AEU Longshore Blog ISSUE: State Guarantee Funds

This is mostly a reiteration of information that I posted back in March 2014.  It’s important, in my opinion, and it bears repeating.  Brokers and maritime employers should be aware of a potential gap in protection in their insured Longshore Act coverage.

The U.S. Department of Labor (DOL) administers the Longshore and Harbor Workers’ Compensation Act, and its extensions, the Defense Base Act, the Outer Continental Shelf Lands Act, and the Nonappropriated Fund Instrumentalities Act.

Section 935 of the Longshore Act provides that payment of benefits by an insurance carrier on behalf of an insured employer discharges that employer’s obligation to pay those benefits. But if the insurance carrier fails to pay then the employer must immediately assume its primary obligation to pay all benefits due and payable, subject to the penalty and interest provisions of the Act.

The DOL implemented a security requirement in 1990 applicable to authorized insurance carriers rated lower than “A” by the A.M. Best Company, in order to protect injured workers from the consequences of default in the payment of benefits due to insolvency, and to protect the Special Fund administered under section 944 of the Act.  This was in response to the carrier insolvencies during the 1980s and the subsequent failure by many state guarantee funds to protect Longshore employers and employees.

Due to the inability of Best ratings (or any other rating system) to predict insurance carriers’ financial viability for the long term of the typical workers’ compensation long tail obligation, and the continuing failure by many state guarantee funds to protect maritime employers, DOL published new regulations during 2005 aimed at requiring security from insurance carriers without regard to Best ratings, but rather aimed specifically at business written in those states where the state guarantee funds do not fully protect Longshore benefits.

State insurance laws creating and governing guarantee funds come with a wide variety of restrictions and conditions.  Some states’ funds simply do NOT pay federal Longshore benefits.  These states are:  Arizona, California, Iowa, Kentucky, Missouri, New Mexico, North Dakota, Ohio, Oklahoma, South Dakota, Tennessee, West Virginia, and Wyoming.  Longshore Act business written in these states must be fully secured with DOL.

In addition, provisions in many other states restrict Longshore protection.  A partial list of the restrictions on state payments includes time limits for filing, claims definitions that do not recognize occupational disease exposures, non-payment of deductible portions of an employer’s exposure, maximum limits on benefits, restrictions based on the financial size of the insured employer, restrictions based on financial viability of the insured employer, residency requirements, and payments that are limited to state rates that are lower than federal Longshore rates.

The following states have demonstrated that their guarantee funds do not provide full protection for Longshore benefits:  Alabama, Arkansas, Delaware, Illinois, Indiana, Louisiana, Maine, New Jersey, New York, Oregon, Pennsylvania, Utah, and Wisconsin.  Longshore business written in these states must be partially secured with DOL.

States’ funds that have paid or are likely to pay Longshore benefits in full include:  Alaska, Colorado, Connecticut, Florida, Georgia, Hawaii, Idaho, Kansas, Maryland, Massachusetts, Michigan, Minnesota, Mississippi, Montana, Nebraska, Nevada,  New Hampshire, North Carolina, Rhode Island, South Carolina, Texas, Vermont, Virginia, and Washington.  Security with DOL is not required for Longshore business written in these states.

In those states where guarantee funds have paid full Longshore benefits in the past, it is not a sure thing for the future.  State laws and their interpretation have proven to be very changeable.  I note that the “State Guarantee Fund Longshore Security Factor Chart” on the DOL/OWCP/DLHWC website has not changed since I myself composed it back in 2005.  If your Longshore coverage is in an insured program, you would be well advised to check those states in which you have maritime operations to determine the current status of Longshore claims in the event of an insurance carrier default.

The lesson:  If you are a maritime employer you cannot always rely on state guarantee funds to protect you if your insurance carrier fails to pay your claims.

NOTE:  This list is based on research that I did back when I was still at the Department of Labor.  I don’t think that the DOL has updated it or verified that it’s still 100% accurate.  If you are about to enter into an insured program for your USL&H exposure, it would be a good idea to verify the applicability of the state guarantee fund in the state(s) where the USL&H exposure will be located.

 

 

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John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

AEU Longshore Blog ISSUE: Questions- Extensions

This is the last (for now) of a group of posts dealing with recurring questions regarding the Longshore Act.  Following is a discussion of three issues, one for each of the Act’s three extensions.

Defense Base Act (42 U.S.C. 1651 et seq.)

