PUBLISHED

UNITED STATES COURT OF APPEALS

FOR THE FOURTH CIRCUIT

UNIVERSAL MARITIME CORPORATION,

Petitioner,

v.

FRANK MOORE; DIRECTOR, OFFICE OF

No. 96-2612

WORKERS' COMPENSATION PROGRAM;

UNITED STATES DEPARTMENT OF

LABOR,

Respondents.

On Petition for Review of an Order

of the Benefits Review Board.

(95-575)

Argued: June 5, 1997

Decided: September 16, 1997

Before WIDENER and NIEMEYER, Circuit Judges, and

MICHAEL, Senior United States District Judge for the

Western District of Virginia, sitting by designation.

_________________________________________________________________

Vacated and remanded by published opinion. Judge Niemeyer wrote

the opinion, in which Judge Widener and Senior Judge Michael

joined.

_________________________________________________________________

COUNSEL

ARGUED: Stephen Edward Darling, SINKLER & BOYD, P.A.,

Charleston, South Carolina, for Petitioner. Ralph R. Lorberbaum,
ZIPPERER & LORBERBAUM, P.C., Savannah, Georgia, for

Respondent Moore; Mark A. Reinhalter, Office of the Solicitor,

UNITED STATES DEPARTMENT OF LABOR, Washington, D.C.,

for Respondent Director. ON BRIEF: J. Davitt McAteer, Acting

Solicitor of Labor, Carol A. De Deo, Associate Solicitor, Laura J.

Stomski, Office of the Solicitor, UNITED STATES DEPARTMENT

OF LABOR, Washington, D.C., for Respondent Director.

_________________________________________________________________

OPINION

NIEMEYER, Circuit Judge:

On appeal of an award to Frank Moore of benefits under the Longshore and Harbor Workers' Compensation Act, 33 U.S.C. § 901 et

seq., for permanent total disability, we reverse and remand because

we conclude that (1) the Administrative Law Judge ("ALJ") erred as

a matter of law in applying the statutory presumption under 33 U.S.C.

§ 920(a) to presume that Moore's back pain was caused by a workrelated accident; (2) the ALJ erred in finding permanent total disability without any medical evidence of maximum improvement with

respect to Moore's back problem; (3) the ALJ erred as a matter of law

in refusing to credit a vocational survey on the ground that Moore's

employer failed to interview potential employers in the community

offering alternative jobs; and (4) the ALJ failed to follow 33 U.S.C.

§ 910 in computing Moore's average weekly wage. We reject the

employer's other assignments of error and affirm the ALJ's rulings

refusing to admit a surveillance videotape and finding that the

employer's application for relief from the special fund under 33

U.S.C. § 908(f) was forfeited, although we affirm the latter ruling for

reasons other than those given by the ALJ.

I

On November 18, 1991, Frank Moore fell from a ladder when it

slipped, and he struck his knee on the floor, injuring it. At the time,

Moore was working as a container repairman for Universal Maritime

Corporation in Mt. Pleasant, South Carolina. Two months after the

fall, Moore filed a workers' compensation claim for temporary total

disability caused by injury to his "right leg and right knee joint."

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Moore was a longtime employee who had completed the eighth

grade and had reading and mathematical skills at the third grade level.

He had worked for years as a self-trained repairman of large containers used for shipping. His job involved kneeling, crouching, and

climbing, as well as strenuous lifting of at least up to 50 pounds. Prior

to his November 1991 fall from the ladder, Moore had complained of

back pain and had suffered injuries to his ribs, left hand and left knee.

Even though he has a documented reduction of function in his left

knee, he had been able to perform his job as a container repairman.

Following his November 1991 fall, Moore was treated by Dr. Howard Brilliant, an orthopedist who had regularly treated Moore for various ailments. When Moore's right knee did not respond to treatment,

Dr. Brilliant performed arthroscopic surgery on the knee on March 2,

1992, removing loose debris from the joint. Dr. Brilliant believed his

surgery to have secured all of the improvement to Moore's knee that

was then available. But because Moore continued to complain of pain

and to miss work, at Universal Maritime's urging, Moore was examined by Dr. Bright McConnell, a knee specialist. Dr. McConnell performed a second surgery on October 22, 1992 to repair a tear in the

meniscus. This second surgery appeared to improve Moore's knee

condition, which reached maximum improvement, in Dr. McConnell's opinion, in January 1993. Dr. McConnell concluded that Moore

had suffered a permanent 15% impairment in his right knee as the

combined result of the injury and of degenerative arthritis. He noted

that this impairment would require some work restrictions. Dr. Brilliant, on the other hand, gave an opinion that Moore was totally and

permanently disabled as of March 1992, when Dr. Brilliant performed

the arthroscopic knee surgery.

