A “FAULT”-Y DECISION? The Twenty Per Cent Additional Compensation Denied

The Statute

Section 14(f) of the Longshore and Harbor Workers' Compensation Act provides that “If any compensation provided under the terms of an award is not paid within 10 days after it becomes due, there shall be added to such unpaid compensation an amount equal to 20 per cent thereof.” 

This provision dates back to the original statute of 1927.

The case

In Knox v ManTech International, USDC New Jersey, Civil No. 11-4974, a Petition For The Entry Of Judgment Pursuant To Section 18(A) Of The Longshore And Harbor Workers' Compensation Act was denied.  

The underlying Defense Base Act case was resolved through an 8(i) settlement filed with the Administrative Law Judge on Thursday January 20, and approved by him on Monday January 24, 2011 and the approval filed by the District Director on Wednesday, January 27, 2011.  Payment was required no later than Sunday, February 6, 2011.  The claims adjuster, who submitted an affidavit to the court, stated that the office was closed on February 1, due to snow.  The adjuster therefore first saw the approval to the settlement on Wednesday February 2, 2011.  The adjuster requested that the settlement check be ordered immediately, so that the check could be timely mailed via Federal Express to Mr. Knox on Friday, February 4.  “Unfortunately, on Friday, February 4^th, ice storms and serious weather conditions once again swept through Dallas. This storm prevented [the adjuster] from reaching [the] office.  In addition, on February 4, [the adjuster’s] office was closed.”  The next two days were the weekend.  On Monday, February 7, the insurer reopened for business, and the check was sent via Federal Express.  The check was delivered on February 8.  It was two days late.  The District Director, on April 11, 2011, issued the award required by §14(f).  The Director noted that neither the statute nor regulations make exceptions for the weather.  “Given the nature of the weather and the potential for more of the same in addition to the amount of possible additional compensation, your client should have been more diligent in its effort to process this payment.”  The amount went unpaid, (evidently not due to weather problems).  This enforcement action followed. 

The Decision

The judge noted that indeed there was no force majeure clause provision to lengthen the 10 days.  He cited Sea-land Service v James Barry, a 1994 decision of the Third Circuit, saying that employers are exposed “through absolutely no-fault of their own to additional liability”.  The Circuit “hoped that Congress would address the problems built into this statute”.  The judge remarked: “Unfortunately, nothing has happened.”  He went to say:

“Under the very limited circumstances presented herein, wherein an office is closed and traffic accidents are numerous due to ongoing snow conditions, the rigid statutory language must give some leeway.  Congress could not have intended that under such limited circumstances, a surcharge such as the $60,000 would be imposed upon the employer.  See, Connecticut National Bank v. Germain, 503 U.S. 249, 253 (1992). Moreover, as a judge, it is imprudent to establish a precedent where employers would require employees imperil themselves by requiring them to travel to work on a snowy day to issue a check when the length of delay (two days) and monetary loss is minimal. As noted, courts have found that time frames cannot be extended; but this provision has not been analyzed through the due process clause. That is whether the imposition of a $60,000 surcharge "is arbitrary and unreasonable and not proportionate to the actual damages sustained." St. Louis Ry Co. versus Williams, 251 U.S. 63, 64 (1919). See, Exxon Shipping Co. versus Baker, 554 U.S. 471, 501 (2008); Browning-Ferris Industries versus Kelco Disposal, 492 U.S. 257 (1989). In my view it is an unreasonable levy. Therefore, the motion to dismiss the petition for collection of the supplemental award is granted.”

Procedural Error

I am told that A Rule 59 Motion has been filed.  A judgment based on the unconstitutionality of §14(f) issued without notification to the Attorney General is reversible for that procedural error alone.  The judgment should be vacated, the Attorney General notified and given opportunity to defend the constitutionality of the statute.

Statutory Interpretation

Carriers normally favor strict interpretation of the statue.  “Thus the whirly-gig of time brings in his revenges”, and as with the recently argued Roberts case, (also about an “award”), this time they want some “leeway”.  That is flat out wrong.  The statute means what it says.  Further, “No fault” is not a defense and §4(b) specifically provides “Compensation is payable irrespective of fault as a cause for the injury”.  Of course, §4(b) is addressing the underlying injury; however,  §14(f) deals with the “injury” of non-payment of an award. 

