Confusion in two acts: the Longshore Act and the Jones Act blur liability lines. They are mutually exclusive by design, but in practice often seem to overlap.

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Maritime employers have an insurance problem. It is sometimes difficult to distinguish liability exposure under the Jones Act and general maritime law from workers' compensation exposure under the Longshore and Harbor Workers' Compensation Act.

The two acts are mutually exclusive by design, but in practice they often seem to overlap.

Vessel owners and maritime employers must be certain they have properly identified their exposures and insured their obligations to injured employees, but this is often difficult because of the uncertainty involved when dealing with many types of workers. So how can employers protect themselves?

TWO LAWS

Vessel owners must insure their liability for the illness, injury or death of crewmembers under the Jones Act (46 U.S.C. 31004) and the general maritime law (the judicially created remedies of maintenance and cure, unseaworthiness and wrongful death available to seamen). Maritime employers must provide workers' compensation insurance under the Longshore and Harbor Workers' Compensation Act (33 U.S.C. 901, et seq.) for employees who work on or around vessels but who are not crewmembers.

The Longshore Act states in [section]902(3): "The term 'employee' means any person engaged in maritime employment, including any longshoreman or other person engaged in longshoring operations, and any harbor-worker including a ship repairman, shipbuilder, and ship-breaker."

The Longshore Act in [section]903(a):

"... compensation shall be payable under this Act in respect of disability or death of an employee, but only if the disability or death results from an injury occurring upon the navigable waters of the United States (including any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in loading, unloading, repairing, dismantling, or building a vessel)."

The Longshore Act in [section]902(3)(G) excludes from coverage "a master or member of a crew of any vessel."

The Jones Act states:

"Any seaman who shall suffer personal injury in the course of his employment may, at his election, maintain an action for damages at law, with the right of trial by jury, ... and in the case of the death of any seaman as a result of any such personal injury the personal representative of such seaman may maintain an action for damages at law with the right of trial by jury."

The Longshore Act does not define key terms such as "maritime employment," "harbor worker," "navigable waters" and "other adjoining area;" the Jones Act does not define who is a "seaman" and neither law defines a "vessel."

The courts have tried to define the geographic and occupational tests for Longshore Act coverage (status and situs) and the Jones Act's occupational test for who is a member of a crew of a "vessel."

The case law has at least established that a seaman under the Jones Act is the same as the Longshore Act's "master or member of a crew of any vessel." It has also determined that a "vessel" under the Longshore Act is the same as a "vessel" under the Jones Act. But the courts recognize an "uncertainty zone" where various occupations seem to fit the coverage requirements of both acts.

So, the Longshore Act covers a "maritime" employee, but not a Jones Act seaman, and the Jones Act covers only masters (captains) and crewmembers. The two are mutually exclusive; the Longshore Act covers land based maritime workers, and the Jones Act covers sea based crewmembers.

The problem is that it's not always simple to determine who's who before a loss occurs, and there's a big downside to getting it wrong.

LONGSHORE ACT INSURANCE REQUIREMENT

The Longshore Act in [section]932 requires that every maritime employer obtain Longshore Act coverage from an insurance carrier authorized by the U.S. Dept. of Labor, or obtain the authorization of the U.S. Dept. of Labor to self-insure. If an employer fails to meet this insurance requirement, the following provisions apply:

"If an employer fails to secure payment of compensation as required by this Act, an injured employee, or his legal representative in case death results from the injury, may elect to claim compensation under the Act, or to maintain an action at law or in admiralty for damages on account of such injury or death. In such action the defendant may not plead as a defense that the injury was caused by the negligence of a fellow servant, or that the employee assumed the risk of his employment, or that the injury was due to the contributory negligence of the employee" [[section] 905(a)].

"Any employer required to secure the payment of compensation under this Act who fails to secure such compensation shall be guilty of a misdemeanor and, upon conviction thereof, shall be punished by a fine of not more than $10,000, or by imprisonment for not more than one year, or by both such fine and imprisonment" [[section] 938(a)].

"where such employer is a corporation, the president, secretary, and treasurer thereof shall be also severally liable, jointly with such corporation, for any compensation or other benefit which may accrue under the said Act" [[section] 938(a)].

It's easy to turn a $300,000 workers' compensation loss into a $3 million liability loss, and to force your corporate officers to reach in their own pockets to defend themselves. And if you're an insurance broker, watch out if your insured does not have the coverage he needs. A large uninsured Jones Act loss will have the vessel owner looking for someone to blame.

