Injured Seaman’s Receipt of Social Security Disability Benefits and Shipowner’s Obligation to Pay Maintenance

by Lane Powell PC
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In Lipscomb v. Foss Mar. Co., 83 F.3d 1106 (9th Cir. 1996), the Ninth Circuit defined the policy of awarding maintenance to an injured seaman as follows:

Under the general maritime law, a seaman who falls ill or becomes injured while in the service of a ship is entitled to “maintenance and cure” by his employer. This right includes (1) “maintenance”—a living allowance for food and lodging to the ill seaman; (2) “cure”—reimbursement for medical expenses; and (3) “unearned wages” from the onset of injury or illness until the end of the voyage. The purposes of this right, which dates back to the Middle Ages, are threefold: (1) to protect “poor and improvident” seamen; (2) to encourage shipowners to protect seamen's health and safety; and (3) to induce employment in the merchant marine.

Id. at 1109 (citation and quotation omitted). However, “the vessel has no obligation to provide maintenance and cure if it is furnished by others at no expense to the seaman.” Delaware River & Bay Auth. v. Kopacz, 584 F.3d 622, 631 (3rd Cir. 2009).

Courts have often addressed how a seaman’s receipt of medical benefits or financial support from other sources affects the vessel owner’s maintenance and cure obligations — delivering varying results and providing conflicting guidance. Recently, in Thibodeaux v. Ensco Offshore Co., -- F. Supp. 3d --, 2017 WL 6722811 (W.D. La. Dec. 28, 2017), the Western District of Louisiana considered whether an injured seaman’s receipt of Social Security disability benefits offsets a vessel owner’s obligation to provide that seaman maintenance.

Noting that no Fifth Circuit case had directly dealt with the issue, the Thidodeaux court examined the Third Circuit’s holding in Delaware River regarding SSD benefits and maintenance. Id. *10. In Delaware River, the Third Circuit looked to its holding in Shaw v. Ohio River Co., 526 F.2d 193 (3rd. 1975), which established considerations for determining “when other payments received by an injured seaman satisfy a shipowner’s maintenance obligation.” 584 F.3d at 628. In Shaw, the Third Circuit considered “whether benefits paid to a seaman under a disability policy funded by the shipowner and administered by [an insurer], relieved the shipowner of its maintenance duty.” Id. The Third Circuit “attached primary importance to the ‘character’ of the benefit conferred,” explaining, “where a benefit is part of the seaman’s wage package, it will be deemed separate and independent of the shipowner’s maintenance obligation [and] payment of the benefit will not relieve the shipowner of its maintenance obligation.” Id. The court noted that the disability benefit was “intended as a substitute for lost wages — not as payment for food and lodging — and which were owed to the seaman, independent of his eligibility for maintenance and cure.” Id. at 631. Since the disability benefit was not an “exact equivalent” of maintenance, receipt of the disability benefits did not offset the maintenance owed to the seaman. Id. at 631- 32.

In Delaware River, the “dispositive issue” was “whether SSD benefits provided the ‘exact equivalent’ of maintenance, or whether the two differ in their scope, purpose, and considerations of eligibility.” Id. at 632. The court discussed the distinctions between SSD benefits and maintenance.

The court first looked at the “distinct policy aims underl[ying] maintenance and SSD payments.” Id. “Maintenance is intended to provide for the cost of food and lodging comparable in quality to that the seaman is entitled to at sea,” while “SSD benefits aim to replace the income of beneficiaries when that income is reduced on account of retirement and disability.” Id. (citation and quotation omitted).

The court next examined the substantially differing “conditions of eligibility for maintenance and SSD payments”:

“Maintenance is available solely when a seaman: (1) is injured during the course of his employment or at a place where he is “subject to the call of duty,” (2) is incapable of performing “seaman's work,” and (3) has “actually incurred” food and lodging expenses during his recovery. Maintenance, moreover, is available immediately upon the seaman's incapacitation, but ceases once the seaman attains “maximum cure,” defined as the point at which he is either cured or his condition is diagnosed as permanent and incurable.

The conditions of eligibility for SSD benefits, by contrast, are both more-and less-stringent than those required to obtain maintenance. On the one hand, the SSD requirements are more onerous: a claimant must demonstrate that he has suffered a disability for a minimum period of five months [ ]; that his disability is permanent, having lasted, or been expected to last, for a continuous period of 12 months; and that his impairment precludes performance not only of his former job but also of any work “existing in significant numbers in the national economy,” including “basic work activities.”

