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The Defense Base Act does not apply to KBR? Be careful what you wish for April 14, 2008

Posted by Aaron Walter in Uncategorized.
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I have been reading a lot of comments throughout the internet cheering the recent tort suits against KBR regarding the Good Friday Massacre and also potential sodium dichromate exposures.

See  – “Hoist by their own petard” and “Suing the crap out of KBR.”

Part of their argument is that KBR should not be able to “hide behind” what has been described by many bloggers as the “archaic World War II-era law” protecting KBR from liability for injuries to their employees in Iraq. That law, of course, is the Defense Base Act (as an extension to the Longshore and Harbor Workers’ Compensation Act).

It has recently come to light that KBR was running a bit a tax scam on the United States. Some surmise that this means KBR is admitting they are not a US Corporation and are therefore not entitled to “hide behind” the Defense Base Act. Several bloggers appear to figuratively point their fingers and laugh at KBR for their arrogance in trying to both benefit from US law and foreign tax benefits.

I have no love for KBR. I have already been critical of their unique tax accounting. Additionally, I have been critical of AIG, the insurer in 90% of DBA cases. They overcharged contractors for DBA insurance, at least for the first couple years of the war. Those bills were passed directly to US taxpayers, who essentially pay these premiums for every contractor over in Iraq/Afghanistan. 

But, back to the topic at hand –  lets say KBR, now a foreign corporation, should be found unable to claim refuge from negligence based personal injury actions by its employees. (NOTE: Even under the DBA, KBR could be sued in a personal injury/tort action if the injury were due to intentional actions by KBR). This would mean that the Defense Base Act does not protect KBR. Yeah! Lets all cheer and rejoice!

But wait, lets consider what this means. KBR is the largest US Contractor in Iraq. 1,000+ US Contractors have been killed in action in Iraq and over 10,000 have been injured. Over 11,000 claims have been filed under the Defense Base Act, and a large portion of these have been involving KBR. If The DBA does not apply to KBR the thousands of injured or deceased employees and their families would no longer receive income benefits or medical treatment under the laws of the Defense Base Act. Compared with similar state systems of Workers’ Compensation, the Defense Base Act is quite favorable. This would be a catastrophic loss for thousands of people.

What would be gained? Tens, maybe hundreds of contractors could sue KBR directly alleging specific negligence on KBR’s part which caused their injuries. However, most injuries occuring overseas to contractors are not due to anyone’s negligence. They range from the kind of back injury you could get lifting something in your own backyard to a bullet wound from enemy fire. Thousands of common injuries would no longer be covered so that KBR could be opened up to personal liability in the few situations in which their actions were truly negligent.

In case some readers (possibly international readers) did not know, every state in the US has a Workers’ Compensation system. It is the exclusive remedy for injured employees to recieve compensation (cash or medical). In other words, except in RARE circumstances, you can’t sue your employer because you are hurt. Whether this is a good system for employees/employers I will leave for another day. The fact is – it is there.

If KBR was as reckless and possibly intentional in some of its actions, as media reports indicate, I hope and pray that those contractors and their families are capable of sueing KBR directly for damages in those cases. However, for those who simply cheer bad news for KBR, think about who the Defense Base Act and its Workers’ Compensation system helps before you root for its demise as some archaic WWII systems magically used to insulate KBR from suit. The DBA is as much there for the the individual contractors as it is for KBR.

Comments»

1. Anonymous - April 15, 2008

What is the consequences if you don’t settle? Can your DBA attorny file on you if you don’t?

2. Herbert J. Chestnut - April 15, 2008

Someone else mentioned this today. The story I heard was that the employee did not want to settle his claim under the DBA because he would be stuck with the medical bills. At some point after the employee refused to settle, his attorney allegedly filed suit against him. If anyone has any additional information on this, please let us know. I would be extremely interested in seeing the pleadings.

