AEU Longshore Blog ISSUE: Vessel in Navigation?

A recent decision by the Supreme Court of Texas offers a discussion of an issue that is important to employers (and insurance carriers) struggling to distinguish between liability for injured employees under the Jones Act/General Maritime Law and the Longshore Act.  The case is Helix Energy Solutions Group, Inc., Helix Well Ops, Inc., and Helix Offshore International, Inc. v. Kelvin Gold, (No. 16-0075 in the Supreme Court of Texas, June 16, 2017).  The issue was whether the vessel remained “in navigation” while undergoing an overhaul.

The seaman’s remedies under the Jones Act and the General Maritime Law are only available to members of a crew of a vessel in navigation.  The workers’ compensation remedy under the Longshore Act is only available to land-based maritime workers who are not crew members of a vessel in navigation, so the “in navigation” status of the “vessel” is a key element in determining the correct exposure.

There have been related issues arise on the question of vessel status.  For example, during the shipbuilding process, what is the point at which a vessel under new construction becomes a “vessel in navigation”?  The basic “what is a vessel” question has been addressed by the U.S. Supreme Court in the recent cases of Lozman v. City of Riviera Beach, FL (2013) and Stewart v. Dutra Construction Company (2005).  The Lozman case gives us the current test for vessel status: is the contrivance, viewed through the eyes of a reasonable observer, practically capable of serving as a means of transportation of people or things over water?  Then there’s our present issue: does a vessel remain “in navigation” when it is taken out of service to undergo repairs?

General Statement No. 1:  A vessel is in navigation, although taken to a dry dock or shipyard for repairs, if it remains in readiness for another voyage or is in preparation for making another voyage.  At some point, however, repairs may become sufficiently significant that the vessel can no longer be considered “in navigation” (Fousseini Tounkara v. Glacier Fish Co.; SeaBright Insurance Co., BRB No. 15-0217, January 28, 2016).

General Statement No. 2: “A vessel does not cease to be a vessel when she is not voyaging, but is at anchor, berthed, or dockside … or is taken to a dry dock or shipyard to undergo repairs in preparation to making another trip.” (Chandris v. Latsis, 515 U.S. 347 (1995))

General Statement No. 3: “Major renovations can take a ship out of navigation, even though its use before and after the work will be the same.” (Chandris, citing McKinley v. All Alaskan Seafoods, Inc., 980 F. 2d 567 (9th Cir. 1992))

How do we determine whether a vessel remains in navigation when it leaves the water for repairs?  The answer will usually determine the difference between whether the employer has liability for injuries to employees under the Jones Act or under the Longshore Act.

The Gold case involves the conversion of a drill ship into a well intervention ship servicing pre-existing offshore wells.  The conversion lasted 20 months and cost $115 million, during which the vessel was turned over to contractors and unable to navigate during the entirety of the plaintiff’s employment on board.

In defending the Jones Act lawsuit, the defendant’s burden of proof was to establish that the vessel was not a “vessel in navigation” at the time of the plaintiff’s injury.

The trial court granted the defendant vessel owner’s motion for summary judgment dismissing the Jones Act and General Maritime Law lawsuits based on the fact that during the major overhaul the ship was not a “vessel in navigation”.  An appeals court then reversed and, finally, the state Supreme Court reinstated the trial court’s dismissal on summary judgment.

The Texas Supreme Court found that the vessel in navigation question can sometimes be answered as a matter of law, although it is usually a question of fact.  Conclusive evidence can establish that an extended, major overhaul can remove a vessel from navigation as a matter of law.  Thus, major overhauls that render watercraft practically incapable of transportation are sufficient to remove those craft from “vessel in navigation” status.  Whether a vessel is or is not “in navigation” for Jones Act purposes, while normally a fact-intensive question for the jury to decide, may be removed from the fact finder’s consideration where the facts and the law will reasonably support only one conclusion.

The analytical framework is based on the fact that the spectrum of repairs needed is broad, ranging from temporary routine repairs to complete overhauls. At what point along this spectrum do repairs become sufficiently significant that the vessel can no longer be considered in navigation?  The difference is one of degree.