On the other hand, the conditions of eligibility for SSD benefits are, in certain other respects, less burdensome than those required to receive maintenance. Claimants with nonoccupational injuries may recover SSD benefits, and proof of actual expenditure of funds on food, lodging, or other expenses is not necessary to obtain benefits. Further, SSD payments need not be expended on food and lodging, and financial need is not a prerequisite to obtain assistance. [ ] Further, a Social Security claimant is entitled to benefits, even if his condition is diagnosed as permanent or incurable.

Id. at 632–33 (citation omitted). The court concluded that “[t]hese important differences support classification of maintenance and SSD payments as different, rather than ‘exact[ly] equivalent,’ benefits,” and held receipt of SSD benefits did not relieve shipowner’s maintenance obligation. Id. at 633.

In Thibodeaux, the court declined to utilize the Third Circuit’s “exact equivalent” standard. Instead, the court looked to the Fifth Circuit’s discussion of the collateral source rule in the context of cure in Manderson v. Chet Morrision Contractor, Inc., 666 F. 3d 373 (5th Cir. 2012). Thibodeaux, 2017 WL 6722811 *10. In Manderson, the court wrote:

The collateral-source rule appears incompatible with maintenance and cure. “The collateral source rule is a substantive rule of law that bars a tortfeasor from reducing the quantum of damages owed to a plaintiff by the amount of recovery the plaintiff receives from other sources of compensation that are independent of (or collateral to) the tortfeasor.” A majority of state courts addressing the matter hold the collateral-source rule prohibits in tort actions a reduction of compensatory damages by the difference between the amount billed for medical services and the amount paid.

On the other hand, and as discussed above, maintenance and cure is an implied term of contract for maritime employment and is not “predicated on the fault or negligence of the shipowner”. Accordingly, “[b]ecause of the unique nature of maintenance and cure, normal rules of damages, such as the collateral source rule in tort, are not strictly applied”.

Nevertheless, our court has identified an exception to this general rule: “[W]here a seaman has alone purchased medical insurance, the shipowner is not entitled to a set-off from the maintenance and cure obligation moneys the seamen receives from his insurer”. Our court reasoned: “[T]he policy of protecting injured seamen would be hampered if a shipowner, in hopes of reducing his liability, delayed maintenance and cure in order to force seamen to look first to their private insurer”. Thus, insofar as it can be said the collateral-source rule applies to awards of maintenance and cure, it is in this context.

666 F.3d 373, 381 (5th Cir. 2012) (citation omitted)

Based on Manderson, the Thibodeaux court concluded that because the injured seaman “did not ‘alone’ pay into his SSD credits,” set-off was not prohibited as a matter of law. Thibodeaux, 2017 WL 6722811 *10. However, inadequacy of the record prohibited set-off. Id. Employee and employer (and in most cases multiple employers) payments contribute to employee’s SSD credits. The record lacked information regarding who paid what toward seaman’s SSD eligibility. Thus, consideration of appropriate set-off would have been complete conjecture, and the court declined to award set-off. Id.

Assessment

The Thibodeaux decision suggests set-off in a very specific factual situation — where a court is presented with extensive Social Security payment information and can fashion a definitive calculation for set-off — and its applicability is likely limited. For instance, in the Pacific Northwest and Alaska fishing fleets, which arguably produce the greatest number of maintenance claims in the region, seamen of such vessels routinely receive compensation in the form of a crew share, rather than W-2 wages subject to withholding. Seamen compensated in this way pay the entirety of their own Social Security tax, and so the Thibodeaux ruling, or at least its reasoning, would seem inapplicable to this cohort. In addition, even where seamen are treated as W-2 employees, the transient nature of maritime employment often means that they have had numerous employers paying a portion of the Social Security tax over many years. In such a situation, providing credit to a single employer for SSD benefits would almost certainly involve conjecture.

While Thibodeaux does seem to provide support for the proposition that, in some instances, an employer would be entitled to an offset for Social Security payments to an injured seaman, the contours of this emerging principle are far from clear. Until the courts provide greater clarity on this issue, maritime employers should not assume that collateral benefit payments, from whatever source, will provide any relief from their well-settled obligation to pay maintenance.

DISCLAIMER: Because of the generality of this update, the information provided herein may not be applicable in all situations and should not be acted upon without specific legal advice based on particular situations.

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