In a ruling that will likely send shockwaves through the maritime industry and be considered a landmark decision in years to come, a divided panel of the Fifth Circuit in Naquin v. Elevating Boats, L.L.C., — F.3d —,No. 12-31258 (5th Cir. Mar. 10, 2014) (Davis and Milazzo, J.; Jones, J. dissenting) upheld a jury’s determination that a vessel repair supervisor at a shipyard in Houma, Louisiana qualified as a Jones Act seaman and was entitled to recover money damages under the Jones Act, to the exclusion of the compensation regime under the Longshore Harbor Workers Compensation Act (“LHWCA”). This decision may have an enormous impact on shipyards, the operators whose vessels they service, and the insurers covering them.
The plaintiff in Naquin was in charge of maintenance and repair of the defendant’s (EBI) fleet of 26-30 lift boats, and in this capacity spent 70% of his time working aboard the vessels, and the remaining 30% of his time working in EBI’s fabrication shop or on its land-based crane. His work on the vessels included inspections, cleaning, painting, replacing parts, performing engine repairs, and operating the lift boats cranes and jack-up legs. Occasionally, the plaintiff would go on “test runs” and two to three times a week would work on the vessels while they were being repositioned in the canal on which the EBI yard fronted. Plaintiff was injured while operating the land-based crane and sued EBI seeking damages as a Jones Act seaman.
EBI initially argued that plaintiff was a land-based repairmen, performing classic land-based LHWCA work; indeed, the LHWCA specifically identifies “ship repairmen” as falling within its coverage. The Fifth Circuit rejected this argument out of hand, noting that while the court had previously agreed with EBI’s position in Pizzitolo v. Electro-Coal Transfer Corp., 812 F.2d 977 (5th Cir. 1986), that decision was specifically overruled in this regard by the Supreme Court in Southwest Marine, Inc. v. Gizoni, 502 U.S. 81 (1991).
Moving beyond this LHWCA-based argument, the Naquin majority analyzed the plaintiff’s employment under the familiar two-pronged Chandris test. The court found that the plaintiff undoubtedly met the first prong (contribution to the function of a vessel), insofar as he cleaned/maintained/repaired the vessels and spent the rest of his time on the vessels operating their cranes to secure the decks for voyages. Likewise, the court found that the plaintiff satisfied the second prong (substantial relationship, in duration and nature, to a vessel in navigation), based on the 30% “rule of thumb,” insofar as Naquin spent 70% of his time aboard the EBI vessels. In this point, the court rejected EBI’s argument that the plaintiff did not regularly “face the perils of the sea” because the plaintiff virtually never slept on the vessels, and virtually never traveled with the vessels beyond the canal. Likewise, the court relied in large part on its prior decision in In Re Endeavor Marine, Inc., 234 F.3d 287 (5th Cir. 2000) (holding that crane operator on stationary river barge was a Jones Act seaman) as well as others involving oilfield/inland vessels on which workers were deemed to be seaman even though the vessels remained in inland waterways/canals. The court expressly rejected any possible distinction of these cases based on the fact that the injuries therein occurred on the water as opposed toonshore (given that the seaman status inquiry is not activity dependent).
Judge Jones dissented – specifically noting the potentially overbroad results that may occur under Judge Davis’s decision – based on the contention that allowing essentially land-based repair workers to qualify as seaman under the Jones Act runs afoul of Chandris’s “basic point” that land-based workers are not seaman:
According to the majority, these repairmen could always claim that they spent their time working on vessels . . . despite the fact that they do all of their work on or tied to land, safely removed from maritime dangers. To me, this outcome defies logic and disregards the overarching purpose of the Jones Act as stated in Chandris.
Moreover, Judge Jones’s dissent noted numerous factual distinctions that arguably render Endeavor Marine and other cases cited by the majority fundamentally distinguishable.
It is unclear at this point whether EBI will seek en banc rehearing in Naquin, although a petition for rehearing in this case might very well be granted given the potential impact of the decision..
In the meantime, Naquin will have wide-ranging effects on shipyard operators and the vessels they service. First and foremost, shipyards will need to ensure that they have the proper insurance programs in place to cover Jones Act and other seamen liabilities, including maintenance and cure (arbitrary denial of which can result in punitive damages).
Moreover, while the Naquin decision dealt only with a shipyard owned by the owner of the vessels serviced at the yard, the analysis would apply equally to a traditional shipyard that services third party vessels as well. Thus, vessel owners need to be aware that if they have their vessels serviced at a shipyard such that the shipyard’s employees spend more than 30% of their time working on the owner’s fleet, those employees may qualify as seamen. While this result will not subject vessel owners to Jones Act liability (which is limited to a seaman’s employer), it may subject the vessel owners to seamen’s claims for breach of the warranty of seaworthiness.
Finally, insurers and brokers need to be aware of how Naquin may affect their coverages. For example, port-risk insurance may now need to include coverage for potential injuries to shipyard seamen. Likewise, as noted earlier, shipyard insureds will need to re-evaluate with their brokers and underwriters their maritime employers liability policies to ensure proper coverage for Jones Act liabilities. Additionally, the Naquin decision brings into play another recent decision of the Fifth Circuit in Chenevert v. Travelers Indemnity Co., Case No. 13-60119 (5th Cir. Mar. 7, 2014), which held that “an insurer who makes voluntary LHWCA payments to an injured employee on behalf of a shipowner/employer is entitled to recover these payments from the employee’s settlement of a Jones Act claim against the shipowner/employer based on the same injuries for which the insurer has already compensated him.” Thus, to the extent insurers may have previously paid out LHWCA comp benefits to shipyard workers who may now pursue Jones Act claims under Naquin, those insurers should likewise seek to recoup any such benefits in the event the shipyard workers’ Jones Act claims succeed.