collateral-source ruleThe Fifth Circuit issued an opinion on November 17, 2016, in Robert Deperrodil v. Bozovic Marine, Inc., (No. 16-30009). In a case involving the injury to a passenger aboard a crew boat in high seas, the District Court was called upon to determine whether under the collateral-source rule the plaintiff could recover $186,080.30, which was the amount billed for his medical care, rather than the amount that the insurer was eventually required to pay, $57,385.50, the balance having been written off. Generally the collateral-source rule bars a tortfeasor from reducing his liability by the amount the plaintiff recovers from independent sources. It is a substantive rule of law, as well as an evidentiary rule that disallows evidence of insurance or other collateral payments that may influence the fact finder.

The Fifth Circuit determined that there was no direct authority in the maritime tort context regarding the treatment of written off medical expenses for which liability existed under the Longshore and Harbor Workers’ Compensation Act (LHWCA) 33 USC 901 et. seq. It evaluated the law in its circuit and determined that Mississippi, Louisiana and Texas all had different approaches. The court then reviewed the Fifth Circuit decision in Manderson v. Chet Morrison Contractors, Inc., 666 F.3d 373, 381 (5th Cir. 2012), in which the question was whether the collateral-source rule allowed recovery of written off medical expenses when an employer paid the expenses as part of its maritime cure obligation.  In that case, about which Offshore Winds reported at the time, the Court held that it was error to award the amount charged rather than the amount that was paid.

The Court, in the instant case, while feeling that Manderson was not binding as it involved maritime cure and not a maritime tort or LHWCA insurance, the court considered that this was the most applicable of the various approaches to write-offs. It also felt that the rationale in Manderson was very persuasive because maritime cure and LHWCA insurance create similar obligations for employers. In so doing, it determined that LHWCA medical-expense payments are collateral to a third-party tortfeasor only to the extent paid; in other words, under those circumstances, the plaintiff may not recover for expenses billed, but not paid.

ALI-MLALast week, 425 admiralty and maritime lawyers, law professors, U.S. Coast Guard officers, law students, and maritime industry professionals descended on New Orleans for the Golden Rules: Tulane Admiralty Law Institute and Maritime Law Association’s 50-Year Reunion. The event kicked off Wednesday morning at the New Orleans Board of Trade. The morning CLE program included a 50 year retrospective on marine insurance, followed by programs regarding maritime bodily injury and death. The first was moderated by Patricia Krebs, and featured a discussion of, among other things, strategies for defense counsel to reduce wage bases for claims of future wage loss in maritime employment. It was followed by a presentation on the Federal Arbitration Act, which included an analysis of some interesting recent cases arising in the cruise ship context regarding enforcement of arbitration clauses in U.S. seaman contracts, and the viability of post-injury arbitration agreements. Wednesday afternoon was dedicated to meetings of various committees of the MLA, including the Joint Marine Financing, Marine Bankruptcy, and Practice and Procedure Committees. The evening was capped off with a reception at the Cabildo on Jackson Square.

Thursday morning’s programming included a CLE on professionalism, with Judge Hanks of the Southern District of Texas and Magistrate Judge Knowles of the Eastern District of Louisiana as panelists, followed by presentations on marine finance and liens, collision, limitation of liability and salvage. As was the case Wednesday, Thursday afternoon was dedicated to meetings of committees of the MLA, including the Stevedores, Marine Terminals & Vessel Services Committee, held in the offices of King, Krebs & Jurgens, one of the meeting’s sponsors. Thursday evening provided an opportunity for a variety of social events, including a lively reception at Pat O’Brien’s, jointly hosted by the Young Lawyers Committees of the MLA and ALI.

The events concluded on Friday, with CLE programs in the morning on international law, the past and future of shipping, pollution, and ethics. The general meeting of the MLA was held in the afternoon at McAlister Auditorium, amidst the excitement of homecoming on Tulane’s campus. The week’s programming ended with a well-attended cocktail reception and formal dinner at the Audubon Tea Room.

