Title: State ex rel. Hoover Co. v. Mihm

State: ohio

Issuer: Ohio Supreme Court

Document:

THE STATE EX REL. HOOVER COMPANY, APPELLANT AND CROSS-APPELLEE, 
V. MIHM, ADMR., BUREAU OF WORKERS’ COMPENSATION, APPELLEE AND 
CROSS-APPELLANT. 
[Cite as State ex rel. Hoover Co. v. Mihm (1996), _____ Ohio St.3d _____.] 
Mandamus to compel Bureau of Workers’ Compensation to 
consider relator’s withdrawal from participation in the R.C. 
4123.343 handicap reimbursement program effective for the 
first half of 1990 or for the bureau to calculate its assessment 
for that period under the pre-1990 rate standard -- Writ 
denied, when. 
 
(No. 94-1788--Submitted June 25, 1996--Decided October 9, 1996.) 
 
APPEAL and CROSS-APPEAL from the Court of Appeals for Franklin 
County, No. 92AP-56. 
 
In June 1990, Hoover Company (“Hoover”), appellant and cross-
appellee, gave notice to Patrick G. Mihm, the Administrator of the Bureau 
of Workers’ Compensation (“BWC”), appellee and cross-appellant, that it 
was withdrawing from participation in the R.C. 4123.343 handicap 
reimbursement program.  Hoover, a self-insured employer under R.C. 
4123.35 for other claims under the workers’ compensation laws, also 
requested that this withdrawal notice be given retroactive effect to January 
 
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1, 1990.  Hoover wanted out of the handicap reimbursement program 
because its assessment for participating had increased significantly with (1) 
the November 1989 enactment of R.C. 4123.35(I), which changed the basis 
for the assessment from payroll-based premiums to “paid compensation,” 
and (2) the December 19, 1989 promulgation of Ohio Adm. Code 4123-17-
32(D), which established the new assessment rate for participating self-
insured employers after January 1, 1990. 
 
BWC recognized the withdrawal request as to Hoover’s participation 
after July 1, 1990, but it denied Hoover’s request for retroactive withdrawal 
effective January 1, 1990.  Hoover protested the denial, but the BWC 
adjudicating committee denied the protest.  The BWC administrator refused 
reconsideration. 
 
Hoover sought a writ of mandamus in the Court of Appeals for 
Franklin County.  In its prayer for relief, Hoover requested an order 
directing that (1) BWC consider Hoover’s withdrawal effective for the first 
half of 1990, or (2) BWC calculate its assessment for that period under the 
pre-1990 rate standard.  Hoover argued that Ohio Adm. Code 4123-17-
32(D) had been improperly promulgated under R.C. 111.15, when the more 
 
3
rigorous rule-making procedures in R.C. 119.03 applied.  Hoover claimed 
that Ohio Adm. Code 4123-17-32(D) was thereby invalidated or rescinded 
by operation of R.C. 119.02. 
 
A referee recommended that the writ be denied, finding that BWC’s 
promulgation of Ohio Adm. Code 4123-17-32(D) was “action [taken] 
under” the rate-making authority of R.C. 4123.34 and, therefore, excepted 
by R.C. 119.01(A) from the notice and hearing requirements of R.C. 
Chapter 119.  The referee also rejected Hoover’s argument that R.C. 
4123.35(K) required promulgation of Ohio Adm. Code 4123-17-32(D) 
pursuant to R.C. Chapter 119.  The referee found that (1) R.C. 4123.35(K) 
imposed R.C. Chapter 119 rule-making procedures only for assessments of 
self-insurers who had been granted this status for the first time within the 
last calendar year, and (2) Hoover’s renewal of its self-insuring status did 
not count as a first-time qualification. 
 
