Amicus Curiae Brief — Pauley v. BethEnergy Mines, Inc.

Sire, seis ana id Bane tone va

Nos. 89-1714, 13 and 90-11 rt, ~

IN THE

Supreme Court of the Anited

OCTOBER TERM, 1990

HARRIET PAULEY, Survivor of JOHN C. PAULEY,

Petitioner,

Vv.

BETHENERGY MINES, INC., et al.,

Respondents.

CLINCHFIELD COAL COMPANY,

Petitioner,

Vv

DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS,

U.S. DEPARTMENT OF LABOR, et al.,

Respondents.

CONSOLIDATION COAL COMPANY,

Petitioner,

Vv.

Director, OFFICE OF WORKERS’ COMPENSATION PROGRAMS,

U.S. DEPARTMENT OF LABOR, et al.,

Respondents.

On Writs Of Certiorari To The

United States Courts Of A 8

For The Third And Fourth Circuits

BRIEF AMICUS CURIAE OF

THE NATIONAL COUNCIL ON COMPENSATION

INSURANCE SUBMITTED IN SUPPORT OF

THE MINE OPERATORS

MICHAEL CAMILLERI

Counsel of Record

LisA MURPHY

NATIONAL COUNCIL ON

COMPENSATION INSURANCE

750 Park of Commerce Drive

Boca Raton, Florida 33487

(407) 997-4700

—————————

PRESS OF BYRON 8S. ADAMS, WASHINGTON, D.C. (202) 347-8203

TABLE OF AUTHORITIES

CASES: Page

Addison v. Holly Hill Fruit Products, Inc., 322 U.S.

GRU GIRRED ccnsenssenesnennnienaiaalies 10

Broyles v. Director, orkers’

"Vicon Programs’ 821 F.2d 327 (ath Gr N98,

affd in part, Pittston Coal Group v. Sebben,

GB GE. BD Gee anenneniceeciidenaitine 12

Chevron, U.S.A., Inc. v. Natural Resources Defense

Council, Ine., 467 U.S. 837 (1987) .................. 8

Dayton v. Consolidation Coal Co., 895 F.2d 173 (4th

CR. TIED easccceccnsesstennenmsntenstndpdaimainatinin Meats 4

DeBartolo Corp. v. Florida Gulf Coast Bldg. and

Const. Trades Council, 108 S. Ct. 1392

GRIT <ocssesscecesesnesenseenientuinntniaiinaiamasnibeienes 16

Farmer v. Weinberger, 519 F.2d 627 (6th Cir.

SUED cnnsscsscssssseesemeninmnnnaniinaintialnes 12

Haywood v. Secretary of Health and Human Ser-

vices, 699 F.2d 277 (6th Cir. 1983) ................ 13

Logan v. Zimmerman Brush Co., 455 U.S. 422

GREED arepsrccsssecocssensesenienmensmnastntpeniaiinsiatinaiiie 17

Mullins Coal Co. v. Director, Office of Workers’

Compensation Programs, 484 U.S. 135

ER I Se 4,10,16

NLRB v. United Food & Commercial Workers’

oe FS § eeeeees.2 x

Pittston Coal Group v. Sebben, 488 U.S. 105

GEE? ccccecuncsnsumsnenteiiinniiaeaee 10,11,12,13,17

Pyro Mining Co. v. Slaton, 879 F.2d 187 (6th Cir.

DEED cnesecsenscsnssssnentiidatsendaatiiiaienee 3

Taylor v. Clinchfield Coal Co., 895 F.2d 178 (4th

CARR, TEP consscencccsetinnieniemeiale 3,8

Tazco, Ine. v. Director, Office of Workers’ Compen

— Programs, 895 F.2d 949 (4th Cir.

BEDE) «sececressscenssennsmmeenenenssniisingnaneanaeaads 3

Table of Authorities Continued

Page

Usery v. Turner Elkhorn Mining Co., 428 U.S. 1

ac scrsssssencononoes 16,17

CONSTITUTIONAL PROVISIONS:

EE _.._. consnsoccccoscoccs 16,17

STATUTES AND REGULATIONS:

I .... __cancccccccccccosooces 15

ED ss cccccsncncesercsosscocooes 3,14

ee IIE... ccccsscccccosssccssosocors 14

26 U.S.C. § 9501(d) (1988) ..................csscccssrrrreeeees 3,14

Black Lung Benefits Act, as amended, 30 U.S.C.

aes sacccnscsssaccrcococcees 2

Section 401(a), 30 U.S.C. § 901{a) (1988) .......... 9,16

Section 402(b), 30 U.S.C. .§ 902(b) (1988) .......... 11

Section 402(f), 30 U.S.C. § 902(f) (1988) ........... a

senses 402(f(1A), 30 U.S.C. § 902(f(1\A)

