Petro-Weld, Inc. v. Luke, PETRO-WEL

• Decision Date: 18 June 1980
• Docket Number: INC,No. 78-2579,PETRO-WEL,78-2579
• Citation: 619 F.2d 418
• Parties: and The Travelers Insurance Company, Petitioners, v. Peter LUKE, Director, Office of Workers' Compensation Programs, U. S. Department of Labor, Respondents.
• Court: U.S. Court of Appeals — Fifth Circuit

Page 418

619 F.2d 418

PETRO-WELD, INC. and The Travelers Insurance Company, Petitioners, v. Peter LUKE, Director, Office of Workers' Compensation Programs, U. S. Department of Labor, Respondents.

No. 78-2579.

United States Court of Appeals Fifth Circuit.

June 18, 1980.

Jones, Walker, Waechter, Poitevent, Carrere & Denegre, Robert M. Contois, Jr., New Orleans, La., amicus curiae.

E. D. Vickery, Houston, Tex., for American Home Assurance Co., et al.

Carin A. Clauss, Sol. of Labor, Joshua T. Gillelan, II, Laurie M. Streeter, Associate Sol., U. S. Dept. of Labor, Washington, D. C., for respondents.

Petition for Review of an Order of the Benefits Review Board.

Before DYER, RUBIN and POLITZ, Circuit Judges.

DYER, Circuit Judge:

This proceeding is brought by Petro-Weld, Inc. and its workmens compensation insurer, The Travelers Insurance Company, under the Longshoremen's and Harbor Workers' Compensation Act, 33 U.S.C.A. §§ 901-950, for review, pursuant to § 21(c) of the Act, as amended, 33 U.S.C.A. § 921(c), of the decision and final order of the Benefits Review Board in Luke v. Petro-Weld, Inc., 8 BRBS 369 (1978).

The primary question for our determination is whether Petro-Weld's employee Luke may retain the full amount of his settlement made after judgment with the third party tort feasor Signal Oil, and also collect the full amount of compensation for permanent total disability from his employer's carrier Travelers, notwithstanding the provisions of 33 U.S.C.A. § 933(f), because Travelers agreed with Petro-Weld to waive its subrogation rights against Signal Oil. The Board upheld Luke's double recovery.

Subsidiary issues are the appropriate rates to be applied when the injury occurred after the enactment of the 1972 Amendments but before their effective date, and whether Luke's attorney is entitled to a fee for his services before the Board regardless of having received a fee for his third party tort action representation. The Board applied the post amendment rates, and determined that Luke's attorney was entitled to a fee. We reverse the Board's decision on the primary issue and affirm on the subsidiary issues.

The factual background giving rise to the interrelated legal issues are single and uncontroverted. Luke was accidentally injured on November 21, 1972 while employed by Petro-Weld on a fixed platform on the Outer Continental Shelf. He continued working, although suffering with pain, until December 28, 1972 when he became temporarily totally disabled. On September 18, 1974 his disability became total and permanent.

Luke sued the owner of the platform, Signal Oil, as permitted by Section 33(a) of the Act, as amended, 33 U.S.C.A. § 933(a), and obtained a verdict and judgment of $400,000.00. Pending appeal Luke settled for $350,000.00. After attorney's fees and costs were deducted Luke received $256,451.96.

Travelers, the workmens compensation carrier for Petro-Weld, paid Luke compensation and medical expenses totalling $19,225.18 between the time of injury and the judgment in his suit against Signal. Luke retained this money in addition to his recovery against Signal. Travelers had intervened in the third party suit to assert a lien for the payments made to Luke, but the court denied the intervention because of a provision in the policy expressly waiving subrogation against Signal.

After collecting from Signal, Luke sought reinstatement of his compensation benefits. The Administrative Law Judge found that Luke's disability was permanent and total as claimed but held that since his injury occurred prior to the effective date of the 1972 Amendments, i. e. on November 21, 1972, Travelers' liability was limited to the pre-Amendment rate, which, however, included adjustments payable under Section 10(h) as amended, 33 U.S.C.A. § 910(h) from the sources specified in Section 10(h)(2). The Administrative Law Judge also decided that Travelers was entitled to an offset against Luke's compensation entitlement pursuant to Section 33(f) of the Act so that both Travelers and the Section 10(h)(2) sources should resume paying their respective shares of compensation at such time as Luke's net recovery in the tort action had been exhausted at pre-Amendment rates. The Administrative Law Judge then denied an award of fees and expenses to Luke's attorney. Luke and the Director, Office of Workmen's Compensation Programs, appealed to the Benefits Review Board. The Board reversed, holding that the waiver of subrogation in Travelers policy constituted a waiver of Travelers right under Section 33(f) to offset Luke's recovery from Signal against Travelers future liability for compensation. The Board also held that compensation payable for disability arising from an injury which occurred after the enactment of the 1972 Amendments but before their effective date is not limited to the ceiling imposed by the pre-Amendments provision. Finally the Board held that it was error to deny a fee to Luke's attorney. Petro-Weld and Travelers appealed the Board's decision and order to this Court.