The court noted that there is no uniform approach or comprehensive list of factors in determining where on this scale the vessel leaves “in navigation” status.  The yardstick of analysis is the “status of the ship, the pattern of the repairs, and the extensive nature of the work contracted to be done (West v. United States, 361 U.S. 118 (1959)).  This vague framework includes consideration of (a) the significance of the work performed, (b) the cost of the conversion relative to the value of the ship, (c) whether contractors exercised control over the work, (d) the duration of the repairs, and (e) whether the repairs took the ship out of service.

Also, there is no time limit for the out-of-service repairs as a matter of law.

In the final analysis, this case does not seem to have been a close call.  This vessel was not “in navigation” during the period of claimant’s employment (not limited to the moment of injury).  Thus, he was not a crew member of a vessel in navigation, and he had no Jones Act/General Maritime Law remedy.

Our lesson: The Longshore Act covers workers who repair or build vessels.  A vessel that is not “in navigation” means no Jones Act exposure to crew, but it does mean workers’ compensation exposure under the Longshore Act.

 

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John A. (Jack) Martone served for 27 years in the U.S. Department of Labor, Office of Workers’ Compensation Programs, as the Chief, Branch of Insurance, Financial Management, and Assessments and Acting Director, Division of Longshore and Harbor Workers’ Compensation. Jack joined The American Equity Underwriters, Inc. (AEU) in 2006, where he serves as Senior Vice President, AEU Advisory Services and is the moderator of the AEU Longshore Blog.

ISSUE: Divers

What about divers?  Are they covered by the Longshore Act or are they crewmembers under the Jones Act and general maritime law?

As usual, many coverage questions produce conditional opinions, and the best you can come up with is a best guess at a most likely outcome.   

But questions with regard to divers tend to be even more difficult than usual.  You could say that their duties and circumstances of employment are diverse.  There’s a broad spectrum of employment ranging from land based dock building and repair, to harbor based maintenance and ship repair, to the largest offshore oil and gas operations, and back to inland industrial storage tank and reservoir work and over to self-employed independent contractors hired temporarily for their specific expertise.  One end of the spectrum is land based Longshore Act workers’ compensation and the other end is Jones Act service to a vessel.  But there’s a large middle ground.

To review the tests for coverage:

The Longshore Act contains a status and situs requirement.  You must be engaged in maritime employment involving shipbuilding, ship repair, ship breaking, or the loading or unloading of cargo, or any activity integral to those operations.  This includes constructing, repairing and maintaining the buildings and equipment used in these operations.  There is no moment of injury test.  Any regular part of a worker’s duties that is maritime in nature confers full time Longshore Act status.

The Longshore Act also contains a separate situs provision.  The injury must occur over the navigable waters of the United States, or on any adjoining pier, wharf, dry dock, terminal, building way, marine railway, or other adjoining area customarily used by an employer in maritime employment.  Situs is determined as of the moment of injury.

There is a two part test for Jones Act crewmember status:  the worker must contribute to the mission or function of the vessel, and he must have an employment relationship to a vessel or fleet of vessels under common control that is substantial in terms of both nature and duration.

The two coverages are mutually exclusive since the Longshore Act explicitly excludes Jones Act seamen and the Jones Act only covers seamen, but as we have seen, a large “uncertainty zone” between the Acts causes an overlap where coverage questions constantly arise.

As one judge put it, “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”, (Hawn v American S.S. Co., 107 F.2nd 999 (2nd Cir. 1939)).  This is quoted from a 1939 decision, and we are still fixing the borders.

Many divers actually have mixed duties.  When they are not diving they are performing other tasks such as loading/unloading, maintenance, repair, etc. This makes it very difficult in the broad middle of the employment spectrum to predict whether you have a Longshore Act or a Jones Act exposure.

First, let’s remove some divers from the Longshore Act on the basis of situs.  Large water tanks under industrial facilities, sewage treatment plants, land locked reservoirs, etc. are not navigable waters of the U.S. (and probably not “other adjoining areas”).  So, no Longshore Act coverage (and for the same reasons, probably not Jones Act).