Section 402(f(2), 30 U.S.C. § 902(fX2) (1988) ... passim

Section 413(b), 3u U.S.C. § 923(b) (1988) .......... 10

Section 422, 30 U.S.C. § 932 (1988) ............0..... y

Section 422(a), 30 U.S.C. § 932(a) (1988) .......... 4

Section 422(c), 30 U.S.C. § 932(c) (1988) ........... 4

Section 422(jX1), 30 U.S.C. § 932(jX1) (1988) .... 3

Section 423, 30 U.S.C. § 933 (1988) .................. 13

Section 423(a), 30 U.S.C. § 933(a) (1988) .......... 5,9

Black Lung Benefits Reform Act of 1977, Pub. L.

No. "95-239, 92 Stat. 95 (1978) ............0000.0..0. i4

Black Lung Benefits Revenue Act of 1981 and Black

Lung Benefits Amendments of 1981, Pub. L.

No. 97-119, 95 Stat. 1635 (1981) ..........00.... 14

30 U.S.C. § 1257(f) (1988) ......ssssssesssseeeesseen didi 15

iv

Table of Authorities Continued

Longshore Act, as amended, 33 U.S.C. §§ 901-950

(1988)

Section 28, 33 U.S.C. § 928 (1988) ............0..00..

Section 32, 33 U.S.C. § 982 (1988) ..............000

SD TE. BT IED ticctctesccccscsconssccosesccseseesse

BD eB GR IEEE ccieceerenccssesecsenccccsesconsecess

Bl Be I eerttresecrencscnisatnccntesenicntoncnseese

Ge ae 0 I Biicersceiccscncnssenescmierenscscccsans

eh Be ED settererecevccsncceeneevnieriensnseneens

es Be Ee eiecceneccsennccrcnerscemmeneenesscens

Omnibus Budget Reconciliation Act of 1987, Pub.

L. No. 100-203, 101 Stat. 1330 (1987) ...........

Consolidated Omnibus Budget Reconciliation Act of

need Pub. L. No. 99-272, 100 Stat. 312, 313

Rules of the Supreme Court, Rule 37.8 ................

Ee 2 SE (SEES ea

Social Security Administration Regulations

20 C.F.R. § 410.412(aX1) (1990) .............. eee

et f ef = —_ Ee

Ree EF aN

20 C.F.R. § 410.426(a) (1990) ........... eee eeeeee

20 C.F.R. § 410.450 (1990) .....................cccccceeesse

BD Cr ie B Ge GO cccecescccccccceceseccosccccscees

FO Cie B Ge CD crcececcccccccccccccssccsccoscoss

2u C.F.R. § 410.490(b) (1998) oo..eccccccecccseeeeeeeees

20 C.F.R. § 410.490(bX1) (1990) 0.00.0... eee

20 C.F.R. § 410.490(bX2) (1990) ......... cece

20 C.F.R. § 410.490(c) (1990) .............cccccceseeeeeeee

20 C.F.R. § 410.490(cX2) (1990) .......... eee

Department of Labor Regulations

fee Sy, Fl Een

Table of Authorities Continued

Page

20 C.F.R. § 725.360(aX4) (1990) ............ccceeeeeeeees 3

20 C.F.R. § 725.508 (1990) ...........sccssscscsssssersscees 4

20 C.F.R. § 725.608 (1990) ..........cccscccssscsscsscsscees 4

20 C.F.R. § 725.701 (1990) .............cscccccsssscercseees 4

BD Ge Ne Pe GD titteccccccccsicrcccrscasesnees 2

20 C.F.R. § 726.203 (1990) ...............ccccsssesssesess 6,13,16

20 C.F.R. § 726.203(a) (1990) ..........ccccccceeeeeeeeeees 9

20 C.F.R. § 726.203(c) (1990) .............sccsseecereeeees 6

BD CF Be. B TE GRO ctccccccscccescccccccccccccsceses 4,7,14

20 C.F.R. § 727.203(a) (1990) ...........ccccccccecsesssees 8

20 C.F.R. § 727.203(aX3) (1990) ..........cccceeeeeseeees 8

20 C.F.R. § 727.203(bX3) (1990) .............. 8,10,12,17,18

20 C.F.R. § 727.203(bX4) (1990) ............. eens 8,10,17

OO re te ee cctiiittinstrtennnnesorvccsccsccscnesses 15

LEGISLATIVE MATERIALS:

Hearings on H.R. 10760 and S. 3183 Before the Sub-

comm. on Labor of the Senate Comm. on Labor

and Public Welfare, 94th Cong., 2d Sess.

