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Sisters of St. Joseph of Peace, Health, & Hosp. Servs. v. Russell - 318 Or. 370, 867 P.2d 1377 (1994)

Rule:

For a plaintiff to be a creditor beneficiary, the performance by the promisor must be to satisfy an actual or supposed or asserted duty of the promisee to the plaintiff.

Facts:

On September 13, 1984, Russell was injured while at work. Sacred Heart General Hospital (Hospital) provided medical treatment for his injuries from September 13, 1984, through August 30, 1985. Russell was uncertain who his employer was at the time of the injury. For that reason, he filed four separate workers' compensation claims against four purported employers. After a hearing concerning all four claims, a referee held that an employer insured by The Aetna Casualty & Surety Company (Aetna) was Russell's employer for workers' compensation purposes. The Workers' Compensation Board (Board) affirmed. Aetna and Russell sought judicial review in the Court of Appeals. While those petitions for judicial review were pending, the four purported employers and their insurers, including Aetna, entered into a Disputed Claim Settlement (DCS) agreement with Russell. The Board approved the DCS agreement pursuant to Or. Rev. Stat. § 656.289(4), and Aetna and Russell dismissed their petitions for judicial review of the Board's order. Plaintiff Hospital then brought a 3-count complaint against Russell and Aetna to recover for the medical care that Hospital had provided to Russell. The third count was a claim against Aetna based on the theory that plaintiff was a third-party beneficiary of the DCS agreement, to which Russell and Aetna were parties. At the close of all the evidence, Aetna moved for a directed verdict, pursuant to Or. R. Civ. P. 60. The trial court entered judgment on the verdict. The Court of Appeals reversed, concluding that plaintiff’s right to recover depended on Russell’s actual liability to plaintiff, and therefore, it could not recover unless Hospital proved all the elements of Claim 1, its implied contract claim against Russell. Plaintiff Hospital filed a petition for further appellate review. 

Issue:

Was a hospital a third party beneficiary in the Disputed Claim Settlement agreement between a claimant and an insurer?

Answer:

Yes.

Conclusion:

The Supreme Court of Oregon held that plaintiff hospital was a third-party beneficiary in the DCS agreement between Aetna and Russell, and as such, the trial court was correct in denying the directed verdict in favor of Aetna. According to the Court, by the time Aetna and Russell signed the settlement agreement, plaintiff hospital had already provided something of value to Russell, i.e., life-saving medical treatment, making plaintiff hospital a creditor beneficiary of the agreement as long as Aetna and Russell intended to benefit plaintiff.

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