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Maritime Employees: More Exposure Than You Think
(Part 1 of 2)

There are a number of federal workers compensation and employers liability laws that apply to workplace injuries and illnesses. Those that apply to employees down on the docks or out at sea pose a serious exposure not covered by the standard Workers Compensation and Employers Liability Insurance Policy. The laws were written to protect certain groups of employees for whom the occupational hazards are exceptionally severe, for one reason or another. Unfortunately, these laws often include unintentionally gray areas, and clever attorneys have sometimes used those shady spots to secure additional benefits for their clients. This article looks at two such laws — the Jones Act and the U.S. Longshore and Harbor Workers’ Compensation Act.

Exclusions in the Basic Policy

The standard Workers Compensation and Employers Liability Insurance Policy provides coverage in accordance with state laws in the jurisdictions listed on its Information Page, but coverage is specifically excluded for federal workers compensation and employers liability laws. In the General Section, under paragraph C., Workers Compensation Law, the definition of “law” specifically “does not include any federal workers or workmen’s compensation law, any federal occupational disease law or the provisions of any law that provide nonoccupational disability benefits.” Under Part Two, Employers Liability, there are several exclusions listing by name a number of federal laws to which coverage does not apply, as well as stating that coverage is excluded for “any other federal workers or workmen’s compensation law” and “any other federal laws obligating an employer to pay damages to an employee due to bodily injury arising out of or in the course of employment ....”

Thus, if a claim is brought by an employee under any federal compensation law — and if the policy has not been endorsed to provide coverage for that specific law — the workers compensation insurer will not pay the claim.

Merchant Marine Act of 1920

One of the oldest occupations is that of sailor. Due to the inherently dangerous nature of this occupation, sailors have had certain rights for thousands of years. Among these ancient rights is the right to “wages, transportation, maintenance, and cure,” in the event of injury or illness during a voyage. The right to wages extends to the end of the voyage; transportation is provided back to the home port; maintenance refers to food and quarters to the end of the voyage; and cure is the medical attention and other services required to cure the injury or illness or bring it to maximum medical improvement.

General maritime law, often referred to as the common law of the sea, imposes additional rights and remedies on behalf of the sailor. Among these is one of the implied warranties inherent to every ocean voyage: the seaworthiness of the ship. Seaworthiness refers not only to the structural soundness of the vessel, but also to its being properly loaded, having the required equipment (such as ballast, cables, and anchors), and being properly provisioned with food, water, fuel, and so on.

Illness or injury to a sailor arising out of a lack of seaworthiness is actionable — not only for “wages, transportation, maintenance, and cure,” but also for damages. Suits were brought against the ship, not the shipowner, with the ill or injured employee claiming property interest in the ship itself.

These rights are not unreasonable, given the inherently dangerous nature of ocean voyages. Even now, in the final years of the 20th century, ships are lost at sea; sailors are lost and presumed dead. And when one is ill or injured — and isolated in the middle of the ocean — certain rights need to be in place.

Rights Under the Act

Congress codified these rights with the Merchant Marine Act of 1920, more commonly known as the Jones Act. (Other common references are Maritime Law or Admiralty Law, because the exposures are maritime and the suits by ill or injured sailors are brought in Admiralty Court.) The Jones Act made two significant changes to the common law of the sea:

• First, the Jones Act enabled sailors to sue the shipowner directly, rather than laying claim against the ship.
• Second, common maritime law only gave rights to the sailor, not to anyone else; thus, in the event of death, no suit was allowed by survivors. The Jones Act added wrongful death to the list of actionable causes, and allows the personal representatives of the sailor — e.g., the surviving spouse and children — to sue for wrongful death.

The Jones Act generally requires some degree of negligence on the part of the employer-shipowner for an employee’s suit to be successful. In practice, suits are generally settled, and payments are made for medical care and lost wages much like a workers compensation claim. Again, however, because tort liability is involved, the damages awarded can be substantial.

