Toole By and Through Professional Liability Fund v. EBI Companies

• Jurisdiction: Oregon
• Citation: Toole By and Through Professional Liability Fund v. EBI Companies, 838 P.2d 60, 314 Or. 102 (Or. 1992)
• Docket Number: TP-89010,TP-89003,TP-89022
• Parties: In the Matter of the Compensation of Charlene Toole, Claimant. Charlene TOOLE, by and through the PROFESSIONAL LIABILITY FUND, Respondent on Review, v. EBI COMPANIES, Petitioner on Review. In the Matter of the Compensation of Victor S. Lloyd, Claimant. Victor S. LLOYD, by and through the PROFESSIONAL LIABILITY FUND, Respondent on Review, v. PORT OF PORTLAND, Petitioner on Review. In the Matter of the Compensation of Roger L. Shephard, Claimant. Roger L. SHEPHARD, by and through the PROFESSIONAL LIABILITY FUND, Respondent on Review, v. EBI COMPANIES, Petitioner on Review. WCB; CA A62038 (Control), A62117, A62386; SC S38434.
• Court: Oregon Supreme Court
• Decision Date: 20 August 1992

Page 60

838 P.2d 60

314 Or. 102

In the Matter of the Compensation of Charlene Toole, Claimant.

Charlene TOOLE, by and through the PROFESSIONAL LIABILITY

FUND, Respondent on Review, v.EBI COMPANIES, Petitioner on Review.

In the Matter of the Compensation of Victor S. Lloyd, Claimant.

Victor S. LLOYD, by and through the PROFESSIONAL LIABILITY

FUND, Respondent on Review, v.PORT OF PORTLAND, Petitioner on Review.

In the Matter of the Compensation of Roger L. Shephard, Claimant.

Roger L. SHEPHARD, by and through the PROFESSIONAL LIABILITY

FUND, Respondent on Review, v.EBI COMPANIES, Petitioner on Review.

WCB TP-89003, TP-89022, TP-89010; CA A62038 (Control),

A62117, A62386; SC S38434.

Supreme Court of Oregon In Banc.

Argued and Submitted March 2, 1992.

Decided Aug. 20, 1992.

Ridgway K. Foley, Jr., P.C., of Schwabe, Williamson & Wyatt, Portland, argued the cause for petitioners on review.With him on the petition was M. Elizabeth Duncan.

Deborah L. Sather, of Cooney, Moscato & Crew, P.C., Portland, argued the cause for respondents on review and filed the response to the petition.

PETERSON, Justice.

The question in these three consolidated workers' compensation cases is whether the statutory lien of an insurer or self-insured employer on the proceeds of an injured worker's recovery against a negligent third party extends to the proceeds of a malpractice action against an attorney based on the attorney's mishandling of the worker's third-party negligence action.We hold that it does.

Because our conclusion turns on statutory provisions concerning the lien and third-party actions, we begin with a discussion of the relevant statutes.ORS 656.154 provides:

"If the injury to a worker is due to the negligence or wrong of a third person not in the same employ, the injured worker * * * may elect to seek a remedy against such third person."

A worker who is entitled to seek a remedy against a third person under ORS 656.154 shall elect whether to proceed against the third person for damages.ORS 656.578.¹Each of the three claimants in the present cases elected to proceed with a third-partyparty action for damages.²

ORS 656.580(2) grants a lien to the paying agency:

"The paying agency has a lien against the cause of action as provided by ORS 656.591 or 656.593, which lien shall be preferred to all claims except the cost of recovering such damages."

The "paying agency" is "the self-insured employer or insurer paying benefits to the worker."ORS 656.576.ORS 656.593 sets forth the procedures applicable to third-party actions brought by injured workers:

"(1) If the worker * * * elect[s] to recover damages from the * * * third person, notice of such election shall be given by the paying agency by personal service or by registered or certified mail.The paying agency likewise shall be given notice of the name of the court in which such action is brought, and a return showing service of such notice on the paying agency shall be filed with the clerk of the court but shall not be a part of the record except to give notice to the defendant of the lien of the paying agency, as provided in this section.The proceeds of any damages recovered from * * * [a] third person by the worker * * * shall be subject to a lien of the paying agency for its share of the proceeds as set forth in this section and the total proceeds shall be distributed as follows:

"(a) Costs and attorney fees incurred shall be paid, such attorney fees in no event to exceed the advisory schedule of fees established by the board for such actions.

"(b) The worker * * * shall receive at least 33 1/3 percent of the balance of such recovery.

"(c) The paying agency shall be paid and retain the balance of the recovery, but only to the extent that it is compensated for its expenditures for compensation, first aid or other medical, surgical or hospital service, and for the present value of its reasonably to be expected future expenditures for compensation and other costs of the worker's claim under this chapter.* * *

"(d) The balance of the recovery shall be paid to the worker * * * forthwith.Any conflict as to the amount of the balance which may be retained by the paying agency shall be resolved by the board.

