Oregon Live with: The Oregonian 11/8/99 http://www.oregonlive.com/news/99/11/st110801.html

Fate of workers' comp in court

The stakes are huge in a case being heard today that could upend the insurance system covering injuries on the job

Monday, November 8, 1999

By Ashbel S. Green of The Oregonian staff

A former lube technician from Gresham has mounted the biggest challenge ever to a multibillion-dollar insurance system that has covered workplace injuries in Oregon since before the United States entered World War I.

Terry Smothers, 41, worked for Gresham Transfer Inc. in 1994, when acid-laden mist triggered his disabling respiratory problems.

When the workers' compensation system denied his claim, Smothers did something the system prohibits: He sued his employer.

Smothers' case is before the Oregon Supreme Court, which will hear oral arguments this morning in Salem.

Underestimating the stakes would be difficult.

A ruling against Smothers, trial attorneys say, would continue a situation in which thousands of disabled Oregon workers each year are unable to collect a penny even if their employer's negligence contributed to their health troubles.

If Smothers wins, 79,000 Oregon employers could be left vulnerable to thousands of lawsuits about workplace injuries, creating an unstable business climate that could have disastrous effects on the economy, insurers and employers say.

National experts are watching the case, too.

"Clearly other states will take note because Oregon is seen as a leader," said Eric Oxfeld, president of UWC-Strategic Services on Unemployment & Workers' Compensation, a business trade association based in Washington, D.C.

Although the details are Byzantine, the premise of workers' compensation is a simple trade-off: Businesses buy insurance that pays benefits to employees who are injured on the job. In exchange, employees give up the right to sue their employers for workplace injuries.

The system is largely "no fault," which means it doesn't matter whether a worker's carelessness or an employer's negligence caused the injury.

"Workers gave up the rights to sue a careless employer," said James Coon, a Portland attorney. "In return, the worker was to have gotten coverage for any workplace injury regardless of fault."

All states have workers' compensation systems, and for most of the century, they have undergone constant changes as unions, businesses, trial attorneys, insurers, doctors and others with a financial stake have wrestled about costs and benefits.

By the late 1980s, many observers said Oregon's workers' compensation system was a mess. Employer insurance premiums were skyrocketing. Benefits paid to workers were some of the lowest in the country.

A pre-existing condition

In a 1990 special session, the Legislature approved a compromise: Benefits would increase, but not as many injuries would receive compensation.

The key to limiting what injuries were covered involved the underlying health of workers.

Previously, any workplace accident had only to contribute to the worker's injuries. For example, the system typically would have covered a worker with a bad back who reinjured it on the job. The new standard said the workplace accident must be responsible for 51 percent of the health problem.

Reinjuring a back, for example, might not be covered anymore.

The higher standard is the key to the Smothers' case.

A mixture that was used to wash trucks at Gresham Transfer contained an acid, the fumes of which harmed Smothers' respiratory system, skin, teeth and joints, according to court documents.

Smothers filed a workers' compensation claim, which the company's insurer denied. Smothers appealed, and the Workers' Compensation Board upheld the denial, ruling that the acid fumes were not 51 percent responsible for his injuries because he had a pre-existing respiratory problem.

So Smothers sued Gresham Transfer.

A Multnomah County judge dismissed his case, and the Oregon Court of Appeals upheld that decision, saying Oregon's workers' compensation law prohibits workers from suing their employers for on-the-job injuries.

Smothers' lawyers don't dispute what the law says, but they are asking the Oregon Supreme Court to overturn the prohibition, saying it violates the Oregon Constitution.

"The remedies clause guarantees every person a remedy for any wrong done to him," Coon said. "That is in the constitution, and the Legislature cannot take it away."

Employer and insurance groups say Smothers did have a remedy. But just as in the court system, a remedy is not a guarantee, just an opportunity.

"A remedy is to have access to the system. It doesn't guarantee that you're going to recover from the system," said Chris Davie, government affairs coordinator for Saif, a public corporation that is the largest provider of workers' compensation insurance in the state.

If Smothers wins, many experts say, the workers' compensation system will be broken. Observers expect the Legislature to move quickly to try to fix the problem, even if that requires calling a special session.

But finding an acceptable compromise, with hundreds of millions of dollars in insurance premiums and benefits at stake, will be difficult.

"I don't think it'll be easy, but it won't be impossible," said Mark Gibson, Gov. John Kitzhaber's policy adviser for health care and human services. "The stakes are enormous for both sides. But both sides very quickly reach a point of diminishing returns without a system."

Experts elsewhere watching case

Although a Supreme Court ruling in the Smothers case could cause a political earthquake in Oregon, experts outside the state will be watching for tremors as well.

Oxfeld, whose group monitors workers' compensation law nationwide, said a ruling for Smothers would be historic.

"A decision in favor of the worker in this case would disregard the entire jurisprudence of workers' compensation law," he said. "Creating tort rights for work-related injuries would be a grave mistake and would put Oregon clearly in a position of being outside the mainstream."

A decision for Smothers also would embolden trial lawyers to mount similar constitutional challenges in other states, Oxfeld said.

Ed Welch, director of the Workers' Compensation Center at Michigan State University, said Montana and Ohio courts recently ruled that injured workers could sue if the workers' compensation system did not cover their injuries. But both those cases involved the narrow area of mental illness.

Welch also said Oregon's 51 percent standard probably is the highest in the nation. So if Smothers loses, other states may be likely to adopt the standard thinking it could lead to large cost savings.

"But if Smothers wins," Welch said, "it will discourage these reforms in other states."

No one knows how many workers have been affected by the 51 percent standard, but Workers' Compensation officials estimate that Oregon employers have saved $4.8 billion in premiums since 1990.

Those savings will be awfully enticing to other states should the Supreme Court rule against Smothers, said Emily Spieler, a professor at West Virginia University College of Law.

"I think workers should be nervous," said Spieler, a national expert on workers' compensation. "Because if this case is lost in Oregon, it's going to look like a really good idea to insurance and employer organizations in other states."

You can reach Tony Green at 503-221-8202 or by e-mail at tonygreen@news.oregonian.com.