An LHWCA Insurer’s Right to Jones Act Subrogation

The Longshore and Harbor Workers’ Compensation Act (LHWCA), like other workers’ compensation schemes, provides a compromise between land-based maritime workers and their employers: workers who are injured on the job receive quick, guaranteed compensation from their employers regardless of fault, and employers are generally absolved from any further liability in relation to such injuries. However, the LHWCA generally preserves an injured worker’s remedies against third parties who may be “liable for damages.”

In Chenevert v. Travelers Indem. Co., 746 F.3d 581 (5th Cir. 2014), the Fifth Circuit Court of Appeals recently faced the first-impression issue of whether an insurer who has made voluntary payments under the LHWCA to an injured employee and on behalf of the employer has a right to be reimbursed from the employee’s subsequent settlement of a Jones Act claim against the employer based on the same injuries.

In determining this issue, the court first noted a worker who has received LHWCA benefits may also obtain a double recovery for the same injury by suing his employer for negligence under the Jones Act. As the United States Supreme Court has recognized, a worker whose job title fits within one of the enumerated occupations of the LHWCA, such as a longshoreman or a ship repairman, may nevertheless qualify as a “seaman,” excluded from LHWCA coverage but entitled to bring a claim against his employer under the Jones Act. Moreover, when an employee receives voluntary payments under the LHWCA without a formal award, the employee is not barred from subsequently seeking further relief under the Jones Act because the coverage question has never actually been litigated.

When a worker recovers against a third party under section 905(b) of the LHWCA, the worker is necessarily covered by the LHWCA, yet must use the proceeds of the recovery to repay the employer or insurer for benefits previously received. On the other hand, a worker who succeeds in a Jones Act claim is necessarily a seaman, and therefore not entitled to LHWCA benefits. The court thus reasoned that it would be particularly unfair to deny an insurer the right to recover the benefits it has paid under the LHWCA in such a situation.

Furthermore, the rule prohibiting a carrier from subrogating against its own insured applies only when the claims arise from the very risk for which the insured was covered. In this particular context, the insured employer is covered only for purposes of the LHWCA, but not for Jones Act liability. Accordingly, the Fifth Circuit held an insurer who makes voluntary LHWCA benefits to an injured employee on behalf of the employer acquires a subrogation lien on any recovery by the employee in a Jones Act suit against the employer based on the injuries for which the insurer has already compensated him. Therefore, it is important for LHWCA insurers who have made voluntary payments under the LHWCA to be aware of any subsequent suit brought by the employee and intervene in any Jones Act action.

The Jones Act allows seamen, as opposed to land-based maritime workers, to bring actions against their employers for the negligence of the ship owner, the captain, or fellow members of the crew, as well as against the ship owner for claims of unseaworthiness or negligence.