Determining a Fair Settlement Under Your Defense Base Act Claim for Benefits
Filing a Defense Base Act (DBA) claim can be a long and arduous process. From making sure you make the deadlines to keeping all the right documents, it can get complicated. Furthermore, complications can arise if insurers deny your claim, but you still pursue your rights in litigation. Through all of this, the biggest question on the mind of many contractors and subcontractors covered under the Defense Base Act is whether they will receive their full benefits.
While filing a claim has a process, so does the settlement. Even once the settlement is agreed upon by both parties, it must still be approved by the Department of Labor (DOL) before you receive the money. This is because the DOL wants to make sure that the settlement is fair and just to you, as the injured claimant.
But, before the settlement is agreed upon and, even before you head into negotiations with your Defense Base Act insurance carrier, you probably should know how much to ask for in the settlement. You need to ensure you’re asking for and getting a fair and just settlement.
So, how do you know how much to ask for and, more importantly, what is a fair settlement? The simple answer is that it just depends on various factors since each case and client are different. However, there are some tips that can guide you in determining the fairness of your DBA settlement.
What is the Defense Base Act Process?
First of all, it’s important to have a basic understanding of the process of filing a Defense Base Act claim. Having a basic understanding will give you some expectations so that nothing catches you off guard during the process. A DBA lawyer will be with you every step of the way during the process, including ensuring you understand what’s going on.
This is what you can expect during the entire process of your claim:
- Your claim will be filed with the Department of Labor’s Division of Longshore and Harbor Workers’ Compensation, Office of Workers’ Compensation Programs (known as “OWCP”) which administers all aspects of the Defense Base Act. After receiving your claim, including any and all relevant medical records, the DLHWC will communicate with you, your employer, and carrier. Each party may be called to participate in an informal telephone conference, particularly if where one party requests it. That is usually your DBA attorney when a dispute arises about your entitlement to DBA compensation or medical benefits.
- After from reviewing all claim and associated information, and speaking with each party during the informal telephone conference, the OWCP’s Claim’s Examiner will issue a memorandum with its own recommendations. Because they are issuing recommendations based on received information, it’s important to keep excellent records associated with your injury and have your DBA lawyer present during any conversations regarding your claim
- Each party will have a chance to review the memorandum and the OWCP will request that both parties respond within a few weeks indicating whether they agree or disagree with the Recommendation. If the Recommendation is favorable to you (the injured worker), and your employer or its insurance carrier refuse to accept that Recommendation, they will probably file another Form LS-207. In the LS-207, your employer or the insurance carrier will explain the reasons for rejecting the Recommendation.
- Unless all parties accept the OWCP’s Recommendation, either party may request to bring their case to the Office of Administrative Law Judges (“OALJ”). This is done file by filing a Prehearing Statement (Form LS-18). Once and LS-18 is filed, the District Director at the OWCP will refer the case to the OALJ. Once your case is docketed and a judge at OALJ issues a Notice of Docketing, Notice of Assignment or Prehearing Order, this starts the “formal” adjudication process (compared to the “informal” proceedings before the OWCP), which starts with “discovery”. This is the phase of litigation in the parties attempt to “discover” information from the other side about their evidence. This usually includes “interrogatories” which are basically written questions. Another written discovery tool is a Request for Production of Documents. In almost all cases, the attorney defending your employer and its insurance carrier will want to take your deposition so that questions can be asked and answered under oath. Any witness involved in the case can be called upon to give a deposition: you, your doctors, any defense experts, your employer, and even the insurance adjuster.
- Once the parties are prepared, the judge will schedule a formal hearing to take place “live”, or in the time of COVID, the parties can submit the case for a decision on written records only, without a live hearing. After the evidence has been submitted and a hearing has occurred, it can be as long as a year or sometime more before the judge issues an opinion. After the opinion is issued, either party can appeal it if they disagree with some aspect of the opinion.
- At any time during the process, even after an appeal is filed, you have the right to discuss a simple settlement of your claim. The settlement will still have to be approved by the OWCP or the Judge assigned to your case to ensure you knowingly and voluntarily accept the terms of the settlement, without any duress. Moreover, the OWCP or Judge will assess fairness of the settlement.
