Running a shipyard means managing a workforce that faces real hazards every day. Welding sparks, heavy rigging, confined spaces, and overhead loads are part of the routine. Federal law requires you to carry longshore workers' compensation coverage for employees who meet certain criteria under the Longshore and Harbor Workers' Compensation Act (LHWCA). Getting the right coverage in place protects your workers, satisfies your legal obligations, and helps control long-term claim costs.
This guide walks you through everything you need to know about choosing and managing longshore coverage for your shipyard. From USL&H requirements and state act overlap to claims handling, loss control, and how to evaluate a carrier, each section is designed to stand on its own so you can find answers quickly.
The LHWCA is a federal statute that governs workers' compensation benefits for maritime employees injured on or near navigable waters. The U.S. Department of Labor's Office of Workers' Compensation Programs (OWCP) administers the program. It covers medical care, disability compensation, and survivor benefits for eligible workers.
Shipyards are among the primary workplaces the Act was designed to address. Employees engaged in ship construction, repair, and breaking fall squarely under its coverage provisions, along with longshoremen, stevedores, harbor construction crews, and marine terminal operators.
Compensation under the LHWCA is paid at 66 2/3 percent of the injured employee's average weekly wage, subject to maximum and minimum weekly rates established each year by the OWCP. Medical benefits cover all reasonable and necessary treatment related to the work injury.
USL&H insurance is the commercial product that satisfies an employer's obligation under the LHWCA. If your shipyard employs workers who meet both the situs and status tests, you are required to carry this coverage.
Status asks whether the worker's job duties are maritime in nature. Shipbuilding, ship repair, vessel maintenance, and shipbreaking are all recognized maritime occupations. If any part of an employee's overall duties involves maritime activity, that employee has status under the Act, even during moments when they are performing a non-maritime task.
Situs asks where the injury occurred. The location must be on, over, or adjacent to navigable waters. Enumerated sites include piers, wharves, dry docks, terminals, building ways, and marine railways. Shipyard facilities generally satisfy the situs requirement because the entire facility is typically considered a covered situs under longstanding LHWCA case law.
When both tests are met, the worker is covered under the Longshore Act. Failing to carry proper coverage for those employees exposes you to significant financial and criminal penalties, including fines up to $10,000 and imprisonment of up to one year per the LHWCA.
Federal USL&H coverage does not replace state workers' compensation. In many shipyard operations, you may need both. Certain categories of employees may be excluded from LHWCA coverage if they are already protected by a state workers' compensation law. These include workers employed exclusively in office clerical, secretarial, security, or data processing roles, as well as aquaculture workers and employees of marinas not engaged in construction or expansion.
For your shipyard workforce that meets situs and status, though, USL&H is the required coverage. The two systems run parallel, and benefits received under one may be offset against the other for the same injury, disability, or death.
This dual-coverage environment can create jurisdictional questions. Working with a carrier that specializes in longshore coverage helps you sort through those questions before they become problems. Longshore consulting services can help you map out which employees fall under which jurisdiction.
Though both systems address workplace injuries, several important differences affect how your shipyard manages claims and costs.
Under the LHWCA, compensation is calculated at 66 2/3 percent of the worker's average weekly wage, subject to national maximums set annually by the OWCP. State act benefit rates and caps vary by state, and some states use different wage calculation formulas.
The LHWCA entitles injured workers to all reasonable and necessary medical treatment. There is no fee schedule cap under the federal program, which means claims management and medical cost containment are especially important for shipyard employers.
State act claims are handled through state agencies. LHWCA claims are administered by the OWCP's Division of Longshore and Harbor Workers' Compensation (DLHWC) through a network of district offices. If a claim is disputed, it may proceed through an informal conference, then to a formal hearing before an Administrative Law Judge, and potentially to the Benefits Review Board and federal courts.
Operating without the required USL&H insurance puts your business at serious risk. Under the LHWCA, an uninsured employer faces criminal prosecution, with penalties including fines of up to $10,000 and up to one year of imprisonment. Beyond criminal exposure, you become personally liable for all compensation and medical benefits owed to the injured worker.
The OWCP may also assess penalties for late filing of injury reports. Failure to file the Employer's First Report of Injury (Form LS-202) can result in civil penalties of up to $11,000 per violation. In addition, the one-year statute of limitations for the employee to file a claim does not begin to run until the employer's report is filed.
Proper coverage from an authorized USL&H carrier is the only reliable path to protecting your business from these exposures.
Shipyard workers represent one of the more straightforward LHWCA coverage scenarios. The statute explicitly names shipbuilders, ship repairers, and shipbreakers as covered employees. However, not every person who works at a shipyard facility automatically qualifies.
Office staff, for example, who work exclusively in administrative roles may fall under a state act if your state covers them. The key question is whether the employee's duties have a maritime character. A welder fabricating hull plating clearly qualifies. An accountant who never enters the yard is less likely to meet the status test.
Because the entire shipyard facility is generally treated as a covered situs, the situs question is usually less complicated than it is for multi-use facilities like cargo terminals with distinct maritime and non-maritime zones.
Prompt reporting is one of the most important obligations under the LHWCA. Employers must file the Form LS-202 (Employer's First Report of Injury or Occupational Illness) with the OWCP district director for any injury that causes the loss of one or more work shifts, or results in death. The filing deadline is 10 days from the date of the injury or from the date the employer became aware of it.
Beyond the initial report, employers must also report first voluntary compensation payments, suspensions of payments, and final payments using designated OWCP forms. Failure to file a timely controversion when disputing a claim can lead to additional compensation liability.
