Should I Seek War Hazards Reimbursement or File an Appeal?

One question I am often asked is whether an employer and carrier should seek reimbursement pursuant to the War Hazards Compensation Act (“WHCA”), see 42 U.S.C. § 1704, or file an appeal with the Benefits Review Board, see 33 U.S.C. § 921.  This question arises after an Administrative Law Judge (“ALJ”) finds the employer and carrier liable for benefits in a contested claim that involved alleged “war-risk hazards.” 

My answer to this question is, “It depends.”  In my opinion, when an ALJ issues a Decision and Order that concretely links a claimant’s injuries to “war-risk hazards,” reimbursement should be sought instead of an appeal. 

The Code of Federal Regulations (“CFR”) requires employers and carriers to litigate a Defense Base Act (“DBA”) claim as if the WHCA did not apply.  See 20 C.F.R. § 61.102.  They are required to (1) take advantage of any assignment or subrogation rights due to the liability of a third party; (2) take “reasonable measures to contest, reduce, or terminate its liability…;” (3) make reasonable and adequate investigations into each claim; and (4) avoid delay that could increase DBA liability.  Id.  The reason for these requirements is simple: the Department of Labor (“DOL”) does not want DBA litigants to shift liability to  the government simply because the WHCA may apply.  To ensure this does not happen, the DOL requires reasonable DBA litigation.  But what does “reasonable” mean?

OWCP Bulletin No. 12-01 attempts to define “reasonable” not by express definition, but instead by admonition.  It states:

DFEC requires, before acceptance of any WHCA reimbursement claim, that the employer/carrier has made only reasonable and prudent efforts in presenting all meritorious defenses against a DBA claim without regard to whether the case is eligible for WHCA reimbursement.  An employer/carrier’s inadequate or overly zealous representation in defending against a DBA claim may be grounds for denying all or some portion of a request for WHCA reimbursement.

Based on this language, “reasonable” seems to mean “not doing too much and not doing too little.”  But is that instructive?  An attorney’s zealous representation of his client is required by the Rules of Professional Conduct.   Further, it seems that what is “zeal” to one person may be gauged as “excessive zeal” by another. 

When determining the course of litigation, I prefer to err on the side of the CFR as opposed to the bulletins of administrative agencies.  The Fifth Circuit clearly noted that interpretive bulletins “have no force of law and cannot provide the basis for a result contrary to either statute or regulation.”  Salinas v. Rodriguez, 963 F.2d 791, 793 (5th Cir. 1992).  The Third Circuit has the same belief, noting that “interpretive bulletins do not rise to the level of a regulation and do not have the effect of law.”  Brooks v. Village of Ridgefield Park, 185 F.3d 130, 135 (3d Cir. 1999).  If forced to choose between the litigation requirements in the CFR and the admonitions in OWCP Bulletin No. 12-01, an employer and carrier must choose the CFR.

But that does not mean that “reasonable” should be read out of 20 C.F.R. § 61.102.  As such, it makes more sense in most cases–but certainly not all–to seek reimbursement following an adverse ALJ decision rather than filing an appeal.  When the ALJ issued the Decision and Order, factual findings were made.  If the factual findings link the injury to a “war-risk hazard,” then an employer and carrier should secure reimbursement.  In many situations, WHCA reimbursement is the most economically advantageous course of action.

The decision, however, is always case-specific, which is why the answer to the appeal question is, “It depends.”  To be sure, appealing a potential WHCA claim is not an unreasonable course of action–and it may be required.  Sometimes an ALJ’s findings of fact are soft with respect to the involvement of “war-risk hazards.”  Other times, there exists a fear that the administrators of the WHCA will disagree with the ALJ, thus jeopardizing reimbursement.  And because the time it takes to seek reimbursement is longer than the delays allowed for an appeal–thirty days, 33 U.S.C. § 921(a)–choosing reimbursement more or less forecloses the possibility of appeal if the Division of Federal Employees’ Compensation determines that the WHCA does not apply.  In these claims, an appeal may be the most “reasonable measures to contest, reduce, or terminate…liability.”  See 20 C.F.R. § 61.102.

Accordingly, the most advantageous course of action–reimbursement or appeal after an adverse ALJ Decision–should be an economic decision made with due consideration to the facts of the case and the strength of the Decision and Order.  In most situations reimbursement will win out over appeal.

DBA Settlements Can Be Based on a Peer Review Medical Report

Claimant appealed the decision of an Administrative Law Judge (“ALJ”) who approved Claimant’s Section 8(i) settlement agreement.  Claimant, a Defense Base Act employee, was injured when his weapon’s butt stock struck his breastbone, injuring his chest and ribs.  He voluntarily signed a $15,000 settlement which stated that Dr. Boris Bacic examined him.  Later, however, Claimant stated that he was not actually examined by Dr. Bacic.

The Benefits Review Board (“BRB”) affirmed the ALJ’s decision.  Interestingly, Claimant did not complain about the amount of the settlement, but instead, the fact that the settlement was not based on the opinion of an examining physician.  The BRB noted that the regulations require only that the settlement contain “[a] current medical report,”and there is “no requirement that the report be from a physician who personally examined claimant.”  See 20 C.F.R. § 702.242(b)(5).  The statement in the settlement that Claimant was actually examined by Dr. Bacic was harmless.

Olunga v. Triple Canopy, BRB No. 11-0691 (Apr. 19, 2012) (unpublished).

