The Supreme Court, on Wednesday January 11, decided the case of Pacific Operators Offshore, LLP, et al. v. Valladolid et al.
It seems to me this case is like one of those fireworks that shoot into the air and explode; then explode again; then explode again. And it will be of interest not merely to the claims and legal community, but also to the broking, underwriting and rating communities. And we could not have guessed.
First, there is a small but interesting point for academic administrative law devotees. In general, in a matter of statutory interpretation, where a statute is not clear on its face, the opinion of the agency of the government that administers the statute will be entitled to some form of deference. In the current case, footnote 1 reads: “The Director, Office of Workers’ Compensation Programs, United States Department of Labor, is a respondent in this case because the Director administers the OCSLA workers’ compensation scheme established by §1333(b)”. The decision nowhere refers to the views of the Director, and, in the text to which the footnote is appended, reads: “The Solicitor General suggests a fourth interpretation”. No question of deference is raised, and the Director’s views are never mentioned. It seems incredible that all the paraphernalia of Chevron, Mead and Sizemore have been quietly overlooked.
The case itself wound up being decided in a way curiously at odds with the way it had been argued throughout. It was argued as a status or situs case, and decided as a causality case. And this is what will lead to trouble in the future.
The question, as it came to the court, was whether an injured worker could recover for injuries suffered other than on the Outer Continental Shelf. The statute reads:
“With respect to disability or death of an employee resulting from any injury occurring as the result of operations conducted on the Outer Continental Shelf…”
The cases below treated the question as one of coverage, through the usual arguments of status and situs. Going into the Ninth Circuit there were two basic views, that of the Fifth Circuit, that there is no cover except on the OCS, and that of the Third Circuit, that there is cover if but for the OCS employment the injury would not have occurred. For all cases outside the Third Circuit, the Benefits Review Board adopted the Fifth Circuit approach. It was therefore possible to predict with reasonable certainty which workers might suffer an OCSLA injury, and which would not.
The problem with the “OCS only” theory is, as the Court said, that: “The language of §1333(b) simply does not support a categorical exclusion of injuries that occur beyond the OCS.”
The problem with the Third Circuit’s “but for” test, the Court said, is that it could “reasonably be interpreted to cover land-based office employees whose jobs have virtually nothing to do with extractive operations conducted on the OCS.” The suggestion of the Solicitor General or the Government, (the wording varies, curiously confusing the advocate and the client), urging a “status based” inquiry, similar to the Chandris test for seamen, “might well have merit as legislation. But it has no basis in the text of the OCLSA a presently enacted”.
This left the Ninth Circuit as “the last person standing”. They concluded that an injured worker must “ establish a substantial nexus between the injury and extractive operations on the shelf” to recover under OCSLA. Six justices, in affirming the decision, remarked: “We understand the Ninth Circuit’s test to require the injured employee to establish a significant causal link between the injury he suffered and his employer’s on-OCS operations conducted for the purpose of extracting natural resources from the OCS.”
The only problem with this caveat is that the statute links the injury with “operations on the OCS”, and is not limited to “his employer’s on-OCS” injuries.
Justice Scalia, with whom Justice Alito, concurring in part and concurring in the judgment, and taking issue with the “substantial nexus” wording wrote: “But if we must adopt an indeterminate standard (and the statute’s “as the result of” language leaves us no choice) I prefer the devil we know to the devil of the Ninth Circuit’s imagining. I would hold that an employee may recover under §1331(b) if his injury was proximately caused by operations on the OCS.” He goes on to say: “To be sure, proximate cause is an imperfect legal doctrine; I have no illusions its tenets are easy to describe or straightforward to apply…. “Substantial nexus,” by contrast, is an indeterminate phrase that lacks all pedigree”. (In the footnote on page 3 of the concurrence, there appears to be typographical error, referring to “substantial nexoos”.) Thus, the “concurrers” appear to be urging application of a “known unknown” rather than an “unknown unknown”.
At the end of the short decision, we are left with no secure guidelines either as to the class of employees who are covered, or when they can recover.
1. Workers on the OCS itself. Since the test is now a causal test, accidents on the OCS might not all be covered. Instead of recovery conditioned on only “arising out of and in the course of employment”, each case must also be tested by the “substantial nexus” of the injury with operations on the OCS. However, since the workers on the OCS are clearly at risk of a covered accident, OCSLA cover is clearly needed.
2. Workers travelling to and from the OCS. The test is the same, and clearly workers might be covered, so once again, OCSLA cover is needed. Of course, where the shore side boundary might lie, is up for grabs. One method of analysis might be to inquire what the increased hazard from operations on the continental shelf might be. Thus, a worker tripping as he leaves the helicopter might well be covered; but not when walking to the car park.
3. Shoreside workers. A worker injured during the course of handling materials going to or from the shelf might well be covered; and it is not clear what the boundaries might be. A person hit by an OCS pipe clearly has a “substantial nexus” with the pipe, and his injury is proximately caused by the pipe. It does not seem to matter whether it was his employer’s pipe, nor whether the employer had extractive operations on the OCS, according to the text of the statute. If such a worker is indeed OCSLA compensable, there is clearly no geographic limit to recovery. A worker in Kansas might be covered in respect of a pipe being transported to the Gulf of Mexico. This is an area that is ripe for testing. OCS contractors should make sure that their OCSLA policy covers all workers, not merely those who work on the OCS. For non-OCS employers who handle supplies or material from OCS, even if only on land, should consult with their brokers and lawyers to determine whether they should add OCSLA cover to their policies, even on an “if-any” basis.
Now that recovery under OCSLA has broken free of the shackles of situs and status, we need to hit the books on causation. Professor Epstein’s blog:
http://www.scotusblog.com/2012/01/opinion-analysis-the-limited-virtues-of-judicial-modesty/
is an interesting starting point.
For brokers, insurers and employers there is further uncertainty. “Substantial nexus” does not necessarily include an employment nexus, so that workers not employed by extractive corporations might, pending future litigation to the contrary, be covered for some accidents. Most state compensation acts are clear as which workers are covered based on some form of geography, either where the employment contract is made or where the injury occurred. This case transforms OCSLA into “a brooding omnipresence in the sky” hurling its benefits like random thunderbolts, indiscriminately. It will take some years for the contours of the new landscape to become clear. In the meanwhile, employers should adopt a cautious attitude, and buy cover as best they may to protect themselves against these unknown unknowns.
Disclaimer. Please note that these opinions and statements are my own. They do not represent the position of my clients or any organization to which I belong. These opinions may not even represent my own opinion at a later time or place. Under no circumstances should these opinions and statements be considered legal advice. If you want legal advice, please consult an attorney.
No comments:
Post a Comment