Moore never returned to work after his second surgery, citing

among other things the combination of the impairments in both knees,

his need to wear a knee brace on the injured right knee, and his need

to use a cane for balance.

At his hearing for workers' compensation, Moore presented evidence not only of his knee injury, but also of back problems which

limited his ability to bend and lift. While the effects of Moore's back

problem were adequately documented at the hearing, evidence regarding its nature and origin was sparse and confusing. Moore had a his-

 3
tory of low back pain predating the 1991 fall from the ladder. But in

a report dated January 1992, only two months after the fall, examining physician Dr. Warren specifically noted that Moore "does not

complain of back pain." By the summer of 1992, some eight months

after the accident, a first report of back pain was made by Dr. McConnell, who had performed the second surgery on Moore's knee, reporting that Moore "is complaining of some low back discomfort with

pain down the lateral aspect of his right side and right lower leg." And

on November 6, 1992, almost a year after the fall, Dr. Brilliant first

reported a complaint from Moore of back pain, noting"since he was

here last he had developed back pain."

At the hearing before the ALJ, Moore testified that when he woke

up one day in November 1992, about a year after the fall, he experienced serious pain in his back:

I couldn't move and I did manage to get up out of the bed

and make it, and get in my automobile and go to the hospital

to find out what was going on because I had never had that

pain before and I never was drawn up in a knot like that.

Elsewhere in his testimony, Moore acknowledged that he had also

suffered back pain as a result of an earlier injury that preceded the

1991 fall. Medical records relating to that fact showed that within the

month before the fall Moore complained of pain in his back. At

another point during the hearing, Moore testified that after his fall,

both his knee and his back were "bothering him" and that he had been

"complaining about my back ever since I had the injury. No one has

ever done anything about my back." This testimony replaced his prehearing statement that the back pain was a result of gait changes

caused by the knee injury, a theory which would make the back pain

secondary and not a direct result of the fall. No medical records provided support for the gait-change theory in any case, nor did any medical professional express any opinion as to the cause of the back pain,

although Dr. Brilliant did state that Moore was suffering from arthritis

of the back subsequent to his accident. Finally, medical records

expressed no opinion as to the prognosis for Moore's back pain,

including whether the condition had reached its maximum improvement.

 4
In his opinion awarding benefits for permanent total disability

under § 8(a) of the Longshore and Harbor Workers' Compensation

Act, the ALJ stated that:

The medical reports of Dr. Brilliant as well as claimant's

complaints and symptoms of pain established that his right

knee and back injuries could have been caused by the

November 18, 1991 work related accident, and thus, under

§ 20(a), it is presumed that claimant's right knee and back

injuries were caused by the November, 1991 accident.

(Emphasis added). The ALJ also concluded that Universal Maritime

had not rebutted the § 20(a) presumption of causation because "the

reports of Dr. McConnell and Dr. Shutte are given less weight than

those of Dr. Brilliant."

In finding permanent total disability, the ALJ determined that

Moore was incapable of returning to his prior job and rejected evidence that suitable alternative work was available in the community

because the employer had not adequately considered the limitations

on Moore as a result of the pre-existing reduction of function in his

left knee and his poor education and it had not contacted the prospective alternative employers to determine the full requirements for the

available jobs. The ALJ rejected the employer's evidence of job

descriptions taken from the Dictionary of Occupational Titles, published by the Department of Labor.

The decision of the ALJ was affirmed by the Benefits Review

Board by operation of law, pursuant to the Omnibus Consolidated

Rescissions and Appropriations Act of 1996, Pub. L. No. 104-134,

§ 101(d), 110 Stat. 1321, 1321-29 (1996), providing that certain decisions pending before the Benefits Review Board for more than one

year are to be considered affirmed for purposes of seeking judicial

review. This appeal followed.

II

Universal Maritime's chief complaint about the Board's decision

centers on the manner in which the ALJ considered Moore's back

 5
pain to conclude that Moore was totally and permanently disabled.