Employers must maintain injury records for at least five years. Having a system in place for timely reporting, such as The American Equity Underwriters' online claims reporting tools, helps you meet these deadlines and avoid penalties.
Effective claims management is one of the biggest levers you have for controlling your longshore workers' compensation costs. Because the LHWCA does not impose a medical fee schedule, medical expenses on longshore claims can exceed what you would see under a state program. That makes proactive medical management and early intervention essential.
Key claims strategies for shipyard employers include:
A carrier with dedicated USL&H claims specialists understands the procedural requirements and case law that affect longshore claims. The American Equity Underwriters pairs each member with a dedicated claims team that focuses exclusively on longshore workers' compensation outcomes.
Shipyards present a distinct set of hazards: falls from height, struck-by injuries, burns, confined space incidents, and hearing loss from prolonged noise exposure. A loss control program built around your actual work environment can reduce both the frequency and severity of claims.
Effective loss control for shipyard operations typically includes:
The American Equity Underwriters' loss control team works directly with shipyard members to develop programs tailored to maritime conditions. ALMA members also have access to AEU Academy, which includes training videos, e-learning modules, toolbox talks, and other safety resources created for waterfront operations.
Not every workers' compensation carrier has experience with the Longshore Act. The federal program has its own procedural rules, benefit structures, and case law. Choosing a carrier with deep USL&H expertise is critical for shipyard employers.
When evaluating carriers, consider the following:
AEU has served waterfront employers for more than 25 years and works exclusively in longshore workers' compensation. With more than 2,340 policyholders and a 98% policyholder retention rate, AEU brings both the expertise and the stability that shipyard employers need.
The LHWCA’s definition of “injury” includes occupational diseases, hearing loss, and other illnesses arising out of employment. In shipyards, common claims involving long-term or repeated workplace exposure include:
Claims involving long-term exposure can be complex, especially when a condition is not identified until years later. You may face claims from former employees after they leave your employment. A carrier experienced in Longshore claims can help you navigate these scenarios.
Frontline supervisors set the tone for safety on the yard floor. They decide how tasks are planned, how hazards are communicated, and how crews respond when something goes wrong. Investing in supervisor development has a direct effect on your injury rates and, as a result, on your longshore workers' compensation costs.
Strong supervisor skills contribute to better hazard recognition, faster incident response, more accurate injury reporting, and a culture where employees feel comfortable raising safety concerns. AEU's LEAD program offers supervisor development training exclusively to ALMA members, covering topics like safety leadership, crew communication, and situational awareness.
Your longshore workers' compensation rate is influenced by your claims experience. The more claims your shipyard generates, and the more expensive those claims are, the higher your premiums will trend. That gives you a direct incentive to invest in safety, claims management, and return-to-work strategies.
Some carriers offer loss-sensitive rating programs that tie your premium contributions to your actual loss performance. This means that when your safety program reduces incidents and your claims team controls costs, you see the benefit reflected in your rate. AEU introduced its loss divisor program to give ALMA members this kind of control over their long-term costs.
Pair a loss-sensitive program with consistent safety training, prompt claims reporting, and ongoing injury data analysis, and you build a cycle of improvement that benefits both your workers and your bottom line.
The Longshore Act is a specialized area of law with decades of evolving case law, regulatory interpretation, and jurisdictional nuance. Longshore consulting helps shipyard employers and their insurance brokers understand the practical implications of this legal framework.
Consulting services can help you determine which employees require USL&H coverage, how to structure your insurance program to account for dual-jurisdiction exposures, and what to expect when claims are disputed. AEU Advisory Services is led by Jack Martone, former OWCP official with decades of experience administering the Longshore Act, giving members access to deep institutional knowledge.
Getting longshore coverage right starts with understanding your obligations under the LHWCA, knowing which employees qualify for federal versus state coverage, and choosing a carrier built for the maritime industry. From there, the work shifts to managing claims effectively, investing in safety programs that target your specific hazards, and building a leadership culture that puts worker protection first.
The American Equity Underwriters and ALMA exist to support shipyard employers through every part of this process. With USL&H coverage, claims handling, loss control, longshore consulting, and leadership training all focused exclusively on the waterfront, AEU gives you the specialized partnership your operation requires. Reach out to learn how AEU can help your shipyard.
USL&H insurance covers your workers' compensation obligations under the Longshore and Harbor Workers' Compensation Act. Shipyards need it because their employees perform maritime work on or near navigable waters, which triggers federal coverage requirements.
The American Equity Underwriters serves shipyard employers through ALMA, offering USL&H coverage, dedicated claims handling, loss control tailored to maritime conditions, longshore consulting, and leadership training. AEU focuses exclusively on longshore workers' compensation.
Yes, certain employees may have exposure under both systems. Benefits paid under one law for the same injury are typically offset against benefits owed under the other. Your carrier can help you determine which coverage applies to each employee.
An uninsured employer may face criminal fines of up to $10,000 and up to one year of imprisonment under the LHWCA. The employer also becomes personally liable for all compensation and medical costs owed to injured workers.
Loss control programs reduce claims by identifying and mitigating workplace hazards before they result in injuries. The American Equity Underwriters' loss control team works with shipyard members to develop targeted safety programs that address risks specific to maritime operations.
The Form LS-202 is the Employer's First Report of Injury or Occupational Illness required by the LHWCA. You must file it with the OWCP district director for any injury causing one or more lost work shifts, or a death, no later than 10 days after the event or after you become aware of it.