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Marine operations often require specialty workers compensation arrangements that differ substantially from those used by landlocked employers, brokers, insurers and risk managers say.
Companies involved in shipbuilding, stevedoring or offshore oil operations, for instance, are likely to need coverage for injured worker claims filed under the U.S. Longshore and Harbor Workers' Compensation Act.
Claims filed under the federal law often expose employers to greater financial loss than those brought under state workers comp systems. The complexity and additional expense of Longshore Act claims drive a need for specialty underwriting and claims handling expertise, several experts say.
"Certainly, USL&H is very much a specialty field and in the (United) States, there are probably only four or five markets that really specialize in writing that business," said Gary Moore, a principal and marine practice leader at Integro Ltd. in New York.
In addition to specialists, many multiline and workers compensation insurers offer Longshore Act coverage as an extension of their state act policies. They often do so for employers that mostly operate inland, but have some incidental marine-related risks.
"Longshore claims are very, very expensive in comparison to state act claims," said Kristy Bottomley, senior vp, claims and employee risk for Alaska National Insurance Co. in Seattle.
Several factors drive up the costs.
Dock workers tend to have high salaries, so wage replacement costs are greater than for employees working inland. In addition, Longshore Act benefits often are more generous than those provided under state workers comp laws, several industry watchers said.
Under the Longshore Act, for example, the duration of benefits to be paid for permanent partial disability claims is sometimes determined by a statutory schedule, while other times the benefit duration is not scheduled.
Whether benefits are scheduled depends on the body part that is injured, Ms. Bottomley said. Head and back injuries, for instance, are not scheduled.
For those that are not scheduled under the Longshore Act, a claimant can collect for loss of wage capacity for their entire lifetime--not just their working years, Ms. Bottomley said.
In contrast, state workers comp systems more often compensate permanent partial disability injuries using a schedule that caps benefits at a certain number of weeks. The number of weeks for which the injured employee is compensated often is less than the employee's work life, Ms. Bottomley said.
Unlike many state systems that allow employers or insurers to direct injured employees to doctors with proven track records, that is not allowed under Longshore Act rules, said Mary Ann Calkins, vp of maritime for Seabright Insurance Co. in Seattle. Therefore, greater attention must be paid to managing each claim's peculiarities, she added.
Seabright is a specialty workers comp insurer that distributes its product mainly through retail brokers, but has a Seattle-based wholesale unit and third-party administrator named PointSure Insurance Services that also distributes its products.
Structured settlements are common under the Longshore Act because of the large size of such claims, said Ed Cooke, executive vp for Lockton Insurance Brokers Inc. in Los Angeles.
Because of the generous benefits and higher claims costs, the price for Longshore Act coverage runs about 50% higher than for insuring employees doing similar work inland, Mr. Cooke estimated.
There are also the Longshore Act's other complexities.
Under the federal law, for example, many more factors exist than under state systems that influence the calculation of an injured employee's average weekly wage, which determines benefit amounts, several experts said.
The differences add to an employer's costs and provide a good reason to purchase Longshore Act coverage from a specialist underwriter that has the knowledge necessary to help limit expenses as much as possible, said Ellen Vinck, vp of risk management benefits and safety for BAE Systems Ship Repair Inc. in San Diego. Ms. Vinck is also a former president of the New York based Risk & Insurance Management Society Inc.
She purchases Longshore Act coverage from Signal Mutual Indemnity Assn., a Wilton, Conn.-based monoline insurer with more than 200 member companies.
Not all risk managers agree, though, that Longshore Act claims are necessarily more complex. The processes for handling a claim under a single federal system is at times easier than following some state processes, which vary among the states, said Bruce E. McEwan, vp, administration and risk manager for Hawaiian Tug & Barge and Young Bros. Ltd. in Honolulu.
Additionally, state systems change more frequently than does the more stable federal system, Mr. McEwan added.
Underwriting Longshore Act coverage shares many similarities with underwriting other insurance lines, said Richard Wood, Signal Mutual's chief operating officer. But it also helps to have specialty knowledge of waterfront operations, including the type of equipment used, how ships are loaded and the building practices applied in a shipyard, he added.
"You have to have knowledge of the business so you can recognize trouble before it comes up," Mr. Wood said.
Making matters even more complicated for insurers and employers with marine-related operations, injured employees in some cases can file claims for the same injury simultaneously under three different jurisdictional systems.
They can file a Longshore Act claim while seeking benefits under a state workers comp system and simultaneously pursuing a claim under the federal Merchant Marine Act of 1920, also known as the Jones Act, which allows seamen employed on vessels to sue employers for liability as well as medical care and wages.
Maritime employer liability insurance provides coverage for Jones Act claims, but determining under which system benefits should be paid requires vigilance, insurers say.
Employees can be working in a dock area and be covered under the Longshore Act, then board a ship and bring maritime employers liability coverage into play.
"You have guys that are walking in and out of two different coverages," Ms. Bottomley said.
"You have to have a real solid knowledge of case law to do the analysis that will tell you which jurisdiction (the claim) will fall into. On many occasions, they can fall into three jurisdictions that the plaintiff can simultaneously pursue," he said.