Lovilia Coal Co. v. Williams, 96-2980

Decision Date29 April 1998
Docket NumberNo. 96-2980,96-2980
Citation143 F.3d 317
PartiesLOVILIA COAL COMPANY and Bituminous Casualty Corporation, Petitioners, v. Verda M. WILLIAMS and Office of Workers' Compensation Programs, Respondents.
CourtU.S. Court of Appeals — Seventh Circuit

Mark E. Solomons (argued), Laura M. Klaus, Arter & Hadden, Washington, DC, for Petitioners.

Ronald K. Bruce, Madisonville, KY, for Respondent Williams.

Allen H. Feldman, Department of Labor, Appellate Litigation, Washington, DC, Donald S. Shire, Edward D. Sieger, Elizabeth Hopkins (argued), Barry H. Joyner, Department of Labor, Office of the Solicitor, Washington, DC, for Respondent Office of Workers' Compensation Programs.

Thomas O. Shepherd, Jr., Benefits Review Board, Washington, DC, for Party-In-Interest Benefits Review Board.

Before BAUER, COFFEY and RIPPLE, Circuit Judges.

COFFEY, Circuit Judge.

On November 23, 1990, Billie Williams ("Williams") filed a claim for workmen's compensation benefits pursuant to the Black Lung Benefits Act, 30 U.S.C. § 901. Williams, who suffered from pneumoconiosis, or "black lung disease," died on July 31, 1992, before his claim was fully processed. Williams's widow, respondent Verda Williams, continued to pursue her husband's claim. Petitioners Lovilia Coal Company ("Lovilia") and Bituminous Casualty Corporation ("Bituminous") contested the claim in a hearing before an administrative law judge ("ALJ") on March 19, 1994. The ALJ ruled that although Mrs. Williams was entitled to benefits, Lovilia and Bituminous were not responsible for the payment of those benefits. The Director of the U.S. Labor Department Office of Workers' Compensation Programs and Mrs. Williams appealed the ruling to the Benefits Review Board, which reversed, holding that Lovilia, as a "responsible operator," and Bituminous, as a "responsible insurer," were liable to pay benefits. Lovilia and Bituminous appeal and we affirm.

I. BACKGROUND

Partners Williams and Tommy Wignall ("Wignall") became joint-owners of Lovilia Coal in the early 1980's. Williams took an active role in the management of the coal operation, and frequently worked in the coal mines alongside other employees. According to the Black Lung Benefits Act ("BLBA"), as an "operator" of a coal mine, Lovilia was required to demonstrate to the federal Government an ability to provide workmen's compensation benefits either through self-insurance or commercial insurance to its employees who became disabled by black lung disease. See 30 U.S.C. § 933. 1 Operators who are unable to make this showing may be punished by civil penalty. The BLBA requires coal mine operators to provide benefits to miners who are totally disabled due to black lung disease contracted as a result of employment in coal mines, as well as to surviving family members when a miner's death is caused by black lung disease. See id. at §§ 901(a), 922(a), 932(c). A "miner" is "any individual who works or has worked in or around a coal mine or coal preparation facility in the extraction or preparation of coal." Id. at § 902(d).

To comply with the federal insurance requirement, Lovilia purchased a commercial insurance policy from Bituminous. A commercial policy fulfills an operator's duty to insure under the BLBA only if: (1) benefits are paid notwithstanding the requirements of a state workmen's compensation law providing for lesser payments; and (2) insolvency or bankruptcy of the operator does not relieve the insurance carrier from liability for payment. See id. at § 933(b). The policy, which contained both of these mandatory elements, provided that Bituminous would "pay promptly when due all compensation and other benefits required of the insured by the workmen's compensation law." (emphasis added). Furthermore, federal regulations require that the parties entering into BLBA workmen's compensation insurance policies append an FCMHSA "endorsement" assuring compliance with the BLBA. See 20 C.F.R. § 726.203(a). Accordingly, the contract between Lovilia and Bituminous included an endorsement stating, in relevant part:

It is agreed that: 1. with respect to the operations ..., the unqualified term "workmen's compensation law" includes part C of title IV of the Federal Coal Mine Health and Safety Act of 1969, 30 U.S.C. §§ 931-936, and any law amendatory thereto, or supplementary thereto, which may be or become effective while this policy is in force, and definition (a) of Insuring Agreement III is amended accordingly.

This language had the effect of incorporating the provisions of the BLBA into the terms of the insurance policy contract.

Bituminous charged a premium for the policy based, in part, on the salaries of the covered miners. The owners of Lovilia Coal, Williams and Wignall, did not pay insurance premiums for themselves. An audit by Bituminous dated July 24, 1985, reflected that both partners were excluded from workmen's compensation coverage.

