A new Defense Base Act / Longshore decision from the U.S. Court of Appeals for the District of Columbia discusses penalties available to contractors injured overseas. Importantly, the decision also addresses the remedies that are not available to aggrieved contractors and longshore workers. The decision is Brink v. Continental Insurance Company.
To start with, I am going to quote from the court’s syllabus, but keep reading:
Appellant Daniel Brink, joined by thirty-one other individuals, brought a class action lawsuit stemming from the workers’ compensation benefits owed to class members under the Defense Base Act, 42 U.S.C. § 1651 et seq., for injuries suffered while working for United States government contractors in Iraq and Afghanistan. In connection with their Base Act claims, appellants alleged that several government contractors, insurance companies, and third parties (collectively “contractors”) committed torts and violated the Longshore and Harbor Workers’ Compensation Act, the Racketeer Influenced and Corrupt Organizations Act (“RICO”), and the Americans with Disabilities Act (“ADA”). The district court dismissed all of appellants’ claims. We affirm the dismissal of appellants’ class-wide tort claims as well as their RICO and Longshore Act claims. This dismissal, however, does not preclude any individual appellants from bringing independent claims outside of the Base Act’s statutory scheme. With respect to the ADA claims brought by three individual appellants, we remand to the district court to reconsider and explain its denial of leave to amend the complaint.
There’s a lot going on in the syllabus…which makes sense considering the depth of the original complaint. In a nutshell, the plaintiffs were injured civilian and military contractors who alleged that insurance companies and employers committed a number of reprehensible actions while administering their claims. Some of the actions included:
- Failing or refusing to provide medical benefits owed under the Defense Base Act;
- Cutting off or delaying medical benefits inappropriately;
- Making false statements and misrepresentations;
- Failing to comply with Defense Base Act orders;
- Threatening or otherwise discouraging workers from making claims; and
- Terminating employment after a contractor suffered a Defense Base Act injury.
The legal vehicles for these claims included tort law, RICO, and the ADA.
Defense Base Act Exclusivity Barred Certain Claims:
Workers compensation is a trade-off. Injured workers are supposed to be paid quickly and without all the rigamarole of litigation. In exchange, employers and insurance carriers are generally immune from civil lawsuits.
The Defense Base Act is a system of federal workers’ compensation. It has a specific exclusivity provision which states that an employer’s or insurance carrier’s DBA liability “shall be exclusive and in place of all other liability.” See 42 U.S.C. § 1651(c). In other words, if you are a civilian contractor working overseas who is hurt at work, and the DBA applies to your claim, then you are generally restricted to the recovery allowed by the DBA.
Because of this exclusivity provision, the D.C. Circuit Court of Appeals affirmed the dismissal of the plaintiffs’ class-wide tort claims. The RICO claims crumbled under the weight of the exclusivity provision, and for failing to state a cause of action. The ADA claim survived to the extent that the district court had to explain why it denied the plaintiffs an opportunity to amend their claims.
Even though the court affirmed the dismissal of the majority of the non-DBA claims, the court also noted that there may be situations when remedies falling outside of the DBA are available to individual plaintiffs. For instance, an individual plaintiff who is also a DBA contractor could pursue claims for common-law assault, sexual assault, or breach of contract.
Penalties and Remedies Available to Longshore and DBA Litigants:
So, why did the Brink court affirm the dismissal of the majority of the claims? It’s because of the availability of statutory penalties.
The penalties available to Longshore and Defense Base Act litigants can be found in the Longshore and Harbor Workers’ Compensation Act. So, for purposes of the following discussion, I am going to cite to the Longshore statutes to discuss some of the penalties available to litigants.
Prosecution for Felony Misrepresentation:
Probably the strongest–or at least most fear-inducing–penalty is the Section 31 misrepresentation penalty. See 33 U.S.C. 931. Under Section 31, a claim, claimant’s representative, employer, employer’s agent, or employee of an insurance company can be fined and imprisoned. To make a claim for misrepresentation, the aggrieved party contacts their District Director and alleges the violation. If the District Director believes there is merit to the claim, then they will forward the claim to the Regional Director, who will determine if the claim should be referred to the U.S. Attorneys office. And if the U.S. Attorneys get involved…well, that’s not good. For more information about Section 31, take a look at the following statutory quote. I’ve highlighted the conduct that could lead to penalties:
Sec. 31 (a)(1) Any claimant or representative of a claimant who knowingly and willfully makes a false statement or representation for the purpose of obtaining a benefit or payment under this Act shall be guilty of a felony, and on conviction thereof shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.
(c) A person including, but not limited to, an employer, his duly authorized agent, or an employee of an insurance carrier who knowingly and willfully makes a false statement or representation for the purpose of reducing, denying, or terminating benefits to an injured employee, or his dependents pursuant to section 9 if the injury results in death, shall be punished by a fine not to exceed $10,000, by imprisonment not to exceed five years, or by both.
Section 31 is invoked more often by employers and carriers when they believe that a claimant has lied in order to procure benefits. But Section 31 is not limited to claimants. Lying employers and insurance company employees also run the risk of felony conviction under the misrepresentation statute. So, be honest.
Interest on Past Due Amounts:
The Department of Labor and the Office of Administrative Law Judges will make an employer and insurance carrier pay interest when there are past due compensation payments. Even though there are no statutes authorizing the payment of interest, the Benefits Review Board and the courts have held that interest is appropriate.
