A Maritime, Longshore and Defense Base Act Blog

Archive for the ‘War Hazards Compensation Act’ Category

The Defense Base Act (“DBA”) is a system of federal workers’ compensation applied to United States contractors working abroad on U.S. bases or pursuant to a U.S. contract.  When these contractors sustain a work-related injury, they are entitled to benefits.  In some instances, the event that caused the contractor’s injury qualifies as a “war-risk hazard.”  See 42 U.S.C. 1711 and 20 C.F.R. 61.4.  Generally, “war-risk hazards” include the discharge of weapons; any action by a hostile force or person, including insurrection or rebellion; the discharge of munitions intended for use in war; the collision of vessels and aircraft operating without customary navigation aids; and the operation of a vessel or aircraft in a zone of hostility or engaged in war activities.  The benefits paid to a DBA claimant because of injuries caused by a ”war-risk hazard” qualifies the employer, insurance carrier, or compensation fund that paid benefits to reimbursement under the War Hazards Compensation Act (“WHCA”).

Although there are other instances when the WHCA applies the focus of this post is reimbursement.  The pertinent provision for reimbursement is 42 U.S.C. 1704, which states in pertinent part:

(a) Where any employer or his insurance carrier or compensation fund pays or is required to pay benefits–

(1) to any person or fund on account of injury or death of any person coming within the purview of this Act or sections 1-4 of the Defense Base Act if such injury or death arose from a war-risk hazard, which are payable under any workmen’s compensation law of the United States or of any State, Territory, or possession of the United States or other jurisdiction; or

. . .

(3) . . . such employer, carrier, or fund shall be entitled to be reimbursed for all benefits so paid or payable, including funeral and burial expenses, medical, hospital, or other similar costs for treatment and care; and reasonable and necessary claims expense in connection therewith.

The WHCA sets forth the precise category of items that are reimbursable.  A employer, carrier, or compensation fund can seek a dollar-for-dollar reimbursement of all medical benefits, indemnity benefits, and funeral benefits it was required to pay to a DBA claimant.  See 33 U.S.C. 907, 908, 909.  Further, the employer, carrier, or compensation fund is entitled to reimbursement of reasonable and necessary claims expense.  Pursuant to the Code of Federal Regulations, claims expenses can be allocated or unallocated.  See 20 C.F.R. 61.104.  Allocated claims expenses include “reasonable attorneys’ fees, court and litigation costs, expenses of witnesses and expert testimony, examinations, autopsies and other items of that were reasonably incurred in determining liability under the Defense Base Act . . . .”  Id.  Unallocated expenses are expenses that cannot be specifically itemized or documented.  To account for reimbursement, 15% of the sum of the reimbursable payments is added to the reimbursement amount.  Id.  In practice, the Division of Federal Employees Compensation, which is the agency charged with administering the WHCA, applies the unallocated expense provision only to medical, indemnity, and funeral benefits–but not to future indemnity benefits incurred as a result of a commutation request.  See FECA Bulletin No. 12-01.

To be sure, anything that is paid pursuant to the DBA is reimbursable.  Not only are the claimant’s benefits reimbursable, but so are the litigation costs associated with the claimant’s DBA case.  Although there is debate in the Longshore community about the necessary scope of litigation for DBA injuries caused by a “war-risk hazard,” the WHCA makes it clear that a carrier must litigate each claim just as it would if the WHCA did not apply.  An employer and insurance carrier must “take reasonable measures to contest, reduce, or terminate its liability by appropriate available procedure under workers’ compensation law or otherwise . . . .”  See 20 C.F.R. 61.102.