Universal Maritime contends that the ALJ gave virtually conclusive

weight to the presumption afforded by § 20(a) of the Longshore and

Harbor Workers' Compensation Act (hereinafter "the Act"), 33

U.S.C. § 920(a), that Moore's back claim came within the provisions

of the Act and therefore failed to make the necessary factual determinations about whether the back pain was caused by Moore's fall in

November 1991 from the ladder.

The ALJ relied on evidence of back pain first reported approximately eight months after Moore's accident and on Moore's testimony that he had been experiencing back pain since the date of the

accident. The ALJ concluded that because the back injury "could have

been caused by the November, 1991 work related accident" that

injury "is presumed to have been caused" by the 1991 accident. After

summarizing some of the employer's evidence that cast doubt about

the cause of Moore's back pain -- relating to Moore's credibility and

the absence of any contemporaneous reports of pain-- the ALJ concluded that the evidence was "insufficient to rebut the § 20(a) presumption of causation." Accordingly, the ALJ continued to consider

the presumption as evidence, weighing it against the employer's evidence: "The employer has not met its burden of rebutting the § 20(a)

presumption of causation as the reports of Dr. McConnell and Dr.

Shutte are given less weight than those of Dr. Brilliant." Before

addressing Universal Maritime's argument, it will be useful to review

the nature and scope of the statutory presumption created by the Act.

Section 20(a) of the Act, 33 U.S.C. § 920(a), provides in pertinent

part, "In any proceeding for the enforcement of a claim for compensation under this chapter it shall be presumed, in the absence of substantial evidence to the contrary . . . that the claim comes within the

provisions of this chapter." The presumption is a broad one, and

advances the facility with which claims are to be treated to further the

Act's purpose of compensating injured workers regardless of fault.

But that procedural facilitating device is not a substitute for substantive evidence which an injured worker must present to be entitled to

compensation. See U.S. Industries/Federal Sheet Metal, Inc. v. Director, OWCP, 455 U.S. 608, 614 n.7 (1982) ("As Professor Larson

warns, `[n]o amount of informality can alter the elementary require-

 6
ment that the claimant allege and prove the substance of all essential

elements in his case'").

In order for the presumption to apply, a claim must be made that

brings an injury within the outer scope of the Act. As the Court in

U.S. Industries stated, "A prima facie `claim for compensation,' to

which the statutory presumption refers, must at least allege an injury

that arose in the course of employment as well as out of employment." 455 U.S. at 615. Thus, an employee seeking to have the benefit of the statutory presumption must first allege (1) an injury or death

(2) that arose out of and in the course of (3) his maritime employment. To this claim attaches a presumption of coverage by the Act,

shifting the burden of proceeding further to the employer. While the

presumption thus facilitates the presentation of a claim, it provides

"no substitute for the allegations necessary to state a prima facie

case." Id. at 616.

If an employer does not offer substantial evidence to rebut the presumption, it is true that the presumption provided by § 20 will entitle

a claimant to compensation. See Del Vecchio v. Bowers, 296 U.S.

280, 284-85 (1935). When the employer, however, does offer evidence sufficient to justify denial of a claim, the statutory presumption

"falls out of the case" and does not remain as evidence that is weighed

in finding facts. Id. at 286. Rather the issues then must be resolved

only on the evidence in the case. As the Supreme Court explained in

Del Vecchio:

If the employer alone adduces evidence which tends to support the theory [contrary to the presumption], the case must

be decided upon that evidence. Where the claimant offers

substantial evidence in opposition, . . . the issue must be

resolved upon the whole body of proof pro and con; and if

it permits an inference either way upon the question. . ., the

Deputy Commissioner and he alone is empowered to draw

the inference; his decision as to the weight of the evidence

may not be disturbed by the court.

Id. at 286-87. Thus, the statutory presumption created by 33 U.S.C.

