ISSUE: U.S. Department of Labor

Jack_crop 72dpiThe Longshore Act is administered by the Division of Longshore and Harbor Workers’ Compensation (DLHWC), Office of Workers’ Compensation Programs (OWCP), in the U.S. Department of Labor (DOL).

There are significant changes underway in the management of the Longshore Division.

Miranda Chiu has retired as Director, DLHWC. The Acting Longshore Director, effective March 15th, is Antonio Rios, formerly the Deputy Director, Division of Federal Employees Compensation.

Brandon Miller has left as Chief, Branch of Insurance and Financial Management, and has been replaced, effective March 25th, by Rich Stanton, formerly with Maher Terminals.

So, currently, who, what, and where is the DOL that administers the Longshore Act?

The DLHWC consists of a National Office in Washington, DC and eleven District Offices located around the country.

The National Office management staff consists of the Acting Director, Tony Rios, and the two Branch Chiefs, Eric Richardson and Rich Stanton, along with their respective staffs. Eric’s staff handles second injury fund applications, district office administration, regulatory drafting and interpretation, coordination of legal matters with the Office of the Solicitor, policy formulation, and procedural matters. Rich’s staff administers the Special Fund, bills and collects the industry assessment, authorizes insurance carriers and self-insurers, collects and maintains collateral deposits, administers assessment reporting and reserve audits, administers insolvency cases, enforces the insurance provisions of the Longshore Act, and participates in policy formulation. These are partial lists.

District offices provide medical management, informal dispute resolution, education and outreach, and claims administration services under the direction of District Directors.

Following is a list of Longshore district offices along with their respective state jurisdictions:

Boston – District Director David B. Groeneveld, States of CT, ME, MA, NH, RI, VT, and DBA jurisdiction – east of the 75th degree west longitude, Newfoundland, and Greenland.

New York – District Director Richard V. Robilotti, States (and Territories) of NY, NJ, Puerto Rico, Virgin Islands and DBA – Mexico, Central and South America; areas east of the continents of North and South America to the 60th degree east longitude (including Iraq Afghanistan and Iran) and any other areas or locations not covered under any other district office

Baltimore – District Director Theresa Magyar, States of DE, DC, MD, PA, WV

Norfolk – District Director Theresa Magyar, State of VA

Jacksonville – District Director Charles Lee, States of AL, FL, GA, KY, NC, SC, TN

Houston – District Director David Widener, States of TX, OK, NM, IL, IN, IO, MI, MN, OH, WI, MO, NE, KS and DBA – Canada, west of the 75th degree and east of the 110th degree west longitude

New Orleans – District Director David A. Duhon, States of LA, AR, MS

San Francisco – District Director R. Todd Bruininks, States of CA (north of the northern boundaries of the counties of San Luis Obispo, Kern, and San Bernardino), AZ, NV

Honolulu – District Director R. Todd Bruininks, State of HI, and DBA – all areas west of the continents of North and South America to 60 degrees east longitude (excluding Iran, Iraq, and Afghanistan)

Long Beach – District Director Marco Adame, State of CA (South of the northern boundaries of the counties of San Luis Obispo, Kern, and San Bernardino)

Seattle – District Director R. Todd Bruininks, States of AK, OR, WA, CO, ID, MT, ND, SD, UT, WY and DBA – Canada west of the 110th degree west longitude, and all areas in the Pacific Ocean north of the 45th degree north latitude

As you can see, National Office management is largely new, and there are several District Directors managing more than one office, so DOL is spread pretty thin right now.

Claims issues that cannot be resolved at the District Office level are referred for formal hearing to the Office of Administrative Law Judges (OALJ) within DOL. Appeals from decisions at the OALJ go to the DOL’s Benefits Review Board (BRB).

The DLHWC management is evaluated and measured by how quickly the Program resolves claim disputes, and by how effectively it enforces key reporting and entitlement elements of claims, such as initial reporting of injuries by employers and timeliness of payments to injured workers.

For further information please visit the DLHWC website at http://www.dol.gov/owcp/dlhwc. There you will find a lot of useful information, such as Forms, FAQs, Procedure Guides, Benefit Guides, texts of the laws, as well as links to the OALJ and BRB websites.

ISSUE: U.S. Department of Labor Audits

The Longshore and Harbor Workers’ Compensation Act is administered by the Division of Longshore and Harbor Workers’ Compensation, Office of Workers’ Compensation Programs, in the U.S. Department of Labor (DOL).

Key elements of the administration of the Act include collection of the annual Special Fund industry assessment and the maintenance of security deposits for DOL authorized insurance carriers and self-insured employers.  (For information concerning the Special Fund please see the discussion posted on October 27, 2010.)

The amount of each authorized insurance carrier’s and self-insurer’s annual Special Fund assessment is based in part on the Form LS-513, Report of Payments, that the carriers and self-insurers file each year showing the total of direct indemnity payments that each made on all of their cases during the preceding calendar year.

The amount of each authorized insurance carrier’s and self-insurer’s security deposit is based in large part on the Form LS-274, Report of Outstanding Liabilities, that each files annually listing total incurred liability, paid and reserved, for all open cases.

These reports have serious financial implications for the carriers and self-insurers that file them.  And the DOL must try to make sure that the Forms LS-513 are accurate in order to make sure that everyone pays their fair share of the assessment and that the Forms LS-274 are as reasonable as possible in order to protect the future benefits of injured workers and to protect the Special Fund from the possibility of future insolvency claims. 

Does the DOL have a system in place to try to insure that these Reports are as accurate and complete as reasonably possible?