PEE - sensicuncinsiniinuemindeeedinntiniaggnaninimitnneempnsien 13

H.R. Rep. No. 864, 95th Cong., 2d Sess. (1978) .. 11

H.R. Rep. No. 1410, 96th Cong., 2d Sess. (1980) . 14

House Comm. on Ways and Means, Subcomm. on

po teg ht, Report and Recommendations on

ung Disability Trust Fund, 97th Cong.,

es ry bao (Comm. Print IEEE cacssitbduininatteadentene 14

MISCELLANEOUS:

National Coal Ass’n, Facts About Coal 1990

SEITE icetiiidtidealeshgaiiciiteneemieneniiesennneimmmmeerernccesvetes 5

National Council on Compensation Insurance, /ssues

- Fee CEEe tikerntictinnctertiintetntattenenen 6

U.S. Dep’t of Labor, 1980 Annual Report on

Administration of the Black Lung Benefits Act

GETEIUTEED wiusseteescpeiichiiminbitiniiusininsiinanapentpilantnndancesens 5

IN THE

Supreme Court of the GAuited States

OCTOBER TERM, 1990

Nos. 89-1714, 90-113 and 90-114

HARRIET PAULEY, Survivor of JOHN C. PAULEY,

Petitioner,

Vv.

BETHENERGY Minzs, INc., et al.,

Respondents.

CLINCHFIELD COAL COMPANY,

Petitioner,

Vv.

DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS,

U.S. DEPARTMENT OF LABOR, et al.,

Respondents.

CONSOLIDATION COAL COMPANY,

Petitioner,

Vv.

DIRECTOR, OFFICE OF WORKERS’ COMPENSATION PROGRAMS,

U.S. DEPARTMENT OF LABOR, et al.,

Respondents.

BRIEF AMICUS CURIAE OF

THE NATIONAL COUNCIL ON COMPENSATION

INSURANCE SUBMITTED IN SUPPORT OF

THE MINE OPERATORS

The National Council on Compensation Insurance sub-

mits this Brief Amicus Curiae’ to respectfully request the

reversal of the decisions of the United States Court of

Appeals for the Fourth Circuit in Nos. 90-113 and 90-114,

and the affirmance of the decision of the United States

Court of Appeals for the Third Circuit in No. 89-1714.

INTEREST OF AMICI

The National Council on Compensation Insurance

(“NCCT”) is the largest not-for-profit workers’ compen-

sation insurance service organization in the United States.

Its membership includes more than 750 insurance com-

panies and competitive state insurance funds that provide

workers’ compensation insurance coverage to employers

throughout most of the United States. In thirty-two states,

including most major coal mining states, NCCI collects

data and develops premium rates and rating plans for

workers’ compensation insurance. NCCI also manages var-

ious workers’ compensation assigned risk plans and the

National Workers’ Compensation Reinsurance Pool (the

‘“‘Pool”’). Pool members reinsure among themselves several

categories of risk that arise under the Black Lung Benefits

Act. 30 U.S.C. §§ 901-945 (1988) (the “‘Act’’). In particular,

the Pool is the only commercial vehicle available to small

or high-risk mine operators that are unable to qualify to

self-insure their federal black lung liabilities under U.S.

Department of Labor regulations, 20 C.F.R. Part 726

(1990), or to purchase direct coverage from a state fund

or insurance carrier. Most of NCCI’s members participate

in the Pool and are individually liable to the Pool for losses

or payouts on claims that exceed the ability of the Pool

to make payments from insurance premiums collected. His-

torically, 15% to 20% of all federal claim liabilities are

insured or reinsured by the Pool. Approximately 50% of

‘In accordance with Rule 37.3, the written consents of all parties

are submitted herewith.

Sotied Unseen Mebiitien et may be dieested to

individual mine owner are commercially insured.? The com-

panies and competitive state insurance funds represented

by NCCI account for more than 90% of the premium dollar

volume of all insured U.S. workers’ compensation -over-

ages, including those available under the federal black lung

program.

In federal black lung claims, the insurer is a party to

the litigation and, as such, participates directly on behalf

of its insured. 20 C.F.R. § 725.360(aX4); Tazco, Inc. v.

Director, Office of Workers’ Compensation Programs, 895

F.2d 949, 952-53 (4th Cir. 1990). In this capacity, the

insurance carrier hires defense counsel and bears the costs

of litigation and administration. Jd. A workers’ compen-

sation insurance policy including coverage for the federal

black lung risk effectively transfers to the carrier all of

the rights and obligations of the insured mine operator.

