When a civilian contractor or longshore worker dies as a result of their employment, their beneficiaries may be entitled to death benefits. In this post, I examine the methods used to calculate the value of Defense Base Act and Longshore death benefits. I address the importance of the average weekly wage; who may qualify as a beneficiary; compensation rates and cost of living adjustments; and I provide some example death benefits calculations based on hypothetical facts.
Keep reading…despite the math. You will see how a death benefits Defense Base Act or Longshore claim could be valued over $1,750,000. Make no mistake: death benefits claims are high dollar, high stakes claims.
What Was the Decedent’s Average Weekly Wage?
First, start with the decedent’s average weekly wage. Section 10 of the Longshore and Harbor Workers’ Compensation Act provides the statutory requirements for determining a contractor or longshore worker’s average weekly wage. Essentially, the AWW is calculated in one of three ways:
- Section 10(a) applies when an employee worked 5 days per week for substantially the whole of the year prior to the injury.
- Section 10(b) applies when an employee worked 6 days per week for substantially the whole of the year prior to the injury.
- Section 10(c) applies when neither Section 10(a) or Section 10(b) will work. Section 10(c) requires a fair and reasonable determination of the employee’s annual earnings. The average weekly wages for most Defense Base Act contractors fall within the Section 10(c) calculation because most work 7 days per week.
Make no mistake that the AWW calculation is one of the most important aspects of any Defense Base Act or Longshore case. This determination controls the overall value of the death benefits claim. In the event you believe the employer or insurance company has failed to calculate an appropriate average weekly wage, contact an experienced Defense Base Act or Longshore attorney. Really…AWW is that important.
Who Are Statutory Beneficiaries?
Before we can determine the amount of benefits owed as a result of a civilian contractor’s or longshore worker’s death, we must next determine the identity of the beneficiaries. Each type of beneficiary, which is usually determined by the familial relationship of the beneficiary to the contractor or longshore worker, is paid a specific percentage of the average weekly wage.
Section 9 of the Longshore and Harbor Workers’ Compensation Act defines the identity of beneficiaries as well as the percentage of the average weekly wage owed to each beneficiary. But, claimant’s must remember that there are classes of beneficiaries, some of which are preferred over others. If a preferred class of beneficiary exists, then a non-preferred class is typically excluded.
The following beneficiaries, listed in order of preferred class, may receive death benefits under the Defense Base Act and the Longshore Act:
- Surviving spouse (widow or widower) and child. The spouse is entitled to 50% of the decedent’s AWW. The surviving child is entitled to 16.6667% of the AWW. Together, the spouse and child are entitled to 66.6667% of the AWW, subject to the statutory maximum compensation rate established by the Division of Longshore and Harbor Workers’ Compensation.
- If there is a spouse but no child, or a child but no spouse, then that surviving family member is entitled to 50% of the decedent’s AWW.
- Dependent grandchildren and siblings may receive 20% (each) of the AWW. Any other “dependents,” as defined by Section152 of the Tax Code may receive (20%) each of the AWW. Dependent parents or grandparents may receive 25% (each) of the AWW.
Dependency is determined at the time of the injury.
Widows or widowers who receive Section 9 death benefits must be aware that remarriage will extinguish their right to continued benefits. In the event a widow or widower remarries, they will receive a one-time lump sum payment equal to two years of benefits. Any benefits paid to children will increase to either 50% (in the case of one child) or 66.6667% (in the case of two or more children).
What is the Maximum Compensation Rate?
If the decedent was a high wage earner, then the death benefits compensation rate will be high, too. Congress inserted a cap in the Longshore Act which limits the amount of benefits owed. Each year, the maximum weekly amount owed for benefits is increased:
- For disabilities beginning after October 1, 2014, the maximum weekly compensation rate is $1,377.02.
- For disabilities beginning after October 1, 2013, the maximum weekly compensation rate is $1,346.68.
- For disabilities beginning after October 1, 2012, the maximum weekly compensation rate is $1,325.18.
- For disabilities beginning after October 1, 2011, the maximum weekly compensation rate is $1,295.20.
- For disabilities beginning after October 1, 2010, the maximum weekly compensation rate is $1,256.84.
The National Average Weekly Wage percent increase list goes on and on, all the way back to 1972. This list must be consulted with a high wage earner to determine the amount of benefits owed. Why? Because, in the event of a high wage earner, benefits could be capped even though the typical compensation rate calculation would produce a higher rate.
What are Cost of Living Adjustments?
