Court Opinion

ID: 9339345
Source: CourtListenerOpinion
Date Created: 2022-12-16 17:46:36.108649+00
Date Added: 2024-06-11T17:15:19.356688
License: Public Domain

WIDENER, Circuit Judge,
dissenting:
I respectfully dissent.
I would relieve the prior insurer of liability for compensating an entirely new class of claims which were only created by statute after its insurance contract with the now self-insuring employer had terminated.
On March 24, 1967, James T. Spence was permanently and totally disabled by an injury in the course of his employment with Terminal Shipping Co. (Terminal), and received compensation for this injury under the Longshoremen’s and Harbor Workers’ Compensation Act, 33 U.S.C. § 908(a). The petitioner, Pennsylvania National Mutual Casualty Insurance Co. (Pennsylvania National) was Terminal’s insurer on March 24, 1967, and pursuant to the insurance contract, Pennsylvania National paid Spence’s disability benefits until his death on November 11, 1973. In the period between Spence’s injury and his death, however, several significant events occurred. On January 1, 1970, Terminal was acquired by Atlantic and Gulf Stevedores, Inc. (Atlantic), which assumed all liabilities of Terminal. On February 1, 1971, Pennsylvania National’s coverage of Terminal expired and Atlantic became the self-insurer of its new purchase. On November 26, 1972, more than a year and a half after Pennsylvania’s coverage ceased, 33 U.S.C. § 909 was amended to provide death benefits to employees who were permanently and totally disabled in the course of their employment but whose death was not caused by the disabling injury. Prior to the date of this amendment, § 909 provided death benefits only when death was caused by the disabling injury. It is undisputed that Spence’s *989death in November 1973 resulted from causes unrelated to his earlier injuries, and thus his statutory beneficiaries were eligible for death benefits under the 1972 amendment.
The issue presented in this case is whether an insurance company should be forced to pay for benefits not in existence until after the date its coverage has ended. The majority answers this question in the affirmative, and gives two reasons for its decision. First, the court appears to reject Pennsylvania National’s argument that the cause of action for death benefits arises at the time of death. Second, the majority sees no distinction between the employer and the insured, and, therefore, since the employer is liable for the newly created benefits, the insurance company also is liable.
In support of its first argument, the majority notes that while the Act provides for two types of recovery — compensation for disability and death benefits, both awards “derive their basis from the same event”— the initial injury. I cannot agree. First, as a matter of logic, a cause of action cannot accrue under § 909 (death benefits) until the employee dies. Of course, one of the requirements for recovering death benefits is a prior permanently and totally disabling injury, but I do not think a prerequisite for recovery can be said to give rise to a cause of action for death benefits before death has occurred. Second, if the majority is in fact rejecting the two causes of action theory, it declines to follow circuit precedent established in Hampton Stevedoring Corp. v. O’Hearne, 184 F.2d 76, 79 (4th Cir. 1950). In Hampton, we clearly held that the death benefit was a new and distinct cause of action from the injury benefit, and our decision on this point has been followed in State Ins. Fund v. Pesce, 548 F.2d 1112 (2d Cir. 1977). The precise issue in Hampton was whether the injury and death benefits would be considered separately or together in determining the maximum award available under the Act. This issue admittedly is somewhat different than the one before us today, but I do not believe this provides a basis for distinguishing the holding in Hampton, that death benefits create a separate cause of action for a different beneficiary.
The fact that two causes of action exist, however, does not mean that a prior insurer can avoid all death benefits once its contract is terminated. All benefits in effect during the term of coverage are the responsibility of the insurer, and so would any increase in benefits enacted after the insurer went off the risk. Long range payments under existing law and subsequent increases clearly are within the foreseeable coverage of an insurer under the Act. In the case at bar, however, we are not faced with a benefit which existed during the time of coverage or any increase in the amount of these benefits. In amending § 909, Congress created an entirely new death benefit for employees who were totally disabled on the job but died from causes unrelated to the injury.