§ 920 functions similarly to the presumption created by Rule 301 of

the Federal Rules of Evidence and the proof scheme under Title VII

 7
of the Civil Rights Act of 1964 as described in Texas Dep't of Community Affairs v. Burdine, 450 U.S. 248 (1981). See U.S. Industries,

455 U.S. at 612 n.5.

In the case before us, Moore testified that he experienced back pain

immediately after the accident in November 1991. Even though it

may appear incredible in light of Moore's other testimony, his prehearing statement to Dr. Warren that he was not experiencing back

pain, and the absence of any complaint to his other doctors, the ALJ

was entitled to credit Moore's testimony that the back pain resulted

from the accident itself. Because of this testimony establishing a

prima facie case, Moore's claim was properly given the benefit of the

presumption created by 33 U.S.C. § 920(a). But the ALJ then ignored

the legal import of evidence rebutting this presumption. Once evidence is presented that could support a finding against Moore, the

presumption falls out of the case, and the ALJ is required to weigh

only the evidence, not the presumption itself. The ALJ, however, continued to treat the presumption as substantive evidence and, in doing

so, erred.

The employer's rebuttal evidence would undoubtedly support a

finding that Moore's back pain was not caused by the accident. As the

ALJ observed, "Dr. Brilliant's post-accident medical records indicate

no sign of back complaints until [a year after the accident]." Moreover, Dr. Warren affirmatively reported two months after the accident

that Moore "does not complain of back pain." Indeed, no medical

report refers to any back pain until more than one-half year after the

accident when Dr. McConnell first refers to Moore's complaint of

"some low back discomfort." While the evidence indicating the

absence of any back pain complaint for six to eight months after the

accident and the affirmative statement of Dr. Warren placed causation

squarely at issue, there is also evidence in the record that Moore had

experienced back problems prior to the accident to which any later

back pain could have been attributed. All of this evidence is sufficient

to justify a factfinder to conclude that the back pain was not caused

by the accident but rather by either a pre-existing condition or a subsequent unrelated deterioration. While substantial evidence requires

"more than a mere scintilla," it is only "such relevant evidence as a

reasonable mind might accept as adequate to support a conclusion."

Richardson v. Perales, 402 U.S. 389, 401 (1971) (quoting

 8
Consolidated Edison v. NLRB, 305 U.S. 197, 229 (1938)). Under this

standard, the evidence that Universal Maritime presented casting

doubt on the causative link between Moore's November 1991 fall and

his subsequent back pain was sufficient as a matter of law to cause

the statutory presumption afforded by 33 U.S.C.§ 920(a) to drop

from the case. See Del Vecchio, 296 U.S. at 286. The ALJ was then

left with the task of weighing the evidence in the record. Rather than

doing that, the ALJ continued to weigh the employer's evidence

against the weight of the presumption as if the presumption were evidence.

Accordingly, it is necessary to remand the case to permit the ALJ

to apply the statutory presumption in the proper manner.

III

Universal Maritime also contends that Moore failed to introduce

evidence sufficient to find permanent disability as a result of his back

pain. In order to make a finding of permanent disability, there must

be substantial evidence that the condition alleged to be disabling has

reached maximum medical improvement. See SGS Control Serv. v.

Director, OWCP, 86 F.3d 438, 443-44 (5th Cir. 1996); Director,

OWCP v. Berkstresser, 921 F.2d 306, 312 (D.C. Cir. 1991). Although

there was evidence of maximum improvement with regard to Moore's

knee, there was no opinion from any source as to the prognosis for

Moore's back condition. Thus, the ALJ also erred in finding total and

permanent disability based in part on the limitations of Moore's functional ability caused by his back.

IV

Universal Maritime contends that the ALJ abused his discretion in

excluding from evidence at the hearing a surveillance videotape of

Moore which Universal Maritime sought to introduce even though it

had not included the tape on its pre-hearing list of exhibits. Universal

Maritime noted that the tape did not exist before the weekend preceding the Monday hearing so that it could not have included the tape on

a pre-hearing list.

 9
Evidentiary matters at hearings under the Longshore and Harbor

Workers' Compensation Act are governed by 29 C.F.R.§ 18.103,

which states in relevant part:

Error may not be predicated upon a ruling which admits or

excludes evidence unless a substantial right of the party is

affected and . . . [i]n case the ruling is one excluding evidence, the substance of the evidence was made known to the

judge by offer or was apparent from the context within

which questions were asked.

29 C.F.R. § 18.103(a)(2).

In this case, Universal Maritime did not mark the videotape for

identification, nor did it make a proffer of its contents. Rather it simply stated that the videotape was "material" and that it was the product of a recent surveillance. Accordingly, we have nothing in the

record by which we can review the nature of the evidence excluded.

