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Workers’ comp law: Insurance not a legal shield

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Monday, May 01, 2006
by Laurie Hager, Sussman Shank LLP

In a recent decision, the Oregon Court of Appeals rebuffed an employer’s attempt to use workers’ compensation insurance as a shield from liability for work-related negligence and assault claims.

In Olsen v. Deschutes County, decided earlier this year, three employee plaintiffs sued Deschutes County for damages relating to unsafe work conditions and retaliation for complaining about such conditions. The three plaintiffs worked as mental health professionals at a county care facility for the mentally ill. Their supervisor allegedly maintained an unsafe work environment, including failing to implement safety precautions for dealing with HIV-infected or hepatitis-infected patients. Their supervisor also failed to follow rules concerning aggressive patients, leading to an assault on one of the plaintiffs. Each plaintiff claimed to suffer from sleeplessness, anxiety and emotional distress as a result of these work conditions.

After complaining about the unsafe work conditions, each of the plaintiffs was either actually or constructively discharged. They sued the county under a number of theories including wrongful termination, unlawful employment practices and negligence. The assault-victim plaintiff also sued the county for assault. The jury reached a verdict in favor of all three plaintiffs on these claims. The county appealed on several grounds.

Among other issues, the county argued that the workers’ compensation statutes provide an employee’s exclusive remedies and precludes an action for negligence or assault. In rejecting this argument, the court cited Smothers v. Gresham Transfer, where the Oregon Supreme Court decided that under some circumstances workers’ compensation cannot preclude certain remedies for a claimant employee.

In Smothers, the employee’s occupational disease was not compensable under the workers’ compensation system, because his on-the-job exposure was not a major contributing factor. Because the Oregon Constitution requires an adequate remedy for claimants and workers’ compensation failed to provide one, the Smothers court permitted the claimant’s negligence action against the county.

In Olsen, the Court of Appeals expanded the rule of Smothers. The court rejected the county’s argument that Smothers only applies when the claimant is denied workers’ compensation coverage because the work-related injury is not a major contributing factor to the harm. Under Olsen, if a claim is protected by the Oregon Constitution, but cannot be remedied through workers’ compensation, an employee can bring a separate lawsuit against the county for that claim. This rule applies to private, as well as public, employers. Since the Olsen court found workers compensation provided no remedy for plaintiffs’ claims, it affirmed the jury verdict against the county.

What does this mean for Oregon businesses? Employers should not rely on payment of workers’ compensation insurance premiums as the sole insurance against liability for work-related injuries. In Olsen, the employer’s failure to establish adequate safety rules ultimately led to its liability. The employer was also liable for failing to follow the county’s existing rules intended to keep its employees safe. Establishing and following rules to maintain a safe work environment is another necessary insurance program.

— Laurie Hager, Sussman Shank LLP
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