What is Reimbursable Under the War Hazards Compensation Act? And When is it Reimbursable?

The Defense Base Act (“DBA”) is a system of federal workers’ compensation applied to United States contractors working abroad on U.S. bases or pursuant to a U.S. contract.  When these contractors sustain a work-related injury, they are entitled to benefits.  In some instances, the event that caused the contractor’s injury qualifies as a “war-risk hazard.”  See 42 U.S.C. 1711 and 20 C.F.R. 61.4.  Generally, “war-risk hazards” include the discharge of weapons; any action by a hostile force or person, including insurrection or rebellion; the discharge of munitions intended for use in war; the collision of vessels and aircraft operating without customary navigation aids; and the operation of a vessel or aircraft in a zone of hostility or engaged in war activities.  The benefits paid to a DBA claimant because of injuries caused by a “war-risk hazard” qualifies the employer, insurance carrier, or compensation fund that paid benefits to reimbursement under the War Hazards Compensation Act (“WHCA”).

Although there are other instances when the WHCA applies the focus of this post is reimbursement.  The pertinent provision for reimbursement is 42 U.S.C. 1704, which states in pertinent part:

(a) Where any employer or his insurance carrier or compensation fund pays or is required to pay benefits–

(1) to any person or fund on account of injury or death of any person coming within the purview of this Act or sections 1-4 of the Defense Base Act if such injury or death arose from a war-risk hazard, which are payable under any workmen’s compensation law of the United States or of any State, Territory, or possession of the United States or other jurisdiction; or

. . .

(3) . . . such employer, carrier, or fund shall be entitled to be reimbursed for all benefits so paid or payable, including funeral and burial expenses, medical, hospital, or other similar costs for treatment and care; and reasonable and necessary claims expense in connection therewith.

The WHCA sets forth the precise category of items that are reimbursable.  A employer, carrier, or compensation fund can seek a dollar-for-dollar reimbursement of all medical benefits, indemnity benefits, and funeral benefits it was required to pay to a DBA claimant.  See 33 U.S.C. 907, 908, 909.  Further, the employer, carrier, or compensation fund is entitled to reimbursement of reasonable and necessary claims expense.  Pursuant to the Code of Federal Regulations, claims expenses can be allocated or unallocated.  See 20 C.F.R. 61.104.  Allocated claims expenses include “reasonable attorneys’ fees, court and litigation costs, expenses of witnesses and expert testimony, examinations, autopsies and other items of that were reasonably incurred in determining liability under the Defense Base Act . . . .”  Id.  Unallocated expenses are expenses that cannot be specifically itemized or documented.  To account for reimbursement, 15% of the sum of the reimbursable payments is added to the reimbursement amount.  Id.  In practice, the Division of Federal Employees Compensation, which is the agency charged with administering the WHCA, applies the unallocated expense provision only to medical, indemnity, and funeral benefits–but not to future indemnity benefits incurred as a result of a commutation request.  See FECA Bulletin No. 12-01.

To be sure, anything that is paid pursuant to the DBA is reimbursable.  Not only are the claimant’s benefits reimbursable, but so are the litigation costs associated with the claimant’s DBA case.  Although there is debate in the Longshore community about the necessary scope of litigation for DBA injuries caused by a “war-risk hazard,” the WHCA makes it clear that a carrier must litigate each claim just as it would if the WHCA did not apply.  An employer and insurance carrier must “take reasonable measures to contest, reduce, or terminate its liability by appropriate available procedure under workers’ compensation law or otherwise . . . .”  See 20 C.F.R. 61.102.

The moment when an employer becomes entitled to reimbursement has also been debated in the Longshore community.  The answer to that debate is contained in the the reimbursement statute.  It says that an employer, carrier, or compensation fund shall be entitled to reimbursement when it is required to pay DBA benefits.  See 42 U.S.C. 1704.  In other words, when a DBA claimant’s entitlement to DBA benefits accrues, the employer, carrier, or compensation funds right to WHCA reimbursement accrues too.  There is no provision in the WHCA that tolls the entitlement to reimbursement to some later point in time, like the date when the claimant reaches maximum medical improvement or is released to return to work.  When a DBA claimant is entitled to receive his first dollar in benefits, the WHCA allows reimbursement of that dollar.  Compare 33 U.S.C. 914 and 42 U.S.C. 1704cf. Roberts v. Sea-Land Services, — S. Ct. —-, 2012 WL 912953 (2012).  And while the practice is to secure a DBA compensation order prior to requesting reimbursement, there is no statutory or regulatory requirement for an employer and carrier to secure an order prior to requesting reimbursement, which the Office of Workers’ Compensation Program recognized in OWCP Bulletin No. 05-01.

In closing, the WHCA reimburses an employer, carrier, or compensation fund–presumably the Special Fund established by the Longshore Act, see 33 U.S.C. 944 and 33 U.S.C. 908(f)–for the medical, indemnity and funeral expenses paid to a DBA claimant injured by a “war-risk hazard.”  Further, the DBA reimburses litigation costs and other claims expenses incurred in determining DBA liability.  The entitlement to reimbursement accrues at the moment the employer, carrier, or insurance fund is required to pay benefits–which is the date the claimant becomes entitled to benefits.