The CLE programs and committee meetings provided a variety of interesting and useful insights into recent developments in the maritime world. A few examples:

  • Although the Federal Arbitration Act expressly excludes contracts of employment of U.S. seamen, rendering arbitration clauses in such contracts generally unenforceable, several courts have recently enforced arbitration clauses in U.S. seamen contracts when “performance is envisioned abroad.” See, e.g., Alberts v. RCCL, 2016 U.S. App. LEXIS 15502 (11th Cir. Aug. 23, 2016).
  • The impact of the Zika virus on the cruise line industry is ramping up. For example, in early August 2016, the shares of three major cruise lines fell the day after an advisory from the CDC was issued that warned pregnant women of the risk of Zika infection.
  • The Federal Maritime Commission has recently proposed several new rulemakings for further regulation of the marine terminal industry, driven, in great part, by actions taken and developments occurring at West Coast ports. Many parties, both ocean carriers and marine terminal operators, including the National Association of Waterfront Employers, have submitted comments to indicate displeasure with many of the proposed changes as too burdensome on the regulated parties and not providing the FMC with meaningful additional information.

When everything was said and done, attendees earned up to 975 minutes of CLE credit while meeting and reconnecting with colleagues from around the globe. It can truly be said that good times were had by all.

The next meeting of the Maritime Law Association will be held in May of 2017 in New York City.

Proposed LHWCA Maximum Compensation ChangeThe Office of Workers’ Compensation Programs, Department of Labor, posted proposed rules affecting section 906 of the Longshore and Harbor Workers’ Compensation Act 33 U.S.C. § 901 et seq., Federal Register, Volume 81, No. 166, August 26, 2016. The Department invited written comments on the proposed regulations from interested parties by October 25, 2016. The proposed change is designed to address how the provision in Section 906 related to “maximum” compensation is to be applied. These changes focus upon the interpretation of 906(c). For the purpose of this discussion, it should be understood that compensation benefits are capped at 200% of the national average weekly wage (906(b)(1)). Additionally, the national average weekly wage is recalculated every year pursuant to 906(b)(3). Historically an increase in this figure has always occurred. Section 906(c) provides that: determinations made of the national average weekly wage with respect to a period “shall apply to employees or survivors currently receiving compensation for permanent total benefits or death benefits during such period, as well as those newly-awarded compensation during such period.”

As noted in the proposed regulations, the terms “currently receiving compensation” and “newly-awarded compensation” have been the subject of certain litigation over the years. It appears that what the proposed regulations do is to place into a regulation a Benefit Review Board (BRB) ruling that has never been tested in the U.S. Circuit Courts of Appeals. The BRB ruling in Marko v. Morris Boney Company, 23 BRBS 353 (1990), held that 33 U.S.C. § 906(c) required that a claimant who is totally and permanently disabled is to be provided an increase in the maximum allowable benefit annually rather than being held to a fixed maximum that would be established by the date of his disability. So, if an employee’s initial benefit, due to his high average weekly wage (AWW), is limited by the cap of the maximum benefit provided in 906(b)(1), he will not receive a full two-thirds of his AWW as a weekly benefit. If later annual increases in the maximum allowable benefit reach a point where they exceed two-thirds of the claimant’s AWW, he will not then be so limited and will receive his full benefits.  If the maximum were fixed, as a number of employers have asserted, this would not occur.

Should an employer be concerned about this reformulated regulation, depends upon whether its employees fall into a category where their compensation rate would be limited by the maximum allowed under Section 906(b)(1). For present purposes, the maximum rate that will come into effect on October 1st, 2016, is $1,436.48. To max out at this rate, an individual would need to have an AWW of $2,154.72 or an annual income of $112,045.44. If employees receive wages in or around this level, then the potential effect of the application of this regulation may be of concern to employers.

