation, which engenders uncertainty across a wide variety of subrogation claims and contexts.
Ohio’s Subrogation Diminishment Dispute: What is “Full Value”?
The core argument in this subrogation context is the concept of full value. Attorneys representing the injured party frequently argue their client(s) did not receive “full value” from a settlement and therefore the insurer’s subrogation interest must be reduced proportionately. But this does not automatically justify a reduction; subrogation counsel should ask why their client failed to recover the full value.
Not every settlement compromise demonstrates that an injured party was unfairly undercompensated. Litigation risk, dispute resolution strategy, delay concerns, and attorney preferences all influence settlement decisions; a claimant may accept less than the theoretical maximum recovery for practical reasons unrelated to actual damage and/or liability. Insurers and Ohio subrogation lawyers should scrutinize reduction requests with a fine-toothed comb to ensure the opposing party is operating from a statute-focused perspective, not an opportunistic one.
Questions to Ask About a Reduction Request Under ORC § 2323.44
When confronted with a request to reduce a subrogation claim, recovery professionals should conduct a detailed subrogation investigation. Several key questions can help determine whether a reduction request has any merit:
1. Was comparative negligence actually a factor?
If the injured party’s attorney invokes the statute based on an argument their client did not received “full value” due to comparative negligence, ask for specifics.
- What negligent conduct contributed to the accident?
- How much fault is being attributed to the injured party?
- Was liability ever formally disputed?
- Are there witness statements, police reports, or expert opinions supporting comparative fault?
General assertions are not enough; the subrogating insurer should understand precisely how negligence affected the settlement value before agreeing to reduce its recovery interest.
Learn more about comparative vs. contributory fault: Subrogation Fault Lines Spread Across States
2. Were insurance limits truly exhausted?
Another common basis for requesting a reduction, subrogating parties should verify the available coverage and determine whether the settlement actually exhausted those coverage limits. If the tortfeasor carried minimum liability insurance and the insured’s damages exceed available coverage, a proportional reduction might be reasonable. However, subrogated insurers cannot rely on opposing insurers or insured’s counsel to make determinations on a subrogated insurer’s right to subrogation recovery. Subrogating insurers and their legal team independently must investigate and confirm the available coverage and claimed damages.
3. Is the settlement final?
It may seem obvious, but an important question is whether or not the case is truly settled. Subrogating insurer’s should avoid agreeing to reductions while insurance and subrogation negotiations are still ongoing.Prematurely reducing the subrogation claim could limit the maximum recovery potential. Confirming finality of settlement protects insurers from making concessions based on incomplete information.
4. Does the settlement sound reasonable?
Subrogating insurers and subrogation attorneys must also assess whether the settlement amount appears fair, all things considered. If a subrogated insurer paid a small amount but the injured party received a much larger settlement, it would be difficult to argue that the injured party failed to obtain sufficient compensation. Conversely, a severely limited recovery in relation to catastrophic damages would more likely support an argument for proportional reduction. Evaluating the equity of an insurance settlement requires looking at the entire context of the claim.
What About Other Parties Interested in the Subrogation Settlement?
Another complication is competing claims against the settlement proceeds. Medical liens, workers’ compensation interests, provider balances, and other reimbursement obligations can significantly reduce the injured party’s net recovery. If other liens consume most of the settlement funds, the argument for claims reduction becomes more compelling. The subrogation team managing the case should investigate whether outstanding obligations exist and to what extent they will reduce the injured party’s recovery.
The subrogation team should also examine whether attorneys are requesting reductions from multiple parties at the same time. Counsel may negotiate discounts on medical bills while also demanding reductions from the subrogating insurer. This can create concerns about “double dipping” – where multiple parties reduce their claims to increase the injured party’s and/or attorney’s share of the settlement. Understanding the overall distribution of insurance settlements helps insurers evaluate whether a requested reduction is equitable.
What About Other Subrogation Costs?