Even on appeal, Universal Maritime does not describe precisely what

the videotape would show, making it impossible for us to determine

whether its exclusion should be found to be plain error despite the

failure to make a proffer. See 29 C.F.R.§ 18.103(c). Accordingly, on

the record before us, we can find no abuse of discretion by the ALJ

in excluding the videotape from evidence.

V

Universal Maritime next challenges the ALJ's finding that Moore

is totally disabled.

To determine whether disability is partial or total involves a shifting proof scheme. Once a claimant establishes that he is incapable of

returning to his prior employment, the burden shifts to the employer

to prove that the claimant is not totally disabled by presenting evidence of other jobs that are available in the relevant geographic market for which the claimant is physically and educationally qualified.

See Newport News Shipbuilding & Dry Dock Co. v. Tann, 841 F.2d

540, 542 (4th Cir. 1988).

 10
In this case, the employer challenges first the substantiality of the

evidence supporting the ALJ's conclusion that Moore was incapable

of returning to his prior position as a container repairman. Although

the ALJ possibly relied in part on the evidence of Moore's back pain

to which he erroneously applied the § 920(a) presumption to establish

causation, even in the absence of that evidence we believe that there

is substantial evidence from which the ALJ could have concluded

that, as a result of the condition of both knees, Moore was incapable

of performing the bending and climbing required by his former work.

Universal Maritime's second argument, that the ALJ erred in refusing to credit its survey of available alternative employment, is more

substantial. To meet its burden of demonstrating the availability of

alternative employment, Universal Maritime presented the testimony

of a vocational surveyor who derived a list of available positions from

want ads and listings in the local employment office. To flesh out the

physical and educational demands of each advertised position, the

expert relied on standard job descriptions found in the Dictionary of

Occupational Titles, published by the United States Department of

Labor. The ALJ rejected the validity of the survey, however, based

in part upon the vocational expert's failure to contact the prospective

employers to ascertain specifically their requirements for the listed

positions. Without other evidence of available alternative employment, the ALJ found Moore to be totally disabled.

Our precedents establish that to meet the burden of showing the

availability of alternative work, the employer need not contact prospective employers to inform them of the qualifications and limitations of the claimant and to determine if they would in fact consider

hiring the candidate for their position. See Newport News

Shipbuilding, 841 F.2d at 542; Trans-State Dredging v. Benefits

Review Board, 731 F.2d 199, 201 (4th Cir. 1984). But we have never

before determined whether the defendant employer must contact the

prospective employers in his survey to obtain their specific job

requirements before determining whether the claimant would be qualified for such work.

Such a requirement, like that rejected in Newport News

Shipbuilding and Trans-State Dredging, would, we believe, substantially increase the employer's burden without a commensurate bene-

 11
fit. Although requiring such specific description might increase the

precision of vocational surveys, such precision is not necessary since

the claimant is able to correct any overbreadth in a survey by demonstrating the failure of his good faith effort to secure employment. See

Newport News Shipbuilding, 841 F.2d at 542.

Accordingly, we hold that the employer may meet his burden of

responding to a total disability claim by demonstrating the availability

of specific jobs in a local market and by relying on standard occupational descriptions to fill out the qualifications for performing such

jobs. The employer need not contact the prospective employer for its

specific requirements in order to establish a valid vocational survey.

In adopting this rule, we impose a burden parallel to that required by

other compensation schemes such as Social Security Disability Insurance and Railroad Retirement Act disability benefits, both of which

rely on standard occupational descriptions, including those provided

in the Dictionary of Occupational Titles. See 20 C.F.R.

§§ 404.1566(d)(1) & 220.131(d)(1).

VI

Universal Maritime also challenges the manner in which the ALJ

determined Moore's average weekly wage for purposes of awarding

compensation. The ALJ calculated Moore's average weekly wage by

taking his annual earnings for calendar year 1991 as reported on his

W-2 forms and dividing that number by 46, the number of weeks that

Moore worked in 1991 prior to his accident in mid-November. Moore

did not work for the remainder of the calendar year. The ALJ added

to this number the annual amount of container royalties, holiday, and

vacation pay for 1991, divided by the full 52 weeks of the year. Contending that this method of calculation artificially inflated Moore's

average weekly wage, Universal Maritime argues instead that the ALJ

should have taken Moore's total salary not for calendar 1991 but for

the 52 week period preceding the accident and should have divided

this number by 52 weeks to determine the average weekly wage,

despite the fact that Moore was absent from work without earnings

during 9 of the 52 weeks preceding the accident.

