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

When Congress decided to extend federal protection to the shore — to maritime workers who were not masters or crew of vessels and, therefore, not subject to the Jones Act — all but a few of the states had passed workers compensation laws. For that reason, the idea of a no-fault law — one where employers were “on the hook,” regardless of fault, in exchange for protection from negligence suits — had been accepted.

Originally enacted as the U.S. Longshoremen’s and Harbor Workers' Compensation Act (USLHWCA) in 1927, Congress passed the legislation to provide for payment of compensation and other benefits to employees such as longshoremen, harbor workers, ship repairmen, shipbuilders, and shipbreakers. The scope of coverage is defined as follows:

Compensation shall be payable under this Act in respect of disability or death of an employee, but only if the disability or death results from injury occurring upon the navigable waters of the United States (including any adjoining pier, wharf, drydock, terminal, building way, marine railway or other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling, or building a vessel).

USLHWCA was originally very comprehensive — too comprehensive, in fact. The wording opened the door for many individuals who were incidentally on or near wharves, or who were incidentally on board ships, to try to obtain USLHWCA benefits. For example, a delivery person who, while bringing a bouquet of flowers to a ship, tripped and broke a leg on a gangway would, technically, meet the requirements of the Act. The motive would be monetary — the benefits are generous and higher than many state-mandated payments. For example, the maximum rate of compensation is capped at 200 percent of the applicable national average wage, where many states cap benefits at 100 percent of state average wage.

Current Law

The law has been revised twice — once in 1972 and again in 1984. The current version attempts to curb the jurisdictional scope of the USLHWCA, restricting the law to only those employees who are regularly working in the areas covered by the law, not those who are incidentally on the docks. The term “employee” is now defined as follows: “Any person engaged in maritime employment, including any longshoreman or other person engaged in longshoring operations, any harbor-worker including a shop repairman, shipbuilder, and shipbreaker, but such term does not include

(A)  individuals employed exclusively to perform office clerical, secretarial, security, or data processing work;

(B)  individuals employed by a club, camp, recreational operation, restaurant, museum, or retail outlet;

(C)  individuals employed by a marina and who are not engaged in construction, replacement, or expansion of such marina (except for routine maintenance);

(D)  individuals who (i) are employed by suppliers, transporters, or vendors, (ii) are temporarily doing business on the premises of an employer described in paragraph (4) [to which coverage applies], and (iii) are not engaged in work normally performed by employees of that employer under this act;

(E)   aquacultural workers;

(F)  individuals employed to build repair, or dismantle any recreational vessel under sixty-five feet in length;

(G)  a master or member of a crew of any vessel; or

(H)  any person engaged by a master to load or unload or repair any small vessel under eighteen tons net….”

Employees whose job descriptions fall into (A) through (F) are precluded from collecting benefits under the USLHWCA provided they are covered by state workers compensation law. (Clauses (G) and (H) are covered under the Jones Act.) And while the vast majority of employees are covered under most state laws, there are some who may not be, notably:

• agricultural workers in some states; and
• employees of companies that are exempt from the workers compensation law of a particular jurisdiction, due to the small number of employees.

Coverage

In order to provide USLHWCA coverage, the Longshore and Harbor Workers’ Compensation Act Coverage Endorsement (WC 00 01 06 A) is added to the standard policy. The endorsement amends the policy to include the USLHWCA and deletes the employers liability exclusion for federal laws as regards USLHWCA. The endorsement specifically states that it does not apply to work subject to the Defense Base Act, Outer Continental Shelf Lands Act, or Nonappropriated Fund Instrumentalities Act.

Interestingly, the endorsement can also be used in the states that have monopolistic state funds. The reason is that, although the standard policy is designed to cover state workers compensation laws, this endorsement extends it to cover federal law. Thus, the restrictions in monopolistic fund states that prohibit commercial insurance do not apply to USLHWCA coverage.

The classifications applicable to USLHWCA exposures are easily identified by the “F” that follows the normal four-digit code for the class. For example, most of the stevedoring classifications are followed by an “F,” and the cost of benefits under the USLHWCA is built into the rates.