I most recently discussed the Defense Base Act (DBA) on July 14, 2015.  You are encouraged to refer back to that entry, especially since it includes a discussion of the U.S. Department of Labor’s DBA waiver process.

The question that comes up with regularity is whether or not the DBA only covers U.S. citizens.   THE DBA DOES NOT ONLY COVER U.S. CITIZENS.  The DBA covers all employees, including third country nationals and host country nationals, who meet the statutory coverage requirements.

The DBA provides:

“Section 1(a) Places of employment.

Except as herein modified, the provisions of the Longshore and Harbor Workers’ Compensation Act, as amended, shall apply in respect to the injury or death of any employee engaged in any employment –

  • At any military, air, or naval base acquired after January 1, 1940, by the United States from any foreign government; or
  • Upon any lands occupied or used by the United States for military or naval purposes in any Territory or possession outside the continental United States (including the United States Naval Operating Base, Guantanamo Bay, Cuba; and the Canal Zone; or
  • Upon any public work in any Territory or possession outside the continental United States … if such employee is engaged in employment at such place under the contract of a contractor (or any subcontractor or subordinate subcontractor with respect to the contract of such contractor) with the United States; …
  • Under a contract entered into with the United States or any executive department, independent establishment, or agency thereof (including any corporate instrumentality of the United States), or any subcontract, or subordinate contract with respect to such contract, where such contract is to be performed outside the continental United States and at places not within the areas described in subparagraphs (1), (2), and (3) of this subdivision, for the purpose of engaging in public work, and every such contract shall contain provisions requiring that the contractor (and subcontractor or subordinate contractor with respect to such contract) (1) shall, before commencing performance of such contract, provide for securing to or on behalf of employees engaged in such public work under such contract the payment of compensation and other benefits under the provisions of this Act, and (2) shall maintain in full force and effect during the term of such contract, subcontract, or subordinate contract, or while employees are engaged in work performed thereunder, the said security for the payment of such compensation and benefits …;
  • Under a contract approved and financed by the United States or any executive department … where such contract is to be performed outside the continental United States, under the Mutual Security Act of 1954 …;
  • Outside the continental United States by an American employer providing welfare or similar services for the benefit of the Armed Forces pursuant to appropriate authorization by the Secretary of Defense;”

That is the entire coverage provision.  You will notice that “employees” are covered, without reference to citizenship, nationality, or resident status.

NOTE:  Under paragraph (4), the provision “for the purpose of engaging in public work” is broadly interpreted.  If you have any employees traveling outside the continental U.S. (the “continental U.S.”  includes Alaska and Hawaii for the DBA) under a U.S. government contract you should be thinking DBA.

NOTE:  DBA coverage is separate from USL&H coverage, requiring a separate endorsement.

So, this has been a long way of saying that the DBA does not only cover U.S. citizens.

Outer Continental Shelf Lands Act (43 U.S.C. 1331 et seq.)

I most recently discussed the Outer Continental Shelf Lands Act (OCSLA) on February 29, 2016.  The occasion was a BRB decision interpreting the Supreme Court’s OCSLA coverage test from the case of Pacific Operators Offshore, LLP v. Valladolid, 132 S.Ct. 680 (2012).

NOTE:  In Valladolid the Supreme Court resolved a conflict among three federal Circuit Courts of Appeals and held that to be covered by OCSLA the injury does not have to occur on the outer continental shelf (OCS) of the U.S.  The Court adopted a test that requires a substantial nexus, or significant causal link between the injury and the employer’s on OCS oil and gas operations.  The Court recognized that this test is fact specific to each case.

We’ve only had a few cases so far applying this test, and we’ve just had another one, as the BRB is sorting out somewhat inconsistent results from the administrative law judges (ALJ).

In Boudreaux v. Owensby & Kritikos, Inc., 49 BRBS 83 (2015), the BRB affirmed the ALJs finding of OCSLA coverage for an employee injured in a car accident while on his way to a pick up point from which he would be transported to OCS platforms.  His job was to perform ultrasonic testing on the platforms.  The ALJ, as affirmed by the BRB, found that this employee satisfied the substantial nexus test.

The test was not whether at the time of injury the claimant was engaged in activity that met the substantial nexus test.  In this case he was not.  It was a car accident.  The test is whether his job duties significantly contribute to his employer’s on OCS operations and whether the accident occurs in the course and scope of his employment.