Over Hoover’s objections, the court of appeals agreed with the 
referee that R.C. 4123.35(K) did not require promulgation of Ohio Adm. 
Code 4123-17-32(D) in accordance with R.C. Chapter 119.  However, the 
court agreed with Hoover that Ohio Adm. Code 4123-17-32(D) represented 
 
4
“action [taken] under” R.C. 4123.343 and 4123.35, as well as R.C. 4123.34, 
for purposes of the R.C. 119.01(A) exception.  Since R.C. 119.01(A) does 
not except “action under” R.C. 4123.343 and 4123.35, the court held that 
Ohio Adm. Code 4123-17-32(D) was invalid because it had not been 
promulgated in compliance with R.C. Chapter 119. 
 
But the court of appeals still denied the writ.  As to Hoover’s claim 
for retroactive effect of its notice of withdrawal from the handicap 
reimbursement program, the court found that “the invalidity of the 
administrative rule confers no such right.”  And, as to applying the pre-1990 
assessment rate, which had also been set by administrative rule, the court 
said “presumably the old calculation method would not reflect the changes 
made by the [1989] amendment to R.C. 4123.35.” 
 
The cause is now before this court pursuant to Hoover’s appeal as of 
right and the allowance of BWC’s cross-appeal. 
 
Black, McCuskey, Souers & Arbaugh, Gust Callas and Charles E. 
Ringer, for appellant and cross-appellee. 
 
Betty D. Montgomery, Attorney General, and Gerald H. Waterman, 
Assistant Attorney General, for appellee and cross-appellant. 
 
5
 
Per Curiam.  Two issues are presented for our review.  First, is the 
promulgation of Ohio Adm. Code 4123-17-32(D) invalid due to BWC’s 
failure to comply with R.C. Chapter 119?  Second, does BWC owe a duty, 
by virtue of the asserted improper promulgation of Ohio Adm. Code 4123-
17-32(D), either to grant retroactive effect to Hoover’s notice of withdrawal 
or to calculate Hoover’s assessment for the first half of 1990 under the pre-
1990 standard?  For the reasons that follow, we hold that Hoover has no 
right to BWC’s performance of the requested acts, regardless of whether 
Ohio Adm. Code 4123-17-32(D) was promulgated properly.  Accordingly, 
we affirm the court of appeals’ judgment denying the writ of mandamus and 
do not pass upon the alleged invalidity of Ohio Adm. Code 4123-17-32(D). 
 
In 1989 and before, Hoover participated in the handicap 
reimbursement program established under R.C. 4123.343.  This statute, 
enacted in 1955 to encourage employment of disabled workers, charges 
employee injury claims attributable to a preexisting handicap to the surplus 
portion of the state insurance fund.  Fulton, Ohio Workers’ Compensation 
Law (1991) 312, Section 14.15; Young, Workman’s Compensation Law of 
Ohio (2 Ed. 1971) 288, Section 17.5.  The surplus fund either pays such 
 
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claims directly or reimburses self-insured employers for paid handicap 
claim expenses.  Fulton, supra. 
 
Since the 1986 enactment of R.C. 4123.343(G), 141 Ohio Laws, Part 
I, 745, self-insured employers have been allowed to withdraw from or “opt 
out” of the handicap reimbursement program.  In June 1990, Hoover gave 
notice of its withdrawal mainly to avoid the consequences of R.C. 
4123.35(I), effective November 3, 1989.  143 Ohio Laws, Part II, 3197, 
3328.  Beginning on July 1, 1990, R.C. 4123.35(I) authorized a new basis 
for calculating the assessment of participating self-insured employers to 
compensate the surplus fund and to finance the program.  Previously, all 
self-insurers contributed to the surplus fund by paying a percentage of the 
payroll-based premium they would have paid as a state fund employer, and 
self-insurers participating in the handicap reimbursement program paid an 
additional percentage of that premium.  Young, supra, at 237, Section 13.6; 
Fulton, supra, at 310-311, Section 14.13; Ohio Adm. Code 4123-17-30(B).1  
The new handicap reimbursement assessment was to be calculated based on 
the “paid compensation” expended by each self-insurer in the preceding 
year.2  Apparently, it was also to be calculated separately and only in 
 
7
relation to other self-insurers, such that handicap claim costs were no longer 
spread over all employers according to their classification of hazard.  See 
Fulton, supra, at 311, Section 14.13.  This change, together with the 12.4 
percent rate Ohio Adm. Code 4123-17-32(D) 3 applied to the self-insurer’s 
paid compensation, allegedly increased Hoover’s assessment by six hundred 
percent. 
 
