Responsible Reporting Third Party Settlement - Case Summary

The Parties

Mr. Edwards’s vehicle was struck from behind by a truck that was either at or near an entrance gate to the Marine Repair facility in South Carolina.

Marine Repair Services owns depots where it repairs intermodal equipment. It also provides mobile repair service for trucks near marine and rail terminals.

The Facts

Mr. Edwards filed a claim under the Longshore and Harbor Workers’ Compensation Act in 2012 and alleged that he sustained injuries on June 10, 2010. This occurred when his vehicle was struck from behind by a truck at or near an entrance gate to the Marine Repair Services facility in South Carolina.

In addition, Mr. Edwards also filed a tort suit in federal court against the owners of the truck that hit him.  The parties to the tort action settled the claim for an undisclosed amount, and that court dismissed the tort action on April 29, 2013.

With respect to Mr. Edwards’s claim under the Act, Marine Repair Services filed a motion for summary decision (to have the matter dismissed without having to conduct a full hearing) with the administrative law judge in September 2014. Marine Repair Services asserted that Mr. Edwards did not obtain his employer’s prior written approval of the third-party settlement in accordance with Section 33(g)(1) or notify it of the settlement in accordance with Section 33(g)(2).

Mr. Edwards filed a response brief, asserting that Marine Repair Services had assumed contradictory defensive positions and, effectively, argued that Mr. Edwards was not a “person entitled to compensation” (PETC), thereby making Section 33(g) not apply.  As such, Mr. Edwards contended that Marine Repair Services was judicially estopped (prevented) from arguing the Section 33(g) defense when it had already asserted other procedural defenses which prevented Mr. Edwards from being designated as a PETC.  Mr. Edwards also argued that a genuine issue of material fact existed as to the applicability of Section 33(g) because Marine Repair Services failed to show that Mr. Edwards settled with a third party for less than his compensation entitlement under the Longshore and Harbor Workers’ Compensation Act.

Employment Conditions

The injuries

There are no specifics as to Mr. Edwards’s injuries, and there are no specified surgeries.

The employer’s actions

Marine Repair Services has not paid any benefits and has disputed the claim on multiple grounds.

Results of the Initial Hearing

The administrative law judge found that Marine Repair Services’ defenses to the claim were not inconsistent with its assertion that Mr. Edwards was a person entitled to compensation.  Although the administrative law judge noted he did not know the amount of the third-party settlement, and, thus, whether Section 33(g)(1) or (g)(2) specifically applied, the administrative law judge found it is undisputed that Mr. Edwards did not notify Marine Repair Services, or get its prior written approval, of his tort settlement.

Therefore, the administrative law judge essentially found that either section would act to preclude Mr. Edwards’s entitlement to benefits.  Accordingly, the administrative law judge granted Marine Repair Services’ motion for summary decision and as a result dismissed Mr. Edwards’s claim.  Mr. Edwards filed a motion for reconsideration, and the administrative law judge stated that he had granted summary decision on the grounds that Mr. Edwards failed to comply with Section 33(g) and on his rejection of Mr. Edwards’s judicial estoppel argument.  As Mr. Edwards did not raise a genuine issue of material fact with regard to Section 33(g), the administrative law judge thereby denied the motion for reconsideration.

The Appeal

Mr. Edwards appealed the administrative law judge’s orders, asserting error because:

  • The time for complying with Section 33(g) should have been tolled (tolling allows for the pausing or delaying of the running of the period of time as set forth by a statute of limitations. Tolling is most often used when a claimant is a minor, and that was not the case here);
  • Edwards was not a person entitled to compensation;
  • Marine Repair Services had actual or constructive knowledge of the third-party settlement; and
  • the administrative law judge’s lack of knowledge as to the amount of the third-party settlement precluded application of Section 33(g).

Marine Repair Services responded and urged the summary decision in its favor be affirmed.

The Ruling on Appeal

The administrative appeals judges determined that notice must be given before an employer has made any payments of compensation and before the agency announces any award of benefits. Any failure to provide notice of a third-party settlement in this time-frame would thereby result in the loss of compensation and medical benefits under the Act.

Mr. Edwards did not notify Marine Repair Services of the third-party settlement at the time of the settlement, and no party disputed this.  However, there was also no dispute that Mr. Edwards notified Marine Repair Services of the third-party settlement at some point thereafter (“months later”).  At the time of the appeal, Marine Repair Services had paid no benefits and the administrative law judge had issued no award.  Although Mr. Edwards did not notify Marine Repair Services of the third-party settlement at the time of the settlement, his notification did predate any payment by Marine Repair Services and any action by the administrative law judge.  Therefore, they found that Mr. Edwards complied with the notice provision.

They also found that the administrative law judge needed to make a comparison between a Mr. Edwards’s gross third-party settlement and his compensation entitlement under the Act.  Section 33(g)(1) would only apply when the third-party settlement is less than Mr. Edwards’s compensation entitlement under the Act.

Because there was no evidence regarding the amount of the third-party settlement, Mr. Edwards correctly contended there remained a genuine issue of material fact which prevented the granting of summary decision for Marine Repair Services. Because he did not obtain Marine Repair Services’ prior written approval, if Mr. Edwards’s third-party settlement was for less than the amount to which he would be entitled under the Act, he would have forfeited his disability and medical benefits under the Act.  However, because he notified Marine Repair Services of the settlement before Marine Repair Services paid benefits or an award issued, if his settlement was for an amount greater than or equal to his entitlement under the Act, there would be nothing precluding Mr. Edwards from receiving benefits under the Act. The administrative law judge did not make a finding as to whether Mr. Edwards’s settlement was for an amount greater than or less than his entitlement under the Act.  This genuine issue of material fact meant it was improper for the administrative law judge to grant Marine Repair Services’ motion for summary decision.   The administrative appeals judges thereby vacated (rendered void) the administrative law judge’s orders granting Marine Repair Services’ motion for summary decision and remanded (returned for further review) this case to the administrative law judge for further proceedings.

On remand, the parties may establish the remaining facts necessary to resolve the matter, or the administrative law judge may resolve the case on other grounds without other issues.  If Marine Repair Services’ other defenses fail, then other issues would need to be decided.

The Takeaway

The employer really jumped the gun on this one, by denying benefits after merely hearing about a third-party settlement. They should have gotten the information on the amount and then made a determination about payment, without assuming the third-party settlement was a significant amount under the Act.

Darrell Edwards v. Marine Repair Services, Inc.   https://www.dol.gov/brb/decisions/lngshore/published/15-0112.htm