The Connecticut National Bank case states:

“In any event, canons of construction are no more than rules of thumb that help courts determine the meaning of legislation, and in interpreting a statute, a court should always turn first to one cardinal canon before all others. We have stated time and again that courts must presume that a legislature says in a statute what it means and means in a statute what it says there. When the words of a statute are unambiguous, then this first canon is also the last: "judicial inquiry is complete." This does not support the judge’s desire for “leeway”.

The St. Louis Ry Co. case dealt with a penalty clause in a railroad case.  A 66-cent overcharge was subject to a penalty of $75 plus costs and attorney fee of $25.   The court stated:

“The ultimate question is whether a penalty of not less than fifty dollars and not more than three hundred dollars for the offense in question can be said to bring the provision prescribing it into conflict with the due process of law clause of the Fourteenth Amendment…Of this penalty and the need for it the Supreme Court of the State says: 'It is commonly known that carriers are not prone to adhere uniformly to rates lawfully prescribed and it is necessary that deviation from such rates be discouraged and prohibited by adequate liabilities and penalties, and we regard the penalties prescribed as no more than reasonable and adequate to accomplish the purpose of the law and remedy the evil intended to be reached.' When the penalty is contrasted with the overcharge possible in any instance it of course seems large, but, as we have said, its validity is not to be tested in that way. When it is considered with due regard for the interests of the public, the numberless opportunities for committing the offense, and the need for securing uniform adherence to established passenger rates, we think it properly cannot be said to be so severe and oppressive as to be wholly disproportioned to the offense or obviously unreasonable. Judgment affirmed.”

So the penalty was upheld as to the amount.

The Exxon and the Browning-Ferris cases each deal with jury awards of punitive damages.  Since restrictions on punitive damages are generally reckoned in multiples rather than factors of the original award.  They hardly support the view that a 20% addition to an award is “unreasonable”.

The Judge does no more than announce that a provision that has stood for over 70 years is “an unreasonable levy”, with no reasoning.   As we shall see, his assumption that the failure was due to force majeure was mistaken also.  

An Ithacan lawyer tells me that the provision in the Act is “Draconian”.  This man of many devices knows, of course, that Draco was an Athenian, who prescribed death for even minor offenses.  (The Athenians soon adopted the less rigorous laws of Solon.) Carriers need not fear; they have not been condemned to death, nor even to punitive damages, merely to a modest percentage, for failure to do the right thing.

The “Oh Dear, Its snowing in Dallas” Defense

The judge remarked:  “Moreover, as a judge, it is imprudent to establish a precedent where employers would require employees imperil themselves by requiring them to travel to work on a snowy day to issue a check when the length of delay (two days) and monetary loss is minimal.” This is, of course, quite correct.  But, the judge would be setting no such precedent.  The cause of the failure to deliver the check was not the bad weather, but the failure of the employer to set up a system for the delivery of payments on time without imperiling their employees, given the possibility even in Dallas, of bad weather.   The District Director pointed out in his award that the employer “should have been more diligent” in its efforts to process this payment.  His mastery of understatement is to be admired; but he correctly identified the problem.  The Judge did not address it.

The Insurance Company of the State of Pennsylvania was founded in 1794.  It is no novice in the handling of claims.  It was authorized to write business under the Longshore and Harbor Workers' Compensation Act and its extensions on May 16, 1957.  Chartis handled the claim on behalf of its subsidiary or affiliate.  Chartis, if not the largest insurer in the world, is certainly up there.  They have a worldwide presence.  They created a “center of excellence” in Dallas to handle their claims.   Under the Defense Base Act, Chartis covers workers from all over the globe, from the foothills of Everest in Nepal, the war torn deserts of Iraq, to the remote snowy hills of Afghanistan.  The problems of delivery in those countries are of a different order of magnitude from getting a payment sent out from a multi-office corporation in the continental United States.   That they cannot get a payment from their own chosen center because bad weather shut down the office on two separate days would seem to be something they would wish to hush up as fast as possible.  “Tell it not in Chicago, publish it not in the streets of Philadelphia” lest competitors rejoice.   