The moment when an employer becomes entitled to reimbursement has also been debated in the Longshore community.  The answer to that debate is contained in the the reimbursement statute.  It says that an employer, carrier, or compensation fund shall be entitled to reimbursement when it is required to pay DBA benefits.  See 42 U.S.C. 1704.  In other words, when a DBA claimant’s entitlement to DBA benefits accrues, the employer, carrier, or compensation funds right to WHCA reimbursement accrues too.  There is no provision in the WHCA that tolls the entitlement to reimbursement to some later point in time, like the date when the claimant reaches maximum medical improvement or is released to return to work.  When a DBA claimant is entitled to receive his first dollar in benefits, the WHCA allows reimbursement of that dollar.  Compare 33 U.S.C. 914 and 42 U.S.C. 1704; cf. Roberts v. Sea-Land Services, — S. Ct. —-, 2012 WL 912953 (2012).  And while the practice is to secure a DBA compensation order prior to requesting reimbursement, there is no statutory or regulatory requirement for an employer and carrier to secure an order prior to requesting reimbursement, which the Office of Workers’ Compensation Program recognized in OWCP Bulletin No. 05-01.

In closing, the WHCA reimburses an employer, carrier, or compensation fund–presumably the Special Fund established by the Longshore Act, see 33 U.S.C. 944 and 33 U.S.C. 908(f)–for the medical, indemnity and funeral expenses paid to a DBA claimant injured by a “war-risk hazard.”  Further, the DBA reimburses litigation costs and other claims expenses incurred in determining DBA liability.  The entitlement to reimbursement accrues at the moment the employer, carrier, or insurance fund is required to pay benefits–which is the date the claimant becomes entitled to benefits.

We are pleased to announce that Navigable Waters has been honored by LexisNexis as one of the Top 25 Workers’ Compensation Blogs for 2011.  It is exciting to be included on a list of such excellent workers’ compensation blogs, and we are humbled by the award.  A link to the article discussing those blogs is here.  Take a look!   We check out many of the blogs identified by LexisNexis on a near daily basis.  Finally, we extend our sincere thanks to those individuals who took time out of their busy schedule to nominate Navigable Waters as a Top 25 Workers’ Compensation Blog.  Thank you.

This post continues the review of OWCP Bulletin No. 12-01, which was issued on October 6, 2011.  The Bulletin focuses on the direct payment provisions of the War Hazards Compensation Act (WHCA) and how those provisions are administered for claims originating under the Defense Base Act (DBA).

Compensation for Disability and Permanent Impairment:

The Division of Federal Employees Compensation (DFEC) pays benefits in accordance with the Division of Longshore and Harbor Workers’ Compensation’s (DLHWC) compensation order, and the amount of benefits paid by DFEC cannot be changed absent a Section 22 modification.  If a claimant requests a change in the benefit amount, he will be referred to the DLHWC for modification.  If DFEC disagrees with the claimant’s request, it “will outline the rationale for its disagreement and attach any applicable documentation.”  In the event that DFEC, itself, obtains evidence that demonstrates a modification may be required, it may notify the DLHWC which, if in agreement, can unilaterally initiate modification proceedings.

In the event that an overpayment is made, DFEC will seek guidance from the DLHWC.  It is the DLHWC that will determine whether there was an overpayment and whether a credit will be taken.  DFEC retains the right to arrange independent medical examinations and require completed Form LS-200s to support ongoing claims for disability benefits.

Note: DFEC’s ability to prepare a written rationale for its disagreement with a claimant’s compensation rate increase poses an interesting question.  If a carrier must present any and all viable defenses to protect its right for reimbursement, then must it litigate DFEC’s written rationale as if that rationale was the carrier’s defense?

Compensation in Death Cases:

DFEC pays death benefits in accordance with the DLHWC compensation order, and a change to the benefits payment can only be made following the entry of a modified order.  Pursuant to Section 9 of the Longshore and harbor Workers’ Compensation Act, DFEC does not have to seek modification in the event that the decedent’s widow or widower remarries.  In the event of remarriage, DFEC will make a lump sum payment representing two years of benefits less any overpayment credit.  Further, modification does not have to be sought when the decedent’s minor child reaches 18 or is no longer a full-time student.  Finally, in the event that an injured worker receiving benefits dies as a result of his injuries, DFEC will direct any potential death benefits claimant to the DLHWC.  This is not a modification proceeding, however, because the potential claimant is seeking death benefits in their own right.  If death benefits are awarded, a carrier may request reimbursement and direct payment of those benefits.