The Jones Act applies to seamen — masters and crew of vessels. But “seaman” is a term not specifically defined in the Act. The definition has been — and continues to be — established by the courts. Essentially, the claimant must have an employment-related connection to a vessel in navigable waters, or capable of operating in navigable waters, and must be doing ship’s work. Who does or does not have such a connection and what is or is not ship’s work are decided by the courts on a case-by-case basis.

For example, the Jones Act is probably not intended to cover an employee of a “land” company who takes a ferry across Chesapeake Bay or Puget Sound to visit a client. On the other hand, if a firm manufactures sonar equipment and technicians test it on board a ship, they may be construed to be subject to the Jones Act. If a firm is involved in any oceangoing enterprises — perhaps even hosting business clients and prospects on a pleasure vessel — it is worth asking the insurer to provide coverage at least on a contingent basis.

Workers Compensation Coverage

The are two levels of coverage available for the Jones Act under standard workers compensation policies: Program I and Program II.

Program I

Program I provides statutory liability under the workers compensation law of any state designated in Item 3.A. of the Information Page and employers liability coverage for Jones Act exposures with a standard limit of $25,000. This limit applies to bodily injury by accident for any one accident and as a separate aggregate limit for bodily injury by disease. Both accident and disease limits can be increased up to $500,000. Current National Council on Compensation Insurance (NCCI) minimum premiums range from $100 for $25,000 to $138 for $500,000.

Coverage is effected by adding the Maritime Coverage Endorsement (WC 00 02 01 A) to the standard workers compensation policy.

Program II

Program II provides the same coverages as Program I, but with the addition of voluntary compensation coverage. The insurer will offer settlement of claims strictly in accordance with the statutory benefits provided by the workers compensation law designated in the voluntary compensation endorsement attached to the policy, instead of subject to the laws of negligence. If the settlement offer is declined by the claimant, who then sues the employer, the employers liability limit applies to the claim or suit. The same range of limits is available for Program II as for Program I. Current NCCI minimum premiums range from $200 to $276, twice those applicable to Program I.

Coverage is effected by adding both the Maritime Coverage Endorsement (WC 00 02 01 A) and the Voluntary Compensation Maritime Coverage Endorsement (WC 00 02 03) to the standard workers compensation policy.

A Better Coverage Option

Under the Jones Act, there is also the option of providing coverage for employees and protecting the company against suit by purchasing a protection and indemnity (P&I) policy or an endorsement to a marine policy from one of the several marine insurers. Coverage, which protects against suits by members of the public for damage to other vessels and other third-party suits, can be amended to include coverage for suits by seamen — masters and crew of vessels.

If there is a significant Jones Act exposure, the second option is probably better for at least four reasons:

1. Most P&I policies are nonstandard contracts, so the terms and conditions, including the rates and premiums, are negotiable. If prior loss experience is good, better coverage should be available for less money.

2. Most P&I policies provide the option of buying considerably higher limits than are normally available under a workers compensation policy. P&I policies are routinely written with a limit of $500,000, $1 million, or more. The employers liability coverage grant under a workers compensation policy starts at a mere $25,000, and in fact may end there if coverage is in an assigned risk pool. Even if voluntary coverage is obtained, workers compensation underwriters are often leery of Jones Act exposures and may not offer more than $50,000.

3. The territory in which coverage applies on a workers compensation policy is limited to the United States, its territories or possessions, and Canada. A P&I policy can be written with a broader, perhaps even worldwide, territory.

4. Claims under a P&I policy will not affect the workers compensation experience modification.

Read Maritime Employees: More Exposure Than You Think (Part 2)

ABOUT THE AUTHOR

The Journal of Workers Compensation is a quarterly review of risk management and cost containment strategies published by Standard Publishing in Boston, Massachusetts. For more information, please visit standard-pub.com, or contact the editor at 800-682-5759, extension 222, or subscription services at extension 228.

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August 2000