It is known to every competent carrier that there is a deadline of ten calendar days for payment of settlements.  It is known that once the settlement application is delivered, the Administrative Law Judge or District Director has thirty days to approve or deny the claim.  In this case, the settlement application includes an agreement as to the address to which payment must be sent, obviously to avoid any mistake in delivery.  The carrier had clearly covered that possibility.  It might have also tried for an electronic transfer or direct debit, which is quick and avoids the risks of traffic accidents, destruction of checks in transit and so forth.  Assuming the claimant would not agree to that procedure, the obvious course of action is to requisition the check when the settlement agreement is sent to the judge.  It is highly unlikely that the judge will reject a settlement supported by counsel.  If he does, void the check.  If not, mail it at once.  In this case, the check should have been sent via Federal Express on Wednesday evening, February 2.  It could then have been delivered on February 3, well in time to beat the deadline.

It is therefore clear that this is not a case of a misfortune for a single adjuster, whose workplace was rendered suddenly inaccessible.  It is a case of the failure of an authorized insurance company,  over two hundred years old, with over forty years experience of the statute, whose obligation is to pay claims within the dates prescribed by statute, failing to implement a system to ensure that this happens; and failing to provide for an emergency plan if it doesn’t. 

Had they spent half the additional compensation implement a system that worked, it would have been well spent.   The administration of claims under the Defense Base Act by AIG, as it then was, was subject to severe criticism at a congressional hearing, not least because of the high premiums charged.  And the accounts of lavish spending on entertainment were widely circulated at the time that the financial crisis broke.  The problem is not lack of money.  In this case, elementary precautions were simply not in place.  No force majeure, no isolated event caused this failure to pay on time, and to put a front line adjuster up to present a sob story irrelevant to the matter in hand, simply adds to the managerial failure to take responsibility for its procedures or lack of them. 

As you will recognize, the above is not a legal opinion, but my own take on a situation.  If you want legal advice you should hire an attorney licensed to practice law. 

MEDIATION

John Chamberlain Consulting LLC

MEDIATION

UNDER THE LONGSHORE ACT AND ITS EXTENSIONS

I will mediate any cases under the Longshore and Harbor Workers' Compensation Act and its extensions anywhere in the United States and the territories.  I will also mediate, if required, under the Defense Base Act overseas.

My experience with the LHWCA dates back to 1969, under the old Sieracki/Ryan regime before the 1972 amendments.  From 1986 until December 2005 I worked for the Signal Mutual Indemnity Association, Ltd., a group self-insurer.  From December 2005 to December 2010 I worked for the U. S. Department of Labor as Branch Chief of Financial Management, Insurance and Assessments, in the Division of Longshore and Harbor Workers’ Compensation.

My experience with Signal gave me an insight into the difficulties of employers, (as opposed to carriers), both large and small.  The problems of a small business are very different from those of large companies.  It also gave me considerable insight into the difficulties of employees, both in relation to their former employer and with their medical care.  My experience with the Department of Labor also gave me direct experience with the Defense Base Act, and, particularly for overseas workers, with waivers.  I also learned the problems confronting carriers, not merely the claims department, but the compliance departments also.

I am therefore happy to mediate (or, should you so choose, arbitrate) not merely disputes between employees and employers, but also disputes relating to cover and to recovery under excess or reinsurance policies.

I believe that workers’ compensation should be “trouble free” for both employees and employer; and mediation provides a method to resolve disputes without resort to the panoply of formal hearings.  The best outcome of a mediation is a settlement under § 8(i) of the statute, which is adequate and resolves all current issues.

I believe in the “classical approach” to mediation.  Each party sends me separately a confidential outline of their position so that I am aware of what the issues are.  At the mediation each side explains their position.  After that, I caucus with each side separately and move between the two until agreement, (or agreement not to agree), is reached.  I will then produce a memorandum of the agreement. 

Defense Base Act v. War Hazards Decision

Cathey v. Service Employers International, Inc. / Insurance Company of the State of Pennsylvania and Director, Office Of Workers’ Compensation Programs.

2012 LDA 00064. The decision may be found here: ALJ Decisions.

On January 18, 2012, Judge Levin, the Administrative Law Judge, (ALJ), issued a Summary Decision Dismissing a Challenge to the Application of the War Hazards Act.