We conclude that neither of the foregoing calculations conforms to

the method specified by § 10(a) of the Act, 33 U.S.C. § 910(a). Sec-

 12
tion 10(a) states, "[i]f the injured employee shall have worked in the

employment in which he was working at the time of the injury . . .

during substantially the whole of the year immediately preceding his

injury, his average annual earnings shall consist of[a multiple of] the

average daily wage . . . which he shall have earned in such employment during the days when so employed." 33 U.S.C. § 910(a) (emphasis added). Thus, the proper inquiry requires the ALJ to determine the

total income earned by the claimant in the 52 weeks prior to the accident and to divide that sum by the actual number of days for which

the employee was paid to determine an average daily wage. This daily

wage must then be multiplied by 300 if the ALJ determines the claimant to have worked a 6-day week, or by 260 if the claimant worked

a 5-day week, yielding the claimant's average yearly salary. See 33

U.S.C. § 910(a). Finally, this yearly number must be divided by 52 to

yield the average weekly wage. See 33 U.S.C.§ 910(d)(1); see also

Diosdado v. Newpark Shipbuilding & Repair, Inc., B.R.B. No. 96-

1585, 1997 WL 369949, at *6 (Ben. Rev. Bd. June 10, 1997).

Accordingly, if Moore is to be awarded compensation, the amount

must be calculated in accordance with 33 U.S.C.§ 910(a) and (d)(1).

VII

Finally, Universal Maritime contends that it is entitled to mitigation

of its future liability by recourse to the special injury liability fund,

established under 33 U.S.C. § 944 and administered under 33 U.S.C.

§ 908(f). Under § 908(f), an employer may mitigate the extent of its

liability for the payment of compensation by showing that the injury

for which it has responsibility under the Act would not have resulted

in total permanent disability but for the presence of a pre-existing

condition of which it was aware. See Director, OWCP v. Newport

News Shipbuilding & Dry Dock Co., 8 F.3d 175, 182 n.5 (4th Cir.

1993). If the employer meets this burden, his liability for compensation will be limited to the benefit payments which would be available

for the partial disability resulting from the work-related accident

alone, generally payable for the number of weeks specifically designated by statute in relation to that injury or for 104 weeks. See 33

U.S.C. § 908(f)(1). The remainder of the claimant's award, constituting the difference between the employer's portion and the award for

permanent total disability, will be paid from a statutory fund to which

the employer shall have contributed. See 33 U.S.C. § 908(f)(2).

 13
Because Universal Maritime did not earlier assert a defense claiming

recourse to the special injury fund, thereby denying the Director of

OWCP the opportunity to defend the fund, the ALJ denied its posthearing request to consider the defense for the first time on motion

for reconsideration. Universal Maritime argues that this was error in

light of its efforts to preserve the claim before hearing and the conditional nature of its defense of the case. The issue thus presented is

whether Universal Maritime forfeited its claim for§ 908(f) relief by

raising it for the first time in its motion for reconsideration.

Prior to 1984, § 8(f) of the Act, 33 U.S.C.§ 908(f), contained no

explicit restrictions on the time for raising a claim for relief under its

provisions. See Pub. L. No. 98-426, § 8(e)(5), 98 Stat. 1646 (amending 33 U.S.C. § 908(f) to add paragraph (f)(3)). Cases decided under

the pre-1984 version of § 8(f) nonetheless construed it as requiring

the claim for special fund apportionment to be raised at the first available opportunity, generally no later than the initial hearing before the

ALJ. See Brady-Hamilton Stevedore Co. v. Director, OWCP, 779

F.2d 512, 513-14 (9th Cir. 1985) (§ 8(f) relief must be sought at first

hearing before ALJ or be waived); Verderane v. Jacksonville Shipyards, Inc., 772 F.2d 775, 778-79 (11th Cir. 1985) (where § 8(f) relief

claim was not raised at first hearing before ALJ, right was waived and

employer could not raise it during proceedings before ALJ on remand

ordered by BRB to resolve discrete statutory coverage issue);

American Bridge Division v. Director, OWCP, 679 F.2d 81 (5th Cir.