The proposed regulations also establish a standard based upon the Ninth Circuit’s decision in Roberts v. Director, OWCP, 625 F.3d 1204, 1208-09 (9th Cir. 2010), aff’d sub nom Roberts v. Sea-Land Services, Inc., 132 S.Ct. 1350 (2012), and the Eleventh Circuit decision in Boroski v. Dyncorp. Int’l, 662 F.3d 1197 (11th Cir. 2011). Both of these courts interpreted Section 906(c)’s “currently receiving compensation” language for permanent and total disability or death benefits, and they have allowed a step-up in the maximum where the claimant’s disability category changed from temporary total disability (TTD) to permanent total disability (PTD). Rather than limit the employee to the maximum at the time of injury, the employee’s rate was subject to the maximum as of the date that his disability was classed as permanent and total. In one of these cases, the claimant, originally injured in 2012, went from TTD to PTD in 2005, and at that time his rate was found to be controlled by the maximum in the 2005 fiscal year. Later, when a wage-earning capacity was established, thereby changing the rate to one of permanent partial disability, the 2002 maximum rate for the date of injury was found to be applicable.

James Baker Jr. v. Director, OWCP; Gulf Island Marine Fabricators, LLCJames Baker, Jr. v. Director, OWCP; Gulf Island Marine Fabricators, LLC, U.S. Fifth Circuit No. 15-60634 (August 19, 2016). In this case the Court of Appeals affirmed the Administrative Law Judge’s (ALJ) determination that Mr. Baker, an employee of Gulf Island Marine Fabricators, LLC (Gulf Island) did not qualify for benefits under the Longshore & Harbor Workers Compensation Act (LHWCA), 33 U.S.C. § 901 et seq., either directly or by application of the Outer Continental Shelf Lands Act (OCSLA), 43 U.S.C. § 1331 et seq.

Mr. Baker filed a claim with the U.S. Department of Labor alleging an injury in the course and scope of his employment with Gulf Island for which he sought benefits under the LHWCA. Gulf Island was in the business of constructing and repairing vessels, and specialized in maritime oil and gas structures. One of Gulf Island’s projects was to fabricate the topside living quarters for the tension-legged platform, Big Foot. Mr. Baker had been hired by Gulf Island to work as a carpenter in the fabrication of the living quarters. His entire employment was spent on this project. His work was within 100 yards of the Houma Navigation Canal to which the employer’s property abutted, but he always worked on dry land. Mr. Baker never went offshore to participate in work duties on the Outer Continental Shelf. The parties had stipulated that the “situs” prong of the jurisdictional test under the LHWCA was met as Mr. Baker performed his duties in an area adjacent to navigable water, but the employer disputed whether under the “status” prong of the jurisdictional test Mr. Baker was involved in maritime employment.

In applying the recent decisions of the U.S. Supreme Court in Stewart v. Dutra Construction Company, 543 U.S. 481 (2005) and Lozman v. City of Riviera Beach, Fla., 133 S.Ct. 735 (2013), the ALJ determined that the tension-legged platform, Big Foot, was not a “vessel” in the context of the LHWCA as that term has been defined by decisional law, and Mr. Baker was therefore not involved in maritime employment.

Mr. Baker also sought coverage under the Act by application of the OCSLA, asserting that the Supreme Court’s decision in Pacific Operators Offshore, LLP v. Valladolid, 132 S.Ct. 680 (2012), extended OCSLA coverage to one who was injured on land. As noted by the ALJ, the Supreme Court decision applying OCSLA extra-territorially required the injured employee to establish a significant causal link between the injury that he suffered and his employer’s onsite OCS operations conducted for the purpose of extracting natural resources from the OCS. In this instance, the ALJ found that Mr. Baker never set foot on the OCS and his employer had no role in transporting the Big Foot to the OCS, installing it there or operating it, ergo OCSLA did not provide him with an avenue to LHWCA coverage.

The ALJ’s decision was affirmed by the Benefit Review Board and Mr. Baker appealed to the U.S. Fifth Circuit Court of Appeals. The Fifth Circuit’s decision likewise analyzed the Dutra and Lozman decisions of the Supreme Court and concluded that the Big Foot was not a “vessel” under the LHWCA. It felt that this comported with its cited precedent denying vessel status to structures that were not designed or engaged in maritime transportation noting that mere flotation on water does not constitute a structure a vessel.