The Judge appeared to be persuaded that:

1.              The case was about the War Hazards Compensation Act, (WHCA), not the Defense Base Act, (DBA).

2.              The case dealt only the payment for medical services under the WHCA.

3.              Section 104(a)(3) of the WHCA controls.

4.              The regulation 20 CFR 61.104(a) implements that section.

5.              The regulation 20 CFR 61.105 applies to this case.

6.              The case arose because the claimant would not do what the government told him to.

7.              The carrier did nothing wrong.

8.              The case was similar to an 8(f) case.

The Parties and the Proceeding

The claimant and the employer/carrier appeared.  The Director, Office of Workers’ Compensation Programs, was listed as a Party in Interest.  Footnote 1 reads:  “Director, OWCP, did not participate in this proceeding”.   This is not unusual, since the Director rarely appears in ALJ proceedings, although he sometimes files a brief or letter in second injury relief cases.  The OALJ has several times noted the absence of the Director causing problems. 

It will be interesting to see what position he adopts on appeal.  In this case, the Director was involved both as administrator of the LHWCA and of the WHCA.  It is not clear that the interests of both positions are exactly aligned.  Different solicitors represent the two Divisions.

The Judge was thus deprived of input from the source most likely to be able to assist him, leaving him only with the employee and the carrier.  Employees are not likely to have much experience with the War Hazards Act.  The Judge was therefore faced with what in effect was an ex parte application, the real defendant being an “empty chair”.

The decision notes: -   

Briefly, Claimant, while working in Iraq, allegedly sustained shrapnel wounds and other injuries when the truck in which he was riding came under enemy fire. Claimant subsequently received indemnity benefits under the DBA which were, on December 10, 2009, the subject of an approved settlement. His medical benefits, however, were not affected by the settlement agreement.

Following the settlement of Claimant’s compensation benefits, Employer petitioned the Director, in accordance with the provisions of the WHCA, for relief from the obligation to cover the medical costs associated with Claimant’s injuries. The Director granted Employer the relief which it sought and notified Claimant that the Department had accepted the responsibility under the WHCA to pay his medical expenses. The Director then advised Claimant of the procedure he should follow to secure the medical benefits to which he is entitled.

The record shows that Claimant now needs medical treatment and submitted a request for surgery to his Employer. His Employer declined to authorize the treatment because the Department has accepted the responsibility for his medical expenses under the WHCA. The Department has, in turn, advised Claimant of steps he should take to obtain his medical benefits, but Claimant has declined to follow the procedures established by the Director to implement the WHCA. Claimant, instead, insisted that the Director refer the matter for a hearing so that he may adjudicate his right to continue to demand medical benefits from his Employer under the DBA. Believing that it has no further obligation to Claimant, Employer has moved for summary decision dismissing this matter. The Employer’s motion will be granted.

The interplay between the DBA and WHCA has not been much litigated.  The decision notes the BRB case of Smith v. Director, 17 BRBS 89. If there have been other cases, none were cited.[1]

Discussion

The decision is imprecise, probably because the underlying case is imprecise and the Director, who understands the minutiae, was not available to explain.  There are no regulations or procedure manual directives under the LHWCA or DBA to cover this situation.  The FECA regulations at 20 C.F.R. 61 cover it to some extent and a recent bulletin, OWCP No. 12-01 dated 10/6/11, gives some guidance in similar situations.  The decision does not mention this document, whether because it came out after the pleadings were closed or because it did not catch the attention of the parties or the judge we cannot tell.

The Settlement of the DBA case

The judge wrote in the passage quoted above:

“His medical benefits, however, were not affected by the settlement agreement.”

What does this mean?  Does it mean that the Order approving the settlement included an order that the employer should continue to provide and pay for medicals, (“furnish” in the language of § 7), or was the employer paying medicals voluntarily?  The distinction can be important, as the Roberts case recently argued before the Supreme Court illustrates.  The sentence is imprecise.

We may deduce that there was a settlement, approved by the Division of Longshore and Harbor Workers' Compensation, under §8(i) ending all liability for compensation.  As part of the order, the employer was obliged to continue furnishing medical benefits under §7 of the LHWCA.

The Employer claims WHCA relief

The decision continues, telling us that the Employer petitioned for “relief from the obligation to cover the medical costs”. Any settlement under §8(i) is final if not appealed within 30 days.  The settlement was not appealed.  The only ways to avoid the obligation to cover the medical costs are (i) to enter into a separate settlement under §8(i), or (ii) modify the award under §22.  Neither of these paths appears to have been taken.  The final order of settlement therefore continues until modified.