It is possible to have employees whose occupations qualify them for USLHWCA benefits, but who do not fit into the USLHWCA classifications. For example, drivers who are employed by stevedoring companies, but who do not conduct stevedoring operations, are classified as “Trucking NOC,” a “non-F” classification. If injured on the docks, a driver may be eligible for USLHWCA benefits. Coverage can be added by increasing the rate for “Trucking NOC” by the USLHWCA coverage percentage specified on individual state rate pages.

The fact that rates are increased to add USLHWCA coverage is indicative of the higher benefits generally available under the USLHWCA. And the percentage increases to compensate for the higher loss costs range from 2 percent to over 100 percent, with the largest increases found in the states with the lowest scheduled indemnity payments.

It should be noted that coverage is compulsory. It may be secured by adding the USLHWCA endorsement to the standard policy, or it may be self-insured.

Extensions of the USLHWCA

Provisions of the USLHWCA have been extended to other employments by Congress.

Defense Base Act

The Defense Base Act extends provisions of the USLHWCA to apply to certain civilian employees involved in defense work at U.S. military, air, and naval bases outside of the United States. It also applies to employees involved in public works contracts in territories or possessions outside the continental United States. These projects often involve U.S. contractors’ having military or public works contracts with the U.S. government. However, the employees of these contractors are not government employees. They are civilians, often U.S. citizens, who work overseas on such bases or other projects.

Coverage is not included for the Defense Base Act in the USLHWCA endorsement. It must be separately endorsed by using the Defense Base Act Coverage Endorsement (WC 00 01 01 A), or it may be self-insured. The endorsement adds both workers compensation and employers liability insurance. Some companies that write foreign voluntary workers compensation will add coverage for the Defense Base Act to the foreign coverage policy.

Outer Continental Shelf Lands Act

Congress has also extended USLHWCA benefits to employees on offshore drilling platforms, with the passage of the Outer Continental Shelf Lands Act (OCSLA). The law does not apply to those employees who are masters and crew members (to whom the Jones Act applies), but it does apply to the other employees on these large and inherently hazardous rigs.

OCSLA benefits are also not covered by the USLHWCA endorsement. There is yet another endorsement available, the Outer Continental Shelf Lands Act Coverage Endorsement (WC 00 01 09 A), which provides workers compensation and employers liability for these employees. Again, this obligation may be self-insured.

Civilian Employees of Nonappropriated Fund Instrumentalities Act

A nonappropriated fund instrumentality is an activity that is not funded by congressional appropriation. Military bases often house post exchanges and service clubs — two such activities. USLHWCA benefits for civilian employees of these nonappropriated fund instrumentalities have been provided by Congress with the Civilian Employees of Nonappropriated Fund Instrumentalities Act.

Coverage is excluded from the USLHWCA endorsement, but both workers compensation and employers liability coverage can be added with the Nonappropriated Fund Instrumentalities Act Coverage Endorsement (WC 00 01 08 A). Once more, self-insurance is permitted.

Jones Act and USLHWCA

The Jones Act covers, but does not define, “seamen.” So, it is possible to have a worker who is covered under the USLHWCA make a claim under the Jones Act, as settlements can be sizable. And an employee who is covered under the Jones Act might file a claim under the USLHWCA, as coverage is on a no-fault basis and is not affected by employee negligence.

For example, a mechanic, usually employed to maintain terminal facilities, might go aboard a ship to repair equipment while the ship is under way. If injured, that employee might consider the likelihood of a Jones Act claim settlement exceeding the benefits under the USLHWCA.

Where there’s a will, there’s a way. Enterprising lawyers and injured employees push the boundaries every day on what is and is not compensable — and under what law and in what jurisdiction. As long as the benefits for work-related injuries remain different in different jurisdictions and under different laws, there will always be an incentive to file a claim or suit in the most lucrative way possible.

Under the theory “better safe than sorry,” employers should ask their insurers to provide coverage both for the Jones Act and for USLHWCA (and its extensions) on an “if-any” basis.

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

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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September 2000