Hoover claims that it would have opted out of the handicap 
reimbursement program timely, that is, before December 31, 1989, with 
better notice of the new assessment rate in Ohio Adm. Code 4123-17-32(D).  
Hoover’s speculation as to this possibility, however, is insufficient to justify 
retroactive relief from the assessment.  Moreover, Hoover’s cited authority--
Condee v. Lindley (1984), 12 Ohio St.3d 90, 12 OBR 79, 465 N.E.2d 450--
does not establish a right to this or other affirmative relief upon the 
invalidation or rescission of a regulation pursuant to R.C. 119.02.  In 
Condee, we invalidated a Tax Commissioner’s policy for apportioning the 
tax value of public utility property because the policy had not been formally 
promulgated in accordance with R.C. Chapter 119.  We did not go further 
 
8
and attempt to correct the inequity challenged by the complaining county 
auditor. 
 
Nor has Hoover shown a clear right to assessment for the first half of 
1990 under pre-1990 standards.  The parties agree that the enactment of 
R.C. 4123.35(I) changed the self-insurers’ handicap reimbursement 
assessment from a percentage of the payroll-based premium under former 
Ohio Adm. Code 4123-17-30(B) to a calculation based on paid 
compensation.  Ohio Adm. Code 4123-17-30(B), therefore, has been 
superseded by R.C. 4123.35(I).  DLZ Corp. v. Dept. of Adm. Serv. (1995), 
102 Ohio App.3d 777, 781, 658 N.E.2d 28, 31 (“An administrative rule that 
would preclude the use of a statute must yield to the statute.”).  See, also, 
State ex rel. Kildow v. Indus. Comm. (1934), 128 Ohio St. 573, 581, 1 O.O. 
235, 238, 192 N.E.2d 873, 876, and State ex rel. Galloway v. Indus. Comm. 
(1938), 134 Ohio St. 496, 13 O.O. 102, 17 N.E.2d 918, paragraph one of the 
syllabus (rules in conflict with express provisions of statutes are 
unenforceable). 
 
For this reason, Hoover’s cited authority for invoking the previous 
assessment standard--State ex rel. Reider’s, Inc. v. Indus. Comm. (1988), 48 
 
9
Ohio App. 3d 242, 549 N.E.2d 532--also does not apply here.  In Reider’s, 
the Court of Appeals for Franklin County invalidated a resolution in which 
the Industrial Commission declared a “temporary moratorium” on 
processing applications for self-insured status.  The court held that the 
temporary moratorium “was but a thinly veiled attempt to rescind a 
preexisting rule, as defined by R.C. 119.01(C), by resolution,” id. at 245, 
549 N.E.2d at 534, and it ordered that the applications for self-insurance be 
processed in accordance with the preexisting rule.  However, the Reider’s 
court was not confronted with an intervening statute, similar to R.C. 
4123.35(I), that had changed the procedure for processing these applications 
and was in conflict with the preexisting rule. 
 
Finally, Hoover complains that the court of appeals’ decision--to deny 
mandamus despite its conclusion that Ohio Adm. Code 4123-17-32(D) was 
invalid--left the parties “in limbo” as far as the assessment of self-insured 
employers participating in the handicap reimbursement program.  However, 
the invalidation of an administrative rule does not, as Hoover seems to 
argue, necessarily leave the regulated agency rudderless in carrying out 
statutory duties.  Rather, the agency must still execute authority reasonably 
 
10
and in a manner consistent with the objectives and standards that governing 
statutes impose.  See, e.g., Dressler Coal Corp. v. Call (1981), 4 Ohio 
App.3d 81, 85, 4 OBR 161, 166, 446 N.E.2d 785, 789 (agency permissibly 
enforced statutory standards with internally developed evaluation criteria 
where its previously adopted rules had been enjoined and new rules had not 
yet been promulgated).  Thus, even if we were to declare Ohio Adm. Code 
4123-17-32(D) invalid as improperly promulgated, BWC would 
nevertheless have been required to execute its charge under R.C. 4123.35(I) 
in accordance with R.C. Chapter 4123 and other applicable law. 
 