There is nothing in the DBA and nothing in the WHCA which relieves an employer, (or the carrier), from their obligation to cover medical costs.  The use of the word “cover” may be the problem, since §7 uses the word “furnish”, so the meaning of the term “cover” is not clear and therefore imprecise.

The employer is granted relief

The decision then advises us that the relief was granted and the claimant told that Director had accepted responsibility to pay his medical expenses.  We are not told how the relief was granted, nor how the clamant was “told” of this decision.  The wording of this “relief” is not quoted by the ALJ.  We are therefore not able to discern what the “grant” said, nor by what statutory authority it was granted.  We know that there is no such “relief” under either the LHWCA or under the WHCA.

We may assume that the employer in fact filed a request for reimbursement of the compensation and medical benefits already paid, under §104(a) of the WHCA.[2]  The Division of Federal Employees Compensation, DFEC, no doubt considered the request under 20 CFR 61. 102, “Disposition of reimbursement requests”.  Since this was a request for reimbursement after an 8(i) settlement, §61.102(c) would appear to apply.  In any event, DFEC appear to have agreed to reimbursement for amounts paid and, under §61.105(a), for direct payments of future benefits.[3]

Direct payment of future benefits

The regulation §61.105(d) says that: “In cases transferred to the Office for direct payment, medical care for the...injury may be furnished in a manner consistent with …5 U.S.C. 8101 et seq.” §61.105(e) then says “The transfer of a case to the Office for direct payment does not affect the hearing or adjudicatory rights” of the beneficiary under the DBA.

We should also note §61.102(e).  In determining whether a claim is reimbursable, the Office holds the carrier to the same degree of care and prudence as any individual or corporation …would be expected to exercise under similar circumstances.  A part or an item of a claim may be disapproved if the Office finds that the carrier, (§61.102(e)(4)), failed to avoid augmentation of liability by reason of delay in recognizing or discharging a compensation claimant’s right to benefits.

Thus, direct payment is conditional on the carrier acting in a prudent and careful manner, and not delaying in recognizing rights to benefits.  The direct payment adopted by the Department “may” adopt the FECA rules.  There is nothing to say that those rules supersede, preempt or overturn a claimant’s property rights in an award already issued under the Defense Base Act.

The Claimant was told

The ALJ tells us that the claimant was “informed” of the transfer and of the “procedure” to “secure” the medical benefits to which he is entitled.  Thus, despite an unmodified order under the DBA that the employer continue to furnish medical care, the claimant is told that as a result of an agreement between the carrier and the Division of Federal Compensation of the OWCP, the claimant’s property rights in the order have been altered without a hearing. 

Under the LHWCA it is not the claimant who has to secure the benefits, but the employer under § 32(a); there is no statutory requirement for the employee to secure, let alone re-secure benefits at any time. 

There is a difference between payment of benefits, and responsibility for furnishing the care.  A company may outsource the payment of salaries; they do not outsource the decisions as what the salary ought to be.

Once again we have to distinguish between the OWCP’s decision to pay the medical benefits, and a decision as to which benefits to pay.  The former right falls under WHCA, the latter falls under DBA.  

The claimant did not do what he was told

Without addressing the difference, the judge speaks of the Department “providing the medical benefits afforded by the DBA”, and later, “The Department merely asks [the claimant] to process his medical requests through the Department rather than the employer,” and “asked him to inform his medical providers” to send their bills to the Department.  

Once again, the Defense Base Act confers the employee’s rights.  That Act regulates certain matters between the employer and employee.  The government is not the employer.  The WHCA regulates certain matters between the carrier and the government as the insurer of the carrier.  The claimant is not a party. 

Medical benefits under the Defense Base Act arise under §7 of the Longshore and Harbor Workers' Compensation Act.  The employer has an obligation to furnish medical treatment, and although the employee has the right to choose his own physician, he does not “direct his providers to bill the employer”.  The employer authorizes treatment (see for example form LS-1 under LHWCA), and directs the providers to bill him or his carrier directly.  If that relationship has changed, because the government is now paying the bills, and the government want them submitted in a particular way, then the government should advise the providers, or require the carrier to do so, rather than dump on the claimant the burden of explaining a deal cut behind doors closed to both the claimant and his providers.