"(2) The amount retained by the worker * * * shall be in addition to the compensation of other benefits to which such worker [is] entitled under this chapter.

"(3)A claimant may settle any third party case with the approval of the paying agency, in which event the paying agency is authorized to accept such a share of the proceeds as may be just and proper and the worker shall receive the amount to which the worker would be entitled for a recovery under subsections (1) and (2) of this section.Any conflict as to what may be a just and proper distribution shall be resolved by the board."

Settlements made without approval are void.ORS 656.587 provides:

"Any compromise by the worker * * * of any right of action against [a] * * * third party is void unless made with the written approval of the paying agency or, in the event of a dispute between the parties, by order of the board."

In the present cases, claimants Toole, Lloyd, and Shephard each suffered an employment-related injury.Each claimant's third-party action was either partially or wholly unsuccessful, and each claimant thereafter brought a negligence claim against the attorney who had handled the third-party action.The Professional Liability Fund (PLF) undertook the defense of the attorneys who were accused of malpractice.Although the paying agencies had notified the PLF, claimants, and claimants' new attorneys of their contention that they had enforceable liens on the proceeds of the malpractice actions, the PLF and claimants compromised and settled the claims without the participation or approval of the paying agencies or resolution of any conflict by the Workers' Compensation Board(Board).³

The paying agencies then petitioned the Board for relief, asserting the validity of their liens and requesting either a share of the proceeds of the malpractice settlements or a declaration that the settlements were void for lack of the paying agencies' written approval.The PLF asserted that the Board lacked jurisdiction over the paying agencies' petitions for relief, because the malpractice settlement proceeds were not subject to statutory liens.The Board concluded that it had jurisdiction over the petitions, that the paying agencies' liens extended to the malpractice settlements, and that the settlements were void for lack of the paying agencies' written approval.

Claimants' petitions for judicial review were consolidated by order of the Court of Appeals.That court upheld the Board's jurisdiction over the paying agencies' petitions for relief, but concluded on the merits that their liens did not extend to the proceeds of the malpractice settlements.Toole v. EBI Companies, 108 Or.App. 57, 64, 66, 815 P.2d 216(1991).The Court of Appeals held that the allegedly negligent attorneys were not "third parties" for purposes of ORS 656.154 and 656.578, because they could not be held liable for causing compensable injuries--i.e., employment-related accidental injuries, ORS 656.005(7)(a)--to claimants.Id. at 66, 815 P.2d 216.

The paying agencies petitioned for review, seeking reversal of the Court of Appeals' decision and reinstatement of the Board's orders declaring the settlements void.We allowed review and now reverse the decision of the Court of Appeals insofar as it concluded that the liens did not extend to the malpractice settlements.

The first issue that we address is whether the Board had jurisdiction over the paying agencies' petitions for relief.In SAIF v. Wright, 312 Or. 132, 137-38, 817 P.2d 1317(1991), this court held that the Board had authority to determine whether an insurance carrier was a "paying agency" under ORS 656.593(3), saying:

"Finally, we note that the Board is the most appropriate tribunal to determine what a 'paying agency' is in the first instance.The legislature designed the workers' compensation law as an integrated body of statutes, with the Board generally charged with matters relating to the adjudication of claims."(Footnote omitted.)

For the same reason, the Board is the appropriate tribunal to determine whether the attorneys against whom the claims were made are "third parties" under the statutory scheme described above.

ORS 656.587 authorizes the Board to approve a compromise of a claimant's third-party action where there is a dispute between the parties.ORS 656.593(3) provides that the Board shall resolve any conflict between a claimant and a paying agency concerning the "just and proper distribution" of settlement proceeds from the claimant's third-party action.A necessary prerequisite to resolving such conflicts is the authority to determine whether the settlement at issue is one that requires the approval of the paying agency or the Board or is subject to the Board's power to decide the distribution of proceeds.

Under the statutory scheme, the Board is the appropriate tribunal to decide whether the settlements here were or were not settlements of a third-party claim.We therefore agree with the Court of Appeals that the Board had jurisdiction to resolve whether the claims against the attorneys are third-party claims, whether the malpractice settlements were void for lack of approval by the paying agencies or the Board, ORS 656.587, and whether the paying agencies were entitled to a "just and proper" share of the settlement proceeds.ORS 656.593(3).

Having determined that the Board had jurisdiction to decide the issue presented to it, we now turn to whether it decided that issue correctly.The PLF asserts that the statutes creating the lien, ORS 656.580(2) and 656.593(1), are, by their terms, limited to the proceeds of an action against or settlement with a third person who is alleged to be directly responsible for a claimant's...