The diver who works from land in dock and pier construction and repair is most likely a harbor worker covered by the Longshore Act.

The diver who works from barges or floating work platforms engaged in the construction and repair of land based marine facilities is probably still covered by the Longshore Act, although we are getting further along the spectrum toward the Jones Act.

The diver who works in a harbor from a vessel doing such things as building artificial reefs, maintaining and repairing buoys and markers, and inspecting vessels is further down the spectrum and has probably just gone past the middle into Jones Act coverage.

The diver who lays underwater cable from a cable laying vessel, or who works off a floating platform in oil and gas exploration and production is most likely on the Jones Act crewmember side.

Frequently, it comes down to the nature of the worker’s relationship to a vessel (remember the test is a relationship that is substantial in terms of nature and duration).  In an attempt to simplify the analysis and application of the coverage tests, the courts frequently use a 30% rule of thumb.  If the worker spends less than 30% of his total work time on the vessel then he is probably not a Jones Act crewmember.  This usually includes time spent traveling to and from the vessel, and these close cases always involve a detailed accounting of the worker’s time.

The crucial issue in cases involving divers frequently seems to be the “substantial employment relationship to a vessel in terms of duration” portion of the two part test.  The “contribute to the mission or function of the vessel” and the “substantial employment relationship to a vessel in terms of nature” are the easy parts for the typical diver.

In view of the relatively short length of many diving contracts, there is a suggestion that the courts will relax the “substantial duration” test somewhat for divers.  One federal circuit has held that 10 days is not too brief to constitute substantial duration as a matter of law, and another has affirmed that 4 weeks satisfies the substantial duration test.  For the “substantial duration” part of the test, the 30% rule is important.    

Due to the uncertainty inherent in many coverage issues involving divers, the bad news is that maritime employers often find themselves fully insuring workers separately under two mutually exclusive statutes.  Nonetheless, it is a good idea to carry both coverages in any uncertain situation to be on the safe side.

ISSUE: Remedies

How about a short review of some of the coverage issues that arise between the boundaries that separate the Longshore Act from other remedies available to the injured worker?  Some of these issues come up constantly and have been the subject of previous postings, while others arise less frequently.

1.  LONGSHORE ACT/JONES ACT  –  The Longshore Act in section 902(3)(G) excludes crewmembers of any vessel and the Jones Act only covers crewmembers of a vessel.  So, the two laws are mutually exclusive in their coverage.

The Longshore Act tests for coverage are Situs (geography and function) and Status (nature of duties).  You must be a land based maritime worker working in a maritime area as defined in the Act and the case law.  The Jones Act test for coverage is Occupational.  The worker must have an employment relationship to a vessel, or group of vessels under common control that is substantial in terms of both duration and nature, and his duties must contribute to the mission or function of the vessel.

The Longshore Act is a workers’ compensation statute administered by the U.S. Department of Labor.  The statute provides the benefit rates and federal regulations govern administration.  The Jones Act is a tort remedy based on negligence, enforced by filing a complaint in court.  The worker is entitled to a jury trial, and the potential recovery can far exceed workers’ compensation benefits.

Longshore Act insurance must be obtained from an insurance carrier licensed by the U.S. DOL, or the employer must obtain DOL’s approval to be self-insured.  Jones Act insurance coverage is liability coverage usually provided in the vessel owner’s protection and indemnity policy, or by adding the maritime coverage endorsement to the workers’ compensation and employer’s liability policy, or by adding a marine liability endorsement to the commercial general liability policy.

There is a coverage overlap.  The federal Fifth Circuit Court of Appeals has said:  “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”.   Many cases can go either way.  NOTE:  There is a rule of thumb that the courts use: if a worker spends less than 30% of his work time aboard a vessel then he is probably not a Jones Act seaman.

2.  LONGSHORE ACT/STATE WORKERS’ COMPENSATION The U.S. Supreme Court has held that the Longshore Act does not supplant state workers’ compensation laws, it supplements them.  The Longshore Act and a state compensation law can apply simultaneously to the same injury.