To answer the question, I do not see any scenario where an attorney can sue a client for refusing to settle a DBA claim. Sometimes, a contract may give an attorney the right to sue for a fee. However, under the Longshore Act (and DBA), section 28 prohibits receiving a fee which has not been approved by the District Director. There may even be criminal sanctions against an attorney attempting to do so.

You cannot be forced to settle your DBA claim and I do not see any validity to a law suit by an attorney trying to force you to do so. I hope this answers your question. If not, please e-mail me directly.

3. queenbee - April 23, 2008

I think “sue” may be the wrong term to use here, but more as a DBA attorney can put a “lien” on your settlement, if you don’t settle.

4. Herbert J. Chestnut - April 24, 2008

That is possible. When an attorney-client relationship is dissolved, often the attorney can file a lien for what is known as a “quantum meruit” fee. This rule generally applies to all types of cases, such as, personal injury, divorce, contract litigation and workers’ compensation. The logic behind the rule is to prevent someone from using an attorney to prepare his or her claim then terminate the attorney’s services just before settlement. The lien attaches to the suit (in the case of a civil case) and to the claim (in the case of a workers’ compensation settlement). Finally, just because a lien has been filed does not mean the attorney will get what he asked for. The fees still have to be approved under the DBA and the judge will take the circumstances into account in determining the propriety of the fee.

5. What comes around goes around - May 23, 2008

There are a couple cases of widows of civilian contractors suing the parent company of Dy Corp. Anyone remember the bombing in Afghanistan outside the company headquarters where three Americans died 3 or 4 years ago? From what I understand from one of the cases, the men were recruited by Dycorp Inc. and sent to Afghanistan under contract by Dyncorp FZ-LLC. I looked up this FZ (Free zone) and it is a company in Dubai. The widows attorneys (I say this as a plural because they have 5 or 6 lawyers all over this) arent suing the actual employer which was dycorp fz-llc because according the Defense Base Act you cant sue your employer. This was a subcontract and since dycorp Inc was the parent company and they provided recruiting, plane tickets, transportation and hotel accomodations during the process, they are a third party entity and are not immune for liability in a third party tort suit. See parlin v. dyncorp and duely v. dyncorp.

6. jackle - June 3, 2008

So with KBR you mean the contractors could then sue SEII (Service Employees International Inc), ? Interesting…..

7. What comes around goes around - June 5, 2008

Actually there is a great case that was just successfully appealed in the US Court of appeals for the fifth circuit on 5/28/2008 – lane v. halliburton Case number 06-20874

Read it and let me know what you think….

8. Anonymous - June 21, 2008

My issue is being told by my lawer that even though I am 100% dissabled and the time is comming for a ruling, that AIG does NOT have to give me a lump sum, in fact, they only have to pay me the max comp rate for the rest of my life. (in his words)

But I read in the DBA law, that they have to compute the federal life expectancy, times it by the fed 10 year bond, do some more math and THATS what I can get as a LUMP SUM settlement.

He said , NO, you are mistaken.

SO what gives? I now have to read it over again to see who is full of sh!t.

These DBA lawyer are NOT our friends. If our case stays open, which some of them recomend, they stay of the payrole. To quote my lawyer “You should just be happy you are getting the max comp rate and not push it any farther because they wont either.”

Is my lawyer best friends with AIG ????

Because the only person who is NOT making money is ME. He is saving AIG a LOT of money and he making money himself by keeping me as a LIFETIME client! Doing letters here and there as AIG disputes something here and there.

He told me ONLY congress can change the law and FORCE AIG to settle because AIG hold all the cards.

How in gods name, does a company like AIG, HIRED BY THE US, to insure contracting companies, hold ANY CARD?? They are middle men who DISTRIBUTE the CASH THEN BILL THE GOVERNMENT WHICH THEN BILLS THE US CITIZEN.

They have no right to keep what is not there’s. My life is in their hand??? What if they go bankrupt? What then? Who is the overseeing authority because its not the DOL. Quote “The DOL can only make reccomendations, they cant MAKE AIG do anything.”