In reaching its decision concerning the effect of Travelers waiver of subrogation the Board determined that Allen v. Texaco Inc., 510 F.2d 977 (5th Cir. 1975) and Capps v. Humble Oil & Refining Co., 536 F.2d 80 (5th Cir. 1976), "contain language which compels the decision we reach in this case" that is that the rationale of the Administrative Law Judge ". . . that Section 33(f) offset is not related to the right of subrogation, is erroneous." ¹ In essence then the issue before us arises from the competing interpretations of Allen, by Luke and the Director on one hand and by Petro-Weld and Travelers on the other hand.

At the outset we observe that "(t)he standard by which we review administrative decisions under the Act is to reverse only if there is an error of law or when a finding of fact is unsupported by substantial evidence on the record considered as a whole." Equitable Equip. Co. Inc. v. Hardy, 558 F.2d 1192, 1196 (5th Cir. 1977); Presley v. Tinsley Maintenance Service, 529 F.2d 433 (5th Cir. 1976). The issue before us for review is a question of law. We are called upon to determine whether the Board erred in interpreting an express statutory provision, Section 33(f) of the Act, and our decision in Allen.

Allen involved an injury sustained by an employee of a contractor, American Casing Crews, aboard an oil drilling barge while performing work for the barge's owner Texaco. The contract between American and Texaco provided in pertinent part that American obtain from its compensation insurer a waiver of its subrogation rights against Texaco in case of injury to employees of American. American complied. However, when the injured employee sued Texaco, American's compensation insurer asserted a lien for the amount of compensation it had already paid. The case was settled for $15,000 plus any sum to which the insurer might be determined to be entitled by way of a lien. We affirmed the district court's holding that the insurer had waived its right to recoup compensation payment against the employees recovery against Texaco when it waived its subrogation rights and said,

Does the waiver of subrogation rights by the compensation carrier bar a lien against and participation in the proceeds of the settlement between the employee and the third party, to which the carrier would otherwise be legally entitled? . . . We decide the workmen's compensation carrier waived any claim to the settlement between the third party and the employee.

510 F.2d at 978.

Drawing on this language and particularly emphasizing the words "participation in" and "any claim," the Director argues that a waiver of subrogation by an insurance carrier in favor of a designated beneficiary operates to exclude any consideration of a third party tort recovery in determining what benefits an employee receives under the Act. In this instance, according to the Director, the employee is entitled to full compensation and in addition the sum of $256,451.96. He argues that under Allen the right to Section 33(f) credit or offset is a right to "participation in the proceeds" of the third party action and a "claim to" the benefit of those proceeds; that the assertion of a lien and the allowance of an offset are two methods for the enforcement of the same right, to reduce or eliminate compensation liability where a third party is liable for damages.

On the other side of the coin Travelers points out the dissimilarity of this case and Allen. The narrow issue in Allen was an attempt by the insurance carrier to obtain reimbursement for compensation previously paid to the employee. Here no reimbursement is sought. Again in Allen the waiver was written for the specific benefit of Texaco and it was Texaco who invoked the waiver of subrogation provision in the policy. Here Luke, not Signal, seeks to benefit from the insurance contract to which he was neither a party nor the designated third party beneficiary. In Allen there was to be double recovery. Here Signal has settled and paid and has no further interest in this dispute which will result in a double recovery if Luke receives both compensation and his tort recovery.

We disagree with the Director's broad interpretation of Allen. The narrow issue there did not encompass the question of further entitlement to benefits under 33 U.S.C.A. § 933(f) because that question was not before the Court. Nor do we agree with the Director's extrapolation from Allen that the right to Section 33(f) offset is a right to "participation in the proceeds" of the third party action and a "claim to" the settlement proceeds which was barred by the waiver of subrogation. It is neither. Travelers is not seeking any right of subrogation against Signal; it is not seeking to defeat or diminish the legal rights of Luke by conferring a benefit on Signal; it is not seeking to participate in or make any claim to the settlement funds or to diminish them in any respect;...