The Fifth Circuit also addressed the Pacific Operators holding indicating that Mr. Baker’s injury occurred on dry land while he was building the living and dining quarters for the Big Foot, and therefore, he did not satisfy the fact-specific test enunciated by the Supreme Court. The Court reasoned that Mr. Baker’s job of constructing living and dining quarters was too attenuated from Big Foot’s future purpose of extracting natural resources from the OCS for the OCSLA to cover his injury. Mr. Baker’s employment was located solely on land, whereas the employee in Valladolid spent 98% of his time on an offshore drilling platform. Furthermore, Mr. Baker’s particular job did not require him to travel to the OCS at all, making his work geographically distant from the OCS. Likewise, his employer had no role in moving the Big Foot to and installing it on the OCS. Based upon these specific facts of Mr. Baker’s employment, the Fifth Circuit concluded that the ALJ appropriately denied Mr. Baker’s claim.

Coast Guard Inspection of Towing Vessels RuleThe U.S. Coast Guard Inspection of Towing Vessels Final Rule under 46 CFR Subchapter M takes effect on July 20, 2016. The Rule, published this week, has its roots in the Coast Guard and Maritime Transportation Act of 2004, and creates many new requirements for the equipment, operations, construction and design of towing vessels, and establishes a comprehensive inspection regime. The Rule provides that towing vessel owners/operators must select for their fleet one of two inspection compliance options: (1) the Coast Guard inspection option or (2) the Towing Safety Management System (TSMS) option.

The Coast Guard inspection option is fairly straightforward; under it, the Coast Guard conducts annual routine inspections of towing vessels or fleets. To meet record keeping requirements, vessel owners may use a safety management system (SMS), towing vessel record, vessel operations manual or logbook. The second option, TSMS, requires owners/operators to implement a survey program for vessel compliance, which may be internal or external. Under an external survey program, Third Party Organizations (TPOs), such as certain classification societies, perform routine inspections of the vessels. An internal survey program is conducted using internal resources or contracted surveyors, with the oversight of a TPO. Whatever option is selected, a new towing vessel must obtain a Certificate of Inspection from the Coast Guard before it enters into service. Owners/operators of only one towing vessel must have a valid Certificate of Inspection by July 20, 2020, while owners/operators of a fleet of towing vessels must obtain a Certificate of Inspection for each vessel according to a set schedule (July 2019 for at least 25% of the fleet; July 2020 for at least 50%; July 2021 for at least 75% and July 19, 2022 for 100% of the fleet). Owners/operators that select the TSMS option must obtain a TSMS certificate from a TPO at least six months before their vessels may obtain a Certificate of Inspection.

The Coast Guard estimates that the Inspection of Towing Vessels Final Rule will affect 5,509 U.S.-flag towing vessels and 1,096 owners or operators of towing vessels. The financial impact on the industry is estimated to amount to an annual cost of about $33 million, with some cost savings stemming from certain exemptions in the Rule for existing vessels. Vessel owners/operators are well-advised to fully review the Final Rule to ensure compliance, as failure to timely implement the Rule’s requirements could result in substantial penalties, delay in vessel operations, and other liabilities.

Surveillance and Section 20a PresumptionThe recent decision of the U.S. Court of Appeals for the Fifth Circuit in Bis Salamis, Inc. v. Director, OWCP (Joseph Meeks), No. 15-60148 (March 17, 2016), highlights how the defense to a claim under the Longshore and Harbor Workers’ Compensation Act, 33 USC 901 et.seq. (LHWCA), can have a tortured journey through the liberal Benefits Review Board (BRB) until a successful result is reached in at least some of the U.S. Courts of Appeals. This opinion also underscores the importance of surveillance evidence when facing a prevaricating claimant.

In this matter the Fifth Circuit reversed the BRB which had twice reversed an Administrative Law Judge’s (ALJ) finding that the claimant’s testimony, video surveillance and other evidence presented by the employer showed that the claimant’s assertions were so unworthy of belief that they were not adequate to invoke the Section 20(a) presumption. Without the presumption aiding the claimant, the ALJ concluded that the claimant had failed to prove that his disability was related to his work activities. Not only did the claimant relate several versions of how his alleged accident occurred, he was also heard to say shortly after the event that he had been “hurt before but … never got anything for it.” There was also conflicting evidence as to whether the personnel basket transfer that was used to transport the claimant from a platform to a vessel and that was alleged to have caused the injury, resulted in a small jostling of personnel or involved a six to ten foot fall.

