Recent Developments in The Law

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FIFTH CIRCUIT STREAMLINES TEST FOR MARITIME CONTRACTS

Sitting en banc, the U.S. Fifth Circuit abandoned its six part Davis test to determine whether providing services for the exploration, drilling and production of oil and gas is governed by maritime law or state law. The new test, regardless of the contract’s choice of law provision, is: (1) is the contract one to provide services to facilitate the drilling or production of oil and gas on navigable waters; and, if so, (2) does the contract provide or do the parties expect that a vessel will play a substantial role in the completion of the contract? The Court acknowledged that some of the Davis factors may still be relevant in determining whether a vessel’s role is substantial, but the new test is intended to shift the focus from the nature of the services provided to the use of a vessel in completing the contract. In the Matter of Larry Doiron, Inc., No. 16-30217 (5th Cir. 2017)(en banc).

OSCLA REGULATIONS DO NOT APPLY TO CONTRACTORS.

In U.S. v. Moss, No. 16-30561 (5th Cir. 09/27/2017), the Fifth Circuit held that OCSLA regulations and their corresponding criminal penalties do not apply to platform contractors because contractors do not come within the statutory definition of “You” in the regulations, which list specific categories of entities, such as lessees, permittees, and well operators. The Court also cited the agency’s history of not prosecuting contractors, as well as the fact that criminal, not civil, liability was involved.

ONLY MEDICAL EXPENSES ACTUALLY PAID ARE RECOVERABLE.

The Fifth Circuit holds that an injured worker receiving benefits under the Longshore and Harbor Worker’s Compensation Act (LHWCA) who sues a third party for injuries is entitled to recover only the medical expenses actually paid by the LHWCA carrier, not the amounts written off by medical providers. Deperrodil v. Bozovic Marine, Inc., 16-30009 (5th Cir. 2016).

ATTORNEYS’ FEES AWARDED IN ALLISION CASE.

A tug and tow allided with a moored vessel, which was a constructive total loss as a result of the allision. Although attorneys’ fees are not typically awarded in maritime cases, the Fifth Circuit affirmed the attorneys’ fees award as a sanction for the bad faith handling of the case when the defendant had no valid defense to liability and presented damages experts who were ill-prepared or unqualified. Moench v. Marquette Transportation Company, 15-31105 (5th Cir. 2016).

PRO RATA SHARING OF DEFENSE COSTS WITH INSURED FOR LONG LATENCY EXPOSURE.

The plaintiffs alleged hearing loss due to exposure to loud noise during the long course of their employment. The employer was insured for only one year of the employment duration and had a policy which covered defense costs for injuries suffered as a result of an occurrence during the policy period. The Louisiana Supreme Court holds that, under the policy language, the insurer owed only a pro rata portion of defense costs based upon the period of coverage as compared to the total period of exposure. The employer/insured was responsible for the remaining 96% of defense costs. Arceneaux v. Amstar Corp., 2015-0588 (La. 9/7/16).

PENALTIES FOR PAYING MAINTENANCE AND CURE UNDER PROTEST.

A seaman’s employer denied that an injury occurred and initially refused to pay maintenance and cure. The employer later paid back maintenance and cure and began paying maintenance and cure under protest. The Louisiana court of appeal found the employer’s payment under protest did not shield it from penalties and upheld an award of $300,000 in attorney fees — in addition to $300,000 in punitive damages — for the employer’s arbitrary and capricious “failure” to pay maintenance and cure. The Court agreed with the seaman that the Jones Act and maintenance and cure claims were so intertwined that 90% of the attorneys’ time spent on the entire case could be allocated to the maintenance and cure issues and awarded attorneys’ fees at $300 per hour. Stermer v. Archer Daniels Midland Co., 15-811 (La. App. 3 Cir. 2/23/16).

NON-OPERATING PARTNER IS ALSO STATUTORY EMPLOYER.

The Fifth Circuit, applying Louisiana law, held a non-operating partner of an industrial plant is entitled to the same statutory employer immunity as the operating partner for injuries to a contractor’s employee, even though only the operating partner was designated as the statutory employer in the master service agreement. Wright v. Excel Paralubes, 14-31215 (5th Cir. 2015).

NTSB REPORT NOT ADMISSIBLE AT TRIAL.

