OWCP Proposes Changes to Longshore Act Civil Penalties Procedures

The U.S. Department of Labor has proposed changes to the regulatory framework governing penalties assessed against employers and insurance providers for non-compliance with reporting obligations under the Longshore & Harbor Workers’ Compensation Act.

Under the Longshore & Harbor Workers’ Compensation Act (LHWCA), compensation, medical care, and vocational rehabilitation services are provided to employees incapacitated by job-related injuries on U.S. navigable waters or adjacent areas typically used for ship-related activities. The LHWCA also stipulates survivor benefits for dependents in cases where a work-related injury leads to an employee's death.

The LHWCA allows the Office of Workers’ Compensation Programs (OWCP) to impose civil penalties against employers failing to report workplace injuries or deaths promptly and accurately.

In an effort to bring more transparency to the process, the proposed modifications unveiled by OWCP on September 11, 2023, would alter the practice of assessing and imposing civil penalties. 

By implementing a system of graduated penalties based on violation history, increasing measures for clarification throughout the assessment process, and expanding opportunities for employer appeals, the OWCP aims to promote accountability and ensure fairness in the process.  

OWCP is accepting written comments regarding the proposed rulemaking through November 13, 2023. You may submit written comments, identified by RIN number 1240–AA17, via the Federal eRulemaking Portal.

Ian Greenway

Congress Amends Limitation of Liability Act to Protect Passengers on “Small Passenger Vessels”

Congress has amended the Limitation of Liability Act to remove “Small Passenger Vessels” from its protection. The amendment, passed as part of the National Defense Authorization Act for Fiscal Year 2023, will make it more difficult for vessel owners to limit their liability in accidents that cause death or injuries.

The Limitation of Liability Act was enacted in 1851 to protect shipowners from financial ruin in a maritime accident. The law allows shipowners to limit their liability to the value of the vessel and its cargo. However, the amendment to the law now excludes “Small Passenger Vessels”.

The amendment was prompted by the 2019 Conception fire, which killed 34 people. The Conception was a small passenger vessel that caught fire while anchored off the coast of California. The fire quickly spread, and many passengers were trapped below deck. The owners of the Conception were able to limit their liability under the Limitation of Liability Act, even though they were found to be negligent.

A “Small Passenger Vessel” in the United States, is defined as a vessel that is less than 100 gross tons and carries more than six passengers for hire but fewer than 150 passengers or fewer than 49 passengers overnight. This includes vessels that are chartered with the crew provided or specified by the owner or the owner's representative and vessels that are chartered with no crew provided or specified by the owner or the owner's representative.

Examples include:

• Ferryboats
• Sightseeing boats
  
• Dinner cruises
• Charter boats
• Fishing boats
• Water taxis

 What does this mean for passengers?

Previously, the law potentially allowed vessel owners to limit their liability to the value of the vessel and its cargo, even if they were found to be negligent. With “small passenger vessels” removed, the Limitation of Liability Act amendment means that passengers on such vessels will now have a better chance of recovering damages if they are injured or killed in an accident. 

Review the law and amendment

• Revision to the law
• Full law: Chapter 305—Exoneration and Limitation of Liability

Ian Greenway

The largest changes to the Jones Act in years

Tucked away on page 1748 of the "James M. Inhofe National Defense Authorization Act for Fiscal Year 2023" were changes to the Jones Act—the most dramatic changes since 2008.

The changes introduce something the Jones Act has never had before: expressly excluded operations.

The predominant changes are as follows:

New Definition:
The law introduces the term "aquaculture worker."

Exclusion from Seaman Category:
Aquaculture workers are excluded from being classified as "seamen" under subsection (a) if two conditions are met: (A) State workers' compensation is available to the individual, and (B) The individual was engaged in aquaculture activities at the time of injury in a place where they had lawful access.

Looking at the reason these changes were made, the most vocal proponent of the changes we see is the East Coast Shellfish Growers Association (ECSGA). They point to the expense of Jones Act coverage and the non-standardized application of the perceived need.

Jones Act crew benefits cost the insured more than workers' compensation, with average Jones Act claims several times more expensive than the average similar State Act Claim. With the goals in mind, the changes will likely fit the bill.

However, the problems arise from the unintended consequences of these changes. The first is that the Jones Act defines aquaculture instead of relying on the Longshore Act's exact definition from the Code of Federal Regulations. The duplication rather than re-use means any case law in one is not immediately applicable to the other. Any changes to the code of Federal Regulations will also not be directly applied to the Jones Act.

The second significant change is to the newly defined subsection (a) of section 30104 of the U.S. Code. The subsection now starts with the clause "In General.—". This clause introduces more ambiguity as to who is a Jones Act Seaman. We have a specific named carve-out for Aquaculture Workers, but no limiting clause that states that it is the only carved-out operation.