In his original opinion the ALJ concluded that the claimant was such an unreliable witness and dishonest individual that his testimony and the supporting opinions and reports of the doctors who relied on what he told them had virtually no probative value or evidentiary weight. The ALJ found that the only relevant fact that was established, as more likely than not to have occurred, was that the claimant was involved in an incident where he was tossed about in a personnel basket.

Underlying the ALJ’s initial opinion was his evaluation of  surveillance video showing the claimant capable of performing many activities without exhibiting pain or limitation at the time he reported to doctors that he was in intense pain and incapable of performing even the lightest of activities. The video also refuted the claimant’s testimony that he spent most of his time in bed and could not lift anything heavier than 10 lbs.

The Benefit Review Board (BRB) reversed the ALJ’s first opinion faulting the ALJ for failing to place his findings within the LHWCA’s framework or explicitly discussing the presumption on causation in the claimant’s favor under Section 920(a). The BRB felt that the ALJ had shifted the burden onto the claimant to prove the work relatedness of his injuries.

After the first remand to the ALJ, he again found that any testimony, findings or opinions based on the claimant’s statements and complaints were entitled to virtually no weight because he found the claimant to be so dishonest and unreliable. The ALJ acknowledged that employers are liable for instances that aggravate pre-existing conditions, but found that the claimant failed to meet even the slight prima facie burden to establish a compensable harm. The only harm the ALJ found claimant incurred was a lumbar strain for which claimant was treated and released to full duty.

On the second appeal to the BRB, it again reversed the finding that the ALJ’s order indicating it was not supported by substantial evidence because objective medical evidence in the record established that the claimant required treatment for his injuries and was prevented from going back to his hard labor job. On the second remand, the parties stipulated to the claimant’s average weekly wage and the ALJ entered an order awarding temporary total disability in compliance with the direction of the BRB. This was then appealed to the Fifth Circuit.

Applying the accepted standard of review in determining whether the ALJ’s decision was supported by substantial evidence, the Fifth Circuit concluded that an ALJ may make credibility determinations in asserting whether a claimant has established the prima facie showing required to obtain the benefit of the presumption under 20(a). The Court indicated that the BRB had improperly reasoned that even if the claimant was not credible, some of the medical evidence was sufficiently objective, that the ALJ should have accounted for it and applied the Section 20(a) presumption. The Court noted that it is established law that the ALJ may choose between reasonable inferences and that he exclusively empowered to weigh the evidence. It reiterated that an ALJ may accept or reject the conclusions of experts and is not required to accept the opinion or theory of a medical expert that contradicts his findings based on common sense. It noted that there was plentiful evidence demonstrating that the claimant had a preexisting degenerative back condition that could reasonably cause the pain he alleged. The court, however, found that there was no definitive evidence showing that the claimant’s suffered a traumatic injury, and that there was no evidence showing a difference in his spine before and after the incident on the personnel basket. The Court further noted that although some of the doctor’s findings were based on what they viewed as objective tests, it was not irrational for the ALJ to conclude that the claimant probably faked assertions of pain and limited range of motion which was refuted by the video surveillance.

Punitive Damages - US Eastern District Court HouseFollowing the Fifth Circuit’s opinion in McBride v. Estis Well Service, 768 F.3d 382, 391 (5th Cir. 2014), we reported that punitive damages had “expired and gone to meet their maker” when it comes to Jones Act seamen. As it turns out, they were only mostly dead. In Corey Hume et al. v. Consolidated Grain & Barge, Inc. et al., No. CA 15-0935, 2016 WL 1089349, at *1 (E.D. La. Mar. 21, 2016), Judge Zainey of the Eastern District ruled that punitive damages are still recoverable by Jones Act seamen against non-employer third parties.