It does.  DOL contracts with an outside public accounting firm to conduct reviews of Form LS-513 and Form LS-274.  This firm is very experienced at these audits.  The auditors know what they’re doing.  The audits protect the integrity of the Special Fund assessment and they protect the adequacy of security deposits.

Before I forget, the American Longshore Mutual Association (ALMA) has just been audited by DOL.  The results of the audit of ALMA’s LS-513, Report of Payments, for calendar year 2011 have been released.  In the words of the auditor, “Of the potential exceptions for the year 2011 filing, I tested 322 open cases and 600 closed cases.  I found no exceptions in our testing and therefore noted no adjustments to the 2011 LS-513 form filed by American Longshore Mutual Association.”

Brandon Miller, Chief, Branch of Insurance and Financial Management at DOL (my old job) stated that this result is “very impressive given the size and scope of your claims population compared to other employers and carriers.”

And that’s a very fair “assessment” of the audit result. ALMA is one of the biggest writers of Longshore coverage worldwide.  The reporting systems administered by The American Equity Underwriters (AEU) on behalf of ALMA are operating perfectly.  The DOL has been reassured that ALMA is reporting properly and paying its fair share of the Special Fund assessment.

ISSUE: Director, Division of Longshore and Harbor Workers’ Compensation Act

Congratulations to Miranda Chiu.  She has just been officially appointed the Director, Division of Longshore and Harbor Workers’ Compensation, Office of Workers’ Compensation Programs, in the U.S. Department of Labor.  Miranda has been serving as Acting Director since the retirement of Mike Niss, and this announcement makes it official.

I worked with Miranda at DOL for years.  She is a no nonsense hard worker, and DOL could not have done better.  Based on my personal experience, she is very well qualified for and very deserving of this appointment.

On the down side, Carl Abildso in the Longshore Division’s National Office has just retired.  Anyone who’s ever paid a Special Fund assessment bill or put a case into the Special Fund knows Carl.  He’ll be missed, and I wish Carl a long and happy retirement.

ISSUE: Individual Self-Insurance

Section 904(a) states, “Every employer shall be liable for and shall secure the payment to his employees of the compensation payable ….”

Section 932(a) states, “Every employer shall secure the payment of compensation under this Act –

(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 workmen’s 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….  Any employer securing compensation in accordance with the provisions of this paragraph shall be known as a self-insurer.

You have two choices.  Buy insurance from an insurance carrier authorized by the Secretary of Labor to write Longshore Act coverage.  Or obtain authorization from the Secretary of Labor as a self-insurer.

How do you become self-insured?  You complete Form LS-271, Application for Self-Insurance, which, along with the supporting documentation, goes to the Division of Longshore and Harbor Workers’ Compensation’s National Office at the U.S. Department of Labor, 200 Constitution Ave., NW, Room C-4315, Washington, DC  20210.

What is the supporting documentation?

  1. Audited financial statements for the most recent three years.  They must be audited, certified by a public accounting firm.  No exceptions.  If you don’t have audited financial statements, save yourself the trouble.  The financial statements will be evaluated using standard liquidity, profitability, and debt ratios.
  2. Loss information for the most recent five years, showing paid and total incurred losses under the Longshore Act.
  3. The identity of the carrier and the limits of your proposed excess insurance coverage, and a sample of the policy form if requested.
  4. Statement of proposed claims administration.  If claims will be self administered, submit resumes of your claims people.  If you will use a third party administrator, submit sufficient information to demonstrate the organization’s experience with the Longshore Act.
  5. Statement of annual Longshore Act payroll by classification code.
  6. A corporate officer certification on a Longshore Division form committing the company to voluntary compliance with all statutory and regulatory requirements, and good faith participation in dispute resolution and self-policing.

That’s it.  There’s no filing or other fee associated with the application process.  You will have a decision in 30 – 60 days.

There are a number of other considerations, however, of which you should be aware.

Every self-insured employer must meet a security requirement.  The minimum security required is $400,000 for incidental Longshore exposure.  Otherwise, for a ballpark estimate take the last five years total incurred losses, increase the most recent two years by 35%, and obtain the five year average.  This will be your approximate starting point for the required collateral.

You have three ways to meet the security requirement:  1) deposit cash in a Federal Reserve Bank account in the name of the Office of Workers’ Compensation Programs, 2) obtain a letter of credit from an approved bank on the form supplied by the Longshore Division, or 3) obtain a surety bond on a form supplied by the Longshore Division issued by a surety company approved by the U.S. Treasury.

If a parent company and one or more separately incorporated subsidiaries are applying for self-insurance, a separate application will be required for each company.  A parent company guarantee will be required in the format provided by the Longshore Division.

The self-insurance authorization is non-transferable, so if ownership of the company changes, a new application will be required.  There is no expiration date or renewal date.  The authorization will continue until revoked by the Longshore Division for good cause.

There are annual reporting requirements.  Form LS-513, Report of Payments, will provide the basis of the self-insurer’s annual Special Fund Assessment.  Form LS-274, Report of Outstanding Liabilities, will measure the ongoing security requirement.  The self-insurer is also required to file an annual statement of its excess insurance coverage, and, if requested, an annual audited financial statement.  Also, any corporate name changes, significant changes in exposure, and new operations in previously unlisted locations should also be immediately reported.

Note:  There are currently about 209 authorized individual Longshore Act self-insurers.  If you go back about 25 five years, there were twice that many.

If you have any questions regarding Longshore Act self-insurance you can contact me at jack.martone@amequity.com.