DLHWC Determinations and DFEC’s Role:

Even though DFEC may pay benefits directly to a claimant by virtue of the WHCA, the claimant still remains a Defense Base Act claimant.  Therefore, when modification may be warranted, and the claim is referred back to the DLHWC, DFEC will “maintain active oversight” over the DBA claim.

Note: In this section of the Bulletin, there is no indication that the carrier will again become involved in the claim, but it is more likely than not that the DLHWC will either request or require the carrier’s involvement.

DBA Decisions:

OWCP Bulletin No. 12-01 contains a brief discussion of the legal consequences of a DBA compensation order.  If a District Director at the DLHWC issues a compensation order, it is usually because the parties agreed to all pertinent issues.  When no agreement is reached, a case may proceed to litigation at the Office of Administrative Law Judges, and can be appealed to the Benefits Review Board and then federal courts.  In any event, once the order issued by these adjudicatory bodies becomes final, “it is binding and DFEC must proceed accordingly, e.g. increasing the benefit level, paying an additional award, accepting a new medical condition, etc.”

Note: One issue that arises in DBA/WHCA claims is whether a factual finding made by a District Director regarding the fact of injury is binding on DFEC.  The WHCA regulations state that the order will be prima facie evidence of the claimant’s right to the benefits awarded.  DFEC maintains that it gets to make the ultimate determination as to whether a claim was caused by a “war-risk hazard.”  Yet, if the DLHWC has made a finding that a particular injury occurred a particular way, it remains to be seen how that finding could be disagreed with by another division of the Office of Workers’ Compensation Programs.

Attorney Fees:

In certain situations, a claimant’s attorneys fees can be paid under Section 28 of the LHWCA.  Before payment is made, however, the DLHWC must review the claimant’s attorney’s fee petition.  If an attorney submits a fee petition to DFEC, then DFEC will direct the attorney to the appropriate adjudicatory body.  DFEC reserves the right to object to and challenge the attorney’s fee petition, but it must do so in accordance with LHWCA provisions.

Note: What about work that a claimant’s attorney performs before DFEC?  The WHCA provisions contain a regulation for attorney’s fees, but the Bulletin suggests that only LHWCA provisions will apply.

Notice to Employer/Carrier:

When DFEC accepts a claim for direct payment, it will notify the employer and carrier.  If the employer and carrier object to any of DFEC’s proposals, it must file an objection within 15 days and then take “appropriate action in furtherance of its objection.”

Note: This is an extra-regulatory requirement that may prove too onerous.  First, 15 days is too short a time to lodge an appropriate objection, unless DFEC is satisfied with a general objection.  The time limit should be at least 30 days, and the clock should not start until the employer or carrier receives DFEC’s direct payment notice.  Second, because there is no statute or regulation supporting this objection requirement, this requirement most likely cannot be enforced.

Miscellaneous:

OWCP Bulletin No. 12-01 closes with a warning to employers and carriers.  An employer and carrier must present all meritorious defenses against a DBA claimant without regard to whether the case is eligible for WHCA reimbursement.  To be sure, this is a regulatory requirement.  The fact that DFEC repeated this warning multiple times throughout the Bulletin means that DFEC is quite serious about this requirement.  Interestingly, however, DFEC also states that “overly zealous representation” may be a ground “for denying all or some portion of a request for WHCA reimbursement.”

Note: It is not clear what constitutes “overly zealous representation,” but because the statement is directed to employers and carriers, it likely refers to an “overly zealous” defense of a claim.  With this undefined statement, DFEC has defined the scope of an employer’s and carrier’s defense in a DBA claim that will eventually qualify for WHCA reimbursement.  An employer and carrier should present any and all meritorious defenses (i.e. a defense going to the merits, substance, or essentials of the case), but not to the point that they become “overly zealous.”

On October 6, 2011, the Department of Labor issued OWCP Bulletin No. 12-01, which supplements information contained in the Federal Employees’ Compensation Act (FECA) Procedure Manual and OWCP Bulletin No. 05-01.  The stated purpose for the new OWCP Bulletin, which addresses the Defense Base Act (DBA) and War Hazards Compensation Act (WHCA), is to “provide specific guidance on the interplay between” the Division of Federal Employees Compensation (DFEC) and the Division of Longshore and Harbor Workers’ Compensation (DLHWC), and to explain ”the responsibilities of each program in the administration of DBA/WHCA reimbursement cases with ongoing entitlement.”  This may be the most significant development in WHCA administration in years.

