Maritime Exposure. Jones Act USL&H OCSLA 10/28/2017 MARITIME EXPOSURES ADMIRALTY LAW POTENTIAL JOB ON OR NEAR THE WATER, NOW WHAT?

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1 MARITIME EXPOSURES ADMIRALTY LAW Presented by John Coffaro & Lisa Letson Amerisure Insurance I VE NEVER HEARD OF THAT; BUT I AM SURE WE DON T HAVE ANY!! Maritime Exposure USL&H Jones Act OCSLA POTENTIAL JOB ON OR NEAR THE WATER, NOW WHAT? 1

2 LONGSHORE AND HARBOR WORKERS COMPENSATION ACT Commonly referred to as: LHWCA USLH&W USL&H The United States Longshore and Harbor Workers Compensation Act. Originally passed in 1927 Provided both compensation and medical benefits to any employee engaged in maritime employment (except the master or members of the crew of a vessel) who suffered a work-related injury, disability, or death while upon the navigable waters of the United States. USL&H A HISTORY LESSON Amended in 1972 Prohibits injured maritime workers subject to the USL&H from filing suit against the vessel owner on the basis of the "unseaworthiness" of the vessel. However, suit can still be brought against a third party (including the vessel owner) on the basis of negligence. Makes hold harmless agreements between maritime employers and vessel owners unenforceable. Prohibits third-party suits. Increases USL&H benefit levels to the point that they are generally higher than those offered under state compensation laws. Establishes situs" and "status" tests as prerequisites for coverage under the USL&H act. USL&H A HISTORY LESSON 2

3 Amended in 1984 Renames the Act the "Longshore and Harbor Workers Compensation Act." Congress attempted to limit shore side coverage under the Act by excluding certain types of workers from the definition of "employee." USL&H A HISTORY LESSON The 1984 Amendment made the following group NOT subject to USL&H Coverage: Individuals employed exclusively to perform office clerical, secretarial, security, or data processing work Individuals employed by a club, camp, recreational operation, restaurant, museum, or retail outlet Individuals employed by a marina and who are not engaged in construction, replacement, or expansion of such marina (except for routine maintenance) Individuals who (a) are employed by suppliers, transporters, vendors; (b) are temporarily doing business on the premises of a covered employer; and (c) are not performing work normally performed by employees of that employer Aquaculture workers Individuals employed to build, repair, or dismantle any recreational vessel less than 65 feet in length USL&H A HISTORY LESSON The American Recovery and Reinvestment Act of 2009 Removed the clause about the length of the recreational vessel. This now applies to all recreational vessels regardless of size. Exception is if they are being worked on navigable water ways. USL&H A HISTORY LESSON 3

4 In 1953 Congress passed the Outer Continental Shelf Land Act (OCSLA). Why? Disputes over state or federal control of this area. The passage of this act defined state vs federal boundaries. Boundaries are generally 3 miles offshore, except Florida and Texas where it extends 10 miles offshore. Past these boundaries this act extends USL&H benefits to workers injured or killed working upon fixed structures permanently attached to outer continental shelf (Offshore oil and gas operations). Outer Continental Shelf Lands Act Coverage Endorsement Needs to be endorsed on policy to extend coverage. USL&H EXTENSION Not automatically provided by the standard Workers Comp Policy. Endorsed on by the Longshore and Harbor Workers Compensation Act Coverage Endorsement (WC A). Coverage may or may not be afforded by your carrier. To keep policyholders compliant on jobs with maritime exposure. Non Compliance can result in $10,000 fine and up to 1 year imprisonment for each corporate officer. Officers are also personally liable, jointly and severally, with the corporation for any compensation of benefits due to the injured worker. WHY IS THIS IMPORTANT TO AUDITORS? With the strong penalties, even the most remote possibility of exposure will create a request for coverage to be endorsed on If Any. When the policy is endorsed for USL&H coverage, the auditor is responsible for identifying possible exposure and charging for it at audit. To capture correct exposures / premium. With greater benefits comes higher rates. In most instances, you are going to be the expert on this topic. You can provide guidance back to the policyholder and / or underwriter. WHY IS THIS IMPORTANT TO AUDITORS? 4

5 Identifying exposure can be more murky than the navigable water they work on or near. What does maritime employment mean? What does adjacent, near, next to mean? The Situs and Status Test must be applied. POSSIBLE USL&H EXPOSURE? USL&H CRITERIA TEST Situs Status Potential USL&H Refers to the location of the work. Must be on or next to navigable waterways. Navigable The Supreme Court has held that a body of water is navigable for federal admiralty jurisdiction purposes if it forms a continuous highway capable of sustaining interstate or foreign commerce. PAAS suggest that this includes the entire coast, any river or lake with an outlet into the ocean or gulf. Any river or lake that links two or more states. WHAT IS SITUS? 5

6 A covered situs includes adjoining piers, wharves, docks, building ways, marine railways, and other areas where vessels are loaded, unloaded, built, or repaired. They are regarded as extensions of the terminal or yard and fall within the jurisdiction of the act. Can extend well inshore. WHAT IS SITUS? Intercostal waterways? Yes, can sustain interstate or foreign commerce. Lake Michigan? Yes, can sustain interstate commerce Gulf of Mexico? Yes, can sustain interstate or foreign commerce. Lake Okeechobee? No, cannot sustain interstate of foreign commerce. Mississippi River? Yes, can sustain interstate or foreign commerce. DOES THIS MEET THE SITUS CRITERIA? Maritime occupation test. All employment performed on navigable waters, whether it has an immediate relation to commercial shipping operations or not, should be considered as maritime employment, with one exception. Does not cover master & members of a crew. Section 902 list employment excluded from coverage under this act. WHAT IS STATUS? 6