For a writ of mandamus to issue, Hoover must establish that it has a 
clear legal right to BWC’s performance of a clear legal duty, and that 
Hoover has no adequate remedy in the ordinary course of law.  State ex rel. 
Huntington Ins. Agency, Inc. v. Duryee (1995), 73 Ohio St.3d 530, 653 
N.E.2d 349.  Hoover has failed to satisfy this standard.  Accordingly, the 
court of appeals correctly denied the requested writ of mandamus and its 
judgment is affirmed. 
Judgment accordingly. 
 
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MOYER, C.J., RESNICK, F.E. SWEENEY, PFEIFER, COOK and STRATTON, 
JJ., concur. 
 
DOUGLAS, J., concurs in part and dissents in part. 
 
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DOUGLAS, J., concurring in part and dissenting in part.     We have 
before us an appeal (Hoover) and a cross-appeal (BWC).  I concur with the 
ultimate judgment of the majority.  I also concur with the majority’s 
treatment of Hoover’s appeal.  I respectfully dissent from the judgment of 
the majority which, in effect, ignores the very important issue and concept 
brought to us by BWC’s cross-appeal and our allowance thereof.  
Accordingly, I respectfully dissent as to that portion of the majority’s 
judgment and would, instead, reverse the court of appeals on the issue 
presented by BWC and find the cross-appeal of BWC to be well taken. 
 
In its cross-appeal, BWC contends that promulgation of Ohio Adm. 
Code 4123-17-32(D) represents “action [taken] under” R.C. 4123.34 and is, 
therefore, excepted from R.C. Chapter 119 rule-making.  I agree.  Thus, I 
would hold that (1) R.C. 4123.34, together with R.C. 4123.29, confers on 
BWC the authority to set rates, including rates for assessing self-insured 
employers, to maintain the solvency of the surplus fund, (2) Ohio Adm. 
Code 4123-17-32(D) establishes a rate for this purpose, and, therefore, (3) 
Ohio Adm. Code 4123-17-32(D) represents action under R.C. 4123.34 and 
is excepted from R.C. Chapter 119 compliance.  I would, therefore, reject 
 
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the court of appeals’ conclusion that Ohio Adm. Code 4123-17-32(D) was 
invalidly promulgated. 
 
Hoover contends that it did not receive sufficient notice of the new 
assessment rate in Ohio Adm. Code 4123-17-32(D) because the regulation 
was promulgated pursuant to the abbreviated rule-making procedures in 
R.C. 111.15 (rule effective ten days after proper filing).  Hoover maintains 
that the thirty-day notice and hearing procedures in R.C. 119.03 applied.  In 
defining the agencies to which R.C. Chapter 119 applies, R.C. 119.01(A) 
provides in part: 
 
“Sections 119.01 to 119.13 of the Revised Code do not apply * * * to 
the actions of the industrial commission and bureau of workers’ 
compensation under * * * sections 4123.29 [authorizes administrator to, 
inter alia, fix premium rates to maintain state insurance fund], 4123.34 
[authorizes administrator to fix and maintain premium rates for state 
insurance fund and for creation and maintenance of surplus fund], 4123.341, 
4123.342, 4123.40, 4123.411, 4123.44, 4123.441, 4123.442, and divisions 
(B), (C), and (E) of section 4131.14 of the Revised Code.”  (Emphasis 
added.) 
 
