Youngstown Daily Legal News

Plan would protect colleges against certain lawsuits

TIFFANY L. PARKS
Special to the Legal News
Published: November 20, 2014

A University of Cincinnati official has joined Sen. John Eklund, R-Chardon, in stumping for a bill that would protect state universities and colleges from double recoveries in lawsuits.

Senate Bill 326 would revise a passage in state law that addresses set-off of collateral recoveries against damages in certain civil actions against institutions of higher education.

The measure provides that recoveries in an action against a state university or college to recover damages for injury, death or loss to person or property under certain circumstances must be reduced by the aggregate of insurance proceeds, disability award, settlements or any other collateral recovery the plaintiff receives or is entitled to receive.

David Schwallie, assistant senior vice president in the University of Cincinnati’s Office of Risk Management, is responsible for the university’s liability insurance program, including the purchase of liability insurance, risk financing and the handling of self-insured claims.

He endorsed SB 326 before the Senate Civil Justice Committee.

“As you might imagine, each of our state universities presents potential risks not unlike that of a small city, with not only classrooms and other academic spaces, but research facilities, housing complexes, patient care (and) transportation,” he said.

“While each of the universities attempts to prudently reduce the risk of these activities, it is a challenge to balance potential risk with a modern university’s mission, particularly in an academic environment that fosters student participation, innovation and community service.”

Unlike private organizations, Schwallie said state institutions were immune from liability under common law and the waiver of sovereign immunity in Ohio is a matter of statute.

“Since the original establishment of the Ohio Court of Claims, the General Assembly has seen fit to circumscribe the state’s liability, to continue to protect public assets, but also allow for fair compensation in the event of a failure by the state entity or public employees in the course of their duties,” he said.

Despite such protections, as the general landscape of institutional liability changed in the 1970s and 1980s, it became increasingly difficult to insure public entities in the commercial insurance market, Schwallie said.

“I recall one point in the mid-1980s when commercial general liability insurance was simply unavailable to us,” he said.

“Insurers were simply unwilling to insure the things that universities do, not because U.C. or other state universities in Ohio made bad decisions or used unsafe practices, but because underwriters were uncomfortable with the potential of such diverse and wide-ranging activities.”

It is within that environment that the General Assembly originally passed legislation that provides no limitation on the compensation that represent the actual loss of the person who is awarded damages.

However, Schwallie said the statute provides that if a plaintiff receives or is entitled to receive “benefits for injuries or loss allegedly incurred from a policy or policies of insurance or any other source, the benefits shall be disclosed to the court, and the amount of benefits shall be deducted from any award against the state university or college.”

He said the intent and effect of the statute seemed clear in aiming to avoid double recoveries.

However, in the case of Adae v. University of Cincinnati, the 10th District Court of Appeals interpreted the statute differently.

In that case, which involved a U.C. faculty physician, the plaintiff had received a $2 million settlement from the hospital where some of the care had occurred.

The court determined that the plaintiff’s total damages were $3.2 million, but refused to consider in its award the $2 million the plaintiff had already received in settlement, relying on an Ohio Supreme Court interpretation of the term “benefits” to limit the offset to amounts received from insurance or public programs.

The court of appeals required the university to play the full amount of total damages, resulting in a recovery of more than $5 million.

“Certainly, the Adae (case) involved substantial injuries and substantial damages, and in that sense it is unusual,” Schwallie said.

“However, it is not unusual for a plaintiff making a claim against a state college or university to also have a claim against a private party. If the exposure to potential judgments is actually twice or triple the amount that would exist with the set off, this will have substantial impact on the funding required for universities’ self-insurance programs, and potentially on the commercial insurance markets’ willingness to accept the college or university risk, even at an excess level.”

Schwallie said SB 326 is rooted in restoring the original intent of state law.

“The ordinary definition of ‘benefit’ includes concepts such as ‘advantage, profit’ and ‘gain,’ not simply the term of art for insurance proceeds,” he said.

Like Schwallie, Eklund has said enacting the bill would eliminate profit recoveries.

“It would remove the potential for windfall recoveries paid for at taxpayer expense,” he said. “Clarification is needed to assure an appropriate application of (state law).”

SB 326 is co-sponsored by Sen. William Coley, R-Middletown.

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