See Pyro Mining Co. v. Slaton, 879 F.2d 187 (6th Cir.

1989). If benefits are awarded in an insured claim, they

are paid by the carrier.

NCCI and its members have a direct, immediate and

substantial interest in the outcome of this litigation.

ARGUMENT

A. Introduction

It is the purpose of this Brief Amicus Curiae to convey

to this Court the special concerns of the workers’ com-

pensation insurance industry arising as a result of the

decisions of the United States Court of Appeals for the

Fourth Circuit in Taylor ». Clinchfield Coal Co., 895 F.2d

? Liability arising out of claims in which the miner was last employed

prior to January 1, 1970, and certain uninsured liabilities are paid by

the Black Lung Disability Trust Fund. 26 U.S.C. § 9501(d), incorporated

by reference into 30 U.S.C.§ 932(jX1). The Trust Fund is financed by

a producer tax on coal. 26 U.S.C. § 4121.

B. The Black Lung insurance Program

It is not necessary to burden the Court with another

history of the Act or the interim presumptions, or to at-

tempt to explore the intricacies of the rules and statutory

* The claims of Taylor and Dayton were adjudicated under the De-

partment of Labor “‘interim”’ eligibility rules. 20 C.F.R. § 727.203 (1990).

The interim rules were superseded by permanent eligibility regulations

published by the Department that became effective on April 1, 1980.

20 C.F.R. § 718.2; Mullins Coal Co. v. Director, Office of Workers’

Compensation Programs, 484 U.S. 135, 139 (1987).

‘ Benefits are typically payable retroactive to the date the claim was

originally filed unless the proof establishes a specific month of onset

of disability. In a survivor's claim, benefits are payable retroactive to

the month of the miner’s death. 20 C.F.R. § 725.503 (1990). Post-

judgment interest on past due benefits is included in all awards, id.

§ 725.608, as are certain medical treatment benefits, id. § 725.701. An

employee or carrier that has elected to defend a claim is also required

to pay the claimant’s attorney's fee if an award is made. 33 U.S.C.

§ 928, incorporated by reference into 30 U.S.C. § 932(a).

provisions involved. The parties will surely cover those

points in detail. The contribution the insurance industry

can make to the discussion lies in an explanation of how

black lung insurance works, with the hope of demonstrat-

ing that Congress would not have and did not sanction

the result reached by the court below.

Insurance carriers called upon to underwrite the federal

black lung risk have always faced difficult challenges. The

coal industry, unlike some other major industrial sectors

of the economy, is composed of thousands of mostly smal!

producers.’ Most of these companies would have no finan-

cial ability to pay or even defend a single claim, the cost

of which averages from $118,315.88 for a claimant without

dependents to $185,659.69 for a married miner. Costs can

go much higher. The costs of litigation and administration

of claims are not included in these data. See U.S. Dep't

of Labor, 1980 Annual Report on Administration of the

Black Lung Benefits Act 32 (1981).

Workers’ compensation insurance, unlike most commer-

cial lines, cannot limit the maximum liability of the carrier.

If a carrier offers workers’ compensation coverage, it must

provide full coverage for the insured employer’s statutory

workers’ compensation liability, come what may, in order

for the employer to comply with mandatory insurance re-

quirements imposed by state workers’ compensation laws.°

*In 1989, approximately 55.6% of U.S. coal tonnage produced was

mined by the thirty largest operators. See National Coal Ass'n, Facts

About Coal 1990 15 (1990). During the period from 1980-1989, the

number of operating coal mines in .he United States varied from 3337

to 4424. Id. at 16.

* State insurance officials regulate insurance premium rates and policy

provisions. In workers’ compensation lines of coverage, the carrier must

provide full coverage for all insured employers. The Act contemplates

the regulation of rates and coverages for the federal program by state

agencies. 30 U.S.C. § 933(a). A premium charged for a policy covering

the federal black lung risk must be approved by the appropriate state

agency. The Department of Labor has no authority to regulate premium

rates.

Under laws regulating the business of insurance, retro-

active adjustment of workers’ compensation premium rates

to cover losses generated by the insurance carriers’ mis-

calculations of the cost of a risk is impossible. The entire

estimated cost of insuring a risk is fixed at the time a

policy is sold and, when an occupational disease claim is

filed, it attaches to the policy in effect on the date of the

workers’ last employment. See 20 C.F.R. § 726.203.’ Pre-

miums collected for that policy must cover all claims at-

tributable to that policy. Premiums charged for policies in

future years are not and cannot be calculated to pay the

cost of previously incurred claims. In the black lung con-

text, all the premium dollars that ever will be collected

for the federal risk produced by claims filed prior to April

1, 1980, have already been charged and paid, and cannot

be supplemented. The reasonable pricing assumptions made

then, more than a decade ago, are irrevocable.

