Opinion ID: 3010705
Heading Depth: 2
Heading Rank: 1

Heading: The Special Fund Under S 8(f)

Text: Section 8(f) of the Act provides that when an employee with a pre-existing condition suffers an on-the-job injury or is afflicted with a work-related disease which, in combination with the pre-existing condition,4 causes a more severe, permanent disability, the employer can apply to the Director for relief from disability payments after the employer has made such payments to the employee for 104 weeks. See 33 U.S.C. S 908(f)(1). The relevant text of the statute reads as follows: In any case in which an employee having an existing permanent partial disability suffers injury, the employer shall provide compensation for such disability as is found to be attributable to that injury based upon the average weekly wages of the employee at the time of the injury. If following an injury falling within the provisions of subsection (c)(1)-(20) of this section, the employee is totally and permanently disabled, and the disability is found not to be due solely to that injury, the employer shall provide compensation for the applicable prescribed period of weeks provided for in that section for the subsequent injury, or for one hundred and four weeks, whichever is the greater . . . . In all other cases in which the employee has a permanent partial disability, found not to be due solely to that injury, and such disability is materially and _________________________________________________________________ 4. There is no requirement that the pre-existing condition be workrelated. Lawson v. Suwanee Fruit & Steamship Co., 336 U.S. 198, 204 (1949). 8 substantially greater than that which would have resulted from the subsequent injury alone, the employer shall provide in addition to compensation under subsections (b) and (e) of this section, compensation for one hundred and four weeks only. 33 U.S.C. S 908(f)(1). The Special Fund was established in 1927 with the enactment of the LHWCA. It was created by 33 U.S.C. S 944, and was intended to spread liability for injuries sustained by employees with pre-existing conditions equally among all employers in the maritime industry.5 The Special Fund was originally enacted . . . to fund expenditures [where] an employee received an injury which alone caused only permanent partial disability, but resulted in the employee's permanent disability when combined with a previous disability, the employer had to provide compensation for the disability caused by the second or subsequent injury . . . .[T]he employee would be paid the remainder of his compensation for permanent total disability out of the Special Fund . . . Smith, The Special Fund Under The Longshore And Harbor Workers' Compensation Act, 11 Mar. Law 71 (1986). The LHWCA was enacted in response to a series of Supreme Court decisions that invalidated prior attempts to cover maritime workers under existing state compensation structures. Bath Iron Works Corp. v. Director, Office of Workers' Compensation, 136 F.3d 34, 40 (1st Cir. 1998). Those decisions resulted in a situation where the last employer was liable for injuries that became totally disabling only as a result of preexisting injuries for which the last employer had no responsibility, and over which, it had no control. The Supreme Court discussed this situation _________________________________________________________________ 5. Contribution to the Special Fund is mandatory for all maritime industry employers. Annual assessments are determined using the ratio of the employer's compensation payments under the LHWCA to the total compensation paid by all employers under the LHWCA. 33 U.S.C. S 944(c)(2); see also Lawrence P. Postol, The Federal Solution to Occupational Disease Claims -- The Longshore Act and Federal Program 21 Tort & Inc. L.J. 199, 229-30 (1996) (explaining how formula is utilized). 9 in Lawson v. Suwanee Fruit & S. S. Co., and the modern interpretation of section 8(f) can be traced directly to that decision. In Lawson, an employee had lost the sight of one eye in an accident not connected to the maritime industry. He was later hired by a steamship company and thereafter injured in a work related accident that took the sight of the other eye leaving him totally blind, and permanently disabled. However, since the total disability did not result solely from maritime employment, an issue arose as to the scope of the maritime employer's liability for the total disability. The Court defined the issue as follows: should the employer or the second injury fund6 . . . be liable for the balance of payments to equal compensation for total disability? Id. The Court noted the problems caused by earlier decisions holding the last employer fully responsible for the effects of a second injury although total disability only resulted from the combined effect of the latter injury and a preexisting condition. In particular, the Court noted the prior decision of the Oklahoma Supreme Court in Nease v. Hughes Stone Co., 114 Okl. 170 (Okla. 1925), where the second employer had been held liable for total compensation for loss of the second eye. Lawson, 336 U.S. at 203. The Court noted that [a]fter the decision . . . thousands of one-eyed, onelegged, one-armed, one-handed men in the State of Oklahoma [lost their jobs] and [could] not get employment. . . . The decision displaced between seven and eight thousand men in less than 30 days in Oklahoma. Id. (internal quotation marks omitted). See also Bath Iron Works, 136 F.3d at 41 (quoting Lawson). At the time Lawson was decided, S 8(f) provided that if an employee receives an injury which of itself would only cause permanent partial disability but which, combined with a previous disability, does in fact cause permanent disability, the employer shall provide _________________________________________________________________ 6. The Special Fund under section 8(f) of the Act is often referred to as the second injury fund. 10 compensation only for the disability caused by the subsequent injury: Provided, however, that . . . after the cessation of the payments for the prescribed period of weeks, the employee shall be paid the remainder of the compensation that would be due for permanent total disability. . . . out of the special fund. Id. at 200. The Court held that this second injury provision served a double purpose. It protects the employer who has hired, say, a one-eyed worker who goes and loses his other eye and becomes a total disability. Id. at 202. However, it also protects the worker with one eye from being denied employment on account of his being an extra risk. Now, . . . it is possible to protect both the employer and to protect the one-eyed employee also. Id. See also Bath Iron Works Corp., 136 F.3d at 40 (1st Cir. 1998). The Court concluded that the protection of the Act could not have been intended only when the first disability resulted from a covered occupation. If the Act were so limited, the employers would still be reluctant to hire workers with pre-existing injuries. The problem was not the source of the pre-existing injury, but the fact that the worker who came to an employer with a disability posed a greater risk of becoming totally disabled while working for the subsequent employer. The Court in Lawson held that Congress had to intend previous disability as used in the Act to include a disability in fact, whether or not it occurred under circumstances covered by the LHWCA. Thus, it was necessary to allow the employer relief from the special fund even though the pre-existing injury was not related to an occupation covered by the LHWCA. Since Lawson, courts have interpreted the LHWCA in a manner that is consistent with the public policy of preventing discrimination against employees with preexisting injuries. We have stated that the underlying congressional purpose in creating the special fund was to encourage the employment of partially disabled persons. Director, Office of Workers' Compensation v. Universal Terminal & Stevedoring Corp., 575 F.2d 452, 456 (3d Cir. 1978).7 Moreover, the congressional committee reports for _________________________________________________________________ 7. Several courts of appeals have held that the purpose is only to prevent discrimination. See C.G. Willis, Inc. v. Director, Office of Workers' 11 the 1972 amendments to the LHWCA specifically affirm that section 8(f) relief is intended to encourage the employment of handicapped workers. H.R. Rep. No. 1411, 92nd Cong., 2nd Sess. 8 (1972). Congress initially created only two conditions precedent to section 8(f) relief. An employee had to have a preexisting partial disability, and that disability had to combine with a subsequent work injury to create a permanent, total disability. See 33 U.S.C. S 908(f)(1). However, the strong anti-discrimination policy endemic to the LHWCA gave rise to a third condition. That judicially created condition precedent to section 8(f) is known as the manifestation requirement. This is the condition that is at the center of the instant dispute.