Another recurring issue is other costs, such as attorney fees and litigation expenses. Some attorneys argue that carriers should contribute toward the costs incurred in obtaining the settlement. However, Ohio’s statute does not expressly mention such costs or utilize the common fund doctrine, so the injured party’s counsel is not automatically entitled to reimbursement for costs or a fee from the insurer’s subrogation recovery unless they were explicitly retained by the insurer.
Subrogating insurers should scrutinize the claimed litigation costs. Expenses such as filing fees, deposition transcripts, medical record requests, and administrative charges are often part of ordinary litigation practice. They should not necessarily be treated as automatic justifications for reducing the insuer’s subrogation recovery. Insurers should distinguish between legitimate statutory reduction factors and general costs associated with pursuing a subrogation claim.
Learn more about the common fund doctrine: Considering the Common Fund Doctrine in Subrogation Settlements
ORC § 2323.44 Does Not Invoke the “Made Whole” Framework
One of the most important aspects of Ohio’s subrogation diminishment statute is what it does not say. These distinctions are important because misconceptions about the law can lead carriers to surrender recovery rights unnecessarily:
1. The Claimant Does Not Need to Be Made Whole for Subrogation.
The statute does not transform Ohio into a “made whole” state. An injured party’s attorney may argue otherwise, but the law does not establish a blanket rule limiting an insurer’s right to recovery unless the insured can demonstrate they are not receiving “full value.”
2. Insurers Retain the Right to Subrogation Recovery.
The statute does not prohibit an insurer’s right to pursue recovery under a subrogation theory. Early interpretations of the statute suggested it would place major obstacles in front of insurers, but in practice, Ohio’s subrogation process continues to function much as it did before the law was enacted in 2015.
3. Claimant Counsel Does Not Control the Settlement.
The statute does not place control of subrogation settlement negotiations in the hands of the injured party’s counsel. Subrogating insurer’s can (and should) communicate directly with other parties, evaluate settlement information independently, and negotiate reimbursement issues themselves.
4. Remedies Available When Parties Cannot Resolve Subrogation Claims.
If the parties involved in a subrogation dispute cannot resolve their differences, the statute allows for either party to file a Declaratory Judgment action seeking a court’s review. A court can evaluate the circumstances surrounding the settlement and determine whether the request is appropriate under the statute. However, the case law exploring this statute is still quite scarce, indicating that much of the practical application is being developed through alternative dispute resolution as opposed to seeking a remedy through the courts.
Skilled Subrogation Lawyers Can Overcome Ohio’s Diminishment Statute
ORC § 2323.44 generated a lot of concern within the insurance sector when it was enacted, but many subrogation professionals now view its impact as much more limited than originally feared. Subrogation recovery remains a viable option, and most disputes come down to factual analysis as opposed to a blanket legal doctrine. As in all things subrogation, the key for carriers and subrogation law firms is to approach each claim critically and methodically. Do not automatically accept opposing counsel’s claims – investigate the reasons behind the settlement, available coverage, comparative fault issues, and competing liens and expenses.
Ultimately, successful subrogation case management under Ohio law requires preparation, documentation, and informed negotiation. Jurisdictional experience is critical, as is a broader understanding of how these frameworks are handled across states. By asking the right questions and understanding both the language and limitations of the statute, damaged parties can reach fair and reasonable resolutions while still protecting valuable subrogation recovery rights.
Looking for more open-access resources on subrogation law and process? Rathbone Group’s attorneys unpack important subrogation topics in our YouTube series, present in-depth discussions in our On Subrogation podcast, and provide informative articles like this one in our Subrogation Blog. Reach out at blog@rathbonegorup.com to ask a question or suggest a subject for a new episode, or email info@rathbonegroup.com for more about Rathbone Group’s unmatched subrogation services – nationwide subrogation case management that advocates insurer rights, minimizes the cost of pursuit, and maximizes subrogation recovery.