Each year, on October 1st, death benefits recipients are entitled to a weekly compensation rate increase. Section 10(f) of the Longshore Act provides that the increase is a percentage equal to the increase the national average weekly wage. Then, Section 10(g) states that the COLA increase “shall be fixed at the nearest dollar.”
All of this means that each year of death benefits will be increased by a set percentage and then rounded to the closest dollar amount. Over the past five years, the NAWW percent increases have been:
- The percent increase for October 1, 2014 was 2.25%.
- The percent increase for October 1, 2013 was 1.62%.
- The percent increase for October 1, 2012 was 2.31%.
- The percent increase for October 1, 2011 was 3.05%.
- The percent increase for October 1, 2010 was 2.63%.
Before moving on, compare these bullet points to the bullet points in the previous section. You will notice that the maximum compensation rate that went into effect on October 1, 2014 is 2.25% greater than the rate that went into effect on October 1, 2013. Also, the maximum compensation rate that went into effect on October 1, 2013 was 1.62% greater than the rate that went into effect on October 1, 2012. And so on…
What are Some Examples of Death Benefits Calculations?
Specific examples are the best way to demonstrate how death benefits are calculated. Please keep in mind that these are just examples based on hypothetical facts.
Example 1: Defense Base Act Contractor with a Wife and Child:
A Defense Base Act contractor employed at Kabul International Airport was killed in a green-on-blue attack on January 29, 2015. He worked for the employer for over one year. The decedent’s average weekly wage was $2,884.62 based on a $150,000 annual salary. He was survived by a 35-year-old wife and 5-year-old child.
With an average weekly wage of $2,884.62, the initial weekly compensation rate due to the widow and child totals $1,377.02 per week (because benefits are capped at the maximum compensation rate). On October 1st of each year, the compensation rate will increase by the cost of living adjustment, and the product of that increase will be rounded to the nearest dollar.
Assuming the widow never remarries, and that the widow has a 47 year life expectancy, the estimated present dollar value of the death benefits claim when discounted by 3% (which is generous in this market) is roughly $1,790,000.
But there is a catch. The decedent was killed by a green-on-blue attack. If terrorist activity is confirmed, then the employer and insurance carrier will likely use the War Hazards Compensation Act to shift the claim to the government. Doing so will prevent a lump sum settlement; but the widow and child will continue to receive weekly benefits, which will be paid by the government instead of the carrier.
Example 2: Longshoreman and a Remarried Widow:
A West Coast stevedore was killed on September 20, 2011 during the course and scope of his employment. He earned $105,000 per year, and he worked for the same employer for 15 years. The decedent’s average weekly wage was $2,019.23. He was survived by a 42-year-old widow who, after four years, remarries.
Here, we have to determine the initial compensation rate and then apply the annual cost of living adjustments. The widow’s the initial compensation rate is $1,256.84. Applying the percent increases established by the Department of Labor reveals that the widow’s death benefits increased as follows:
- From September 21, 2011 to September 30, 2011, the widow received $1,256.84 per week;
- From October 1, 2011 to September 30, 2012, the widow received $1,295 per week;
- From October 1, 2012 to September 30, 2013, the widow received $1,325 per week;
- From October 1, 2013 to September 30, 2014, the widow received $1,346 per week; and
- From October 1, 2014 to the date of remarriage, the widow received $1,376 per week.
If the widow remarried on March 1, 2015, then she would receive a two-year lump sum payment. The two-year payment should be calculated using the rate in effect on the date of remarriage. In this hypothetical, the widow was paid $1,376 per week when she remarried. Therefore, the employer and carrier would pay the widow $143,104 in a lump sum and then the death benefits claim would be over.
The total value of this claim from start to finish: roughly $380,000.
Example 3: Financially Dependent Parents:
A 45-year-old Defense Base Act contractor died following a heart attack in Afghanistan. He left behind a financially dependent mother (70 years old) and father (76 years old), both of whom relied on their son for support. The decedent earned $125,000 per year, and his average weekly wage was $2,402.85.
After proving financial dependency, it became obvious that the mother and father were entitled to benefits. Based on Section 9 of the Longshore and Harbor Workers’ Compensation Act, both the mother and the father are entitled to 25% of the decedent’s average weekly wage. To put it another way, the mother is entitled to 25% and, quite separately, the father is entitled to 25%.
Using the 25% rate established by the Longshore Act, we can calculate that the mother is entitled to $600.71 per week. Further, the father is entitled to $600.71 per week, too. The total weekly payment that will be made by the insurance company is $1,201.42.
