Generally speaking, when a defense contractor is injured by a “war-risk hazard,” the carrier that pays benefits is entitled to reimbursement under the War Hazards Compensation Act (“WHCA”). See 42 U.S.C. § 1704. When the injured worker resides in the United States or Canada, carriers often seek reimbursement and the direct payment of future benefits. See id.; see also 20 C.F.R. § 61.105. When the Division of Federal Employees’ Compensation (“DFEC”) agrees to directly pay future benefits, it will notify the carrier and the claimant that, on a particular date, DFEC will assume all future indemnity and medical payments.
Even after DFEC takes over the administration of a claim, the modification provision of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”) remains a viable option for reducing—or increasing—future benefits. See 33 U.S.C. § 922. Section 22 of the LHWCA allows modification of a compensation award on the ground of a change if conditions. Accordingly, if DFEC believes that a change of condition affects an injured worker’s right to future compensation (either in whole or in part), it can request modification.
OWCP Bulletin No. 12-01 explains the process by which DFEC may seek modification. DFEC will notify the Division of Longshore and Harbor Workers’ Compensation (“DLHWC”) that modification may be warranted. DFEC will notify the DLHWC in writing, with supporting documentation. If DLHWC agrees that modification is warranted, then DLHWC will initiate modification proceedings. If the modification proceeding is commenced, “DFEC may consider terminating direct payment and transfer the case back to the carrier for it to pay subject to reimbursement.” See OWCP Bulletin No. 12-01; see also 20 C.F.R. § 61.105.
Once the case is retransferred back to the carrier, what is next for the employer and carrier? OWCP Bulletin No. 12-01 is silent. More likely than not, DFEC’s desire to modify an award will prompt litigation. The injured worker may not agree that modification is warranted and decide that litigation is the only option for retaining the present benefits award. If litigation ensues, then problems—and questions—will erupt.
For instance, the employer and carrier may have to litigate DFEC’s position, even if they do not agree with DFEC’s modification assessment. Does DFEC control the litigation, or does it merely tell the employer and carrier the result it believes is most appropriate? What if the best way to resolve the claim is a Section 8(i) settlement agreement? Does DFEC have a say in the amount of the settlement, other than disapproving (after the fact) a settlement that it deems excessive?
Claimants will have problems, too. The immediate concern is that modification will reduce the amount of benefits to which an injured worker will be entitled. Another problem is that claimants may have a hard time securing experienced attorneys to represent their interests because employer-paid attorneys’ fees may not be available. Keep in mind that DLHWC decided to initiate modification proceedings because it believed that modification was appropriate. It is unlikely that Section 28(b) fees will be available to a claimants’ attorney (in every federal circuit but the Ninth Circuit) because the DLHWC’s initiation of modification proceedings signals that the claimant would get an unfavorable recommendation at an informal conference. See, e.g., Andrepont v. Murphy Exploration & Prod. Co., 566 F.3d 415, 418 (5th Cir. 2009).
There is little information about DFEC’s specific expectations once a case is retransferred to a carrier for additional adjudication. But there are “reminders” about overriding WHCA obligations. OWCP Bulletin No. 12-01 reminds carriers that “a failure to present any and all viable defenses to such claim[s] may result in a subsequent denial of its reimbursement claim under the WHCA.” Considering this reminder, a cautious employer and carrier will most likely litigate the modification claim as DFEC suggests, unless it wants to lose its right to reimbursement for the benefits and expenses paid.
(Note: I originally published this post on Navigable Waters: A Maritime, Longshore and Defense Base Act Blog.)