Baker v. Gulf Island Marine Fabricators, LLC, 49 BRBS 45 (2015), involved an injured worker who spent 100% of his time working on land building modular living quarters, some of which would eventually be installed on an offshore tension leg (oil) platform.  In this case, the BRB affirmed a coverage denial by the ALJ both under the Longshore Act (the tension leg platform was not a vessel and thus this was not shipbuilding) and under OCSLA.

The substantial nexus test was not satisfied.  The living quarters worked on by the claimant might be installed on the OCS years later, and they would be installed by other entities, not his employer.  His employer had no on OCS operations.    There was an insufficient causal connection between his duties and his employer’s on OCS operations (in this case, none).  The denial of coverage in Baker has been affirmed on appeal at the Fifth Circuit.

The latest case is Anthony Grabert v. Besco Tubular and American Interstate Insurance Company and Director, Office of Workers’ Compensation Programs, U.S. Department of Labor, BRB No. 16-0140, September 22, 2016.  In this case, an ALJ denied OCSLA coverage where the circumstances were very similar to those in Boudreaux.  The claimant was injured in a car accident on his way to a crew boat that would transport him to his job on an offshore platform, where he worked as a “tong operator”, performing casing and tubing tasks.

The ALJ in the Grabert case had issued his denial prior to the BRB’s decision awarding OCSLA benefits in the Boudreaux case.  Rather than remand the case for reconsideration in light of Boudreaux, the BRB simply reversed the denial and remanded the case to the ALJ for an award of benefits.

So although the Valladolid substantial nexus test for OCSLA coverage is getting off to a somewhat inconsistent start at the ALJ level, it appears that there will be a sufficient number of cases in short order to establish a coherent pattern of interpretation.

Nonappropriated Fund Instrumentalities Act, (5 U.S.C. 8171 et seq.)

I last discussed the Nonappropriated Fund Instrumentalities Act (NAFIA) on March 13, 2014.  There’s one provision in the NAFIA that I thought I would highlight, just to cover all three extensions of the Longshore Act.

Remember how the Defense Base Act applies to all employees, whether U.S. citizens or not?  The NAFIA is a little different.

Coverage includes,

  1. “those employees of such nonappropriated fund instrumentalities as are employed within the continental United States” (including Alaska and Hawaii)
  2. “those United States citizens or permanent residents of the United States or a Territory who are employees of such nonappropriated fund instrumentalities outside the continental limits of the United States.”

For employees working outside of the continental United States who are neither citizens nor permanent resident of the United States or a Territory, “compensation shall be provided in accordance with regulations prescribed by the Secretary of the military department concerned and approved by the Secretary of Defense or regulations prescribed by the Secretary of the Treasury ….”

NOTE:  This sets up an apparent conflict with the Defense Base Act, which covers all employment on U.S. military bases outside of the continental U.S.  There is no conflict, however, since as to those non-U.S. citizens employed by NAFI’s overseas the NAFIA preempts the DBA and applies as the NAFI employees’ exclusive remedy for workplace injuries.

 

 

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John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

AEU Longshore Blog ISSUE: New Truck Driver Case

We have a new truck driver case from the U.S. Department of Labor’s Benefits Review Board (BRB).

This one deals with the issue  of situs as well as status.  The decision also ducks the question of whether the driver was an independent contractor, not an employee and thus not covered by workers’ compensation, either state act or federal USL&H.

The case is Abdulaziz A. Ahmed v. Western Ports Transportation, Inc., BRB No. 16-0067, 9/21/16.

The claimant is a commercial truck driver.  His “employer” contracts with independent truck owner/operators to transport domestic and international containers between rail yards, retail outlets, piers, and warehouses.

He usually worked as part of the employer’s “rail” operations, moving containers between the Port of Seattle terminals and rail yards.

He was injured at a rail yard, the Union Pacific Intermodal Facility.  The Facility is two to three miles from the Port and the claimant’s route from the Port to the Facility involves, “… turns onto several streets and Highway 99, as well as crossing a drawbridge …”.

So, based on where the injury occurred, is the Facility a covered situs under the Longshore Act?

The situs provision of the Act, section 3(a), states:

“Except as other wise provided in this section, compensation shall be payable under this chapter in respect of disability or death of an employee, but only if the disability or death results from an injury occurring upon the navigable waters of the United States (including any pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling, or building a vessel).”

