A Review of the Longshore and Harbor Workers Compensation Act
March 2000
This article discusses Federal longshore and
harbor workers compensation insurance.
by
Christine Fuge
IRMI
The failure of state workers compensation statutes to address longshore exposures
coupled with court rulings denying state workers compensation benefits to maritime
employees injured upon United States navigable waters (considered federal jurisdiction)
prompted the U.S. Congress in 1927 to pass the Longshore and Harbor Workers
Compensation Act (LHWCA). The 1927 LHWCA 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.
Three major problems arose in the years following the 1927 passage of the
LHWCA.
- The courts had great difficulty determining whether the LHWCA or the
state workers compensation law applied in a given situation because the
LHWCA failed to clearly delineate jurisdictional boundaries.
- Many maritime workers who were injured on board a ship not only filed
a LHWCA claim but also sued the shipowner under general maritime law, claiming
that the "unseaworthiness" of the vessel was the cause of the injury. This
eventually led to the practice of shipowners requiring an employer of maritime
workers to sign a contractual agreement holding the shipowner harmless in
the event a worker was injured on or about the vessel.
- A shipowner being sued by an injured maritime worker would often sue
the injured worker's employer on the grounds of contributory negligence.
This type of suit is commonly referred to as a third-party-over action.
1972 LHWCA Amendment
The problems with the 1927 LHWCA prompted Congress to amend the Act in 1972.
The 1972 amendment does the following.
- Prohibits injured maritime workers subject to the LHWCA 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-over suits.
- Increases LHWCA benefit levels to the point that they are generally
higher than those offered under state compensation laws.
- Establishes "status" and "situs" tests as prerequisites for coverage
under the LHWCA.
The "status" and "situs" tests have become the most controversial aspects
of the 1972 amendment. For an injured worker to collect under the LHWCA, he
or she must be an "employee" as defined in the Act (status), and the injury
must occur at a location under the jurisdiction of the Act (situs).
According to the 1972 amendment, an "employee" is "any person engaged (in
whole or in part) in maritime employment, including any longshoreman or other
person engaged in longshoring operations, and any harborworker including a ship
repairman, ship builder, and shipbreaker but such term does not include a master
or member of a crew of any vessel, or any person engaged by the master to load
or unload or repair any small vessel under 18 tons net or any officer or employee
of the United States or any agency thereof or any state or foreign government
or any political subdivision thereof." In recent years problems have arisen
from the fact that, while persons engaged in maritime employment are clearly
covered under the Act, the Act contains no precise definition of "maritime employment."
The courts have often interpreted this phrase broadly and have granted status
to clerical workers, airline pilots, and construction workers, to name a few.
Prior to the 1972 amendment, an injury had to take place "upon the navigable
waters of the United States (including dry dock)" to be compensable under the
LHWCA. This meant that a maritime worker traveled out of LHWCA jurisdiction
and into the less lucrative state workers compensation jurisdiction every time
he stepped onto land to perform his employment duties, despite the fact that
the risks inherent in the work were essentially unchanged. Congress attempted
to alleviate this problem by redesigning the "situs" test in the 1972 amendment.
According to the new situs test, compensation is payable under the LHWCA "only
if the disability or death results from an injury occurring 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)."
The courts have interpreted this provision very liberally. The term "adjacent"
has not been interpreted to mean "next to" as one might expect, but rather "close
to or in the vicinity of." In addition, the phrase "customarily used by an employer
in loading, unloading, repairing, or building a vessel" has been interpreted
to mean "customarily used by any employer." In other words, it does not mean
that the employer of the injured worker has to use the area for these operations.
These liberal court interpretations have resulted in the LHWCA being applied
to more workers and more work locations than Congress originally intended. In
1984 Congress once again amended the Act, in part to put a halt to this trend
of expanding coverage.
1984 LHWCA Amendment
The 1984 amendment to the LHWCA renames the Act the "Longshore and Harbor
Workers Compensation Act." In this amendment, Congress attempted to limit shoreside
coverage under the Act by excluding certain types of workers from the definition
of "employee." The law now expressly excludes the following individuals when
they are covered under a state workers compensation law.