1982) (where employer had belatedly mentioned argument for § 8(f)

relief during informal proceedings before deputy commissioner but

neither listed it as issue for resolution by ALJ on pre-hearing form nor

raised it in actual hearing before ALJ, employer could not raise it for

first time on review of ALJ's award of total disability benefits).

Under the pre-1984 version of the law, the Director of OWCP, who

is charged with representing the special injury fund, was usually

unrepresented at the hearing before the ALJ, and thus, assertions of

entitlement to § 8(f) relief often went uncontradicted when raised for

the first time at the hearing. See 51 Fed. Reg. 4270, 4277-78 (February 3, 1986) (reviewing history of actions under prior 33 U.S.C.

§ 908(f) and legislative history of new § 908(f)(3)); cf. American

Bridge Division, 679 F.2d at 83 n.4 & n.5 (suggesting that when

§ 8(f) relief is raised for first time at hearing before ALJ, he should

 14
suspend decision on that point and remand to deputy commissioner

for recommendation).

To remedy this problem, Congress amended § 8(f) in 1984 to

require that entitlement to § 8(f) relief be raised and documented earlier, during informal proceedings before the deputy commissioner.

That section as amended and as here applicable states:

Any request . . . for apportionment of liability to the special

fund . . . for the payment of compensation benefits, and a

statement of the grounds therefore, shall be presented to the

deputy commissioner prior to the consideration of the claim

by the deputy commissioner. Failure to present such request

prior to such consideration shall be an absolute defense to

the special fund's liability for the payment of any benefits

in connection with such claim, unless the employer could

not have reasonably anticipated the liability of the special

fund prior to the issuance of a compensation order.

33 U.S.C. § 908(f)(3). Regulations implementing this statute give

extensive directions for the filing of an application with the district

director during the informal portion of the claim process. See 20

C.F.R. § 702.321(b)(1) &(2); see generally 33 U.S.C. § 919 (explaining claim procedure); 20 C.F.R. §§ 702.301-702.319. And when the

claim cannot be resolved without a formal hearing and is referred to

the Office of Administrative Law Judges ("OALJ") for a hearing, the

regulation provides with regard to an application for special fund

relief:

Where the claimant's condition has not reached maximum

medical improvement and no claim for permanency is raised

by the date the case is referred to the OALJ, an application

need not be submitted to the district director to preserve the

employer's right to later seek relief under section 8(f) of the

Act. In all other cases, failure to submit a fully documented

application by the date established by the district director

shall be an absolute defense to the liability of the special

fund. This defense is an affirmative defense which must be

raised and pleaded by the Director. The absolute defense

will not be raised where permanency was not an issue before

 15
the district director. In all other cases, where permanency

has been raised, the failure of an employer to submit a

timely and fully documented application for section 8(f)

relief shall not prevent the district director, at his/her discretion, from considering the claim for compensation and transmitting the case for formal hearing. The failure of an

employer to present a timely and fully documented application for section 8(f) relief may be excused only where the

employer could not have reasonably anticipated the liability

of the special fund prior to the consideration of the claim by

the district director.

20 C.F.R. § 702.321(b)(3).

Universal Maritime takes the position that it is covered by the first

sentence of 702.321(b)(3) because there has never been a finding of

maximum medical improvement with regard to Moore's back and

because Moore did not claim permanent disability of any kind until

after the case had been referred to the OALJ. Universal Maritime thus

maintains that the ALJ erred in relying on 20 C.F.R.§ 702.321(b)(3)

to bar its belated attempt to raise § 8(f) entitlement because the regulation makes the absolute defense an affirmative defense which must

be raised by the district director.

In this case, no such affirmative defense was raised since the

employer neither submitted an application for relief to the district

director nor actually raised the issue at the hearing before the ALJ.

The employer first sought to assert special fund liability in a petition

for reconsideration made after the ALJ awarded permanent total disability benefits. At that point, the ALJ rejected it as untimely. But

Universal Maritime also appears to contend that since it was not

barred by the affirmative defense provisions of the regulation and

because it gave notice purporting to reserve its right to later raise the

issue of § 8(f) liability prior to the hearing before the ALJ, it was

under no time restriction with regard to actually arguing its claim for

special fund liability, thereby entitling it to address the liability after

the ALJ awarded benefits for permanent and total disability.

