Insurer has Subrogation Lien Against Award in Jones Act Settlement

By Francis Waguespack

In Chenevert v. Travelers Indem. Co., --- F.3d ---, No. 13-60119 (5th Cir. 3/7/2014), the Fifth Circuit addressed whether a Longshore insurance carrier could intervene in a separate Jones Act suit to assert a subrogation lien for Longshore benefits the insurer had previously paid to the Jones Act plaintiff.

Gary Chenevert was injured while working as a crane operator on a barge owned by GC Constructors. As part of

GC’s insurance policy with Travelers Indemnity Co., Travelers voluntarily paid Chenevert $277,728.72 in Longshore benefits on behalf of CG.

Subsequently, Chenevert filed a Jones Act claim against GC. Chenevert’s lawsuit prompted Traveler’s motion to intervene and seek reimbursement of the Longshore benefits it had already paid Chenevert.

The district court rejected Travelers’s motion to intervene and dismissed the case, ruling Travelers had no subrogation right and that GC sufficiently represented Travelers’s interests in the case.

On appeal,

the issue before the Fifth Circuit was whether an insurer who pays Longshore benefits to an employee on behalf of an insured employer becomes subrogated to the employer’s reimbursement rights?

A worker who seeks Longshore benefits from his employer but who also recovers a damage award against a third party is obligated to compensate his employer for the value of the Longshore benefits the employee received. Further, a worker who receives a Jones Act reward is a seaman and not entitled to LHWCA benefits. The Fifth Circuit found it unfair that an insurer should not have a right to reimbursement of LHWCA benefits it has paid a Jones Act seaman and that a seaman could receive double recovery for his injuries.

The Fifth Circuit ruled that Travelers, by voluntarily paying LHWCA benefits to Chenevert on GC’s behalf, is subrogated to GC’s right of reimbursement of those benefits. When Travelers assumed GC’s LHWCA obligation to provide LHWCA benefits to an injured longshoreman, it became subrogated to GC’s reimbursement rights against Chenevert.

Therefore, the Fifth Circuit reversed and remanded the district court’s decision with instructions to allow Travelers to intervene to assert its lien on the funds in the court’s registry.