Lovilia ceased operations and declared bankruptcy in 1984, and Bituminous canceled Lovilia's insurance in 1985 for nonpayment of premiums. In 1990, Williams became sick with black lung disease, and on December 10, 1990, he filed a claim with the Labor Department's Office of Workers' Compensation Programs ("OWCP") for workmen's compensation benefits under the BLBA. Upon receipt of Williams's claim, the OWCP commenced an investigation to assess his eligibility for BLBA benefits.

In June of 1991, the OWCP notified the petitioners that they would be liable for the BLBA benefits to which Williams was entitled if the OWCP found that he was disabled by black lung disease. This determination came as a result of the OWCP's conclusion that Williams was a "miner," as defined under the BLBA, because he "worked in or around a coal mine or coal preparation facility in the extraction or preparation of coal." The OWCP also concluded that Lovilia was the "responsible operator." 2 The OWCP named Bituminous as the insurer in accordance with OWCP's internal records, which identified Bituminous as Lovilia's carrier.

On September 25, 1991, the OWCP concluded that black lung disease had rendered Williams disabled, qualifying him for BLBA benefits. This entitled Williams, and his wife after his demise, to compensation under the BLBA, to be paid by the identified responsible operator through its insurance carrier, or in the event that the insurer was unable to pay, through the Black Lung Disability Trust Fund ("Trust Fund"). The Trust Fund ensures that disabled miners receive their BLBA benefits even when an operator disputes liability or is unable to provide compensation through self-insurance or commercial insurance. See 26 U.S.C. § 9501(d). The OWCP notified Lovilia and Bituminous of its determination, and forwarded an "Agreement to Pay Benefits" form for the petitioners' signatures. The petitioners' signatures would legally bind them to provide Williams with black lung disease benefits. Although Lovilia and Bituminous executed the Agreement to Pay Benefits, they contested Lovilia's designation as the responsible operator, and accordingly, requested a hearing before an ALJ.

Prior to the adjudication of his claim, Williams died of black lung disease. His widow, Verda Williams, notified the ALJ that she would file a survivor's claim under the BLBA, which in turn would entitle her to her husband's benefits. 3 The ALJ later remanded Williams's claim back to the OWCP to determine whether the widow was entitled to benefits. On May 12, 1993, the OWCP notified the parties that Mrs. Williams was entitled to her husband's BLBA benefits. Enclosed with the petitioners' copy of the notice was a second Agreement to Pay Benefits form, which the petitioners declined to sign. The widow's claim was referred to the ALJ for resolution. On July 8, 1994, the ALJ ordered Williams's benefits to be paid from the Trust Fund. The ALJ found that the insurance policy with Bituminous could not reasonably be construed as providing coverage in the event Williams developed black lung disease 4 and that Lovilia, as a matter of law, could not be the responsible operator because it is was organized as a partnership. 5 The Director of OWCP appealed to the Benefits Review Board, which reversed the ALJ's decision and held the petitioners liable for payment of Williams's claims. The Benefits Review Board agreed with the OWCP that the fact that Lovilia was a partnership did not affect its status as a responsible operator. The Board also found that the BLBA does not allow partners to opt out of coverage.

II. ISSUES

On appeal, the petitioners contend that the BLBA cannot require payment of benefits to a mine owner who opted not to purchase workmen's compensation insurance for himself, but who did purchase it for his employees. Bituminous and Lovilia further claim that the McCarran-Ferguson Act precludes the OWCP from requiring that the petitioners pay Williams's benefits.

III. ANALYSIS

In considering an appeal from the judgment of the Benefits Review Board, we evaluate the propriety of the ALJ's underlying decision. See Freeman United Coal Mining Co. v. Stone, 957 F.2d 360, 362 (7th Cir.1992) (citation omitted). This is true even in situations where the Board has overturned the ALJ's decision. "[I]t is the Administrative Law Judge's decision we review to determine whether it is supported by substantial evidence, in accord with the law, and not irrational. If it is, the Board's decision must be reversed, even if it is also supported by substantial evidence." Freeman United Coal Mining Co. v. Benefits Review Bd., 942 F.2d 415, 422 (7th Cir.1991) (citation and internal quotations omitted).

A. Construction of the Insurance Contract

We initially consider whether the insurance policy obligates the petitioners to provide benefits for Williams's entitlements under the BLBA. The petitioners contend that the BLBA does not require an insurer to pay benefits to a mine owner who has opted not to purchase workmen's...

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