First, some background.  Some DBA claims–typically those involving injuries occasioned by “war-risk hazards”–are also WHCA cases.  Benefits are paid to an injured claimant pursuant to the DBA, and the employer, fund, or insurance carrier that paid the benefits retains the right to request reimbursement for all benefits paid, as well as associated claims expenses.  In certain cases, DFEC will pay benefits directly to injured workers, as authorized by 42 U.S.C. § 1704 and 20 C.F.R. § 61.105.  Direct payment is only available when the rate of compensation and the period of payment have become relatively fixed and known.  Although there is no statutory or regulatory requirement to do so, DFEC more or less requires a compensation order from DLHWC before it will accept the claim for direct payment.  And the direct payment of benefits is not limited to indemnity benefits.  Medical benefits will also be paid to the injured worker, but those benefits will be furnished under the FECA guidelines.  One caveat of the direct payment provisions is that DFEC retains the right to transfer a case back to a carrier so that it can continue paying benefits.

It is important to remember that a direct payment case, though paid for by DFEC, remains a DBA case subject to the provisions of the Longshore and Harbor Workers’ Compensation Act (LHWCA).

OWCP Bulletin No. 12-01 is divided into numerous sections, the highlights of which are presented below–along with a few comments.  Based on the length and scope of the Bulletin, we are presenting this article in two parts.

Clarification of DBA Decisions:

DFEC retains the right to seek clarification regarding the terms of a compensation order from the applicable DLHWC District Director.  If necessary, a new order can be issued.  Further, a claimant can have multiple injuries where only some of the injuries qualify for WHCA reimbursement.  In these situations, the carrier can be asked to identify and substantiate the costs associated with only the covered injuries.

Note: Interestingly, the Bulletin states that “clarification of the DLHWC Informal Conference Memorandum or Compensation Order may be required.”  The reason this is interesting is that OWCP Bulletin No. 05-01 specifically prohibits the use of informal conference memoranda as the basis for a direct payment claim.

Disagreement with or Modification of a DBA Decision:

For the most part, DFEC will accept a compensation order without additional review.  Nonetheless, DFEC retains the right to challenge a compensation order when it is believed that there is a mistake of fact or a change in circumstances.  In these situations, DFEC will notify the DLHWC of the perceived problems.  If the DLHWC agrees that modification is warranted, then it will initiate modification proceedings under Section 22 of the LHWCA.  DFEC retains the ability to transfer a case back to the carrier for these proceedings.

Note: This is an interesting provision because, for the most part, direct payment requests are made very soon after the entry of a compensation order.  As such, any challenge would be made soon after the DBA case resolved.  DFEC’s position hints that it could force an employer and carrier to take a defense in future litigation under a modification proceeding despite concessions and stipulations made by the parties in the DBA suit.

Medical Treatment:

As explained earlier, when DFEC accepts a claim for direct payment, it may furnish medical treatment in accordance with the regulations governing medical treatment under FECA.  Because FECA regulations control, carriers should endeavor “to identify the specific medical conditions associated with the DBA claim.”  This list of covered conditions can be included in Stipulations resolving the underlying claim, and the list should be included in an application for reimbursement and direct payment.

When changes in treatment and medical conditions occur, DFEC will process the change under the following steps:

(1) If the new condition is a consequence of the earlier covered condition, then DFEC has to determine whether the medical evidence supports covering the alleged consequential injury.  If so, modification proceedings before the DLHWC may be necessary.

(2) If the new condition is completely new, DFEC will advise the claimant to file a claim for medical benefits with the DLHWC or seek modification.  More DBA litigation will be necessary in this event.

(3) If a claimant requests a change in physicians, DFEC will determine if the change is necessary and, if so, authorize the change.  If DFEC believes that the change may not be warranted, it will refer the claimant back to the DLHWC for an adjudicatory decision.