It’s up to state law.  There are “concurrent” states and there are “exclusive” states.  Here’s a very unofficial list:

  1. Concurrent states:  AL, AK, CA, CT, DE, GA, IL, IN(?), KY(?), MA, MI, MN, MO, NC, NY, PA, RI, SC, TN, VA, WV, WI
  2. Exclusive states:  FL, HI, LA, ME(?), MD, MS, NJ, OH, OK, OR, TX, WA

The Longshore Act and the state acts are all workers’ compensation statutes.  In concurrent states, the worker will typically file claims under both the Longshore Act and the state act.  This entails double costs for the employer.

Insurance is purchased from a licensed insurance carrier or the employer can apply to be approved as a self-insurer by the regulator.

There is an overlap in coverage in the form of simultaneous coverage in concurrent states.  There is double work and expense for the employer in claims administration and reporting, insurance compliance, litigation, benefits, etc.

3.  LONGSHORE ACT/FEDERAL EMPLOYERS’ LIABILITY ACT (FELA) -FELA covers employees of interstate railroads.  It is the Jones Act for railroad employees.  In fact, FELA was passed in 1908, and its remedy provisions were incorporated in the Jones Act in 1920.

FELA covers railroad employees.  The Longshore Act covers land based maritime employees.

FELA is a tort remedy based on negligence.  It is the same as the Jones Act.  The Longshore Act is workers’ compensation.

Like the Jones Act, it is tort liability versus workers’ compensation statutory benefits.

In theory there is no overlap in coverage with the Longshore Act.  But it can be tricky for the railroads.  A railroad worker who meets situs and status under the Longshore Act is covered by the Longshore Act.  He does not have a FELA remedy.  It is not concurrent.  It is either/or.  The problem is that there is a practical overlap, depending on where the line is to be drawn between overland transportation and “longshoring operations”.  The lesson is that railroads need Longshore Act insurance coverage.

4.  LONGSHORE ACT/OUTER CONTINENTAL SHELF LANDS ACT (OCSLA) – The OCSLA is an extension of the Longshore Act, extending Longshore Act benefits to the oil and gas workers on the U.S. outer continental shelf. You are covered by one or the other, but picking which one can be tricky.

Once again, the test for Longshore Act coverage is maritime situs and status (navigable waters of the U.S.).  The OCSLA covers workers engaged in the exploration for, development, and production of oil and gas on the U.S. outer continental shelf.

Both are workers’ compensation statutes.  The OCSLA extends Longshore Act benefits to the OCS.

They are mutually exclusive laws requiring separate insurance coverage.

There ordinarily is no overlap, but you’ve got plenty of choices.  Work on fixed oil and gas platforms in state waters is not maritime employment and it is not OCSLA.  It is state act workers’ compensation.  Work on the OCS in oil and gas production, exploration, and development is OCSLA, not Longshore.  Maritime employment on the navigable waters of the U.S. is Longshore Act.  Note:  Work on floating rigs may be Jones Act, because floating drilling rigs and production platforms are vessels.  Another Note:  Coverage depends on where the worker is and what is he doing.  (There is a circuit conflict on the “where the worker is” part between the 3rd, 9th and 5th circuits.  The 5th circuit says that the injury must occur on the OCS, the other two circuits say that there is no situs requirement for compensation under OCSLA.  The injury must only be as a result of operations on the OCS, so you can have OCSLA exposure in locations other than on the outer continental shelf.

5.  LONGSHORE ACT/EMPLOYER TORT LIABILITY – Section 905(a) of the Longshore Act states:  The employer’s liability shall be “exclusive and in place of all other liability of such employer to the employee….”  The employer is immune from suits “at law or in admiralty”.  It doesn’t necessarily mean what it says; “at law or in admiralty” does not include other workers’ compensation laws, so you have concurrent jurisdiction with the states. 

There are numerous exceptions in state laws, and it seems like there are more all the time, giving injured workers a tort remedy against the employer outside of the employer’s workers’ compensation immunity.  This is a bigger problem for maritime employers in concurrent states, since strictly Longshore claims still give the employer the section 905(a) immunity.