A civilian company can TELL our governemnt to screw off???? WHAT!!

Some Congress person should do something fast.

9. Aaron Walter - June 23, 2008

A,

Although we are not your attorneys and do not know the details of your case, I can tell you have been through a lot concerning your claim and have some strong emotions concerning it. Without knowing the details of your claim we can only deal with the general problems you have raised.

First, I can say with 100% certainly that AIG is in no way required by the Defense Base Act Extension to the Longshore and Harbor Workers’ Compensation Act to settle your claim. A settlement in these claims is a essentially a business decision for both you and the insurance company. There are many subtleties involved here and reasons why AIG often aggressively pursues settlements in these claims (especially potential permanent and total claims). I’m not sure if you have become disgruntled because your attorney merely stated these generalities concerning the DBA and AIG or if he/she took the time to truly explain your rights and options to you.

While you cannot “force” AIG to settle, there are tried and true methods towards achieving that goal should that be your desire. We can only go so far into discussing strategy concerning your personal claim on a public forum.

Being a lawyer for a law firm who helps many injured overseas contractors with their claims, I respectfully disagree with your wide-sweeping contention that DBA lawyers are not friends to our clients. I am not certain how other attorneys throughout the country conduct themselves, but attorneys practicing in this area should be the best friends a Defense Base Act claimant could have, as the interests of the claimant and attorney are at least linked through a common financial interest. If AIG and other insurers treated every claim with the respect and civility we would expect from a company doing business with our government, no Claimant would need the services of an attorney to guide them through the pitfalls of the system.

Additionally, I know that Herbert Chestnut and myself pride ourselves on giving all we can to help those seeking to secure their proper benefits under the DBA. As members of military families, we take special pride in working for the otherwise unappreciated civilian workers supporting our troops and our nation’s interests overseas. I have yet to speak with a civilian contractor who did not either A) join the war effort, in part, to support our troops or B) while in Iraq/Afghanistan develop a special affinity and pride working with the young men and women who, without regard for Washington politics, do their duty under unimaginable conditions.

To recap:
1. AIG has no legal obligation to settle your claim
2. Your attorney should have gone over the details of the Defense Base Act, the reasoning behind voluntary settlement negotiations, and the ways you can utilize the law if you want to push AIG towards a settlement posture
3. There are good and conscientious attorneys out there handling these cases

We wish you best of luck with your case, and if you have any further questions, please feel free to contact me by email – awalter@chestnutlegal.com or by phone (770) 795-7600 /(800) 881-4892.

Aaron Walter, Esq.

10. HURRY and wait! - June 26, 2008

I know that getting the insurance attorneys for CNA to get things done is like pulling teeth. It is as though they enjoy making our pain worse by drawing this case out (mine took 2 years). Even with Mr. Robilotti (the Director of Labor) specifically outlining what should have occurred in our case, the attorneys for the insurance companies are the feet dragers. My attorney, the great David Linker, (free plug for Dave) kept me informed throughout the years.
A widow from Missouri has been waiting for almost four years for CNA to get their act together and get the papers to the Department of Labor. The tax payers pay the Defense Base act but the longer that the lawyers can keep it on their desk or in court the more money the lawters make. I can understand that they need to make a living, but so they can make a living, the injured workers, widows and children suffer.
I am sure Mr. Walter and Mr. Chestnut are fine men with their clients interest in mind. As a DBA claimant I ask that you push for a time limit that the insurance carriers and/or attorneys for the carriers can drag this out (1 year maximum). Whether it be from injury or a widows loss of her husband, the grieving process can not be accomplished with a constant frustration regarding this delayed process of completing the process of getting benefits. Thank you.

11. Herbert J. Chestnut - June 26, 2008

Thank you for your post. I do feel your pain regarding the time it takes to get an issue resolved. Under the DBA, the claim is initially administered by the Office of Workers’ Compensation Programs (OWCP), a division of the Department of Labor. The OWCP can only recommend that the parties take or not take an action. This comes in the form of a Memorandum of Informal Conference. Thereafter, if the carrier does not comply, a hearing may be requested.