Note: DFEC can refer a claim back to the DLHWC, but it takes the position that it is not a party to the subsequent litigation that could ensue.  And even though it is not a party, DFEC cautions carriers that “a failure to present any and all viable defenses to [a] claim may result in a subsequent denial of its reimbursement claim under the WHCA.”  This statement, which springs from 20 C.F.R. § 61.102, will undoubtedly create additional litigation for fear that a claim will not be reimbursed.

Part Two of this blog entry will be posted soon…

After working for nine years as an officer for the Kansas Department of Corrections, Claimant went to work for Employer in Kosovo, where she would apprehend fugitive parolees.  She started her new job on April 17, 2004.  Her first day of work, however, was marred with tragedy when she and five others were shot by a Jordanian soldier.  Three victims died.  It was not until April 16, 2006, that Claimant filed a claim for benefits under the Longshore and Harbor Workers Compensation Act (“LHWCA”), as extended by the Defense Base Act, for her underlying psychological injuries.  The question presented to the United States Court of Appeals for the Second Circuit was whether this claim was barred by the statute of limitations for failure to timely file a claim.

Section 13 of the LHWCA contains a statute of limitations, offering different filing periods based upon whether or not the underlying injury was a “traumatic injury” or an “occupational disease.”  Claimant’s psychological claim was treated as a “traumatic injury,” which gave her a one-year period in which to file the claim.  Under Section 13(a), “[t]he time for filing a claim shall not begin to run until the employee or beneficiary is aware, or by the exercise of reasonable diligence should have been aware, of the relationship between the injury or death and the employment.”  

The key for the Second Circuit was whether Claimant knew or should have known that the injury would permanently impair her earning power.  Employer argued that substantial evidence supported its denial.  For instance, Claimant (1) changed assignments for Employer; (2) sought psychological counseling from the Army; (3) obtained a prescription for sleeping and anti-anxiety medication from a psychiatrist; (4) submitted to a psychological evaluation ordered by Employer and even sought an independent psychological evaluation; and (5) was experiencing symptoms of PTSD.  The Second Circuit disagreed, determining that while Claimant may have recognized she was psychologically distressed, her work was largely unaffected for one year after the shooting.  Therefore, Claimant timely filed a claim within one year of the time when she knew or should have known that she had suffered a permanent impairment of her earning power.

Dyncorp Int’l v. Director, OWCP, — F.3d —-, 2011 WL 3873793 (2d Cir. 2011).

Note: The Second Circuit mis-quoted Section 13(a), exchanging “reasonable diligence” for “due diligence.” 

Using data compiled by the Bureau of Labor Statistics, the Department of Labor made a final determination as to the national average weekly wage that will go into effect on October 1, 2011.  The final calculations are slightly higher than the estimated increase.

National Average Weekly Wage: $647.60

Maximum Compensation: $1,295.20

Minimum Compensation: $323.80

Percentage Increase: 3.05%

Pursuant to the Department of Labor’s website, new regulations for the Federal Employees’ Compensation Act (“FECA”) go into effect today.  A copy of the regulations can be found here.  These regulations also effect the War Hazards Compensation Act (“WHCA”), including the direct payment regulation, 20 C.F.R. § 61.105.  When a case is accepted for direct payment, the Division of Federal Employees’ Compensation furnishes medical care in accordance with FECA.  Although no changes were made to the WHCA’s regulations, any changes to FECA’s medical care regulations will have a ripple effect on the WHCA’s direct payment regulation.  The good news is that the regulations were amended to bring them up to speed with organizational changes at the Office of Workers’ Compensation programs, and to account for advancing medical billing technologies. 

Is there a statute of limitations for an insurance carrier’s claim for reimbursement under the War Hazards Compensation Act?  Without any statutory or regulatory language to the contrary, the answer is, “No.”  If a Defense Base Act (“DBA”) claimant was injured by a “war-risk hazard,” as that term is defined by 42 U.S.C. § 1711, then a carrier may seek reimbursement for the benefits it was required to pay on account of that injury.  42 U.S.C. § 1704.  The carrier is “entitled to be reimbursed for all benefits so paid or payable, including funeral and burial expenses, medical, hospital, or other similar costs for treatment and care; and reasonable and necessary claims expense in connection therewith.”  Id.  There is no statement in Section 104 that would limit the time when an initial request for reimbursement can be filed.