Our truck driver here was not injured over the water or at any of the specifically enumerated sites, so that leaves us with the question of whether the Union Pacific Intermodal Facility is an “other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling, or building a vessel”.

NOTE:  This injury occurred in the jurisdiction of the federal Ninth Circuit Court of Appeals (states of WA, OR, MT, ID, CA, NV, AZ, AK, HI).  In the Ninth Circuit an “adjoining” area does not have to actually touch or be contiguous with the water as it does in the Fourth (states of MD, VA, WV, SC, NC) and Fifth (states of TX, LA, MS) Circuits, “adjoining” means with “contiguous with”.  In the Ninth Circuit, “adjoining” depends on:

“… the particular suitability of the site for the maritime uses referred to in the statute; whether adjoining properties are devoted primarily to uses in maritime commerce; the proximity of the site to the waterway; and whether the site is as close to the waterway as is feasible given all of the circumstances in the case.” (Brady-Hamilton Stevedore Co. v. Herron, 568 F.2nd 137 (9th Cir. 1978))

In our case, the Facility is surrounded by mixed use properties (maritime and non-maritime), is several miles from the Port, and generally does not function as an area of maritime commerce.

Even in the relatively broad approach to situs used in the Ninth Circuit, the BRB affirmed the Administrative Law Judge’s (ALJ) finding that the claimant’s injuries did not occur on a covered situs.

NOTE:  Although the Facility is located “several miles” from the Port, distance alone was not the reason that it was not a covered situs.  Distance from the water is one among several factors considered in the Ninth Circuit.

So, the claimant in this case does not meet situs, and since both status and situs have to be independently satisfied for Longshore Act coverage, the case could have ended here.

But the BRB also discussed the status of the claimant, and affirmed the ALJ’s finding that the claimant did not meet status.

The claimant moved cargo from the Port of Seattle’s terminals to an intermodal rail facility.  In the landmark case of P.C. Pfeiffer Co. v. Ford, 444 U.S. 69 (1979), the U.S. Supreme Court held that workers engaged in intermediate steps of moving cargo between ship and land transportation were covered by the Longshore Act.  And in another landmark case, Northeast Marine Terminal Co. v. Caputo, 432 U.S. 249 (1977), the Supreme Court rejected the “point of rest” theory.  Unloading of cargo does not consist only of moving the cargo from the vessel to its initial point of rest at dockside.

Was the driver’s job an intermediate step in the process of moving cargo between the Port of Seattle’s terminals and the Intermodal Facility?

This issue involves the identification of the point at which cargo handling ends and land transportation begins.  Workers on one side are engaged in maritime employment and meet status under the Longshore Act.  Workers on the other side of this point are not engaged in maritime employment.

In addressing the status issue in the Ahmed case the BRB reviewed a number of prior truck driver cases.  It considered several cases in which drivers who transported cargo between port terminals and facilities located outside the port were involved in the land based stream of commerce rather than an intermediate step in the loading/unloading process.  The key point in several of the cases is that the drivers were transporting sealed containers to destinations outside the ports area.

On the other hand, transporting containers within the port area, such as from the dockside to terminal storage facilities and other destinations within the port, were considered to be still part of the loading/unloading process, i.e., an intermediate step since the cargo had not yet entered land transportation.

Since the driver in our case was transporting between the port and the Intermodal Facility outside the port he was involved in land transportation and did not meet status under the Longshore Act.

Finally, the claimant in this case did not board vessels or handle cargo.  He just drove the truck.  His activities were the first step in land transportation.  In the other direction, his activity would be the last step in land transportation of cargo to be put aboard vessels.

NOTE:  The ALJ had also found that the claimant was an independent contractor and not an employee.  It would have been an interesting discussion if the BRB had also taken up this issue.

NOTE:  This claimant was also out of luck with his compensation claim under the state act, in which he was adjudicated to be an independent contractor, not covered by workers’ compensation.

 

 

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John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

AEU Longshore Blog ISSUE: More Questions

Here are some more examples of the types of questions that come up on a regular basis.

Question Number 6

Is there USL&H exposure in a contract to construct or renovate a waterside restaurant?

Section 2(3)(B) of the Longshore Act states that individuals employed by a club, camp, recreational operation, restaurant, museum, or retail outlet are excluded from coverage.  This exclusion is based on the identity and nature of the employing enterprise.  Direct employees of, for example, a restaurant are excluded from Longshore Act coverage even though they may be on a covered situs doing work that meets the test for maritime status.