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The court of appeals found that the promulgation of Ohio Adm. Code 
4123-17-32(D) involved more than just BWC “action under * * * R.C. 
4123.34”; it also represented action taken under R.C. 4123.343 and 
4123.35, in that the rule set rates to be applied to the compensation paid by 
self-insurers participating in the handicap reimbursement program.  Neither 
R.C. 4123.343 nor 4123.35 is excepted by R.C. 119.01(A).  Thus, the court 
of appeals found that the promulgation of Ohio Adm. Code 4123-17-32(D) 
required compliance with R.C. Chapter 119. 
 
BWC disputes this finding, arguing, in effect, that (1) R.C. 4123.34 
confers the broad authority under which BWC sets all rates to maintain the 
state insurance and surplus funds and, therefore, (2) all rate setting is 
excepted from R.C. Chapter 119 compliance.  The fact that the formula for 
calculating the rate appears elsewhere in R.C. Chapter 4123 is, according to 
BWC, irrelevant, since the “action” is still rate-setting.  I agree. 
 
R.C. 4123.29 and 4123.34 establish the state insurance fund and, 
more important for this case, the surplus fund into which R.C. 4123.35(I) 
assessments are paid.  These statutes also require BWC to set premiums 
according to payroll-based basic and merit rates and to guarantee the 
 
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solvency of these funds.   Thus, rate-setting which establishes premiums or 
premium-based assessments, as were paid by self-insured employers under 
Ohio Adm. Code 4123-17-30, is fundamentally “action [taken] under” R.C. 
4123.29 and 4123.34.  Accordingly, to the extent that BWC determined a 
self-insurer’s contribution to the surplus fund on the basis of premiums 
authorized by R.C. 4123.29 and 4123.34, those acts were excepted from 
R.C. Chapter 119 pursuant to R.C. 119.01(A). 
 
Hoover recognizes that premium rate-setting is excepted from R.C. 
Chapter 119 rule-making.  However, since the new Ohio Adm. Code 4123-
17-32(D) assessment is authorized by R.C. 4123.35(I) and is no longer a 
percentage of the premiums authorized by R.C. 4123.29 and 4123.34, 
Hoover maintains that the premiums paid by state fund employers must be 
distinguished from the assessments that self-insured employers pay and that 
imposing an assessment constitutes action only under R.C. 4123.35(I).  
BWC gives no credence to the premium/assessment distinction, arguing that 
a self-insurer’s assessment is equivalent to the premium all employers are 
obligated to pay to maintain the solvency of the state insurance fund and the 
surplus fund. 
 
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While I am not prepared to say, based on the arguments before us, 
that premiums and assessments are, for all purposes, equivalent, I do believe 
that to accept Hoover’s distinction requires us to ignore that all employers, 
whether they pay premiums as state fund employers or assessments as self-
insurers, are responsible in some measure for maintaining the surplus fund.  
More specifically, while R.C. 4123.35(B) relieves self-insurers of premiums 
attributable to wage compensation and medical and funeral expenses, these 
employers must still “pay into the state insurance fund such amounts as are 
required to be credited to the surplus fund in [R.C. 4123.34(B)]” under R.C. 
4123.35(D).  The self-insurer’s assessment, therefore, represents its share of 
the premium amount. 
 
The new assessment authorized by R.C. 4123.35(I), while no longer 
based on a percentage of the premium, serves the same purpose.  The 
assessment represents the self-insured employer’s share of the costs of 
maintaining the surplus and various other funds.  As a result, premiums and 
assessments are both chargeable pursuant to the basic authority in R.C. 
4123.29 and 4123.34, and rules governing them are excepted from 
compliance with R.C. Chapter 119.  Accordingly, I would hold that 
 
17
assessments and premiums are sufficiently related, at least insofar as 
deciding which rule-making procedures apply, to find that both are 
generated pursuant to the rate-making authority of R.C. 4123.29 and 
4123.34. 
 
