Defense Base Act Compensation Blog

The Modern Day DBA Casualty

Average Weekly Wage & Residual Earning Capacity in DBA Cases: Beware Adjuster Sleight of Hand

Posted by defensebaseactcomp on July 26, 2012

Guest Post by Doug Grauel, ESQ  July 26. 2012

DBA insurance companies scurry a lot.

They can’t seem to take a claim, look at it, make a reasoned statement of how they see it, and have a conversation about it. Instead they see a claim coming, so they scurry. The scurrying gets so fast it’s like watching a magician running a shell game. One of the favorite deceptions has to do with Average Weekly Wage (on the front end) or Residual Earning Capacity (sometimes called Residual Functional Capacity) on the back end.

Average Weekly Wage (AWW) is generally thought of as the rate of pay that an injured worker was making at the time that he or she was hurt. Section 10 of the Longshore Act tells you how to calculate AWW–sort of.  For most overseas war zone contractors,  AWW is the amount that you would have earned working at your regular, time-of-injury job for one year, divided by 52.  This means that you include overtime, hazard pay, and all the rest to your base pay, figure out what a “typical” year would have looked like, and divide by 52. Roughly. If you are unlucky enough to get hurt before you have worked a year, then there is issue of possible annual or completion bonuses. Workers who are hurt in the third year of overseas work, even if each year was a one-year stint, have stronger claims for higher wages than workers who get hurt six weeks after they arrive on base. It’s just how the world works.

Carriers love this simple trick:

Overseas contractors often earn enough that their DBA/Longshore compensation rate is the maximum. So if you’re an adjuster, do you bother to figure out the real AWW?   No way: You just say, “This year’s max is $1295.20. The comp rate is 2/3 AWW, which is the same as .666xAWW. So .666xAWW=$1295.20.  Therefore AWW=$1295.20/.666= $1944.74.” But $1944.74×52=$101,126.48.  Plenty of overseas contractors are making more than that if you include hazard pay, overtime, and so on.  So that AWW that the adjuster cooked up is too low. Why should you care, if you get the max rate anyway?

Here’s why: After you get a little medical treatment, suddenly the adjuster sends you a “Labor Market Survey,” claiming that you could be working at $12.00 an hour for 35 hours a week. That’s about $420 per week, or $21,840 per year. So now your comp benefits go down, because the carrier says your comp rate should be 2/3 of the difference between AWW at the time of injury ($1944.74) and your residual earning capacity ($420). $1944.74-$420=$1524.74. $1524.74x.666=$1015.48.

Presto: You lose $1295.20-$1015.48=$279.72 per week, or $14,545.44 per year.

All because the adjuster didn’t want to figure out what your real AWW should be.

Douglas Grauel, Esq. | | (603) 369-5010 | 15 N. Main St. Concord NH 03301 |

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