The Plaintiffs, who were employees of defendant Consolidated Grain, were working aboard a vessel owned by defendant Quality Marine Services when a running wire of the vessel struck each of them in the face and head, resulting in brain injuries and facial disfigurement. The Plaintiffs sued Quality Marine for punitive damages under general maritime law. Quality Marine moved to dismiss, arguing that, pursuant to McBride v. Estis Well Service, 768 F.3d 382, 391 (5th Cir. 2014) (en banc), cert. denied, 135 S.Ct. 2310 (2015) (which held that an injured seaman cannot recover punitive damages against his employer), and Scarborough v. Clemco Industries, 391 F.3d 660, 668 (5th Cir. 2004) (which held that a seaman who invokes Jones Act status cannot recover punitive damages against a non-employer third party), Plaintiffs were not able under general maritime law to recover punitive damages from Quality Marine.

The court disagreed. Relying on another recent decision from the Eastern District, Collins v. A.B.C. Marine Towing, L.L.C., 14-1900, 2015 WL 5254710 (E.D. La. Sept. 9, 2015), the court declined to follow the Fifth Circuit’s holding in Scarborough, finding Scarborough had been “effectively overruled” by the Supreme Court in Atlantic Sounding Co. v. Townsend, 557 U.S. 404 (2009). The court held instead that the Jones Act forecloses a seaman’s recovery for non-pecuniary loss in maritime cases only with respect to his employer. With respect to a non-employer tortfeasor such as Quality Marine, to whom the Jones Act does not apply, no statutory regime exists that conflicts with general maritime law remedies, and thus punitive damages may be recoverable. In the end, the court held that the “takeaway from Townsend” was that a seaman may recover punitive damages under general maritime law if the Jones Act is not implicated, and denied Quality Marine’s motion to dismiss the punitive damages claim.

On March 10, 2016, I reported on the Fifth Circuit’s opinion in Petrobras America, Inc., et al. v. Vicinay Cadenas S.A., No. 14-20589 (03/07/16), where the Fifth Circuit addressed the waivability of OCSLA’s choice of law provision and determined that it could never be waived. The appellee, Vicinay Cadenas, S.A., has now petitioned for a rehearing en banc and asserts the decision conflicts with the Court’s prior holding of In Re HECI Expl. Co., 862 F.2d 513 (5th Cir. 1988) holding that choice of law – even if mandated by a statutory provision that cannot be overridden by the parties’ agreement – is non-jurisdictional and thus subject to waiver. The appellee also urges that the decision threatens to impair the efficient administration of justice by placing a statutorily-prescribed choice of law provision on par with subject matter jurisdiction, thereby requiring continual reconsideration of the issue regardless of whether it was ever timely raised. A majority of the Court’s judges must now vote that the matter deserves an en banc rehearing for the appeal to move forward.

OSV OutlookI attended an excellent conference on March 3, 2016, put on by WorkBoat® exploring the “OSV Capital Outlook for 2016 and Beyond”. The conference featured a diverse and highly experienced panel of speakers including investment and marketing analysts and consultants, vessel operators, shipyard executives and WorkBoat® editors. You may want to read WorkBoat’s® own blog post about the conference; my takeaways from attending are as follows:

  • Praveen Narra, a Raymond James analyst, indicated that while oil prices appear to have bottomed and are beginning to climb toward an expected range of $65 to $70 per barrel in 2017 and 2018, a sustainable turnaround in OSV day rates and utilization should not be expected until at least 2018.
  • Mr. Narra stated that actual rig tendering activity will likely continue to decline in 2016 with no substantial uptick in day rates until 2017.
  • Richard Sanchez, a marine analyst with IHS Energy-Petrodata MarineBase, cautioned that when drilling activity does resume, it is likely to first rebound onshore rather than offshore, as onshore projects can be brought to production much faster, more efficiently and at less cost than offshore projects.
  • Sanchez is seeing that the downturn in OSV utilization is affecting shallow water platform supply vessels more than large PSVs and anchor handling tugs, with day rates for shallow water PSVs at below break-even levels.
  • Matthew Rigdon, a senior executive with Jackson Offshore Operators, cited as one of the lingering effects of this downturn the loss of trained, certified and licensed labor to operate vessels when the rebound finally does occur. Many mariners will move to jobs in other industries. Additionally, U.S. Coast Guard certification requirements necessitate expensive periodic training and recertification, the cost of which is traditionally shared between OSV operators and the mariners. Many out-of-work mariners may not have the means or inclination to maintain these certifications, which will shrink the pool of qualified labor available when their services are needed.
  • Allen Brooks, managing director at PPHB, LP, cited as the “elephant” in the rig market the degree of debt-load of drilling companies. This also is a significant concern for OSV operators. High debt service obligation coupled with diminished cash flows due to low utilization and low day rates will lead to substantial destressed asset activity. However, the amount of this activity is unknown. It is also unknown when investors will begin to seize the opportunity to acquire these assets.