- 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
Insuring LHWCA Exposures
According to the LHWCA, an employer is "required to secure coverage under
this Act either through an authorized insurance carrier or by becoming an authorized
self-insurer." If an employer fails to do so and an LHWCA claim arises, the
employer will be subject to a fine of up to $10,000, imprisonment of up to 1
year, or both. Furthermore, when the employer is a corporation, the president,
secretary, and treasurer of the corporation are each subject to this fine and/or
imprisonment in addition to any fine levied against the corporation itself.
These officers are also personally liable, jointly and severally, with the corporation
for any compensation or benefit that may accrue under the LHWCA to an employee
for a covered injury. The fact that no exposure under the Act was anticipated
is not an excuse for the failure to secure coverage under the Act or set up
a proper self-insurance program.
Employers with known LHWCA exposures, such as stevedoring contractors, have
had trouble securing insurance coverage from private insurers in recent years.
For the employer who cannot obtain insurance through private insurers but wishes
to purchase coverage, state funds, assigned risk plans, and assigned risk pools
offer an alternative source of coverage. For the employer who wishes to self-insure
the exposure, permission must first be obtained from the U.S. Department of
Labor.
As a precautionary measure, it is desirable for an employer with no known
LHWCA exposure to attach the Longshore and Harbor Workers Compensation Act Endorsement
to its workers compensation policy. If an injured worker is found to be afforded
coverage under the LHWCA, the employer will then have insurance coverage and
will avoid possible fines and/or jail terms. Many insurers are willing to attach
this endorsement on an "if any" basis for little or no extra premium. If an
exposure arises during the policy period, it will be discovered during the annual
premium audit, and a premium will be charged at the appropriate classification
and rate.
Extensions of the Longshore and Harbor Workers Compensation Act
The provisions of the Longshore and Harbor Workers Compensation Act have
been extended to three additional types of workers through the Outer Continental
Shelf Lands Act, the Defense Base Act, and the Nonappropriated Fund Instrumentalities
Act.
Outer Continental Shelf Lands Act
In 1953 the U.S. Congress passed the Outer Continental Shelf Lands Act (OCSLA)
(http://www4.law.cornell.edu/uscode/html/uscode43).
This Act extends the benefits of the LHWCA to workers injured or killed upon
fixed structures permanently attached to the outer continental shelf for the
purpose of natural resource exploration or development. The outer continental
shelf is generally defined as all submerged lands that lie beyond the coastal
states' territorial boundaries. These territorial boundaries normally extend
3 miles, except in Florida and Texas, where seaward boundaries extend 10 miles.
Employers can obtain coverage for this exposure by adding the Outer Continental
Shelf Lands Act Coverage Endorsement to the workers compensation policy.
Defense Base Act
The Defense Base Act (http://www4.law.cornell.edu/uscode/html/uscode42)
extends LHWCA benefits to civilian employees doing work at any military, air,
or naval base that was acquired after January 1, 1940, from any foreign government.
Also covered by the Act are those employees engaged in public work projects
outside the continental United States. The insurance or authorized self-insurance
requirements of the LHWCA apply. Coverage can be obtained for this exposure
by attaching the Defense Base Act Coverage Endorsement to the workers compensation
policy.
Nonappropriated Fund Instrumentalities Act
The Nonappropriated Fund Instrumentalities Act (http://www4.law.cornell.edu/uscode/html/uscode05)
applies the LHWCA to civilian employees of certain instrumentalities of the
United States under the jurisdiction of the armed forces conducted for the pleasure
and improvement of armed forces personnel. Those covered under this Act would
include civilian employees of the Army and Air Force Exchange Service; Army
and Air Force Motion Picture Service; Navy, Marine, and Coast Guard Exchanges;
and Navy Ship Stores. Those with an exposure under this Act can obtain insurance
coverage by adding the Nonappropriated Fund Instrumentalities Act Coverage Endorsement
to their workers compensation policy.
Opinions expressed in Expert Commentary articles are those of the author and are
not necessarily held by the author’s employer or IRMI. This article does not purport
to provide legal, accounting, or other professional advice or opinion. If such advice
is needed, consult with your attorney, accountant, or other qualified adviser.