There is, however, a time limit for appealing a denial, so long as the denial decision is final.  If the claim for reimbursement is denied in whole or in part, the carrier must be provided with an explanation of the denial.  Then, a carrier in the United States can file objections (an appeal) within 60 days of the denial.  A carrier outside the United States has six months to file objections.  20 C.F.R. § 61.102.

There are statements in the Code of Federal Regulations that could be mistaken for a statute of limitations, but those mistakes can be easily rectified.  For instance, 20 C.F.R. § 61.202 states that the “time limitation provisions found in 5 U.S.C. 8119 apply to the filing of claims under section 101(a) of the War Hazards Compensation Act.”  While 5 U.S.C. § 8119 provides a 30 day time limit, that time limit is inapplicable to a carrier’s initial claim for benefits.  First, a Section 101(a) claim is a claim made directly by a claimant, not a carrier.  A carrier’s claim for reimbursement is also known as a Section 104 claim.  As the CFR makes clear, different rules are applicable to different types of claims, such as a claimant’s direct claim for benefits (section 101(a)), a claimant’s direct claim for detention benefits (section 101(b)), and a carrier’s claim for reimbursement (section 104).  20 C.F.R. § 61.3.  Nowhere in the rules relating to carriers is there a statement limiting the time for filing an initial request for reimbursement.

What does this mean?  It means that any employer, carrier or compensation fund that was required to pay benefits to any contractor because of a “war-risk hazard” injury can seek reimbursement at any time without concern of being time-barred. 

Claimant worked for a number of years outside of the United States in hostile environments.  After years of this type of work, he decided to take a break from the hostilities and work on the United States Army Kwajalein Atoll in the South Pacific.  On May 1, 2008, Claimant sustained a disabling neck injury for which Claimant received indemnity and medical benefits.  The only issue before the administrative law judge (“ALJ”) was Claimant’s average weekly wage.  The ALJ determined that Claimant’s rate of pay at the time of his injury on the Atoll, in an environment without hostilities, provided the appropriate basis for his Section 10(c) average weekly wage calculation.  Claimant appealed.

The Benefits Review Board (“BRB”) upheld the ALJ’s average weekly wage calculation.  The ALJ refused to include Claimant’s pre-Atoll wages, which were higher, because Claimant’s pre-Atoll job was performed under drastically different conditions.  Whereas Claimant’s pre-Atoll job was performed in a hostile environment, his Atoll job was not.  Thus, the ALJ found that this case represented “the mirror image” of war zone cases.  Claimant voluntarily left the higher-paying jobs in the Middle East for the lower-paying jobs in the Bahamas and the South Pacific.  Further, at the time of the injury, Employer was not paying Claimant a premium for any hazardous duty.  It was appropriate to calculate Claimant’s average weekly wage using only the wages Claimant earned in the South Pacific, a non-combat zone.

Luttrell v. Alutiiq Global Solutions, BRB No. 10-0555 (2011).

Note: The Luttrell decision adds another piece to the AWW puzzle.  Defense Base Act work can be performed in a war zone, or in a place that is a world removed from a combat destination.  Thus, the BRB appears to endorse basing AWW determinations on the “extrinsic circumstances of claimant’s employment.”  If an employee earns war zone wages, look to K.S. [Simons] v. Service Employees Int’l, Inc., 43 BRBS 18, aff’d on recon., 43 BRBS 136 (2009).  If not, look to Luttrell.

The United States Department of Labor, using data compiled by the Bureau of Labor Statistics, has issued a preliminary estimate of the National Average Weekly Wage for the period commencing October 1, 2011.  The following estimates, which are subject to change, are for the period October 1, 2011 through September 30, 2012.

National Average Weekly Wage: $674.35

Maximum Compensation Rate: $1,294.69

Minimum Compensation Rate: $323.69

Percentage Increase: 3.01%