Armed with knowledge of the bleak outlook, OSV operators should be pro-active in making decisions regarding stacking of vessels, redeployment or laying off personnel, cost cutting and restructuring debt-loads. Bankers are traditionally hesitant to repossess OSVs. There is significant costs in storing and maintaining them pending resale and these costs could mount if, as is the case now, prospects for an advantageous resale are dim. It should be emphasized that the current downturn in the OSV market does not only affect the Gulf, but is a global phenomenon. Thus, there will be no buyers for these vessels until the market begins to rebound. This gives OSV operators leverage in restructuring negotiations. [On that note, see my post of November 23, 2015.]

Maritime ContractMany of the indemnity provisions Master Service Agreements use in the energy and construction industries contain the term “invitee” in the definition of “Owner Group” and “Contractor Group”. However, the term “invitee” is rarely defined itself. Drafters should strongly consider jettisoning the term “invitee” from the definition of “group”. For most contracts applicable to worksite operations, the terms “contractor” and “subcontractor” are substantially easier to understand and to apply.

In the absence of a contractual definition, the courts will have to resort to judicial definitions of “invitee” in order to give meaning to the indemnity provision. In Grogan v. W&T Offshore, Inc., No. 15 – 30369 (5th Cir. Jan. 27, 2016), the U.S. Fifth Circuit Court of Appeals had to interpret indemnity provisions in which both “groups” included the undefined term “invitee”.[1] W&T agreed to defend and indemnify Triton from the claims of W&T’s invitees, and Triton agreed to defend and indemnify Triton from the claims of Triton’s invitees.

Tiger was hired by W&T to provide hydrogen sulfide (H2S) monitoring services and personnel, training and equipment during the operation of Triton’s vessel. Mr. Grogan, an employee of Tiger, was injured when he fell to the deck of the Triton vessel on which he had worked while attempting to board a personnel basket.

The Fifth Circuit adopted the parties’ reliance on the Louisiana judicial definition of invitee in Blanks v. Murco Drilling Corp., 766 F.2d 891 (5th Cir. 1985) to supply the applicable definition of invitee in a maritime contract.  (It remains to be seen whether this Louisiana land–based definition is applied by other coastal courts in interpreting “invitee” in their maritime contracts.) Under Blanks, an invitee is “a person who goes onto premises with the expressed or implied invitation of the occupant, on business of the occupant or for their mutual advantage.”  Id. at 894.

The district court denied cross–motions for summary judgment, finding disputed material facts as to whose invitee Mr. Grogan qualified; the issues were ultimately resolved through trial on submitted memoranda and evidence including deposition transcripts.

On appeal, the Fifth Circuit first concluded that even though Triton owned the premises, W&T exercised sufficient control (presence of a company man, establishment of the order of work, etc.), that W&T qualified as an occupant for purposes of Mr. Grogan’s status as W&T’s invitee. Thereafter, the court of appeals concluded that even though Triton impliedly consented to Mr. Grogan’s working from the Triton vessel, and that Triton indirectly benefitted from his presence, it was W&T that ultimately benefitted from Mr. Grogan’s presence and services.  As a result, the district court did not err in concluding Mr. Grogan was the invitee of W&T, not Triton.

[1] King, Krebs & Jurgens, the author, and his partner, Jack Jurgens, represented W&T Offshore in the district court and on appeal.