Estate of Cowart v. Nicklos Drilling Co.

1992-06-22

Headline: Forfeiture rule upheld: Court affirms that failing to get employer’s written approval of a third‑party settlement can terminate longshore workers’ compensation and medical benefits, even when the employer was not paying at the time.

Holding:

Real World Impact:

Workers who settle without written employer approval risk losing compensation and medical benefits.
Employers can use third‑party settlements to avoid paying longshore compensation.
Agency disagreements or past guidance may not protect workers from the statute’s penalty

Topics: longshore worker benefits, workers' compensation, third-party settlements, employer approval, forfeiture of benefits

Summary

Background

The worker, Floyd Cowart, was injured on an offshore oil platform while employed by Nicklos Drilling Company. He sued the platform owner, Transco, and settled for $45,000, receiving about $29,350 after fees. Nicklos funded the settlement and had notice, but Cowart did not get a formal, prior written approval from his employer before settling. He then sought benefits under the federal Longshore and Harbor Workers’ Compensation Act.

Reasoning

The legal issue was whether §33(g)’s written‑approval rule applies when the employer was not then paying compensation or bound by an award. The Supreme Court looked to the statute’s wording and structure, especially the 1984 addition that forfeiture applies “regardless of whether the employer… has made payments.” The Court concluded the phrase “person entitled to compensation” includes workers who have a right to benefits even if the employer has not paid, so Cowart forfeited his future benefits for failing to obtain approval.

Real world impact

The ruling means injured maritime or longshore workers who settle third‑party claims without their employer’s prior written approval risk losing compensation and medical care under the Act. The Court noted the harsh effects and said Congress must change the law if it sees fit. The Court did not resolve questions about retroactive effect or preclusion for others.

Dissents or concurrances

Justice Blackmun (joined by Justices Stevens and O’Connor) dissented, emphasizing that the Department of Labor and its Director long interpreted the statute to protect workers in Cowart’s situation and arguing the statute should be read to avoid harsh results.