UNCERTAINTY ZONE

Federal courts, including the U.S. Supreme Court, have made judgments with regard to the coverage dilemma:

"It is impossible to define the phrase 'member of a crew' in general terms: the words are colloquial and their fringe will always be ragged. Perhaps the best hope is that, as the successive variants appear, they will finally serve rudely to fix the borders." (Bodden v. Coordinated Caribbean Transport Inc., 369 F.2nd 273 [5th Cir. 1966]).

"Thus, despite our continued insistence that a Jones Act 'seaman' and a 'crew member' excluded from the Longshore Act are one and the same (in other words that the statutes are mutually exclusive) we recognize that in a practical sense, a 'zone of uncertainty' inevitably connects the two Acts." (McDermott Inc. v. Boudreaux, 679 F.2nd 452 [5th Cir. 1982]).

"The recognition by this circuit that the Jones Act and the Longshore Act each requires a 'liberal application in favor of claimant to affect its purposes,' has further contributed to the zone of uncertainty and to the dilemma of injured workers within it." (Simms v. Valley Lines Co., 709 F.2nd 409 [5th Cir. 1983]).

"... drawing the distinction between those maritime workers who should qualify as seamen and those who should not has proved to be a difficult task and the source of much litigation particularly because 'the myriad circumstances in which men go upon the water confront courts not with discrete classes of maritime employees, but rather with a spectrum ranging from the blue-water seaman to the land-based longshoreman'" (Brown v. ITT Rayonier Inc., 497 F.2d 234[CA5 1974]).

"The federal courts have struggled over the years to articulate generally applicable criteria to distinguish among the many varieties of maritime workers, often developing detailed multi-pronged tests for seaman status. Since the 1950s, this Court largely has left definition of the Jones Act's scope to the lower courts. Unfortunately, as a result, 'the perils of the sea, which mariners suffer and ship owners insure against, have met their match in the perils of judicial review'" (Chandris, Inc. v. Latsis, 515 US 347 [1995], quoting from Gilmore & Black, "The Law of Admiralty").

"We have made a labyrinth and got lost in it. We must find our way out" (Johnson v. John F. Beasley Construction Co., 742 F.2d 1954 [CA7 1984]).

The maritime employer frequently has two separate exposures to insure, the stakes are high to have the correct coverage in place, and as we shall see, it is not always a simple matter to match the correct exposure with the correct coverage in the "uncertainty zone."

WHO IS COVERED BY EACH ACT?

The Longshore Act has both a status (occupational) and a situs (geographical/functional) test for coverage. Briefly, an employee's occupation must be considered "integral" to the unloading/loading or shipbuilding/ship repair processes (status) and he must be working over the navigable waters of the U.S. (carrying interstate commerce) or in an adjoining area customarily used by an employer for covered activity (situs). Coverage includes a very wide range of occupations, including maintenance and repair workers, construction workers, contractors of all kinds, and everyone whose work requires them to be on the navigable waters. There are hundreds of occupations covered by the Longshore Act in addition to the traditional occupations of longshoreman and shipyard worker.

The Jones Act uses an occupational-based test for coverage, related to the worker's relationship to a vessel. The worker's duties must contribute to the function of the vessel or to the accomplishment of its mission, and the worker must have an employment connection to a vessel in navigation, or an identifiable group of vessels under common ownership, that is substantial in both duration and nature.

The federal Fifth Circuit Court of Appeals, acknowledged by the U.S. Supreme Court, analyzes the problem in terms of the percentage of work performed on vessels for the employer in question--and declines to find seaman status where the employee spends less than 30 percent of this time aboard ship.

The definition of "vessel" under both the Longshore Act and the Jones Act is the same, taken from the Rules of Construction Act, 1 U.S.C [section]3 (1873). It is a very broad definition, and includes any artificial contrivance used or capable of being used as a means of transportation on water.

DIFFERENT REMEDIES, DIFFERENT RECOVERIES

In a perfect world there's a clear distinction between land-based maritime workers who are covered by the Longshore Act and sea-based workers who are covered by the Jones Act and the general maritime law. The maritime employer insures its obligations to the first group by obtaining Longshore Act workers' compensation coverage and to the second group through liability coverage under its protection and indemnity policy, or by adding the maritime coverage endorsement to its workers' compensation and employers liability policy, or by adding a marine liability endorsement to its commercial general liability policy.