The Director of the Office of Workers Compensation Programs

concedes, and we agree, that the ALJ erred in relying on 20 C.F.R.

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§ 720.321 to hold that the request for § 8(f) relief was untimely filed.

As noted, the regulation makes this defense, while absolute, an affirmative defense, and such defense was never raised. Indeed, the district director was not even a participant in the litigation at the time

that the employer attempted to raise § 8(f) liability. Furthermore,

under this circular regulation, it appears that if the exception to the

requirement of filing an application for § 8(f) relief with the district

director, embodied in the first sentence of the subsection, is met, the

regulation prohibits the director from attempting to raise the affirmative defense of untimeliness. See 20 C.F.R.§ 702.321(b)(3) ("The

absolute defense will not be raised where permanency was not an

issue before the district director").

The Director contends, however, that notwithstanding the inapplicability of 20 C.F.R. § 720.321, Universal Maritime remains obligated under § 8(f) to submit a documented application for § 8(f) relief

at the earliest time that it was aware of the claimant's alleged permanent disability and the possibility of special fund relief. In this case,

therefore, the Director asserts that the employer had an obligation to

litigate the special fund's liability fully at the hearing before the ALJ

on the merits of Moore's claim.

As the legislative history summarized above indicates, the 1984

amendment to the Act was designed to advance to a point even earlier

in the claim process the employer's obligation to raise entitlement to

§ 8(f) relief. The earlier the entitlement was alleged, the better the

position of the district director to evaluate and controvert special fund

liability if it were not appropriate. Although the regulations promulgated under the 1984 amendments were designed to preserve the

availability of the relief in cases in which the issue of § 8(f) relief

could not be anticipated during the period of informal claim consideration before the deputy commissioner -- cases in which there was

then no claim of permanency -- in general, they do not provide for

a bifurcated liability determination process. See 51 Fed. Reg. 4270,

4278-79 (Feb. 3, 1986) (rejecting suggestion of bifurcating process).

The Director thus has not construed the 1984 amendment and its regulations as doing away with the previously-established requirement

that special fund liability be both raised and documented at the earliest possible opportunity. Absent a clear congressional intent to the

contrary, we afford deference to a reasonable construction of the Act

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by the Director because of his policy-making authority with regard to

the Act. See Pittman Mechanical Contractors, Inc. v. Director,

OWCP, 35 F.3d 122, 125 (4th Cir. 1994), and authorities collected

therein.

Universal Maritime presents no legitimate excuse for not presenting its § 8(f) claim at the hearing before the ALJ on the merits of

Moore's claim. On its Amended Pre-hearing Statement dated June 23,

1993, it "reserve[d] the right to pursue relief under § 908(f) of the Act

if the Court finds that the back injury claimed by Mr. Moore is related

to his job related accident." Again, on another Amended Pre-hearing

Statement dated October 28, 1993, it stated that it would "present for

resolution at formal hearing . . . [the issue of] 8(f) relief." Yet, at the

hearing it failed to make a § 8(f) claim or to raise the issue. We are

aware of no special circumstances compelling us to excuse this failure. It is true that in order to have raised and argued the issue before

the ALJ, Universal Maritime would have been required to make an

argument which was conditional and in part contradictory to its position on the merits of Moore's claim, since it did not concede that

Moore in fact had suffered any permanent, totally disabling injury at

all. But in civil litigation, parties regularly argue alternative and contradictory theories, and that requirement was expressly accepted in the

promulgation of the regulations. See 51 Fed. Reg. 4270, 4278 (Feb.

3, 1986); Verderane, 772 F.2d at 778-79; American Bridge Division,

679 F.2d at 83; Fed. R. Civ. P. 8(e)(2). Indeed, the continuing obligation to raise and argue § 8(f) liability at the first possible opportunity

is indicated in 33 U.S.C. § 908(f)(3) itself which excuses the failure

to file only where the issue could not reasonably be anticipated "prior

to the issuance of a compensation order."

Accordingly, we conclude that the ALJ did not err in concluding

that Universal Maritime forfeited its § 8(f) claim by its failure to raise

the issue at the initial hearing before the ALJ on the merits of

Moore's claim.

VIII

In summary, we vacate the Board's order affirming the ALJ's

award of permanent total disability benefits to Moore and remand the

case for further proceedings consistent with this opinion.

VACATED AND REMANDED

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