Since I recently discussed the fact that many state guarantee funds will not pay Longshore Act benefits in the event of an insurance carrier default due to insolvency, or will pay only to a limited or conditional degree, and I also recently discussed what typically happens in the immediate aftermath of an insurance carrier insolvency from the perspective of an insured, it seemed like an appropriate time to revisit the fundamentals of the Longshore Act’s insurance requirement.
There is extensive language in the Longshore and Harbor Workers’ Compensation Act which addresses the insurance requirement. Below is a summary:
- If you are a (maritime) employer, then Longshore Act insurance is mandatory.
- If your company doesn’t have it, then the injured worker has an election of remedies; he can accept his compensation benefits or he can sue your company.
- If your company doesn’t have it, you may be prosecuted criminally, and your corporate officers have joint and several liability for criminal prosecution.
- If your company doesn’t have it, then your corporate officers have personal, joint and several liability to the injured worker.
- You have two choices: obtain an insurance policy from an insurance carrier authorized by the U.S. Department of Labor to provide USL&H coverage, or obtain U.S. Department of Labor authorization to self-insure.
While the above summary seems relatively straightforward, it can still be confusing to maritime employers about how, when, or if they need obtain the proper insurance coverage. There are three questions that are most frequently asked:
- When do I need Longshore Act insurance?
If you are a maritime employer employing maritime workers, then you need workers’ compensation coverage under the Longshore and Harbor Workers’ Compensation Act. Whether or not you employ maritime workers depends on whether the workers meet the status (33 U.S.C. 902(3)) and situs (33 U.S.C. 903(a)) provisions of the Longshore Act.
Very briefly, maritime “status” is an occupational concept and encompasses many jobs in addition to the traditional occupations of longshoreman, shipbuilder, ship repair worker, and ship breaker. It includes all workers who build, maintain, and repair the tools, buildings and equipment necessary to the handling of cargo and the building/repairing of ships. There is no “moment of injury test” for status. Even a small percentage of regularly assigned maritime duties produce a full-time maritime worker for purposes of Longshore Act coverage.
Very briefly, “situs” is a geographic and functional concept that is determined by location as of the time of an injury. You meet situs by being injured over navigable waters, by being injured on an enumerated location such as a dry dock, pier, wharf, terminal, building way, or marine railway, or in another adjoining area customarily used by an employer for maritime work.
So, very generally, a worker is a maritime worker if he or she does maritime work in a maritime area.
33 U.S.C. Section 904(a) – “Every employer shall be liable for and shall secure the payment to his employees of the compensation payable under Sections 907, 908, and 909.”
- Where can I get Longshore Act insurance?
Section 932 of the Longshore Act (see below) gives the maritime employer two choices: buy insurance from an insurance carrier authorized by the U.S. Department of Labor or obtain the U.S. Department of Labor’s authorization to self-insure.
33 U.S.C Section 932 – “Every employer shall secure the payment of compensation under this Act –
(a)(1) By insuring and keeping insured the payment of such compensation with any stock company or mutual company or association, or with any other person or fund, while such person or fund is authorized (A) under the laws of the United States or of any State, to insure workers’ compensation, and (B) by the Secretary, to insure payment of compensation under this Act; or
(2) By furnishing satisfactory proof to the Secretary of his financial ability to pay such compensation and receiving an authorization from the Secretary to pay such compensation directly.”
- What happens if I need Longshore Act insurance and I don’t have it?
In the case of an uninsured employer, the company and its corporate officers are in a very vulnerable situation, as outlined in sections 905(a) and 938(a) of the Longshore Act shown below. The injured worker has an election of remedies that can be very costly for the employer. There is potential criminal liability, and most importantly, the corporate officers have personal liability, jointly and severally, with the corporation. The President, Secretary, and Treasurer of an uninsured employer are in a very bad place.
33 U.S.C. Section 905(a) – “… if an employer fails to secure payment of compensation as required by this Act, an injured employee, or his legal representative in case death results from the injury, may elect to claim compensation under the Act, or to maintain an action at law or in admiralty for damages on account of such injury or death. In such action the defendant may not plead as a defense that the injury was caused by the negligence of a fellow servant, or that the employee assumed the risk of his employment, or that the injury was due to the contributory negligence of the employee.”
33 U.S.C. Section 938(a) – “Any employer required to secure the payment of compensation under this Act who fails to secure such compensation shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year, or by both such fine and imprisonment; and in any case where such employer is a corporation, the President, Secretary, and Treasurer thereof shall be also severally liable to such fine and imprisonment as herein provided for the failure of such corporation to secure the payment of compensation, and such President, Secretary, and Treasurer shall be severally personally liable, jointly with such corporation, for any compensation or other benefit which may accrue under the said Act in respect to any injury which may occur to any employee of such corporation while it shall so fail to secure the payment of compensation as required by Section 932 of the Act.”
The Longshore Act insurance requirement can be daunting for those employers that are unclear as to whether or not it applies to their business. An insurance professional with expertise in the maritime industry, specifically USL&H coverage, can be of tremendous benefit in making that determination.
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.