But this is not a perfect world. In the "uncertainty zone," workers seemingly can go either way. The initial choice is with the injured worker. What considerations govern his choice of remedy? Probably money.

The Longshore Act is a workers' compensation statute. It provides for the no-fault, prompt payment of statutory wage replacement payments and for no-fault, prompt medical treatment. It is designed to be predictable for the employer and quick for the worker. It is administered by the U.S. Dept. of Labor, which offers levels of informal dispute resolution services and formal adjudication procedures. Judicial review is available.

The Jones Act is a negligence remedy, enforced by filing a lawsuit with the right to a jury trial. The potential recovery can far exceed the limit of workers' compensation payments. Factors for recovery include pain and suffering, past and future wage loss, past and future fringe benefit value, medical costs, loss of quality of life, and a host of other damage measures. There is no government agency involved. The remedy is with the courts, and the courts afford seamen favorable treatment.

In addition to the Jones Act negligence recovery, a seaman also is entitled to the general maritime law remedies of unseaworthiness, maintenance and cure and wrongful death. These can possibly provide a double recovery to the injured seaman in some circumstances.

A Jones Act recovery can be much greater than a workers' compensation entitlement under the Longshore Act, and a worker can be expected to seek his Jones Act rights even if there is only a small possibility that he could qualify as a seaman.

Attorneys' fees for the successful claimant's attorney provide additional motivation. Under the Longshore Act an attorney's fee must be approved by the adjudicator at the U.S. Department of Labor, based on a detailed fee request listing services rendered and the amount of time spent for each component of work done. Under the Jones Act, attorneys' fees typically amount to 33 percent to 40 percent (plus costs) of the total recovery, depending on whether the case is settled or whether an order is issued following a trial.

An injured worker in the "uncertainty zone" can be expected to seek recovery under both the Jones Act (and general maritime law) and the Longshore Act, either simultaneously or sequentially. The employer must defend twice.

TWO EXAMPLES

Example One: The worker is a cargo operations manager, employed by a terminal operator, which also owns a fleet of barges. The worker's duties require him to spend about 75 percent of his time on board the employer's barges, supervising the loading of cargo. He is injured when he falls while climbing a ladder from the dock to one of the barges.

Should this worker be covered under the Longshore Act, or under the Jones Act? Arguably, it could be either, so he must be considered to be both by the employer.

In favor of Jones Act coverage is the fact that the employee spent 75 percent of his working time aboard the employer's vessels. He also was actually injured on board one of the barges.

Against Jones Act coverage is the occupational analysis. The total circumstances of a worker's duties must be considered. All of the work that he performed must be evaluated. This employee's primary duties involved the supervision of loading and unloading cargo on to the barges. This arguably is land-based employment.

The ultimate inquiry is whether the worker in question is a member of the vessel's crew or simply a land-based employee who is working on the vessel at a given time. In this case, he was determined to be a Longshore Act land-based worker.

Example Two: The employer operates a barge repair facility and also owns two tugboats. The employee works as a welder/fitter, and as a trainee mate/ deckhand on the tugs. The employee died while working on board one of the vessels when he fell overboard and drowned.

The employee's widow filed a Jones Act lawsuit, which she resolved with the employer for a cash settlement. She then filed a claim for widow's benefits under the Longshore Act. This is an unpredictable area for the parties. The courts and lawyers have still not achieved uniformity on the issues of res judicata and collateral estoppel--that is, when a claim under one act is precluded by a claim/recovery under the other act.

After a detailed analysis of the time spent by the employee in each of his job categories, to determine whether he performed a substantial part of his duties on board a vessel so he could qualify as a seaman, it was found that he spent most of his time as a welder. The widow was awarded benefits under the Longshore Act, under two mutually exclusive statutes. There was no double recovery since the employer is entitled to a credit for its Jones Act settlement payment against its Longshore Act liability under [section]903(e). But the employer did have to bear the expense of defending against both claims.

Employers with employees in this "uncertainty zone" should insure against both Jones and Longshore Act liability.

By JOHN A. MARTONE, senior vice president, the American equity Underwriters Inc.

John A. Martone, former branch chief of financial management, insurance and assessment at the U. S. Dept. of Labor, is senior vice president of The American Equity Underwriters inc. During his 27 years with the Department of Labor he directed the licensing and regulation of insurers and self-insured employers under the Longshore and Harbor Workers Compensation Act.