Longshore Act Question Number 7

Why Is Longshore Act Insurance So Expensive?

Note that the question is not, “Is Longshore Act insurance expensive?” We all know that it is, relative to state act coverage in most instances.

So, let’s start by accepting the premise; Longshore Act insurance coverage in almost every instance will cost the employer more than state act coverage.

Some reasons are self-evident. The traditional maritime occupations of longshoreman and shipbuilder are relatively hazardous, earn high wages, and the maximum Longshore Act rate is higher than most states’ maximums.

Note: The U.S. Department of Labor has announced that effective October 1, 2009, the new maximum rate under the Longshore Act is $1,224.66 per week. This is based on a 2% increase in the National Average Weekly Wage (NAWW). The new NAWW is $612.33. The Longshore Act maximum is twice the NAWW and the Longshore Act minimum rate is one-half the NAWW, or $306.17.

But even when work involves nontraditional maritime occupations, where the work is covered by the Longshore Act, the employer will virtually always pay the appropriate state rate multiplied by a “Longshore factor”. For example, in New York an employer in this situation would pay the state rate multiplied by 1.66 for payroll covered under the Longshore Act. So the employer will pay more in most states in most instances where the work comes under the Longshore Act.

What are some of the factors that may account for this?

The Longshore Act is liberally administered to favor the injured worker;

The Longshore Act has not been significantly amended since 1984, and so does not reflect cost control measures adopted in many states, such as provisions relating to medical management and causation;

The section 920 presumptions favor the injured worker;

The Longshore Act still contains an important provision giving the injured worker his choice of treating physician;

There is no lifetime maximum applicable to Longshore Act benefits.

This is a partial list. It can be debated, expanded, refined. But the conclusion remains.

Longshore Act insurance costs more. There are many reasons. You can probably think of some more.