At that point, the case goes to the Office of Administrative Law Judges (OALJ). The OALJ tries to set hearing in a venue convienent to the injured worker and the judge trying the case often has to travel to that location. He or she is not generally going to set a docket with just one case so it takes some juggling on their part to get a full docket in a location where the claimant can attend. This can also cause a delay. The interesting thing is that the Office of Administrative Law Judges, until recently, automatically expedited DBA claims which arose in war zones. Chief Administative Law Judge John Vittone recently issued an order changing this policy.

Under the new procedure, DBA cases are not automatically expedited. An expedited hearing must be requested. This can be done on the LS-18. Please make sure you or your attorney know this if you are requesting a hearing after the order goes into effect. There are also additional changes dealing with discovery so I would urge you to read the order.

I think that your suggestion that Congress make some change in the Act is a good one. Obviously, the more emails and letter a congressman or senator gets, the more likely he or she is to get interested.

The main thing you can do is to keep the pressure on the carrier or hire a good attorney to do so. Hold them to the deadlines established in the Act and get the case before the OALJ as soon as the case warrants it. Once a decision of an administative law judge is final, the carrier can be forced to comply. Additionally, the decision cannot be modified except by order of an ALJ.

I hope this help and thanks again for your comment.

12. War Hazard Compensation - paid by taxpayers - July 2, 2008

It is my understanding that the War Hazard Compensation Act (WHCA) is very rarely provided to family members of deceased security contractors. Can you explain why my husband’s case was moved to the War Hazard which released the insurance company from their duty of making lifelong payments to the widow and minor children? This passes the money that I am paid to the tax payers rather than the insurance company. Henry Waxman recently commented about the Defense Base Act and the War Hazard Compensation Act and how the tax payers are paying these costs while the insurance companies get reimbursed and actually make extra money.
It is like an insurance company getting paid for insuring a pyromaniac knowing that he is going to burn down his own house. The insurance companies know the risk when they insure the companies but then it seems like they are rewarded when men are killed (they probably look forward to it since it is more money in their pockets).
If I live to be 75 I will receive over 2.8 million dollars but why are the taxpayers billed for this? This is wrong in so many ways and the insurance companies are the ones laughing all the way to the bank.

13. Aaron Walter - July 17, 2008

The short answer concerning the Defense Base Act, The War Hazard Act, the US taxpayer, and DBA insurers (mostly AIG) is that – YES, the US taxpayer foots the bill for many of these claims.

First, the US taxpayer reimburses contractors for the required DBA insurance that is purchased from insurers. In most cases, the insurer foots the bill when a covered employee is injured overseas. However, if the injury is specifically war-related, the insurer can receive reimbursement for all of its expenses associated with that claim.

It is yet another little known aspect of this federal system which was no where near as relevant prior to the wars in Iraq and Afghanistan. As the public learns more about the system and most importantly how some of the people eligible for workers’ compensation are treated, maybe Congress will see fit to institute some changes.

14. Help please explain - July 19, 2008

Can you please explain the National Defense Authorization Act for 2008. Under section 1105 Death gratuity authorized for federal employees.
It goes on to speak of the one time benefit to employees (civilian) who died or was injured in connection with the employees service with armed force in the thearter of operations of Operation Enduring Freedom or Operation Iraqi Freedom.
It says the term employee has the meaning provided in section 8101 but also includes a nonappropriated fund instrumentality employee, as defined in section 1587 (a)(1) of title 10.
The death gratuity is $100,000… It is also retroactive to incidents occuring after October 1, 2001.
HELP!!

15. DBA coverage + Obama administration - November 8, 2008

What are the chances of losing Defense Base Act benefits in an Obama Administration? Is it one of the programs that could be discontinued?


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