- When a settlement is made, and the Form LS-8 is filed with the OWCP or submitted to the Judge, the OWCP or Judge have 30 days to review it and determine if its reasonable. If they rule that it’s reasonable, the OWCP or Judge will issue a Compensation Order. After the employer receives the order, they have 10 days to get the money to you, or be subject to penalties.
Because you can settle at any time, it’s important to have a reasonable expectation of what a fair settlement looks like. This means calculating your Average Weekly Wage, and reviewing all the evidence to determine a reasonable settlement range, prior to engaging in settlement negotiations.
Calculating Your Settlement
Since the DBA does not compensate you for your “pain and suffering”, you need to focus on your financial or economic losses resulting from the injury. The insurance company may fight you on most, if not all of the losses you suffer, so it’s important to try to calculate a fair settlement ahead of negotiations so that you know what an unfair settlement looks like.
- Medical expenses, paid and unpaid
- Future medical expenses (will you require further treatment?)
- Lost wages – past and future
- Prolonged or total disability and your ability to work
The medical and compensation benefits you may be entitled to are all based on past and current physical, emotional and mental status (like PTSD) and whether you’ll make a full recovery or have ongoing problems in the future. A fair settlement must also include your specific disabilities like the inability to use certain body parts and how it affects both your daily life and work life. Will you be able to perform the same duties at work? Will you be able to return to work at all and when? If you can’t return to the same work, what work can you perform and how accessible are those jobs? Is your disability permanent and partial, or permanent and total? You’ll know this information from your doctor and medical visits on just how your injury will affect you in terms of any disability (inability to earn wages).
Medical costs need to include both paid and unpaid, as well as any likely future medical treatment and the costs. At this point, it’s important to think about how your injury has really affected you physically, emotionally and psychologically as this could require treatment in the future. Medical costs also include any prescriptions, both past and future. Again, the cost of past and future medical care will depend on what your doctor says about the treatment you will need.
When determining lost wages, you need to calculate this carefully as any mistake in your average weekly wage, involving only a few dollars a week, can result in a significant loss of income over the years. Determining the proper average weekly wage (AWW) and corresponding weekly compensation rate (2/3 of your AWW) is critically important to projecting your future compensation benefits and how much you should accept to settle those benefits. There is much debate about the proper method for calculating AWW and weekly compensation rates in DBA claims since the insurance carrier wants to keep your compensation rate as low as possible. For this reason, there have been many decisions by judges on calculating the AWW. Unless you are an experienced DBA attorney, you probably won’t know these cases and the nuances in the case law to determine whether the insurance carrier has calculated the AWW correctly.
Even in cases where the injured worker has an attorney, there may still be disputes on the correct AWW since this is a hotly debated and contested issue in DBA claims. For instance, some insurance carriers do not include bonuses in calculating the AWW. In other instances, you may not have worked the entire 52 weeks before the injury and the carrier will use the wrong divisor to artificially lower your AWW. So, before you can determine a fair settlement of your future weekly compensation claim, you need to assure that the AWW is correct. This will likely require specific analysis by an experienced Defense Base Act attorney.
Once you’ve calculated the Average Weekly Wage (AWW), your weekly compensation rate will be 2/3 of your AWW. However, you should be aware that the DBA and DOL impose a maximum on the amount of compensation you can receive on a weekly basis under your DBA coverage, no matter how high your AWW may be. As for how long you should receive compensation benefits, your weekly compensation rate should be paid so long as you are disabled from work. This is in addition to your medical expenses. The compensation benefits are intended to compensate you for lost wages (economic loss) due to injury, whether short-term, prolonged, partial or total and permanent. For example, covered employees and government contractors receive two-thirds of their average weekly earnings, subject to the maximum rate in place at the time of injury. As of today, the maximum weekly compensation rate is $1,510.76 USD per week.