In 2009 the changes to the Longshore Act that changed the jurisdiction for the repair of recreational vessels led directly to more attention on what was and was not a recreational vessel. We expect to see similar tests as to what is and is not included in these new changes. Would processing of shellfish count as aquaculture? What does "controlled" mean in cultivation? Most of the well-known Longshore case law about aquaculture is focused on fish canning, so we will see some new cases to follow.

As always, please get in touch with us if you have any questions, such as how best to cover these employers now that the laws are changing.

 - Author: Mark Greenway, President, LIG Marine Managers

Avoid Gaps in Defense Base Act (DBA) by Identifying This Exposure

Defense Base Act (DBA) coverage is usually relatively easy to identify as it is a contractual requirement for Employees working on U.S. defense bases and other similar contracts overseas. It becomes a little trickier when the insured is a subcontractor, as you may need to contact the principal to determine the DBA requirements in the prime contract.
 
When interacting with the Jones Act or other Admiralty remedies, it becomes much more complex. For example, when an insured works on a U.S. Navy vessel (considered a defense base in its own right). If the Employee does enough work on the vessel to meet the "substantial connection to a vessel in navigation" requirement for Admiralty jurisdiction, they have a right to collect those Admiralty (Jones Act) benefits.  
 
Taking this one step further, DBA excludes admiralty employees, so here is what happens:
·        DBA Carrier denies coverage
·        Employee sues and collects under admiralty

Here is the problem – it is so easy to assume that DBA supersedes all other coverages that most agents/brokers will not provide Maritime Employers Liability (MEL) coverage … leaving a massive gap and an E&O exposure for that agent/broker.

 
Even if the "substantial connection" test is not met, the Employee still has the right to sue under Admiralty law, and the DBA policy does not even provide defense cost coverage in this event!
 
I want to assure you that this is not some hypothetical situation. We have practical examples of claims where the DBA carriers have declined defense and indemnity under Admiralty law, and agents/brokers have had to respond under their E&O policy. Further, this does not need to be some vast Navy vessel, a carrier, or Destroyer, etc.; it could be as simple as an 18ft harbor patrol vessel!
 
It is rare to see this happen IF all the work is performed dockside. But, if your DBA employee ever does work on a military vessel in Navigation, you must offer MEL coverage, even if it is only to provide defense costs for the incidental exposure.
 
An "incidental" MEL can cost as little as $3,500 and typically provides $1mil of defense coverage with a small deductible.

If there is a "substantial connection", premiums typically start at $5,000 and above, but both pale significantly against six-figure defense costs, or worse, an actual verdict against your employer/client. Those prices can often be reduced when the MEL is packaged with other coverages.
 
Once you have that primary $1ml, including it in the excess program is usually straightforward.
 
Don't get dragged into a false sense of security when the contract requires DBA but there is an identifiable MEL exposure.

  Ian Greenway

Drawbacks of AI-Driven Rating

AI in underwriting poses significant risks that could have disastrous effects for both consumers and the insurance companies that underwrite them. AI can be prone to inaccuracies if the algorithms fail to properly interpret data points or mistakenly identify risks in consumers. This can potentially lead to incorrect and unfair pricing decisions, resulting in the rejection of legitimate claims or in some cases, the acceptance of fraudulent applications. Additionally, if implemented poorly, AI systems can worsen existing biases, since algorithms can maintain and even amplify existing biases without proper oversight. Finally, AI can lack transparency in its decision-making processes, making it difficult to challenge decisions and uncover systemic flaws in an insurer's underwriting process.

Surprise! That opening paragraph about the risks of AI underwriting was, ironically, written by AI. It was generated using a GPT-3 AI via an API. You can get similar results using the ChatGPT bot over at openai.com.  

It misses some key points though. To understand the problems inherent to AI, it helps to understand how it works. The basic vastly oversimplified explanation is that AI is a black box that you feed inputs and then you get an output. How it determines that output is based on Machine Learning. To oversimplify Machine Learning, you take sample input and then tell the machine what the output should have been. Do this often enough and the machine will learn how to do it.

Hopefully, this has already tipped you off to some of the simple pitfalls of AI. It is only as good as the things it’s trained with, as exampled by the AI bot Tay on Twitter, which had to be taken down hours after release due to the subject matter of its responses.

But some drawbacks are less obvious. AI makes different assumptions than humans do and sometimes they’re wrong. For example, one set of researchers was able to make the AI in a car read 35 as 85 simply by using a piece of black tape to extend the middle arm of the 3. 

Humans have an inherent bias. Sometimes an account gets declined because of how it’s presented and explained. Sometimes they are declined because of the timing in relation to a major news story. Humans are more likely to buy newspaper subscriptions if the day is sunny which there’s no logical reason behind. The machine trying to analyze these could end up making the wrong determination as to why a risk would be good or bad.    

So why do we care? Well, there already existing AI-based syndicates. Some are follow-only, meaning that a human has little to no interaction with it and the underwriting becomes solely a matter of how good the AI is. It’s not science fiction, the technology is here today and is likely already causing issues for insureds. 