Moreover, the non-payroll basis for the new assessments--paid 
compensation--does not sever the fundamental connection of premiums and 
assessments to R.C. 4123.29 and 4123.34 rate-setting.  Where payroll is not 
an adequate measure for determining the premium to be paid for the degree 
of hazard, R.C. 4123.29(A)(2) authorizes premiums calculated on “such 
other basis, consistent with insurance principles, as is equitable in view of 
the degree of hazard.”  Thus, while payroll is ordinarily the basis for 
determining contributions to the state insurance fund, other equitable means 
may be used. 
 
Therefore, Ohio Adm. Code 4123-17-32(D) was properly 
promulgated under R.C. 111.15 because it represents “action [taken] under” 
R.C. 4123.29 and 4123.34 rate-making authority.  R.C. 119.01(A) excepts 
such action.  Ohio Adm. Code 4123-17-32(D), therefore, is not invalid, and 
the court of appeals’ judgment holding otherwise should be reversed.   
 
18
 
Accordingly, I concur in part and dissent in part.  I would affirm on 
the appeal and reverse on the cross-appeal. 
 
                                          
 
1  Ohio Adm. Code 4123-17-30, effective January 1, 1990, provided, in part: 
 
“The bureau of workers’ compensation, exercising its authority to 
determine and levy against the self-insuring employers an amount to be paid 
into the state insurance fund pursuant to sections 4123.34 and 4123.35 of 
the Revised Code ***, hereby sets that contribution to be effective for the 
payroll reporting period beginning on July 1, 1989, as follows: 
 
“ *** 
 
“(B)  Each self-insuring employer shall make payment of one and 
five-tenths per cent of its premium, computed at the basic rate, for self-
insuring employers’ surplus fund charges excluding handicap 
reimbursement charges, except that each self-insuring employer that does 
not elect to not participate in the handicap reimbursement program shall 
make payment of an additional three and five-tenths per cent of its premium, 
computed at the basic rate.”  1989-1990 Ohio Monthly Record 656.  See, 
 
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also, Ohio Adm. Code 4121-7-30, the predecessor to this rule (1988-1989 
Ohio Monthly Record 1315). 
2  Under R.C. 4123.35(I), paid compensation is also the basis upon which 
assessments were calculated for the former intentional tort fund, the safety 
and hygiene fund, certain administrative costs, and the non-handicap 
reimbursement portion of the surplus fund.  “Paid compensation” consists 
essentially of living maintenance benefits and every type of workers’ 
compensation, including awards for violations of specific safety rules, and 
amounts paid in lieu of such compensation.  R.C. 4123.35(L). 
3  Ohio Adm. Code 4123-17-32, also effective January 1, 1990, provided: 
 
“The workers’ compensation board, exercising its authority to 
determine and levy against self-insuring employers amounts to be paid to 
support the intentional tort fund, the safety and hygiene fund, the 
administrative cost fund, the portion of the surplus fund that is not used for 
handicap reimbursement, and the portion of the surplus fund that is used for 
handicap reimbursement, pursuant to sections *** 4121.37 [safety and 
hygiene fund], 4121.80 [intentional tort fund], 4123.34 [premium rates fixed 
 
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and maintained], 4123.342 [administrative costs fund], and 4123.35 of the 
Revised Code *** hereby sets the self-insuring employer assessments to be 
effective January 1, 1990, and paid by August 31, 1990, as follows: 
 
“(A) The assessments shall be on the basis of the paid compensation 
attributable to the individual self-insuring employer as a fraction of the total 
amount of paid compensation for the previous calendar year attributable to 
all amenable self-insuring employers. 
 
“*** 
 
“(D)  The assessment to fund the portion of the surplus fund that is 
used for handicap reimbursement for all self-insuring employers operating 
in Ohio who have not made an election to opt out of the handicap 
reimbursement program under the provisions of division (G) of section 
4123.343 of the Revised Code shall be computed by multiplying the 
following rate by the individual self-insuring employer’s paid compensation 
for calendar year 1989: 
 
“Rate 
 
21
                                                                                                                             
 
 
“Surplus fund (handicap) 
1240.”  1989-1990 Ohio 
Monthly Record, 656.