Another example is the employee of a floating casino who is engaged in what could be considered ship repair work.  Even though this employee meets situs and status, his employer is a recreational operation and so he is excluded from Longshore coverage.

This exclusion does not cover employees of contractors coming on to the property.  The contractors do not have the benefit of the exclusion since the exclusion only applies to clubs, camps, recreational operations, restaurants, museums, or retail outlets.  So you’ve got to know who the employer is.

Question Number 7

Are road pavers working on a highway that passes through a marine terminal covered by the Longshore Act?

These workers meet situs since they are working at a marine terminal.  So you have to take a close look at what they are doing to determine if they might also meet status.  Since these are construction workers we have the questions that typically come up concerning these types of workers:  are they working on an inherently maritime structure or project, and is there ongoing maritime activity at the location.  These questions are within the broader status question of whether their work is integral or essential to traditional maritime activity.

There is ongoing maritime activity in the area where they are working since it’s an active marine terminal.

But are they working on an inherently maritime structure or project?  In this particular case, the roadway was part of the state highway system.  The section being paved happened to be passing through the terminal.  There is nothing inherently maritime about a roadway, so this would be a no, so their case for status is weakened.

Is their work integral or essential to maritime operations?  In this case, the road passed through the terminal property, but it was part of the state highway system and had not been designed to serve the terminal operation.  In other words, use of this roadway at that location was not essential to ongoing terminal operations.

These workers probably would not meet status for Longshore Act coverage.

Question Number 8

Are maintenance workers whose job it is to cut grass, trim bushes and trees, pull weeds, and do general landscaping work at an oil loading/unloading and storage facility covered by the Longshore Act?

Again, we can assume that these workers are on a covered situs, so the question is whether or not they meet maritime status.  In this case, the work that they are doing does not affect the buildings and equipment that are involved in the loading and unloading.  Their job is to keep the property looking neat and professional.  I think that we can confidently conclude that these workers would not be covered by the Longshore Act, since their work is not integral or essential to the ongoing traditional maritime activity.

Question Number 9  

Very frequently the issue of coverage for truck drivers is raised.  These scenarios also sometimes implicate the issue of the application of the so called “vendor” exclusion in section 2(3)(D).  We can address both issues at the same time, if we consider the case of the truck driver who works for a food distributor.

First, section 2(3)(D):

“The term ‘employee’ means any person engaged in maritime employment … but such term does not include – individuals who (i) are employed by suppliers, transporters, or vendors, (ii) are temporarily doing business on the premises of an employer described in paragraph (4) (maritime), and (iii) are not engaged in work normally performed by employees of that employer under this act;”

In our case the truck driver works for a food distributor.  Its customers provide catering services to offshore drilling rigs.  The driver makes deliveries to docks for offshore delivery by other companies.  The driver transports the supplies from the employer’s inland warehouse to staging areas at the docks.

At the docks, the claimant truck driver typically helps the dock employees unload the truck by pushing pallets to the back of the truck where they can be  manually unloaded by dock workers, and if the dock workers use a forklift or crane, the truck driver attaches straps from the pallets to the crane or forklift.

Does this driver meet “status” for coverage under the Longshore Act?

First, assuming for the moment that he meets status is he excluded from coverage by the “vendor” exclusion?  He meets the first two elements, i.e., he is employed by a vendor, transporter, or supplier, and he is temporarily on the premises of a maritime employer.  But what about the third element:  To be excluded from Longshore coverage he cannot engage in work “normally performed by employees of the employer” (maritime work or otherwise).  All three elements must apply in order for the exclusion to apply.

So, in this case, the vendor exclusion does not apply.  The truck driver is doing work normally performed by the dock workers.

So the exclusion does not apply.  Does the driver meet status?

In the actual case, the U.S. Department of Labor’s Benefits Review Board reversed an award of benefits by an Administrative Law Judge and found that the driver did not meet status.

Rather than characterizing the driver’s activity as part of the first step or as an intermediate step in the loading process, the Board found that his duties constituted the last step in land transportation.  His job was to deliver food supplies from an inland warehouse to a staging area at the docks.  Moving the pallets or fastening crane straps was the last step in the process of land transportation.  The food supplies at this point had not yet crossed the invisible line and entered the process of marine cargo handling.

Interesting case.  I think I mentioned that the Longshore Act is never dull.

 

 

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John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation.  Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.