ALJ Did Not Have Power to Resolve Defense Base Act Insurance Dispute

Sandi Group, Inc., employed Iraqi nationals who were injured or killed during their employment. Pending before the Office of Administrative Law Judges ("OALJ") are two claims against Sandi Group, one by an injured claimant, and another on behalf of a deceased claimant. In those proceedings, Sandi Group has taken the position that the claimants were employees working under a subcontract with Dyncorp. Further, Sandi Group alleged that it was entitled to coverage under Dyncorp's insurance policy because Dyncorp is the employer who is statutorily responsible for providing Defense Base Act coverage for these incidents." Dyncorp's insurer, Continental Insurance Company ("Continental"), disagreed, noting that the Dyncorp policy did not cover foreign nationals. Continental then filed a declaratory judgment action in the United States District Court for the District of Columbia to resolve the insurance coverage dispute. Sandi Group asked the court to either dismiss or stay the action, but the court refused. Sandi Group's position was that the Administrative Law Judge ("ALJ") before whom the claimant's claims were pending had to determine the insurance coverage dispute. If the ALJ did not, then there could be inconsistent rulings. Continental argued that contractual indemnification provisions were outside the scope of an ALJ's review. An ALJ's statutory grant of power "to resolve all questions 'in respect of' an employee's claim should be defined as all questions 'integral to' the employee's claim against the employer." Here, the court concluded that Section 19 of the Longshore and Harbor Workers' Compensation Act ("LHWCA") assigns an ALJ the power to resolve one issue, "the claimant's entitlement to payment," and that the insurance dispute between Continental and Sandi Group was collateral to that issue. Even if an ALJ has concurrent authority to consider the scope of a DBA insurance policy, the court reasoned, there was no reason to conclude that the resolution of the insurance question required "specialized knowledge that is resident at the Department of Labor, or that it will turn upon an examination that the ALJ is particularly suited to undertake." Finally, the court was not convinced that the judicial economy militated in favor of dismissal or a stay considering the fact that the declaratory judgment action can be resolved expeditiously with dispositive motions. Continental Ins. Co. v. Sandi Group, Inc., – F. Supp.2d –, 2011 WL 3648253 (D.D.C. Aug. 19, 2011). Note: This decision is concerning because it overly restricts an ALJ's power. The Western District of Washington previously addressed a similar issue in Insurance Co. of N. Am. v. San Juan Excursions, No. C05-2017Z, 2006 WL 2091059 (W.D. Wa. July 25, 2006). There, the court stated that "[t]he absence of statutory language granting administrative tribunals the specific power to decide LHWCA-related contractual issues that are necessary to resolve a claim for benefits does not automatically mean that such power lies with the district courts." Further, in San Juan Excursions, the Director took the position that insurance companies need to litigate liability disputes inside the LHWCA's administrative system and not in civil courts. Simply put, insurance liability disputes are often considered by ALJs when those disputes are "integral" or "essential" to resolving the rights and liabilities of the claim, the employer, and the insurer regarding a compensation claim. For instance, last responsible carrier issues require an ALJ to consider which of multiple insurance carriers are liable for a claimant's injury. Resolution of those issues determines the rights and liabilities of the employer and carriers, which is an essential part of resolving a claimant's entitlement to payment.

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