Although recognizing that other courts have allowed portions of NTSB reports to be admitted at trial, a Louisiana state appellate court held that the federal statute prohibiting the admission of NTSB reports means what it says and affirmed the trial court’s exclusion of the report. The court noted the report was also inadmissible hearsay under Louisiana law. Allen v. PHI, Inc., 15-461 (La. App. 3d Cir. 12/09/15).

WELDER NOT A SEAMAN; NO INDEMNITY FOR DEFENSE COSTS.

In Wilcox v. Wild Well Control, Inc., 13-31281 (5th Cir. 2015), a welder was a borrowed employee of Wild Well. The worker ate and slept aboard a Wild Well vessel for the job, but was working on a fixed platform at the time of his injury. The Court found that the worker was not a seaman because less than 30% of his entire work history for his payroll employer was aboard a vessel. The Court refused to focus its inquiry on only the time spent working for Wild Well. On the cross claim for indemnity by Wild Well against the payroll employer, the Court held that to preserve a claim for defense costs in the event the Louisiana Oilfield Anti-Indemnity Act (LOAIA) applied and Wild Well was found to be free of fault, Wild Well was required to assert such a claim in the trial court even if Wild Well’s primary contention was that the LOAIA did not apply. With regard to a separate vessel access agreement between Wild Well’s parent company and the payroll employer, the Court refused to reform that contract to include Wild Well or award indemnity to the parent company because it did not own the vessel.

NO NEGLIGENT SPOLIATION CLAIM UNDER LOUISIANA LAW.

The Louisiana Supreme Court held Louisiana does not recognize an independent claim for the negligent destruction or loss of evidence in Bordelon v. State Farm Mutual Automobile Ins. Co., 2014-2362 (La. 6/30/15). The Court found that affected parties have adequate protection through adverse discovery and evidentiary rulings if a party negligently destroys evidence and through breach of contract claims if a third party does so.

LOUISIANA SUPREME COURT RULES ON BAD FAITH ISSUES.

In answering certified questions from the United States Fifth Circuit Court of Appeals relating to Louisiana’s bad faith statute, La. Rev. Statute 22:1973, the Louisiana Supreme Court held (1)　an insured may recover from its insurer any judgment in excess of policy limits for the insurer’s bad faith failure to settle a claim; (2) no “firm settlement offer” is required to sustain a cause of action against the insurer for a bad faith failure to settle a claim; and (3)　an insurer’s liability for misrepresentation is not limited to misrepresentations regarding coverage and may stem from misrepresenting or concealing any pertinent facts. Kelly v. State Farm Fire & Cas. Co., No. 2014-CQ-1921 (La. 05/15/15).

ROBINS DRY DOCK RULE BARS MEXICAN STATES’ CLAIMS.

The maritime Robins Dry Dock rule generally precludes recovery of economic losses of a party unless that party had a proprietary interest in physically damaged property. The Fifth Circuit acknowledged that there is uncertainty whether the Robins Dry Dock rule applies if a party’s acts are found to be criminal or intentional, but held that a guilty plea to criminal negligence was insufficient and the Robins Dry Dock rule applied. The Fifth Circuit then found the Mexican federal government, not the Mexican states, had the proprietary interest in the damaged property (Mexican waters and shoreline) and thus dismissed the Mexican states’ claims. In re: DEEPWATER HORIZON, 13-31070 (5th Cir. 2015).

MCCORPEN DEFENSE APPLIES TO SUCCESSOR COMPANY.

An acquiring company which retains the predecessor company’s employees and relies on the predecessor company’s pre-employment medical examinations is entitled to McCorpen protection when a seaman misrepresented his medical condition upon application with the predecessor company. The acquiring company need only show the seaman failed to disclose medical information obviously elicited from the predecessor company, not that the seaman intentionally concealed information he believed the employer deemed important. The Court further held when a seaman intentionally provides false information on a pre-employment medical questionnaire, he may not later argue that his concealment was not intentional because he orally disclosed contradictory medical information. The Court also dismissed the maintenance and cure claim against the seaman’s supervisor because only an employer owes maintenance and cure. The district court’s finding that the seaman’s injury which resulted from lifting a hatch cover was not caused by the defendants’ negligence or an unseaworthy condition was affirmed. Meche v. Doucet, 14-30032 (5th Cir. 2015).

PUNITIVE DAMAGES NOT RECOVERABLE FOR UNSEAWORTHINESS.

The en banc U.S. Fifth Circuit has reversed the panel decision and holds punitive damages are not recoverable under unseaworthiness theory. McBride v. Eustis Well Service, LLC, 12-30714 (5th Cir. 2014).