6.  LONGSHORE ACT/ SECTION 905(b) – Workers covered by the Longshore Act have a federal maritime tort remedy against the vessel owner based on vessel negligence.  This is true even if the vessel owner is also the employer (dual capacity) but the injury must be caused by negligence in vessel operations, not stevedoring.  This remedy is not available to the employee who is employed to provide shipbuilding, ship repair, or ship breaking services.

This is a maritime tort remedy.  The injury must occur on a vessel on navigable waters or possibly on immediately adjoining areas.  It is in addition to the worker’s compensation remedy.   This is the remedy given to longshore workers when the 1972 amendments took away the unseaworthiness remedy mistakenly given to them by the Supreme Court in the Sieracki case.

7.  NONAPPROPRIATED FUND INSTRUMENTALITIES ACT (NAFIA)/DEFENSE BASE ACT – Section 8172 of the NAFIA says, “In case of disability or death resulting from injury … occurring to an employee of a NAFI … who is:

(1)     not a citizen or permanent resident of the United States or a territory or possession of the United States; and

(2)     employed outside the continental United States;

compensation shall be provided in accordance with regulations prescribed by the Secretary of the military department concerned and approved by the Secretary of Defense or regulations prescribed by the Secretary of Transportation, as the case may be. 

So overseas NAFI employees do not get NAFIA benefits.

Section 1651(1)(a) of the Defense Base Act says that the DBA applies to any employee engaged in any employment at any U.S. military base outside the continental U.S.

Each Act says that it is the exclusive remedy for the worker.

What about the case of a non-citizen NAFI worker working on a U.S. military base outside of the U.S.?  He is covered by NAFIA.

8.  LONGSHORE ACT/ FEDERAL EMPLOYEES COMPENSATION ACT (FECA) – FECA is the workers’ compensation law that covers employees of the federal government.  These workers are excluded from the Longshore Act.   There is no overlap.  You are one or the other.

ISSUE: The Jones Act

And now for something completely different.

We’ve previously looked at the Jones Act in the context of determining whether a particular worker is a seaman with a remedy under the Jones Act or a land based worker with a remedy under a workers’ compensation statute such as the Longshore and Harbor Workers’ Compensation Act.

There is another, very important aspect of the Jones Act.  It is a cabotage law that provides that, “A vessel may not provide any part of the transportation of merchandise by water, or by land and water, between points in the U.S. to which the coastwise laws apply, either directly or via a foreign port…” generally unless the vessel is built in the U.S., crewed by Americans, and owned by Americans (46 U.S.C. 55102).

The Jones Act protects U.S. vessel owners, U.S. shipyards, and the jobs of U.S. seamen against competition with often subsidized, frequently under regulated foreign vessel interests that are non-compliant with U.S. labor, safety, security, tax, and environmental laws.

Most importantly, the Jones Act, enacted in 1920 (and continuing a U.S. cabotage tradition going back to the first Congress) represents an important element of national security as clearly stated in its Preamble:  “It is necessary for the national defense and for the proper growth of its foreign and domestic commerce that the U.S. shall have a merchant marine of the best equipped and most suitable types of vessels sufficient to carry the greater portion of its commerce and serve as a naval or military auxiliary in time of war or national emergency ….”

I’d like to step outside of our usual topics relating to various provisions of the Longshore Act and make a few observations with regard to the Jones Act.  It has been criticized in the aftermath of the Deepwater Horizon explosion on April 20, 2010, and it continues to be the focus of actions in Congress and in the federal regulatory and enforcement agencies.  There is much going on that should be of concern to the U.S. maritime community.  Here is a very brief and broad list.

1)      There is a large volume of pending legislation largely in reaction to the Deepwater Horizon event.  There are provisions in various bills to repeal the Jones Act, to repeal the Limitation of Liability Act, to amend the Jones Act, Limitation of Liability Act, and Death on the High Seas Act to increase vessel owner liabilities, to establish new offices in the Departments of the Interior and Energy with sweeping regulatory reform agendas, etc., etc. A PARTIAL list of the bills:  S. 3516, H.R. 3534, H.R. 5629, S. 3755, H.R. 5503, S. 3600, S. 3509, S. 3643, S. 3663, H.R. 5019, S. 2747, S. 3466, S. 3472, S. 3495, S. 3509, S. 3511, S. 3512, S. 3515, S. 3516, S. 3525, S. 3597, S. 3643.  Even in a lame duck session and with a divided Congress returning in January, where most of these provisions will not be enacted in their current form, this list is a good indicator of the current legislative mood.

