Workers' Comp in Oregon May Be in for a Shake-Up

By Rachel Zimmerman

August 12, 1999

Injured workers in Oregon are finally getting their day in court.

In a case that could radically alter the state's business landscape, the Oregon Supreme Court has agreed to decide whether Terry Smothers, a 40-year-old with a debilitating respiratory condition, has the right to sue the former employer he says is responsible for his illness.

A decision in favor of Mr. Smothers may trigger a sweeping overhaul of the state's workers' compensation law, which makes it all but impossible for Oregonians to seek relief through the legal system if the Workers Compensation Board refuses their claims. Such a change could raise the costs of doing business in the state.

"It could be a disaster for employers," says Senate Majority Gene Derfler, a Salem Republican who was instrumental in writing the state's compensation law, one of the most restrictive in the nation. If the high court comes down squarely on Mr. Smothers's side, he says, "the entire workers' compensation system is gone, and I think the governor would have to call a special session," to reassess the system.

Trial lawyers in the state, meanwhile, are thrilled at the prospect of a high-court ruling in Mr. Smothers's favor; they would likely see a windfall of workers' comp cases. "If I were Oregon business, I'd be worried," says Edward Hill, a Portland lawyer who helped write a friend-of-the-court brief on the plaintiff's behalf for the Oregon Trial Lawyers Association.

Mr. Smothers's saga began in 1993 when doctors diagnosed him with bronchitis and pneumonia. He was sure he knew the cause: his breathing of acid-laden fumes at Gresham Transfer Inc., a trucking company where he worked as a mechanic from 1992 until June 1994.

Mr. Smothers worked in the "pit" near an area where trucks were washed with a chemical spray consisting of sulfuric acid, and small amounts of hydrochloric and hydrofluoric acid. He told a workers' comp board that his eyes often itched, watered and burned and that he experienced headaches. In December 1993, he was found lying on the lunchroom floor, according to testimony before the Oregon Workers Compensation Board.

After several hospitalizations, and suffering from a persistent cough, skin blisters and joint pain, Mr. Smothers filed a workers' comp claim in June 1994, asking the company to pay for his medical costs. Gresham Transfer's insurer denied the claim, and the Workers Compensation Board upheld the denial the following year, saying he hadn't proved the acid fumes were the "major" cause of his illness, as required by the state's compensation law.

And because that law declares the workers' compensation system the "exclusive remedy" for on-the-job injuries, Mr. Smothers couldn't, according to the statute, sue Gresham Transfer.

But he sued anyway. A lawsuit Mr Smothers filed in 1995 in Multnomah County Circuit Court alleged that the company had been negligent. Gresham Transfer moved to dismiss the case based on Mr. Smothers's failure to prove he had a claim.

Judge Henry Kantor dismissed the suit, citing the state law's ban on such action if a claim is deemed "noncompensable."

Mr. Smothers then appealed to the Oregon Court of Appeals, arguing that the trial-court ruling was unconstitutional because it gave him no remedy. But the appeals court upheld Judge Kantor's decision, saying that the Legislature "has plenary power to enact laws" and that "within its plenary power, the Legislature has the authority to determine what constitutes a legally cognizable injury."

So Mr. Smothers took his case to the Supreme Court. (This case has meandered through the court system for so long that Mr. Smothers's lawyers are no longer sure where he is living and are considering hiring a private investigator to find him.)

The opposing sides' arguments are basic: Mike Gilbertson, Mr. Smothers's lawyer, says Oregon's workers' comp system violates the state's constitution, which says that every person "shall have remedy by due course of law for injury done." Lawyers for Gresham say lawmakers interpreted that clause to mean something else, as the lower courts found.

"The Legislature can determine what an appropriate remedy is, and access to the workers' comp system is a remedy," says Chuck Lundeen, corporate counsel and vice president for Liberty Northwest Insurance Corp., Portland, Gresham Transfer's Insurer. "That may or may not mean that someone writes the worker a check."

Oregon's current compensation law was written earlier this decade to replace a system that was roundly criticized. With one of the highest employer-paid premium rates in the country and some of the least-generous benefits, labor and management were motivated to revamp it.

So in 1990, then-Gov. Neil Goldschmidt convened a summit at Mahonia Hall, the governor's mansion in Salem, brokering a deal endorsed by disparate groups -- organized labor, insurers and businesses.

The legislation that emerged from the meeting -- and that the Legislature passed in a 1990 special session -- changed the rules for workers: To be able to win claims, they now had to prove that workplace conditions were the "major" cause of an injury or illness, not just a substantial cause.

With few exceptions, such as if an employer is shown to have intentionally hurt a worker, workers' comp was made the only remedy for most workplace injuries.

Critics dubbed the measure "the insurance company enrichment act of 1990."

Then, in 1994, the Oregon Supreme Court ruled that certain workers could file lawsuits against employers if their injuries had been deemed "noncompensable" by the state workers' comp board.

Infuriated, the Legislature in 1995 passed a bill overruling the high court, amending the law to tighten loopholes in the "exclusive remedy" clause. The 1995 law further restricted workers from receiving benefits if their injuries could be at-tributed primarily to age, gender and "predisposed" conditions. In addition, legislators made the law retroactive.

Since the original legislation was passed in 1990, workers' comp premium rates have decreased 54.7%, saving Oregon employers $3.8 billion in direct costs.

But with these savings, comes concern that some workers are getting left out. "No one worries about injured workers until they are one," says John Shilts, manager, benefits section, Oregon's Workers Compensation Division.

Others are more worried about the system as a whole. If the high court overthrows what the Legislature did in 1995, it will "upset the carefully crafted balance between employer and employee," according to a friend-of-the-court brief filed with the Court of Appeals on behalf of Gresham by Associated Oregon Industries, the state's largest business trade group.

On the Job

Number of employees who qualify for workers' comp and accepted claims

Year Employment Disabling claims
1990 1,258,600 35,857
1991 1,258,600 31,479
1992 1,280,500 30,786
1993 1,317,100 30,741
1994 1,378,800 31,530
1995 1,431,800 30,564
1996 1,487,300 28,389
1997 1,547,800 27,922
1998 1,583,900 27,049
Source: Oregon Department of Consumer & Business Services

SOURCE: Source: Wall Street Journal

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