Collateral Source Rule Does Not Apply to Cure Expenses; Attorney’s Fee Claim Reversed

It is well established under the General Maritime Law that a seaman who becomes injured or ill while in the service of the vessel is entitled to receive maintenance and cure benefits until he reaches maximum medical improvement.  Cure is the right to receive reasonable, bona fide and necessary medical services, causally related to the injury or illness.  As a result, it has been a common practice with Jones Act employers and/or their underwriters to have cure expenses audited and, where appropriate, reduced to a “reasonable and necessary” amount.

In Manderson v. Chet Morrison Contractors, Inc. (“CMC”), which was decided by the United States Fifth Circuit Court of Appeals in January 2012, Manderson, who worked for the defendant as an engineer aboard a dive vessel, left the vessel abruptly and was hospitalized for ulcerative colitis, diabetes and a liver condition.  He never returned to work.

Following his illness, Manderson received extensive medical treatment and submitted his bills to his health insurer.  However, he ultimately filed a lawsuit against his employer under the Jones Act and the General Maritime Law.  His lawsuit sought, among other things, the full amount of the medical bills that he had incurred, which totaled approximately $170,000.00.  His health insurer, based upon either audits or fee agreements in place with medical providers, had paid about $70,000.00 in medical expenses, which had been accepted by the medical providers as full payment.

This case was tried to a judge in the United States District Court for the Western District of Louisiana and the judge awarded the full amount of the medical expenses in damages, along with attorney’s fees of $110,950.00 for the alleged arbitrary and capricious failure to pay maintenance and cure.

In awarding the full amount of cure expenses, the district court applied the collateral-source rule, which bars a tortfeasor from reducing the amount of damages owed to a plaintiff by the amount of recovery the plaintiff receives from other sources of compensation that are independent of or collateral to the tortfeasor.  Most states, including Louisiana, apply the collateral-source rule.

On appeal, holding that this appeared to be an issue of first impression, the Fifth Circuit reversed and held that the seaman was only entitled to recover the discounted amount paid by his health insurer and not the full amount of his medical bills.  In doing so, the court recognized that a seaman’s entitlement to maintenance and cure was an implied term of his employment contract and was not predicated on any fault or negligence of the employer.  As such, the Fifth Circuit concluded that the collateral-source rule should not be strictly applied and reduced the cure award by about $100,000.00.

In reversing the award for attorney’s fees for the alleged arbitrary and capricious failure to pay maintenance and cure benefits, the Fifth Circuit recognized that the district court had awarded attorney’s fees without any underlying findings.  At trial, CMC  presented evidence that Manderson had experienced similar flare-ups of his colitis before working for CMC; that he had applied for short term and long term disability and claimed that his colitis was not work related, before filing a suit for maintenance and cure; that Manderson had failed to reveal some of his pre-existing history; and that he never filed any injury report in connection with the incident.  Furthermore, once a formal demand for maintenance and cure was made, CMC promptly referred the matter to its underwriters to investigate the claims and the underwriter did so.  Under the circumstances, the Fifth Circuit reversed the award for attorney’s fees, finding that the evidentiary basis for such an award had not been met.

This decision should further support the employer’s right to have cure expenses audited and paid at a reduced rate.  Furthermore, if the seaman wants to use a physician who will not agree to a reduced rate when other competent medical providers are available who will accept the reduced rate, we believe the employer has an extremely strong argument that it only owes those reasonable and related charges at the reduced rate.

Note: this article first appeared in For the Record, a general-information newsletter published quarterly by Mouledoux, Bland, Legrand & Brackett.  For more information about the newsletter, or to sign up for a free e-mail subscription, please visit http://mblb.com/newletterrevised/.

For Longshore Coverage Exemptions, Focus on the Site of the Injury

The Benefits Review Board (“BRB”) recently affirmed a denial of benefits to a claimant who injured his back.  It was an opportunity for the BRB to address exemptions to the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) granted by the Department of Labor (“DOL”).  At issue was Section 3(d) of the LHWCA, and the proper focus of an exemption inquiry:

(d)(1) No compensation shall be payable to an employee employed at a facility of an employer if, as certified by the Secretary, the facility is engaged in the business of building, repairing, or dismantling exclusively small vessels…unless the injury occurs while upon the navigable waters of the United States or while upon any adjoining pier, wharf, dock, facility over land for launching vessels, or facility over land for hauling, lifting, or drydocking vessels.

(2) Notwithstanding paragraph (1), compensation shall be payable to an employee–

(A) who is employed at a facility which is used in the business of building, repairing, or dismantling small vessels if such facility receives Federal maritime subsidies; or

(B) if the employee is not subject to coverage under a State workers’ compensation law.

(3) for purposes of this subsection, a small vessel means–

(A) a commercial barge which is under 900 lightship displacement tons; or

(B) a commercial tugboat, towboat, crew boat, supply boat, fishing vessel, or other work vessel which is under 1,600 tons gross.

Despite Claimant’s arguments otherwise, the BRB determined that the Administrative Law Judge correctly focused on the site of the injury.  The employer’s facility, known as Plant Number 48, was located adjacent to  the Intracoastal Waterway, a navigable body of water, where hopper barges were built.  The claimant’s injury occurred in an area that was covered by the “Certificate of Exemption From Coverage” issued by the DOL.  As such, and in the absence of arguments to the contrary, the claimant’s injury occurred in an area subject to the small vessel exemption and he was excluded from LHWCA coverage.

Koepp v. Trinity Indus., Inc., BRB No. 11-0611 (Apr. 12, 2012) (published).