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An appellate court has upheld a ruling by Cuyahoga County Common Pleas Judge Richard McMonagle that the Ohio Bureau of Workers' Compensation must refund hundreds of millions of dollars to employers over excessive insurance premiums.

(The Plain Dealer)

CLEVELAND, Ohio -- An appellate court Thursday upheld a decision that the Ohio Bureau of Workers' Compensation must refund hundreds of millions of dollars to thousands of employers for charging them excessive insurance premiums.

The Ohio 8th District Court of Appeals in Cleveland lambasted the state agency for charging the inflated rates and agreed with a ruling by Cuyahoga County Common Pleas Judge Richard McMonagle in 2013. It means employers across the state could get refunds ranging from a pennies to millions of dollars.

The appellate panel of Kenneth Rocco, Eileen A. Gallagher and Mary Eileen Kilbane wasted no time blasting the state office. In the first sentence of the opinion, the panel made its case.

"Reduced to its irreducible essence, this appeal is about a cabal of Ohio Bureau of Workers' Compensation bureaucrats and lobbyists for group sponsors who rigged workers' compensation premium rates so that for employers who participated in the BWC's group-rating plan, it was 'heads we win,' and for employers who did not participate in the group-rating plan, it was 'tails you lose,' '' the ruling said.

The court said that for more than 15 years, the bureau of worker's compensation "allowed non-group rated employers to subsidize excessive, undeserved premium discounts to group-rated employers who were hand-picked by group sponsors to participate in the BWC's group-rating plan.''

A spokeswoman for the state agency said it is reviewing the decision to determine its next legal step.

Attorneys for the employers who sued hailed the decision.

"It's a huge victory for businesses in Ohio,'' said lawyer Stuart Garson.

The appellate decision Thursday marks the latest ruling in a years-long legal fight that started with Woodmere restaurant owner Earl Stein contending that the state bureau's rating system to determine premiums violated the law.

Stein, co-owner of Corky & Lenny's, and other business owners claimed that the bureau forced them to pay absurdly high premiums to offset much lower rates charged to companies that formed groups to get discounted rates.

The non-group employers, as a result, subsidized group employers by about $200 million a year, according to court records.

McMonagle ruled in December 2012 that the employers were entitled to refunds. Months later, the judge said the state must refund $859 million to about 264,000 employers. But the appellate court ordered that McMonagle must offer a detailed accounting of those who would receive the payments.

The ruling said that the state agency ignored the criticisms and recommendations of its consultants and "maintained an unlawful and inequitable rating system.''

"There were both clear winners and clear losers under the BWC's rating system,'' the ruling said. "The clear winners were group-rated employers and their group sponsors; the clear losers -- the nongroup-rated employers.''

The extra costs were a hardship for many businesses, including the Avon-based Our Lady of the Wayside, which provides transportation and housing for people with disabilities. The nonprofit was forced to lay off workers as a result of its higher premiums, an official told The Plain Dealer last year.

The state workers' compensation bureau has objected to the plaintiffs receiving any money. It also claimed the formula used to determine the refunds provides an unfair "windfall" to many companies.

Bureau lawyers noted that some of the companies suing the bureau had at one time belonged to groups that benefited from the discounted premiums, which is one of the reasons that the appellate court ordered the accounting issue back to McMonagle.

Steve Buehrer, the bureau's administrator, acknowledged the appellate court's finding.

"While we're pleased the court recognized that many of the businesses in the suit benefited from the group rating program, we are, of course, disappointed with the decision and are considering our options," Buehrer said.