A wiser person than I might wonder whether this request is in fact “a collection” of information from the public, and whether a form should be required.  If so, the government would have to explain why the collection is necessary from the person required to submit it, and the burden on the claimant for doing so.  This would be subject to publication in the Federal Register, for public comment.

What the dispute is about

Following the settlement, the claimant’s medical condition required surgery.  Like any claimant with an order for medical treatment under the LHWC, who requires surgery, he sought the prior consent of his employer/carrier.  Of course, in the light of the Sir Gean Amos case there should be little problem.  However, the carrier refused either to authorize or not to authorize the surgery.  They gave no medical reason for this action.  They merely claimed that they were no longer liable for the medicals, and authorization should be requested from the DFEC.

Although §7 of the LHWCA requires the Secretary to “actively supervise” the medical care, there is no provision for the Secretary to order surgery.  The claimant therefore asked for an informal conference.  We do not know the result of the conference, but the case was referred for hearing on the issue of the claimant’s right to surgery.  The ALJ did not decide this issue.  He remanded the case to the Director for further appropriate action.

The point is that this dispute is over the employer’s refusal to authorize treatment under the Defense Base Act, not the Department’s methods of paying for it under the War Hazards Act.

Missing the issue

We should note at this point that the claimant has not complained about the payment of his benefits (although he does complain that he is landed with a whole lot of paper work, designed to avoid the carrier or the government doing their job).  He complained that the employer, whose obligation is to furnish the medical care, has failed to authorize surgery. 

The procedure for getting the surgeon paid is an entirely different issue.  The Judge remarks: “Claimant’s current need for the surgery recommended by his physician is not in dispute in this proceeding.” Why else was the case referred to him?  And if the employer does not dispute the need for surgery, why does he not authorize it?  Instead, the employer seeks to force the claimant to seek the prior consent of the Director to the surgery, or to go ahead and then if refused, (having spent the money), seek to reverse the Director’s decision. 

OWCP notice 12-01 tells us that if the Director decides not to pay “DFEC will outline the rationale for its determination in a letter to the claimant, attach any applicable medical documentation, and advise the claimant to seek an adjudicatory decision from DLHWC.  DLHWC and the carrier will be notified of this determination as well.”

We find later in the same bulletin that DFEC believe that DLHWC should “initiate modification proceedings”.  The carrier as well as the claimant are parties, and the carrier’s failure to present any and all defenses may result in a subsequent denial of reimbursement.  A new claim, if accepted [through the DBA modification proceedings, presumably] will not be covered under the WHCA absent a subsequent request by the carrier and determination by DFEC.  The fact that this puts the carrier though annoying hoops is no reason to divert them to the claimant instead.

The judge, however, saw it as the claimant refusing to co-operate :

“As such, Claimant’s embrace of this provision [WHCA Section 104(a)(3), 20 C.F.R. Section 61.105(a)] as a justification for his refusal to cooperate with administrative procedures adopted by the Department for the purpose of

managing the payment of his benefits is entirely unwarranted.”

The carrier was wrong

The case is still a Defense Base Act case, with an order for the employer to furnish medicals.  The carrier has not produced any valid document modifying that settlement.  Although DFEC is paying the medicals, the carrier retains the obligation, and DFEC may decline direct payment at any time.

In fact, in failing to conduct itself as a prudent individual and having delayed the surgery, the correct course of conduct would be for the Director to send the case back to the carrier for payment and refuse reimbursement for the surgery, and for any claims for expense in the meantime, under 61.102(e)(4).

The 8(f) obfustication

The judge then goes on to decide that the claimant has no standing to challenge the Department’s regulations because the Department is merely a source of funds.  In doing so, the judge likens the procedure under the WHCA to that of the second injury relief provided by § 8(f) of the LHWCA.

“Although the Department has not denied Claimant any medical benefits, he objects next to the Director’s effort to manage his claim under the provisions of the WHCA. His challenge in this respect, however, is fundamentally flawed. As the Board observed in Smith, the WHCA “provides only a source of benefits.” Upon reflection, the relief from financial responsibility afforded to an employer under the WHCA for war risk hazards seems strikingly similar to the relief afforded to employers that hire workers with pre-existing disabilities under Section 8(f) of the Longshore Act. In both situations, employers and carriers are, in certain circumstances, permitted to shift all or part of their financial responsibility for work-related injuries to a fund administered by the Department.