The rub with the interest provision is that the interest rate is very low. To determine the amount of interest owed, one must look at 28 U.S.C. § 1961, which provides that “interest shall be calculated…at a rate equal to the weekly average 1-year constant maturity Treasury yield.” Frankly, the interest rate on a one year constant maturity is not very scary–at least not enough to cause an insurance company’s knees to quiver should interest be owed on a denied claim. For the week ending May 29, 2015, the one year constant maturity rate was only 0.26%.
Section 14 Penalties:
In addition to interest, an employer and carrier could owe Section 14 penalties. See 33 U.S.C. § 914. The idea behind Section 14 is that compensation “shall be paid periodically, promptly, and directly to the person entitled thereto….” If it is not, then penalties could be owed.
Section 14(e) penalties apply when there is not an award of benefits–meaning that there isn’t an order. Under Section 14(e), penalties equal to 10% of the unpaid amount are owed if the amount owed is not paid within 14 days after it becomes due.
Section 14(f) penalties apply when there is an award of benefits. In situations where there is an order from the District Director or Administrative Law Judge, the employer and carrier must pay the amount owed within 10 days after it becomes due. Most litigants see Section 14(f) penalties become a big issue with settlements. If the settlement is not paid directly to the claimant within 10 days of the order being served, then the employer and insurance carrier may owe the claimant additional money equal to 20% of the settlement.
Section 14(g) penalties is more for the Department of Labor than the injured worker. If an employer or carrier fails to file a Form LS-208 in a timely manner, then the DOL can assess a $110 fine against the employer or carrier.
Section 30 Penalties:
When an injury occurs at work, the employer has to file a Form LS-202, First Report of Injury. Failing to do so can result in two penalties. See 3o U.S.C. § 930. The first is a monetary penalty, but despite the “misrepresentation” language, there is no criminal sanction:
Any employer, insurance carrier, or self-insured employer who knowingly and willfully fails or refuses to send any report required by this section or knowingly or willfully makes a false statement or misrepresentation in any such report shall be subject to a civil penalty not to exceed $10,000 for each such failure, refusal, false statement, or misrepresentation.
The second penalty in Section 30 is, in my opinion, much more valuable. If the employer fails to file a First Report of Injury, then the statute of limitations does not start:
Where the employer or the carrier has been given notice, or the employer (or his agent in charge of the business in the place where the injury occurred) or the carrier has knowledge, of any injury or death of any employee and fails, neglects, or refuses to file report thereof as required by the provisions of subdivision (a) of the section, the limitations in subdivision (a) of section 13 of this Act shall not begin to run against the claim of the injured employee or his dependents entitled to compensation, or in favor of either the employer or the carrier, until such report shall have been furnished as required by the provisions of subdivision (a) of this section.
Notice how Section 30 references “subdivision (a) of section 13.” In the Longshore Act, Section 13 is the statute of limitations. There is a 1 year limitations period for traumatic injuries; and there is a 2 year limitations period for occupational diseases. “Subdivision (a)” only applies to traumatic injuries, and not occupational diseases.
Penalty for Failing to Secure Payment of Compensation:
Section 38 is rarely used. However, as far as penalties go, Section 38 is pretty severe–but still not as bad as Section 31 misrepresentation. Under the Longshore Act, employers are required to procure insurance or be deemed a self-insurer. See 33 U.S.C. § 932. If the employer fails to do so, then the employer is guilty of a misdemeanor and “shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year, or both such fine and imprisonment.” See 33 U.S.C. § 938.
Penalty for Discrimination:
The Longshore Act also punishes employers who discriminate against employees for filing a workers compensation claim. The Longshore Act’s discrimination provision applies if the employer discharges or discriminates against an employee “because such employee has claimed or attempted to claim compensation from such employer” or “because [the employee] has testified or is about to testify in a [Longshore] proceeding.” See 33 U.S.C. § 948a. The penalty for discrimination is a fine between $1,000 and $5,000, paid to the Department of Labor. Plus, the employee is reinstated to their job and paid lost wages arising out of the discrimination. It is important to remember that the discrimination penalty applies only to employers, and not to insurance carriers.
I understand where the plaintiffs in Brink are coming from. I look at the problem in a few ways. First, does the existence of a remedy necessarily mean that the remedy is readily available? I don’t think so. The Longshore Act definitely has penalties written into it, but some of those penalties–like misrepresentation–are hard to come by.
Even though Section 14 penalties and interest are ubiquitous, is the monetary amount of the penalty sufficient to deter future conduct? To be sure, the idea of interest has been recognized by the Supreme Court of the United States as the “more measured deterrent to employer tardiness” in their benefits payments. See Roberts v. Sea-Land Servs., Inc., 132 S. Ct. 1350, 1363 (2012). Frankly, however, I have to wonder if the Supreme Court’s “more measured deterrent” contemplated the small amount owed for interest. Pennies really.
And what about medical benefits denied to the injured worker? What is the best deterrent to prevent the untoward denial of reasonable and necessary treatment? How is interest applied to a medical procedure that never took place because the injured worker could not afford the care? Should Congress enact a specific statute penalizing unreasonable denials of medical care (including mental health care)? Should there be more Section 31 misrepresentation claims against employers and insurance carriers who deny reasonable and necessary medical treatment in an arbitrary and capricious manner?
If you are having conflicts with your Longshore or Defense Base Act employer and insurance company with respect to your benefits, then contact Jon Robinson at Strongpoint Law Firm for assistance. His telephone number is (985) 246-3194. Or, you can fill out the contact form on this website.