Once we determine the correct AWW and compensation rate, and your doctors tell us about your disability status (past and future), it is usually a matter of mathematics to determine the future compensation you would receive, assuming you live to your life expectancy. Even then, in nearly all cases, we would need to reduce that future stream of compensation payments to “present value” due to the “time value of money”.
Lump Sum DBA Settlement vs Schedule Payouts
Once you’ve determined what a fair settlement would look like to you, you and your DBA lawyer should decide how you want the settlement to be paid out. Usually there are three ways you can receive your compensation: a one-time lump sum payment, scheduled payouts over the course of many years or a combination of the two.
With a lump sum compensation, you’ll get all your money at once, which has many benefits. You don’t have to wait for your money. You’ll be able to pay your bills right away, especially any creditors. You also don’t have to worry about how the future can affect your payments.
If your case is settled in total and a lump sum payout is made, you will be protected from any future investigations from the insurance carrier. If only part of your case is settled, the insurance company will be looking for any excuse to cease payments to you. They do this by investigating you and seeing if you are doing activities that contradict any medical diagnoses or disabilities, even if you’ve healed unexpectedly. Insurance carriers can then take that information as proof to cease payments. In most cases, it’s beneficial to negotiate a full and final settlement.
However, there are some disadvantages to a lump sum, primarily if you’re unprepared to receive such a large amount of cash. This could affect how your settlement actually works best for you in giving you an income over the years. This is called a “structure settlement”. It would be important, then, to talk to a financial advisor in managing the windfall of cash so that you retain the necessary income throughout the years.
If your settlement is relatively small, it might be best to choose a lump sum. For larger payouts, it might be beneficial to have structured payouts to ensure you have a future stream of income. However, each individual case is different and what is best for your settlement may not be best for someone else. Discuss all your concerns and plans with your DBA lawyer so that they can help you decide what the best course of action is to take in regard to how your settlement is paid out.
A Fair Settlement According To The DOL
Once you and the insurance carrier decide that the negotiated settlement is fair, it goes through the process of being evaluated by the U.S Department of Labor. The DOL published in 2014 how it evaluates settlements before approving them when it comes to requesting compensation under the Longshore and Harbor Workers’ Compensation Act and, subsequently, the Defense Base Act. In LHWCA Bulletin No. 14-05, the DOL makes clear the following must be present in order for the settlement to be approved.
- Your settlement must include a clear amount for compensation, medical, and attorney fees.
- The reason for the settlement must also be clear.
- You must also give your biographical information and work history, as well as whether you can work, are capable of working, or when you medically can return to work.
- Your medical report of the injury (which you should already have from filing the claim) must be given to the DOL.
- If you’re requesting medical benefits to be reimbursed or paid for through your claim, you must present an itemized bill of all medical expenses.
When the DOL receives all the necessary information to evaluate the settlement, they also take into account your age, education, work history, and degree of disability or impairment. Even if you cannot carry on the same kind of work you did before you were injured, the DOL will consider any and all available work that you can do. They will also weigh the cost of current and future necessary medical treatment for the injury you received as a government contractor working overseas. Furthermore, the DOL considers your life expectancy using life tables and actuarial science to determine the value of the claim.
Fighting For Your Defense Base Act Benefits
While it is difficult to put a dollar value on your pain and suffering caused by an injury, it is important to remember that pain and suffering are not considered when determining what is a fair settlement of a DBA claim. The DBA only provides compensation on a weekly basis while you are unable to work, and medical expenses. So, determining the correct weekly compensation rate becomes crucial and depends on your Average Weekly Wage. Once we determine the correct AWW, we must look to the opinions of your doctors to consider your disability. Only then can you calculate your past due compensation and future compensation payments, arriving at a fair settlement.
At The Moschetta Law Firm, P.C. we believe the sacrifices you made to work on behalf of the U.S. government overseas -often in dangerous situations or war zones – deserve fair and just compensation. We will work hard to fight for you and protect your right to compensation and medical benefits under the DBA. As attorneys that focus in Defense Base Act cases, we can be your guide in filing a claim and receiving your due benefits. Contact us today for a free consultation.