In support of its argument that the 1972 amendment was only an increase in benefits, the majority cites N., B. & C. Lines v. Director, Office of Workers’ Compensation Programs, 539 F.2d 378, 381 (4th Cir. 1976). Certain language in that opinion does support the majority’s position, but the issue in that case was the constitutionality of the 1972 amendment. The court held that the amendment was not outside the admiralty jurisdiction, or so vague, or so harsh by retroactivity as to be constitutionally invalid. In support of this result, it noted that death benefits were recoverable before 1972, and thus expanding the causal clause to confer death benefits when death was unrelated to the job injury was not a “novel or radical concept.” 539 F.2d at 381. While I acknowledge the holding that the expansion of death benefits by the 1972 amendment is not unconstitutional, I cannot accept the conclusion that this change in the law was only an increase in existing benefits. The amendment covers an entirely new class of claimants, survivors of injured longshoremen who die for any reason unrelated to their injury. Since everyone must die sometime, the class, then, is simply the statutory beneficiary of every longshoreman who has suffered permanent and *990total disability. The only authority cited by the court in N., B. & C. Lines for the proposition that the 1972 amendment was only an increase in benefits was Hampton, supra. In Hampton, however, the change in benefits was an increase in payments for funeral expenses and a removal of the maximum award payable. Both benefits were already covered by the Act, only the amounts were changed.
The majority provides further support for its holding by noting that the petitioner does not contest the fact that the employer is liable for the death benefits. It apparently takes this as some kind of an admission of liability by the prior insurer, and reasons that by entering into an insurance contract the insurer places itself in the shoes of the company. Since the employer remains liable for death benefits after the employee leaves his job, the argument goes, the insurance company remains liable after its contract expires. I cannot agree.
As discussed above, I do not believe that this insurer should be forced to pay benefits when the cause of action arose and the benefits were not even created until after the insurance company went off the risk. A reason for my fundamental disagreement with the majority is because of the extreme burden it places on the insurer with a result so harsh that I think it could not be what Congress intended. This inequity can be illuminated by comparing the relative position of the prior insurer and the employer, or by comparing a prior and a subsequent insurer. Under the rule we lay down today, the prior insurer is left in a position so disadvantageous it cannot extricate itself. It is forced to pay claims for a new benefit, but cannot recover its loss by adjustment or charging of premiums. A subsequent insurer, however, either a new insurance company, or, as in the case at bar, the self-insuring company, does not face these problems. A new insurance company can adjust its premiums to compensate for the additional risk. The employer can pay the higher insurance premiums, look for another insurance company, or become a self-insurer.
Further, I think a central error in the majority opinion lies in its view of this case as an insurer versus an employer. This is demonstrated by the court’s reliance on the following part of N., B. & C. Lines, supra, pointing out that (1) death benefits were allowed long prior to the 1972 amendment, and (2) such benefits could validly be increased. The majority fails to point out, however, that the insurance carrier in N., B. & C Lines was the insurer before and after the 1972 amendment and when the case came up on appeal. Obviously, in that setting the position of the employer and the insurer are the same. In the case at bar, however, the prior insurer’s contract has long since terminated and the employer has become its own insurer. Thus, the employer and the insurance company described in N., B. & C. Lines are the same entity in the case before us, for Terminal’s owner, Atlantic and Gulf Stevedoring, elected to be its own insurer. The majority’s failure to recognize this crucial distinction has contributed, I think, to the erroneous result we reach today.
The simple economic truth is that someone has to pay for the cost of this new benefit, and I do not believe we should place this burden on an insurance company whose contract ended long before the new benefits were created, and which has never been, nor can ever be, paid for the risk it is forced to assume. Based on the predictable costs of the 1972 amendment, a subsequent insurer could adjust its premiums accordingly. The employer can pay the increased premium or insure itself and recoup by increased rates. Indeed, Atlantic has made that decision by becoming and remaining a self-insurer of Terminal. But the prior insurer has no such option; I do not believe Congress intended such a harsh result.