Workers’ Compensation · Primary-source case analysis
Cowart: An Unapproved Third-Party Settlement Can Terminate Longshore Benefits
Decision: Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992).
An employer’s refusal to pay did not let this injured worker settle a third-party claim without the approval required by the Longshore Act. In Estate of Cowart v. Nicklos Drilling Co., 505 U.S. 469 (1992), entitlement arose when the worker qualified for compensation, not when an employer admitted liability or a judge entered an award. Waiting for a compensation decision before checking the settlement-approval rule was therefore dangerous.
The worker settled after becoming entitled to compensation
Floyd Cowart injured his hand on an Outer Continental Shelf oil platform in 1983. His employer and insurer paid temporary disability for ten months, but did not make the permanent-disability payments identified in an informal Labor Department notice. That notice was not an award. He later settled his negligence claim against the platform owner without the required prior written approval. Cowart, 505 U.S. at 471–472.
Entitlement did not depend on an administrative award
The administrative judge and Benefits Review Board treated the absence of current payments or an award as a reason the approval rule did not apply. The Supreme Court rejected that interpretation. A worker becomes entitled when the right to recover vests under the Act’s conditions; an employer cannot postpone that entitlement simply by disputing liability. Cowart, 505 U.S. at 473–478.
Section 33(g) imposed a strict approval consequence
The governing rule required written approval from both the employer and its carrier before execution of a settlement falling within section 33(g)(1). Cowart conceded noncompliance. The Court enforced the resulting loss of further compensation and medical benefits even though the employer was not then paying and had no outstanding order requiring payment. Notice and approval were different questions: The employer and carrier did not claim that they lacked notice of this settlement. Cowart, 505 U.S. at 472–475.
The Court separately explained that a judgment against a third party, or a settlement at least as large as the employer’s total liability, still required notification even where subsection (g)(1)’s written-approval requirement did not apply. Do not treat an approval exception as a notice exception. Cowart, 505 U.S. at 482–483. The current 33 U.S.C. § 933(g)(1)–(2) also specifies filing the approval within thirty days after settlement.
The judgment enforcing forfeiture was affirmed
The Supreme Court affirmed the Fifth Circuit, which had reversed the benefits award. It recognized the harsh consequence but enforced the statute’s language. One issue remained expressly unaddressed: Whether the employer’s participation in funding the third-party settlement placed it outside subsection (g)(1). That contention was not fairly included in the question accepted for review. Cowart, 505 U.S. at 483–484.
Justice Blackmun, joined by Justices Stevens and O’Connor, dissented. He read section 33(g) in the context of the Act as a whole and the agency’s longstanding interpretation. He would not have imposed the written-approval forfeiture on a worker whose employer had notice of the settlement but was neither paying compensation nor subject to an award. He warned that giving a nonpaying employer control over settlement could pressure an injured worker to accept less. The majority’s different reading of entitlement and approval controlled the result. Cowart, 505 U.S. at 484–503 (Blackmun, J., dissenting).
Key takeaways
- Analyze Longshore entitlement before resolving any third-party claim.
- Compare the proposed settlement with the statutory compensation entitlement.
- Obtain written employer and carrier approval before execution when required.
- Preserve the approval form, notice, release, allocation, and payment evidence.
Review your Longshore third-party settlement record
Before signing a third-party release in a Longshore matter, gather the proposed settlement, benefit calculations, payment notices, any orders and employer-and-carrier approval forms. We can review which notice and approval questions the record raises. A California workers’ compensation claim follows different statutes; this federal rule should not be transferred to it by assumption. Call (949) 343-9735 or email office@mishrax.com.
General information only, not legal advice. This article does not approve a settlement, establish entitlement, cure a forfeiture or extend a deadline.