Petition for Review of Decision and Order of the Benefits Review Board; BRB No. 87-468.
Dorothy W. Nelson, Alex Kozinski and Thomas G. Nelson, Circuit Judges.
This is an appeal from a Benefits Review Board (BRB) decision awarding petitioner Lucille Force benefits pursuant to the Longshore and Harbor Workers' Compensation Act (LHWCA), 33 USC § 901 et seq. We must decide whether, and to what extent, an employer is entitled to set off against its workers' compensation liability amounts paid to a claimant by a third party as part of a civil settlement.
Facts and Prior Proceedings
George Force was exposed to asbestos while employed by Kaiser Aluminum and Chemical Corporation in the 1940's. Prior to his 1984 death from asbestos-related mesothelioma, he filed a claim against Kaiser for LHWCA disability benefits. He and his wife Lucille also sued various asbestos manufacturers (the "third parties"). Mr. Force sought recovery for his personal injuries and Mrs. Force sought recovery for loss of consortium. They also asked for punitive damages. Before the LHWCA case went to trial, they settled their third party claims for $480,360. As part of the settlement, Mrs. Force and the couple's two children, Gary and Robert, waived all their potential claims for wrongful death.
After Mr. Force's death, Mrs. Force filed a claim against Kaiser under LHWCA for widow's death benefits, medical expenses and the disability benefits that had accrued to her husband before he passed away. At the hearing before the ALJ, the employer argued that it is entitled to reduce its LHWCA liability by the full amount Mrs. Force and the children obtained under the settlements with the third parties. Mrs. Force argued that the employer should be entitled to offset its liability only by that portion of the third party settlement intended as compensation for economic loss -- the injury for which the employer is liable under LHWCA. She also argued that the employer was not entitled to any offset at all against the death benefits because the statute does not allow an offset. In the alternative, Mrs. Force argued that the employer should only be entitled to offset its death benefits liability by that portion of the settlement attributable to her wrongful death claim, i.e., no offset should be available for that portion of the settlement attributable to the wrongful death claims of her children. As evidence of the various components of the third party settlement, she offered the deposition testimony of David McClain, the attorney who had negotiated the settlement on behalf of the family.
The ALJ allowed the employer a credit against its liability in an amount equal to the entire third party settlement. He reasoned that this was appropriate because the settlement agreements did not allocate specific amounts to the various claims. The ALJ rejected the allocation suggested by McClain in his deposition, finding that "any allocation, made subsequent to the settlement by someone other than the parties to the settlement, [is] based on pure speculation." ER 25 (emphasis in original).
The BRB agreed that McClain's testimony was not sufficient to establish apportionment for purposes of an offset. ER 31. It went on to say that an apportionment as to various types of damages was not necessary anyway because an "employer may always offset its workers' compensation liability against the total net third-party recovery of a party even if it includes such items as pain and suffering and punitive damages." ER 32.
Addressing the employer's liability for death benefits, the BRB rejected Mrs. Force's argument that an offset was unavailable under the statute. It ruled that the employer could offset wrongful death damages obtained by the widow in a third party settlement, but agreed with Mrs. Force that the "employer would only be entitled to offset its liability to claimant for death benefits against those portions of the third-party recovery received in exchange for the surrender of her rights." ER 34 (emphasis in original). Finding that there was insufficient evidence of apportionment among parties, the BRB nevertheless upheld the ALJ's offset of the entire third party settlement. ER 34.
Whether and to what extent funds recovered in settlements with third parties may be offset against benefits recovered under LHWCA is a question of first impression in this circuit. While this is a question of law that we review de novo, we accord "considerable weight" to the construction of the statute urged by the Director of the Office of Workers' Compensation Programs, as he is charged with administering it. McDonald v. Director, OWCP, 897 F.2d 1510, 1512 (9th Cir. 1990).
Two types of LHWCA benefits are at issue here. Disability benefits are available to injured employees under 33 USC § 908(a). An employee who is permanently disabled is entitled to benefits equal to two-thirds of his average weekly wages. Id. A surviving widow may obtain any unpaid portion of the employee's disability award. Id. § 908(d)(1)(A). In addition, death benefits are available to the survivors of an employee under 33 USC § 909 if the ...