We can also estimate the total value of each claim. It is important to separately calculate the value for the mother and the father because each claim is personal to the survivor. Assuming a 16 year life expectancy for the mother, and applying a 3% present value discount, the total estimated value of the mother’s claim is $392,000.
The estimated value of the father’s claim is $266,000. The reason why the value of the father’s claim is less than the value of the mother’s claim is because the father has a shorter life expectancy.
In this case, the decedent died because of a heart attack. Without more facts, it is impossible to determine whether the War Hazards Compensation Act applies to this claim. I have filed successful War Hazards Compensation Act claims when the underlying cardiac condition occurred soon after a rocket attack. In that scenario, the stress caused by the rocket attack led to the heart attack. Consequently, the WHCA applied. But, I have also litigated claims where the heart attack was caused by factors that had nothing to do with war-risk hazards despite the connection between the work injury and the cardiac problem.
Example 4: Longshoreman with Children But Without a Spouse:
A Port of New Orleans longshoreman was killed during the course and scope of his employment. He left behind two boys, aged 8 and 5. At the time of his death, the Longshoreman earned $75,000 per year. His average weekly wage was $1,442.31, with a corresponding compensation rate of $961.54.
Children may receive benefits until they reach the age of majority (18). But, if the children remain in school, then they can receive benefits until the age of 23, provided that they remain full time students. We will assume that the decedent’s sons remained full time students until 23.
Two children existed at the time of the decedent’s death. That means that they split 66.6667% of the decedent’s average weekly wage. The boys will equally share $961.54 per week.
Eventually, the 8 year old will “age out” of benefits but the 5 year old will still have three years of entitlement left. When that happens, the older child’s benefits stop and the younger child’s benefits are based on 50% of the average weekly wage. So, upon the older child’s 23rd birthday, the employer or carrier will start paying the younger child $721.16 per week.
Each child’s entitlement to benefits is a right personal to the child. As such, the value of this death benefits claim must be calculated on a per-child basis. Prior to the older child reaching 23, he would have received half of the $961.54 compensation rate. Accordingly, the estimated value of the older child’s claim, when discounted at 3%, is roughly $298,500. The younger child’s claim is worth more because of the additional three years of benefits that he is entitled to. After adding the additional three years and taking a 3% discount on the claim, the estimated value of the younger child’s claim is roughly $400,000.
What Do Carriers Do to Reduce the Value of a Claim?
Death benefits claims are expensive. In many cases, the primary breadwinner for a family died as a result of a work-related accident. The more the breadwinner earned, the more expensive the claim.
There are some ways that an insurance carrier may try to resolve a death benefits claim for a cheaper sum. For instance, they might:
- Apply a higher discount value. The higher the discount value, the cheaper the claim. Often, carriers want 6%. But because we are discussing death benefits and COLA increases apply, I prepared examples using a 3% discount value. Frankly, I think 3% is generous in this market, but these are just examples.
- Calculate a low average weekly wage. Really, the AWW controls the value of a claim. The lower the AWW, the lower the compensation rate.
- Insist upon remarriage. The younger the widow or widower, the more likely it is that the widow or widower will remarry. Or so insurance companies think. I would not concede remarriage as a basis for reducing the settlement; but I would realistically approach the likelihood of remarriage based on the facts and circumstances of each case.
- Apply the War Hazards Compensation Act. If the WHCA applies, then benefits can be shifted to the government. That means that the government will pay benefits. I have not seen the government negotiate a lump sum payment for a WHCA death claim. It just doesn’t happen. So, when the WHCA applies, it is harder to get a lump sum settlement from the carrier.
- Simply refuse to settle. No one can make anyone settle a Longshore or Defense Base Act claim. Without a settlement, there is no lump sum payment for future benefits. An insurance carrier could simply choose to pay benefits out on a weekly basis and revisit the prospects of settlement annually, to see if the claimants are interested in a reduced settlement offer.
This is just the tip of the iceberg for death benefits claims. There are a slew of other considerations to take into account—such as the nationality of the decedent and claimants, blended families, children with disabilities, etc. With such a broad spectrum of factual differences between claims, any recipient of death benefits should seek the advice of an experienced Defense Base Act or Longshore attorney before making any important decision about their claim. Death benefits claims can be complicated. There is a lot of room for error—and any error is likely to reduce the value of the claim substantially.
In the event you need someone to help with your Defense Base Act or Longshore death benefits claim, contact me (Jon Robinson) at Strongpoint Law Firm immediately. I can be reached at (985) 246-3194 or through the inquiry form in the right-hand margin. Provide me with your name, e-mail address, phone, and any message or comment you may have and I will touch base as soon as possible. The consultation is absolutely free.