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While employers' exclusive remedy protections may be at risk under proposed federal legislation, they are winning some legislative relief at the state level.

Employers should be wary that a controversial workers comp provision may be resurrected and reinserted into the proposed Product Liability Reform Act of 1997, workers comp experts say.

That may be "the most significant" legislative threat today to most employers, said Eric Oxfeld, president of UBA Inc., a Washington-based organization that analyzes workers comp and unemployment benefit issues. "There is strong indication it is more than an idle fear," he said.

The workers comp provision, which was removed from the latest draft of the product liability bill, provides that in some situations where a product manufacturer proved that the employer's actions substantially contributed to the cause of an accident, the employer or insurer would lose its subrogation lien to recover workers comp payments from any award against the manufacturer.

Proponents of the workers comp provision support the restriction because it would remedy an "unfair" situation in which employers that helped cause a worker's injury can legally shift their workers comp-related costs onto manufacturers, said Jim Mack, vp-government relations for AMT-The Assn. for Manufacturing Technology in Washington. However, he added, the workers comp proposal is not critical to the association's support of the overall product liability bill.

The latest version of the bill was voted out of the Senate Commerce, Science and Transportation Committee on a strict party-line vote earlier this month (BI, May 5).

Employers and insurers voiced their opposition to the proposal to restrict subrogation liens when it was first introduced a year ago (BI, March 18, 1996). Critics of the provision claim it would enable employees to receive double recovery and would have increased litigation in the traditionally no-fault workers comp system.

In addition, "there is a real concern it could indirectly be interpreted to allow an exception to exclusive remedy in third-party cases," Mr. Oxfeld said.

Once the fault of an employer becomes an element in a workers comp case, the next step becomes attaching liability to the employer's fault. Doing that would take the case out of the workers comp system and eliminate its exclusive remedy shield, he said.

Concern about reaffirming exclusive remedy in the face of third-party lawsuits motivated the New York Legislature last year to finally modify a 1972 ruling by the New York Court of Appeals, the state's highest court, in Dole vs. Dow Chemical.

In the original case, the widow of a worker who died of chemical exposure while cleaning a vat sued Dow Chemical, which manufactured the toxic chemical. Dow, in turn, was allowed to sue the employer, claiming the employer had an independent duty to Dow to use its product safely, according to court rulings.

For two dozen years, that ruling set a precedent for New York employers to be sued for negligence by third parties who had been sued by injured workers.

After years of failed attempts, the New York Legislature last year "substantially closed the Dole vs. Dow loophole," Mr. Oxfeld said.

It did so by limiting third-party lawsuits to cases involving "grave" injuries, and defined such injuries in the law, said Martin Minkowitz, an attorney with Stroock & Stroock & Lavan in New York.

However, the reforms are not retroactive and do not apply to cases filed before the law went into effect, a state appeals court ruled recently, Mr. Minkowitz said.

The New York Legislature doesn't want to deal with the topic again this year, so there is no chance that employer protections will be expanded soon, added Anne Allen, state legislative counsel for the Risk & Insurance Management Society Inc. in New York.

A survey of recent state legislative actions found other measures designed primarily to help employers:

Virginia lawmakers enacted legislation earlier this year that provides workers comp coverage for some carpal tunnel and hearing loss cases, removing such ailments from the realm of potential tort cases in which awards could be much larger.

The legislation was introduced in reaction to some Virginia Supreme Court decisions that denied coverage for such injuries based on a strict interpretation of the statute.

The new law classifies carpal tunnel and hearing loss as "ordinary diseases of life," and still will require strong evidence to prove that such ailments are work-related, according to a spokesman for the American Insurance Assn.

"Employers and insurers supported the new law because they thought it was appropriate that work-related injuries be compensated through the workers compensation system," another AIA spokesman said. They also wanted to avoid tort lawsuits in state courts if such ailments were not compensable.

"I think they were facing huge problems if they continued to deny carpal tunnel-type claims," said Emily Spieler, a professor at the West Virginia University's College of Law in Morgantown, W.Va.

Louisiana last year established a review process in cases where an employer sues a third party to recover workers comp benefits paid to an injured employee.

In those cases, a "fact finder" will attempt to quantify the fault of the employer, if any, in causing the injury and any recovery against a third party will be reduced by that amount. This reduction is in addition to any reduction in benefits stemming from the negligence of the employee in causing his or her own injury (BI, June 17, 1996).

Oklahoma lawmakers in a conference committee are considering a bill that would exclude mental-mental claims from workers comp coverage.

Some recent legislative sessions provided more gains for workers:

Colorado Gov. Roy Romer earlier this month vetoed two workers comp bills that would have severely restricted benefits for emotional stress claims (BI, May 12).

S.B. 140 would have reduced benefits to injured workers with mental impairments by as much as 48%, while S.B. 139 would have prohibited combining a scheduled injury with mental or emotional stress to get a whole-person rating.

Gov. Romer plans to ask the workers comp review group he appointed last year to analyze the proposed changes and develop a more workable solution.

Connecticut lawmakers last year gave employees of companies that don't carry workers compensation coverage the right to sue their employers as well as having their claims handled by the state's second-injury fund. The second-injury fund would be reimbursed for any benefits paid if the employee's suit is successful (BI, June 17, 1996).