This is significant here because the Board has articulated the principle that, under circumstances in which only the source of funds for the payment of benefits is in issue, a claimant has no standing to challenge the applicability of the statutory provision that determines the funding source.”

The Department has no right to deny the claimant benefits.  This is not an issue.  The issue is the refusal of the employer to authorize them. 

The use of the procedure under §8(f) is indeed instructive.  The claimant cannot, of course, challenge a petition made by the carrier under §8(f). But, first, what is to be paid is the subject of an order which binds the carrier to pay the first 104 weeks of permanent disability and an order for the DLHWC to pay from the Special Fund the remaining amounts due. This modifies any previous order.  Secondly, the Fund itself is not money or property of the United States.  The Secretary of Labor merely administers it.  Thirdly, the employer remains responsible for the claim and any modification is his responsibility.  He is financially involved through the assessment mechanism which in effect requires he pay the fund a percentage of the amounts paid on his behalf.

The procedure (or lack thereof) under WHCA is delightfully informal.  There is no order modifying the Defense Base Act case.  The Department imposes their own conditions on the employee, although he has no standing under the WHCA, to “secure” his benefits already awarded, and provide paper work which could as easily be dealt with by the employer and the Department.  They could perfectly well write to the providers or order the carrier to do so and explain the change in payment mechanisms which they have imposed, with considerably more credibility than the employee.  There is nothing ordering the Director to pay, and the funds that are used are government funds.  The carrier, although clearly responsible under the DBA for the management (but not the payment) of the claim has no fiscal responsibility to the government; and if he spent money to deny the surgery, he would be reimbursed for the expense with a 15% administrative fee on top.  The Department is responsible for paying the claim, not for managing it.

The situation is nothing like 8(f) relief, and from the carrier’s point of view, far closer to an excess or reinsurance without a “follow the fortunes” clause in their favor.  Sooner than accept their responsibility under the DBA and either authorize or deny the surgery, they evade the question by suggesting that it is the claimant who is causing the problem; and seek to remove themselves from the risk of taking a decision by insisting that the claimant must get authorization from the person responsible for paying, rather than the person responsible for authorizing or contesting the benefits.

It is to be hoped that the BRB will reverse the order of the OALJ and order the DHLWC to hold an informal conference to authorize surgery, if the employer does not do so in the interim. 

Some other problems with medicals under the direct pay provisions

In writing this blog, I have been told of other problems.  Two examples are attendant care and psychological care.  Under DBA there are payments to family members who quit their job to take care of severely injured relatives.  But the provisions of 20 CFR 10.314 appear to exclude payment to non-qualified personnel.  Similarly, reimbursement follows precise agreed diagnoses, so that a claimant who has PTSD and depression “must” have an ICD 9 code for both PTSD and depression even if depression is the consequence of the PTSD.  This means, presumably, that to “secure” his benefits has to write to his providers and explain why they have to fool around with coding, dictated by regulations that play no part in the treatment, cure or amelioration of his condition.

This is an area that calls for revision of the two statutes and regulations to provide ones that assist the claimant rather than merely the carrier and the government agency.

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[1] The ALJ in a footnote remarks that the claimant cited the case as “Gordon v. Director”.  The claimant’s name in the case was “Gordon V. Smith” so the decision is “Gordon V. Smith v. Director”.  No doubt it was this unusual combination that allowed the error to creep in.

[2] The ALJ refers to §104(a)(3) as a source of reimbursement.  It appears that this is the fault of the printing of the statutes in the booklet LS Publication 590 issued by the Government Printing Office.  The layout in Lexis Nexis “Defense Base Act and War Hazards Compensation Act Handbook”, edited by Roger Levy, appears correct.  §104(a)(3) ends with the words “arising from a war-risk hazard;” and the full section 104(a) continues with the words “such employer, carrier or fund” which apply not only to (3), but to (1) and (2) as well.

[3] The ALJ writes that §61.104(a) implements the direct payment provisions.  61.104(a) actually deals with reimbursement of “reasonable and necessary claims expense.” This must be a slip of the pen.