Author: Mark Greenway, LIG Marine Managers

Sources:

The Guardian

MIT Technology Review

The British Psychological Society

F vs. U – Understanding Longshore Class Codes

In the world of Longshore, nothing ever seems to be as simple as it should be! So, why should class code suffixes be any different?

In the traditional sense, if you look in NCCI’s SCOPE manual, or Bureau States manuals, you will see that “true” Longshore class codes, i.e. 6872F, 6824F, 6006F, etc. will have an “F” suffix. It’s understood within the insurance industry that the “F” indicates “Federal” coverage. 

You will also see the “F” suffix attached to “true” Longshore class codes in the Advisory Loss Cost pages of NCCI’s Basic Manual. A footnote on these pages states “F Advisory loss cost provides for coverage under the United States Longshore and Harbor Workers Compensation Act and its extensions. Loss cost contains a provision for the USL&HW Assessment.”

Seems simple and straightforward enough, right?  Well, what about the “U” that shows up on the rating pages of some carriers’ quotes or policies? 

Some carriers will attach the “U” to a standard State Act class code, i.e. 3724U, 5403U, etc. to indicate that the Longshore factor has been applied to that class code. 

It is understood within the industry that the “U” represents “USL&H”. However, not all carriers will apply the “U” suffix. Many will still use the “F” suffix on their quote/policy rating pages to reflect the application of the Longshore factor. 

In either circumstance, the “F” or “U” suffix on your quote/policy indicates that coverage under the US Longshore and Harbor Workers Compensation Act has been applied.

Below is a list of the 15 countrywide true “F” classes along with the 7 State-specific true “F” classes:

6801F
Boatbuilding--wood--NOC & drivers
6824F          
Boatbuilding or repair & drivers
6826F            
Marina & drivers--coverage under U.S. Act
6843F            
Barge building--iron or steel--U.S. Act--& drivers
6845F            
Shipbuilding--naval & drivers
6872F            
Ship or repair conversion
6874F           
Painting--ship hulls
7309F            
Stevedoring NOC
7313F            
Coal dock operation & stevedoring
7317F            
Stevedoring--by hand or hand trucks exclusively
7327F            
Stevedoring--containerized freight & drivers
7350F            
Freight handling NOC--coverage under U.S. Act
8709F            
Steamship line or agency--port employees--talliers, checking clerks and employees engaged in mending or repackaging of damaged containers--coverage under U.S. Act
8726F            
Steamship line or agency--port employees--superintendents, captains, engineers, stewards or their assistants, pay clerks
9077F           
United States armed service risk

STATE-SPECIFIC CLASSES

6006F
Marine pile driving, dock & seawall, jetty or breakwater, dike or 

revetment construction--all operations to completion & drivers (FL)

6825F
Shipbuilding--iron or steel & drivers--coverage under US Act (MO)

6828F
Boatbuilding or repair--fiberglass only--& drivers--U.S. Act (FL)

6829F
Oil rig building--mobile offshore jack--up type--& drivers (MS)

6869F
Shipbreaking (OR)

6873F
Diving--U.S. Act (LA, OR)

8711F
Steamship line or agency--port employees--tallymen, checking clerks or employees engaged in mending or repacking of damaged containers (NJ)

We hope this provides some clarity on a topic that can be confusing to many.

The world of longshore can be complex, but the experts at LIG are here to help!

 - Author: Tommy Bridges, VP of Business Development, LIG Marine Managers

Longshore vs. USL&H vs. LHWCA, It’s All in a Name

Marine Insurance has a longstanding tendency to perpetuate confusing names for coverage. You’ve probably heard of Longshore, but are you familiar with USL&H and LHWCA? 

Let’s clear up some of these misunderstandings.

The full name of the act establishing benefits for waterfront workers is “33 U.S. Code Chapter 18 - LONGSHORE AND HARBOR WORKERS’ COMPENSATION ACT.”

If you compare the coverage names and the title of the Act, you’ll see that these three names originate directly from this piece of legislation. Two are partial abbreviations, and the third is a broad single-word simplification.

But which term is the standard for the industry and why are they all used to say essentially the same thing?

• The abbreviation “USL&H” is somewhat incomplete, as it ignores the WCA part.
• The abbreviation “LHWCA” is more complete, but not descriptive.

You’ll often see these abbreviations in written format, especially on ACORD or Carrier forms, as they are easier to include in a short-form question.

Meanwhile, “Longshore” is the broadest and most inclusive term and is much easier to say. Therefore, you may hear this term used more often when speaking about this coverage.

The good news is that everyone in this market segment understands all these terms interchangeably and will quote accordingly.

Now that’s the simple part … more complex is how and where Longshore applies. 

If you need to know more about that, have a look first at Longshore 101 for a basic understanding and then our other webinars for more details.

Keep an eye out for our upcoming blog post covering different types of Longshore rates and how they apply. 

Ian Greenway