The intricacies and nuances of the Longshore Act can be complex and challenging to understand. From time to time, Longshore Insider pops the hood and takes a closer look at some of the most pertinent issues surrounding the Longshore Act. This blog focuses on three important things you should know about Longshore Act coverage.
Longshore Act (LHWCA or USL&H) insurance is required by law. If any of your employees meet situs and status for coverage under the Longshore Act then you are a maritime “employer.” If you do not have the required Longshore Act coverage, then the company and its corporate officers are in a very vulnerable situation. The injured worker has an election of remedies under section 905(a), and the corporate officers have personal liability, jointly and severally with the company under section 938(a). You can satisfy the insurance requirement only by 1) buying coverage from an insurance carrier authorized by the U.S. Department of Labor (D.O.L.) to write insurance under the LHWCA, or 2) by obtaining approval from the D.O.L. to self-insure.
NOTE: The “Secretary” is the Secretary of Labor. References to “Employer” as defined in the Act:
“The term employer means an employer any of whose employees are employed in maritime employment, in whole or in part, upon the navigable waters of the United States (including any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in loading, unloading, repairing, or building a vessel).”
33 U.S.C. Section 904(a) – “Every employer shall be liable for and shall secure payment to his employees of the compensation payable under sections 907, 908, and 909. In the case of an employer who is a subcontractor, only if such subcontractor fails to secure the payment of compensation shall the contractor be liable for and be required to secure the payment of compensation.”
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 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 … 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 ….”
33 U.S.C. Section 932 – “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 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.”
Bottom line: Don’t be uninsured.
Section 935 of the Longshore Act provides that payment of benefits by an insurance carrier on behalf of an insured employer discharges that employer’s obligation to pay those benefits. But if the insurance carrier fails to pay, then the employer must immediately assume its primary obligation to pay all benefits due and payable, subject to the statutory interest and penalty provisions.
State insurance laws creating and governing guarantee funds for various lines of business, including workers’ compensation, come with a wide variety of restrictions and conditions. Some state guarantee funds simply do not pay USL&H benefits in the event of carrier insolvency, and many other states restrict or condition the payment of USL&H benefits.
My unofficial list (as there is no official list) of states in which the state guarantee fund will not protect maritime employers by paying USL&H benefits in the event of insurance carrier default:
My unofficial list of state guarantee funds that restrict or condition the payment of USL&H benefits (examples of types of restrictions and conditions include time limits for filing, non-payment of deductible portions of an employer’s exposure, maximum limits on benefits, restrictions based on the financial size of the employer, restrictions based on the financial viability of the employer, residency requirements, benefit rates that are lower than the federal USL&H rate):
State guarantee funds that will pay or are likely to pay USL&H benefits in full in the event of carrier insolvency:
As I said, this is an unofficial list. The U.S. Department of Labor (DOL) has a list on its website, which is the list I put together many years ago when I worked there. State laws can change. If you are placing USL&H coverage for an employer with an insurance carrier, it would be a good idea to ascertain the current status of guarantee fund protection in each state where the employer operates. If the insurance carrier ever defaults on payment of benefits, there could be a very awkward conversation with the insured.
Workers’ compensation claims are covered simultaneously by the federal Longshore Act and by state act workers’ compensation law in many so-called “concurrent” states. This is based on the U.S. Supreme Court’s decision in Sun Ship v. Pennsylvania, 447 U.S. 715 (1980), in which the Court held that the Longshore Act did not supplant state act workers’ compensation laws but rather supplemented them. In so-called “exclusive” states, following the Sun Ship decision, state laws were amended so that coverage under the Longshore Act excludes a state act claim. These states have expressly provided in their insurance laws that if you are covered by a federal statute then you are not covered by the state act compensation law.
Typical language appears in the Florida law: “No compensation shall be payable with respect to disability or death of any employee covered by the Federal Employers Liability Act, the Longshore and Harbor Workers’ Compensation Act, or the Jones Act.”
Once again, an unofficial list is below.
Concurrent states:
Exclusive states:
This list can change. Within the past 10 years, Virginia and Pennsylvania have gone from concurrent to exclusive. And there is some ambiguity, in my opinion, in the language in some of the state laws. For example, some state laws provide that those workers covered “exclusively” by a federal liability statute are not covered by the state’s workers’ compensation law. The problem is that we know from Sun Ship that the Longshore Act is not “exclusive.” And it is not a liability statute. To my knowledge, litigation has not tested this language.
The problem for maritime employers in concurrent states is self-evident. They do everything twice in complying with two different laws, and the injured worker gets the benefit of the most favorable provisions in each law. For example, the employer will pay the higher weekly compensation rate provided in the Longshore Act, but it will pay higher medical costs if required under state law.
Jack Martone joined The American Equity Underwriters, Inc. in 2006, where he acts as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog. Prior to AEU, Jack served for 27 years in the U.S. Department of Labor, Office of Workers Compensation Programs, as Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers' Compensation for the U.S. Department of Labor. As Branch Chief, Jack directed the licensing and regulation of insurance carriers and self-insured employers under the Longshore and Harbor Workers’ Compensation Act. Jack received his bachelor’s degree from Fordham University and his Juris Doctorate from St. John’s University School of Law.