When Someone Else Caused the Injury: Understanding Oregon Third-Party Claims

By Kolbi E. Trebbien, Attorney at Law

When thinking about workers’ compensation claims, the initial focus is generally on compensability of the underlying claim.  Generally, a worker’s remedies under the claim are exclusive to the Oregon Workers’ Compensation Act.  However, ORS 656.154 indicates that if the injury to the worker is due to the negligence or wrongdoing of a third party not employed by the worker’s employer, the worker may seek remedy from the third party.  Examples of when a third-party claim may be triggered include, but are not limited to:

• An employee is driving between job sites and is rear-ended by another driver and suffers injuries.
• A salesperson visiting a customer’s facility slips on an unmarked wet floor and suffers injuries.
• A machine operator suffers a hand injury when a piece of equipment malfunctions due to a defective safety guard.

In these cases, the fact pattern involves the employee and an outside source, i.e. a person or equipment, that contributed to the worker’s injuries.

If a third-party claim is identified, it is important to assess this at the outset of the claim.  An injured worker, particularly one who is not represented by an attorney, may be unaware they have the option to pursue a claim against a third party in addition to their workers’ compensation benefits.  ORS 656.583 establishes a process that allows for notification of pursuing a third-party action.  Under the statute, the workers’ compensation carrier or self-insured employer (the “paying agency”) can require the worker to make an election. In other words, the carrier can ask the worker to decide whether they intend to pursue a claim against the third party. This is usually done by sending a Third-Party Election Letter.  Once the worker receives the Election Letter, they generally have 60 days to respond.  If the worker elects to pursue a third-party claim, they retain control of the claim.  If the worker elects not to pursue the claim, the right to pursue the third-party action can be assigned to the paying agency.

ORS 656.593 establishes how proceeds recovered through a third-party claim are divided between the worker, the worker’s attorneys, and the paying agency. In most cases, the gross amount of the recovery is first reduced by reasonable attorney fees and litigation costs.  The worker then receives at least one-third of remaining amount recovered.  The paying agency would then be reimbursed for their lien, which contemplates benefits paid under the claim.  Finally, the worker would then receive the remaining balance.

For example, assume a worker settles a third-party motor vehicle claim for $300,000.00. It can be assumed attorney fees and litigation costs total $100,000.00, leaving a net recovery of $200,000.00. Under ORS 656.593, the worker is first entitled to one-third of the net recovery, or approximately $66,667.00. The remaining $133,333.00 is then available to satisfy the paying agency’s lien. If the carrier has paid $75,000.00 in workers’ compensation benefits, it may recover the full $75,000.00. This would leave a balance of $58,333.00, which is then paid to the worker. In this scenario, the worker would receive a total of $125,000.00 from the settlement, while the carrier would receive the full amount of benefits paid under the claim.

This example demonstrates why it is important to assess each claim for potential third parties.   As was demonstrated above, the worker will receive benefits in addition to what they would have received by filing only a workers’ compensation claim, while the paying agency recovers the benefits paid out under the claim.  Although disputes can arise regarding attorney fees, future claim exposure, or settlement allocation may affect the final numbers, ORS 656.593 provides the basic framework for ensuring both parties share appropriately in a successful recovery.