Under Section 916 of the Longshore and Harbor Workers’ Compensation Act (“LHWCA”), “[n]o assignment, release, or commutation of compensation or benefits due or payable under this Act, except as provided by this Act, shall be valid[.]” The Act, however, does not define “due and payable,” and limited case law exists on its interpretation. In Metropolitan Tower Life Insurance Company v. Roosevelt Land Partners Corporation, Arkansas Appellate Court, Division 3, reviewed interpretations of “due and payable” and provided further clarity.
LHWCA Claim and Settlement Agreement: Background
Claimant, settled his claim under the LHWCA and received payments under a structured settlement annuity agreement pursuant to the LHWCA. Under the Section 8(i) Settlement Agreement, terms of the structured settlement rider, and MetLife annuity contract, Claimant agreed that MetLife would assume his annuity settlement payments. Claimant sought to transfer his LHWCA payments to Genex Capital Corporation (“Genex”), in accordance with Arkansas Structured Settlement Protection Act (“ARSSPA”), for a lump-sum settlement through an Assignment Agreement.
The ARSSPA regulates the transfer of structured settlement payment rights and allows for such transfer with few exceptions, including that the “transfer does not contravene any applicable statute or the order of any court or other government authority.” Ark. Code Ann. § 23-81-704. The Assignment Agreement was approved, and rights to the LHWCA payments were transferred to Genex, who subsequently assigned its interest to Roosevelt Land Partners Corporation (“Roosevelt”). MetLife appealed to the Arkansas Appellate Court, Division 3, and the question became whether transfer of Claimant’s structured settlement payment rights contravenes 33 U.S.C. § 916 because compensation was “due and payable.”
The Appeal: Discussion and Ruling
Roosevelt argued that In Re Sloma, 43 F.3d 637 (11th Cir. 1995) controls in this case. In Sloma, the insurance carrier purchased an annuity. The claimant, Sloma, then obtained a business loan using the annuity payments as collateral. Sloma’s business failed and Sloma instructed the annuity obligor that all further payments be sent to him – not the bank he obtained the loan from. Sloma then defaulted on the loan. Sloma filed for bankruptcy and argued that annuity payments were exempt pursuant to 33 U.S.C. § 916.
The Eleventh Circuit found that “payments received by the Claimant under the annuity contract were not due and payable under the Act; they were payments made to him by a third party.” Therefore, “the purpose of the anti-assignability provisions of the Act to benefit an injured employee was served and ended once the amount of the award of $180,000.00 was paid to Sloma by the payment of $10,000.00 and the purchase, in his behalf, of an annuity for $170,000.00.”
The dissent found that the employer and carrier had not made the full payment of $180,000.00 because National Union owned the annuity policy and Sloma was merely the third-party beneficiary who was still in the process of receiving compensation benefits – making them due and payable. Therefore, the dissent reasoned that compensation could not be assigned to another.
The Arkansas Appellate Court noted that the facts of the present case are distinguishable from those of Sloma. The Court then rejected the reasoning from Sloma and agreed with the interpretation of the anti-assignability provision from other courts.
The Pennsylvania Superior Court held that the LHWCA prohibits the assignment of any compensation or benefits owed or being paid pursuant to a claim under the LHWCA. The Pennsylvania Superior Court reasoned that “the plain language of Section 916 applies to any benefits or compensation, either being paid or owed in the future” and that Section 916 “places no limitation on the type or method of compensation, whether by annuity or structured settlement payment, that can be assigned.” In re Dwyer, No. 149 WDA 2016, 2017 WL 384113, at *4 (Pa. Super. Ct. Jan. 27, 2017).
Additionally, the Texas Court of Appeals, San Antonio, concluded that Section 916 bars claimant from assigning her structured settlement payment rights to receive a lump sum payment relying on the reasoning presented in Dwyer. In re Great Plains Management Corp., __ S.W. 3d __, 2022 WL 2960228 (Tex. App. 2022).
The Arkansas Appellate Court agreed with the interpretations in Dwyer and Great Plains. The Court noted that the definition of “compensation” is not limited but is defined as “money allowance payable to an employee.” 33 U.S.C. § 902(12). The settlement agreement for Claimant’s LHWCA claim assigned the carrier’s obligation to make future payments to MetLife in a structured settlement payment. Further, the settlement order stated that employer and carrier pay all amounts due under the settlement, and that obligation was unambiguously assigned to MetLife. Claimant continued to receive payments from MetLife, constituting this compensation as “due and payable.” Claimant’s attempt to transfer the LHWCA payments would contravene 33 U.S.C. § 916 and, therefore, such transfer is prohibited under Ark. Code. Ann. §§ 23-81-704(3) and 28-81-707(e).
When drafting settlement agreements under Section 8(i) that assign settlement payment obligations to annuity carriers, there should be strong language that clearly identifies the annuity carrier and that the employer and carrier fulfill their obligation to agreement by funding the annuity. Further, the assignment agreement should contain the same language that the annuity carrier is responsible for all payments, interest, and penalties for late payment and/or non-payment.