Sunday, July 29, 2012



Pacific Ship Repair and Fabrication Inc. v. Director, Office of Workers’ Compensation Programs; Deborah Benge.  Ninth Circuit July 24, 2012.

The Ninth Circuit, in what can only be described in acceptable words as an “unfortunate” decision, determined that surgery many years after maximum medical improvement changes a “permanent disability” to a “temporary disability” under the Longshore and Harbor Workers' Compensation Act.

Since the employer had been granted second injury fund relief, the change to temporary disability required the employer to pay compensation until the claimant was fully recovered from the surgery.  Thereafter, permanent disability payments were resumed by the fund.

The court noted that its review dealt only with the nature of the disability, temporary or permanent.  It affirmed the Benefits Review Board’s affirmance of the Administrative Law Judge’s decision to this effect, and endorsed as “reasonable” the Director’s longstanding decision supporting the result.

What the court, and evidently the Director, (smarting no doubt from the whipping he received from the Supreme Court in the Harcum case, and so confining himself to “protecting the Special Fund), failed to consider was the effect this case had on the claimant.

The claimant was injured on June 15, 1999.  Her average weekly wage was determined (on remand from the BRB) to be $681.85.  From October 20, 1999, she had a residual wage earning capacity of $539.00.  She reached maximum medical improvement on January 6, 2000.  The employer was ordered to pay 104 weeks of compensation with the Special Fund paying thereafter.

Thus the claimant was awarded:

Temporary Total Disability       06/16/1999 – 10/19/1999          @          $454.57
Temporary Partial Disability     10/20/1999 – 01/06/2000          @          $  95.23
Permanent Partial Disability     01/07/2000 and continuing       @          $  95.23

So far so good.

On October 7, 2007 the claimant had surgery, from which she recovered on June 30, 2008.  After that she had no wage earning capacity.  She petitioned for modification of the prior award.  The Judge awarded:
Temporary Total Disability       10/07/2007 – 06/30/2008          @          $454.57
Permanent Total Disability        07/01/2006 and continuing       @          $454.57

A claimant who is permanently totally disabled is entitled to an annual increase in compensation at the same rate as the increase in the National Average Weekly Wage.  A claimant with a permanent partial disability is not, because all jobs are assumed to increase at the same rate.  The difference between average weekly wage and the residual earning capacity from which the permanent partial rate is calculated would therefore remain constant.  In computing the residual earning capacity determined at the time of maximum medical improvement is discounted downward using the same method, to ensure that the difference is computed using numbers valid at the time of disability.

When the Administrative Law Judge interrupted the flow of permanent partial disability payments on October 7, 2007, reinterpreting “permanent” to mean “temporary” temporarily, he awarded benefits based on the compensation rate established in June 1999.  Once the case reverted to the Special Fund on July 1, 2007 permanent total disability payments continued at that rate.

If the claimant had been permanently totally disabled from January 2000, her rate at the time of surgery would have been $605, since she would have received the annual increases.  Clearly this is the rate she should have received when her earning capacity dropped to zero.  Neither the court nor the Director addresses this point.  The court states in its second paragraph: “The label we affix does not affect whether the disabled employee is entitled to disability benefits; instead it determines who pays the benefits – either the employer or the special workers’ compensation fund”.

This formulation allows the court to ignore the amount due to the claimant.  To the claimant’s detriment.   The claimant is now set to receive as total disability only 75% of her real disability.  Let us hope that someone with standing sets about remedying this anomaly.  Immediately.