7 Status has traditionally been an elusive term because Congress did not define what it meant by "maritime employment. Common feeling is, the nearer and more often an employee frequents a shore side situs, the more likely he/she is to be granted Longshore Act status. FINAL WORD ON STATUS Ship unloading? Yes, these by definition are stevedoring operations. Construction of seawalls for a condo complex on the intercostal of Florida? Yes, all employment on navigable waterways should be considered as meeting Status unless specifically listed as excluded employment. Delivery driver of concrete to jobsite on navigable waterways? No, recall under the excluded employment. Transporters are listed. DOES THIS MEET THE STATUS CRITERIA? Office / clerical employees are not covered under the act. Marina employees are not covered, unless involved in construction. Executive Officers can not opt out of coverage. Wage limits do not apply. An otherwise insured subcontractor that does not carry USL&H coverage should be considered uninsured on covered jobs. USL&H DID YOU KNOW? 7

8 Big problem with Situs Test. The term "adjacent" has not been interpreted to mean "next to" as one might expect, but rather "close to or in the vicinity of. Big problem with the Status Test. An employee must be engaged in Maritime Employment, however the act contains no definition of Maritime Employment. USL&H exposure can still exist onshore for a worker for whom the majority of his employment takes place on or next to navigable water. Example Ship dismantler gets injured working at a yard well inland from the water. Majority of the time he works on or next to navigable water. Hopefully the auditor captured 100% of his payroll under the F code. COMPLICATING FACTORS Segregate payroll. If coverage is endorsed already. Place under applicable F class code. Alert underwriter. If coverage has not been endorsed. Alert underwriter to see if carrier wants to extend coverage. If so, add after endorsement has been added. If not, place under state act and consult with underwriter. USL&H IS APPLICABLE, NOW WHAT? JONES ACT MASTERS & MEMBERS OF CREW 8

9 Do you remember under the USL&H slides, coverage applied to employees engaged in maritime employment with the exception of: Master or Members of the crew. These are often covered under the Jones Act. Not automatically provided by the standard Workers Comp Policy. Coverage is offered by a limited number of insurers. WHAT IS THE JONES ACT? Carriers and Employers prefer USL&H due to certainty of compensation: Immunity from tort liability Claimants / Plaintiffs prefer Jones Act as it affords benefits that USL&H does not: Eligible for maintenance and cure that is not fixed and can continue for life. Maintenance remedy to crew to receive food & lodging at least for the duration of the voyage. Cure remedy to crew to receive medical care, rehabilitation, etc. Affords a jury trial, which opens the door to potential large jury verdicts USL&H VS. JONES ACT BENEFITS JONES ACT CRITERIA TEST In Navigation Master or Crew Permanent Connection to Vessel Contribute to Mission of Vessel Potential Jones Act 9

10 Courts have ruled that claimants only need prove they met 3 of the 4 to qualify for Jones Act benefits. JONES ACT TEST EXCEPTION Simply means the vessel is capable of movement, even if that vessel is at anchor. If the structure is affixed to the bottom, such as an oil rig or barge, that is no longer in navigation. Vessels that would normally not qualify as in navigation can if they travel long distances. IN NAVIGATION Captain Mates Mechanics Deckhands Cooks Etc. MASTER OR CREW 10

11 Generally this follows the master and crew. Courts have argued that seaman only need to be employed and aboard vessel; others have disagreed. This appears to be at the judgment of the courts. IRMI recommends that if an employee spends less than 30% of his/her time in service of a vessel, they do not contribute to the mission. CONTRIBUTE TO MISSION An identifiable group. Does not have to be a live board. Simply means their job / employment is permanent to the vessel. Captain = yes. Worker being taken to jobsite = no. PERMANENT CONNECTION Vessel Courts have held several kinds of construction equipment as a vessel including barges and dredges Supreme Court Ruling Stewart v Dutra Construction Company. Determined a work platform is a vessel if it is capable of navigation. KEY RULINGS 11

12 Segregate payroll If insured has secured Jones Act coverage elsewhere: Exclude payroll. Alert underwriter. If insured does not have any Jones Act coverage in place: Consult with underwriter. Possibly pick up under state act. JONES ACT IS APPLICABLE, NOW WHAT? I provide coverage to a construction secretary in a jobsite trailer next to a navigable waterway. Not maritime, state act should apply. My coverage is not automatic on a standard work comp policy? USL&H, Jones Act, OCSLA. I am in place to cover workers on an oil platform 15 miles offshore in the Gulf of Mexico. OCSLA. My company operates a warehouse near the water to stock cruise ships with food and beverages between voyages. What applies? USL&H My carrier offers my coverage? Good Question!! WHAT APPLIES? The captain and crew of the tug boat positioning a barge into place for a construction job? Jones Act Construction employees being moved on the barge to perform dredging operations. USL&H Construction employees doing the dredging operations after the barge has been anchored. USL&H WHAT APPLIES? ASSUME THESE MEET THE CRITERIA OF USL&H AND / OR JONES ACT 12

13 How should you handle this at audit? They are deemed to be uninsured for the job subject to USL&H and should be picked up as an uninsured subcontractor. Why? The employees of the subcontractor are afforded coverage under the policy of the hiring contractor since the subcontractor hired did not have USL&H coverage secured for their employees. USL&H EXPOSURE IS PRESENT. YOUR POLICYHOLDER HIRES A SUBCONTRACTOR WHO HAS ADEQUATE INSURANCE BUT DOES NOT HAVE USL&H ENDORSED ON THEIR POLICY. 13