Ninth Circuit Declines to Hold Employers and Carriers Responsible for Incidental Financial Consequences Caused by Delayed Compensation Under DBA

The United States Court of Appeals for the Ninth Circuit recently found in favor of employers and carriers when it comes to the financial consequences of delayed compensation for claims arising under the Defense Base Act, 42 U.S.C. § 1651 et seq.

Aegis v. Martin – Background

In Aegis Defense Services, LLC/Allied World Assurance Co. v. Martin, Nos. 19-70566, 19-70588, 2020 U.S. App. LEXIS 31812 (9th Cir. Oct. 7, 2020) (per curiam), the Ninth Circuit affirmed the Benefits Review Board’s denial of reimbursement for the costs of refinancing after the claimant had to refinance his home when the employer’s insurance carrier denied benefits under the Defense Base Act (DBA).

The Benefits Review Board (“BRB”) affirmed an administrative law judge’s (“ALJ”) award of permanent disability to Martin, finding that he suffered a disability only after he began working in Afghanistan under Aegis Defense Services and Allied World Assurance Company’s (“AWAC”) coverage. Having found that the award was supported by substantial evidence, the Ninth Circuit further affirmed the BRB’s ruling that Aegis/AWAC was the last responsible carrier and the award of disability. The Court then turned to Martin’s appeal of the BRB’s denial of reimbursement for costs associated with refinancing his home.

The Appeal

On appeal, Martin argued that he was forced to refinance his home to support his family when AWAC declined to pay benefits under the DBA. Specifically, Martin sought the costs of interest, as well as the refinancing costs, including title service, credit reports, recording charges, inspections, and closing costs, which he likened to the cost of an award of post-judgment interest. While Martin conceded that neither the DBA nor the regulations expressly authorize reimbursement of this type of expense for a carrier’s wrongful termination of benefits and that the money he borrowed on his home was not used to cover medical costs, he nonetheless asserted entitlement to reimbursement “because such recovery is consistent with the underlying policies of the Longshore Act.”

Martin cited the Ninth Circuit’s decision in Foundation Constructors, where the Court held that the District Director’s interpretation of the Longshore Act permitted ALJs to award interest payments for unpaid disability benefits was reasonable and consistent with the Act’s goal of “fully compensating workers for their valid claims.” Found. Constrs, Inc. v. Dir., Office of Workers Comp. Programs, 950 F.2d 621, 625 (9th Cir. 1991) (citing Chevron, U.S.A., Inc. v. Natural Resources Def. Council, Inc., 467 U.S. 837, 843 (1984)).

Martin asserted that reimbursement was necessary to dissuade employers from wrongfully terminating or delaying benefits. Essentially, Martin asked the Court to hold employers and carriers responsible for the incidental financial consequences of delayed compensation.

The Ninth Circuit’s Ruling

The Ninth Circuit disagreed with Martin and explained that the interest in Foundation Constructors was necessary to preserve the value of unpaid awards over time, which directly serves the remedial purpose of the DBA. While Martin was entitled to interest on benefits that had not been paid, his request for refinancing costs went “beyond preserving the value of benefits provided for by the statute.” Because the Court found nothing in the DBA that indicated that Congress intended to provide such a remedy, the Ninth Circuit denied Martin’s request for refinancing costs.