COURT DISMISSES CLAIMS FOR LOSS OF SOCIETY, LOST FUTURE EARNINGS AND PUNITIVE DAMAGES IN JONES ACT DEATH ACTION.

The U.S. District Court for the Eastern District of Louisiana held non-pecuniary losses, such as loss of society, are not recoverable in an action for the wrongful death of a Jones Act seaman. The Court additionally held that although a dependent of a seaman can recover loss of support in her wrongful death action, the estate of the seaman cannot recover for loss of the seaman’s future earnings in the survival action. The Court also dismissed the claims for punitive damages under both the Jones Act and the general maritime law for the wrongful death and survival claims. Ainsworth v. Caillou Island Towing Company, Inc., 2013 WL 3216068 (E.D. La. 2013).

MOORED DREDGE AT FAULT FOR ALLISION.

A passing vessel struck a moored dredge in the Intracoastal Waterway. The Fifth Circuit affirmed the application of The Pennsylvania rule, which creates a presumption that a vessel which violates a “statutory rule intended to prevent collisions” is responsible for the collision. The Court found the dredge violated Inland Navigation Rule 9, which prohibits anchoring in a narrow channel (usually less than 1,000 feet across) unless there is no alternate anchoring location. The Court rejected the argument the moored vessel must be an obstruction to navigation for Rule 9 to apply. Both the dredge and the passing vessel were found to be at fault for the allision. Mike Hooks Dredging Co. v. Marquette Transportation Gulf-Inland LLC, 12-30474 (5th Cir. 2013).

LHWCA SITUS MUST BORDER ON NAVIGABLE WATERS.

In an en banc decision, the Fifth Circuit held that to be covered by the Longshore and Harbor Workers Compensation Act, an employee must work at a location “bordering on or contiguous with navigable waters,” rejecting a broader definition of “adjoining navigable waters.” New Orleans Depot Services, Inc. v. OWCP, 11-60057 (5th Cir. 2013)(en banc). The claimant performed maintenance on shipping containers and chassis at a yard surrounded by commercial establishments and 300 yards from navigable water, which the Court found was not a covered situs under the LHWCA. The Court did not reach the issue of whether maintenance of shipping containers and chassis satisfied the maritime status requirement of the LHWCA. Judge Clement wrote a concurring opinion arguing that the claimant also did not satisfy the LHWCA status requirement because he was not “engaged in maritime employment.”

POLLUTION BUYBACK ENDORSEMENT NOTICE PROVISION ENFORCEABLE.

The Fifth Circuit released two opinions regarding the notice provision of Sudden and Accidental Buyback Pollution Endorsements. In Starr Indemnity & Liability Company v. SGS Petroleum Service Corp., 12-20545 (5th Cir. 2013), the Court followed its earlier opinion that, under Texas law, an insurer is not required to show prejudice to enforce the notice provision of the endorsement. The earlier opinion was called into question as a result of a recent Texas Supreme Court decision, which the Fifth Circuit found to be inapplicable. The Court also addressed the prejudice issue under Louisiana law in In re: Settoon Towing, LLC, 11-31030 (5th Cir. 2013). Noting that Louisiana courts had not directly addressed the issue, the Court held that Louisiana law does not require a showing of insurer prejudice to enforce the notice provision of the endorsement. The Court also found that one insurer forfeited its right to rely on the pollution exclusion because it did not timely provide the insured with the policy after the premium was paid – – even if the insured suffered no prejudice by the untimely delivery of the policy.

NO RESTITUTION FOR SEAMAN’S EMPLOYER FOR MAINTENANCE AND CURE PAID BUT NOT OWED.

After seaman’s maintenance and cure claims were dismissed under McCorpen because of the seaman’s intentional misrepresentation of his pre-existing medical condition, the employer filed a counterclaim seeking reimbursement for the benefits it had paid. The district court found that the employer was legally entitled to reimbursement. The Fifth Circuit reversed, holding that an employer has no right under maritime law to reimbursement for maintenance and cure paid after a McCorpen defense is established. Boudreaux v. Transocean Deepwater, Inc., 12-30041 (5th Cir. 2013).

The information contained herein is not, nor is it intended to be, legal advice. The above is a brief synopsis of recent developments and is not a full analysis of each case’s facts or holdings. Every case is unique and decided upon its own facts. To determine if a recent development is applicable to a particular factual situation, feel free to consult Tom Rayer or any of our attorneys at 504-525-2141.