2)      The Maritime Administration (MARAD) in the Department of Transportation has contracted with PricewaterhouseCoopers to perform a study to provide findings on the cost differential between operating U.S. and foreign flag vessels.  The conventional rule of thumb, based on virtually no data, has been $3 to $1 more costly to use U.S. flagged ships.  The study should be complete by the summer of 2011 and should better inform the Jones Act discussion.

3)      The U.S. Coast Guard in the Department of Homeland Security is in the process of developing a rule requiring foreign flagged vessels to report their arrival on the U.S. outer continental shelf (OCS).  In 2006, section 109 of the SAFE Port Act required the Coast Guard to update and finalize a rulemaking within 180 days to expand the notice of arrival regulations.  On June 22, 2009, the Coast Guard issued a Notice of Proposed Rulemaking and the comment period ended September 21, 2009.  No final rule has been issued and it is obviously overdue.  During Congressional hearings in June 2010 at the Subcommittee on Coast Guard and Maritime Transportation (House Committee on Transportation and Infrastructure) it was made clear that the U.S. currently has no comprehensive or centralized data set on the scope of foreign vessel activity on the OCS.  Except for mobile offshore drilling units and other vessels requiring annual Coast Guard inspections, the Coast Guard does not know who’s operating on the OCS.  This clearly has economic and security implications.

4)      The Internal Revenue Service has begun to focus on foreign vessels working in the oil and gas industry to assess whether there are instances of non-compliance with U.S. tax filing requirements.  The IRS Industry Director’s Directive #1 (10/09) stated (regarding activity on the U.S. OCS), “Our analysis indicates that a significant number of foreign vessels permitted to work in the OCS do not comply with U.S. tax filing requirements.”

5)      Customs and Border Protection (CBP) in the Department of Homeland Security issued (in July 2009) a “Proposed Modification and Revocation of Ruling Letters Relating to the Customs Position on the Application of the Jones Act to the Transportation of Certain Merchandise and Equipment Between Coastwise Points”.  CBP had reviewed existing interpretive rulings on the issues of what constitutes merchandise as distinct from equipment of the vessel and realized that there was a record of conflicting (and incorrect) interpretations.  In a move supported by Jones Act proponents, CBP was planning to modify its previous positions in several areas.  CBP has now decided not to issue any new Rulemaking in this area.  We are back to splitting hairs on the issue of “merchandise” as opposed to “equipment of the vessel”, and we are stuck with the existing record of admittedly incorrect rulings.

6)      The Bureau of Ocean Energy Management, Regulation, and Enforcement (BOEMRE) in the Department of the Interior, the relatively new federal agency that manages U.S. natural gas, oil, and other mineral resources on the OCS, has issued and is in the process of developing new environmental and safety regulations applicable to oil and gas drilling on the OCS.  These regulations can be expected to place greater burdens and costs on owners and operators on the OCS.

I could go on like this for quite a while, but the point of this extremely brief summary of current legislative and regulatory activities is that members of the maritime community should be interested observers of what is happening in Washington.

I know that Jones Act lawyers out there could easily spend an entire day discussing any single one of these issues, and Jones Act specialists could easily add several more items to my partial list of current concerns.  This is just my effort to alert members of the maritime community that a lot is at stake with the Jones Act under attack, foreign vessel activity reportedly increasing on the OCS, and new challenges going forward with the need to produce the advanced vessels increasingly needed for deepwater oil and gas exploration, development, and production, and the necessity that the Jones Act be correctly and consistently enforced with regard to the development of wind farms on the OCS, now in the early stages of becoming a major new industry.

Once again, vessel owners/operators, shipbuilders, ship repairers, and those who work aboard U.S. vessels and in U.S. shipyards should be interested observers.