For these reasons, workers’ compensation insurance pre-

mium ratemaking has evolved into an exacting science.

Predictability, affordability, and a careful evaluation of po-

tential risks are critical features of this very complex proc-

ess. Pooling arrangements, like the National Workers’

Compensation Reinsurance Pool, are essential to accom.

modate otherwise uninsurable employers.* To avoid cata-

strophic unfunded losses, industry specialists devote great

care to reach an understanding of the nature of the risk

to be insured. Sometimes errors are made, and the carriers

’ If the miner was last employed before January 1, 1974, the effective

date of the Department of Labor’s program, the claim attaches to the

policy in effect on the date the claim is first filed against the insured.

*The pools have not shown an operating profit in the last decade

een 1984 and 1988 were subsidized by other markets for losses

and pools are answerable when that occurs.*® That is to be

expected, and is simply a reality of the insurance business.

The decisions below suggest, however, that the industry

did not just make a terrible mistake in relying on the plain

language of the Act and the Department of Labor’s

(“DOL”) interim eligibility presumption, 20 C.F.R.

§ 727.203, but that it was the victim of an amazing de-

ception. Although the DOL presumption and the Act clearly

limit the risk to total disability or death due in part to

pneumoconiosis, the Fourth Circuit now informs us that

by virtue of 30 U.S.C. § 902(f2), the Act is not a workers’

compensation act at all. Rather, it mandates compensation

for coal miners and their families on account of old age,

retirement, disabilities whatever their cause, and death.

The workers’ compensation insurance industry wrote no

policies, collected no premiums and had no basis on which

to ascertain that, in writing a limited workers’ compen-

sation insurance policy covering mine owners whose em-

ployees contracted disabling black lung disease, it was

really insuring the life and health of all coal miners. The

industry was not asked to, did not, and would not have

insured this risk. There is, in fact, no generally available

unified insurance product in this country that could be

purchased for a risk of these dimensions.

From NCCI’s perspective, it surely was the Fourth Cir-

cuit and not DOL which missed the point.

C. DOL’s Rebuttal Rules Are Valid

The central question presented in these cases concerns

the validity of DOL’s third and fourth rebuttal methods

in light of section 402(f2) of the Act. 30 U.S.C. § 902(f\2).

Section 402(f2) provides that in the category of claims

that are at issue, the eligibility criteria applied in their

adjudication shall not be more restrictive than the criteria

* If errors are made in favor of the insurance industry, future rate

calculations usually must reflect an appropriate adjustment.

applied by the Social Security Administration (““‘SSA’’) prior

to July 1, 1973. DOL’s third method allows the denial of

a claim in which the section 727.203(a) presumption is

invoked if: “The evidence establishes that the total disa-

bility or death of the miner did not arise in whole or in

part out of coal mine employment.”” 20 C.F.R.

§ 727.203(bX3). The fourth method allows rebuttal if: ‘“‘The

evidence establishes that the miner does not, or did not,

have pneumoconiosis.”” Jd. § 727.203(b\4). SSA’s interim

presumption rebuttal criteria do not expressly provide for

rebuttal by these methods. Jd. § 410.490(c). The Fourth

Circuit struck down DOL’s rules for this reason.’

The interpretations of the Act reflected in DOL’s ad-

ditional rebuttal regulations must be sustained on judicial

review if they are consistent with the Act and reasonable.

NLRB v. United Food & Commercial Workers’ Union, 484

U.S. 112, 123 (1987). In applying this standard, this Court

looks first to the plain language of the Act, and the inquiry

ends if that language is reasonably clear. Chevron, U.S.A.,

Ine. v. National Resources Defense Council, Inc., 467 U.S.

837, 842-43 (1987). If the statutory mandate does not ad-

dress the precise question presented, this Court defers to

the agency’s approach if it reflects ‘‘a permissible con-

struction of the statute.” Jd.

In the regulatory setting presented, the question is

whether the Act authorizes DOL’s adjudicators to inquire

into the existence of pneumoconiosis and related total dis-

"In Taylor v. Clinchfield, the court below also held that the less

restrictive SSA rebuttal rules applied in a case in which the claimant

if

z

|

The Fourth Circui clearly wrong in its treatment of Taylor.

determination. The Act provides benefits only on account

of total disability or death due to occupationally related

iosis. 30 U.S.C. § 901(a). The Act prohibits the

assignment of liability to any mine operator unless the

pneumoconiosis. 30 U.S.C. § 902(f 1A).

only type of insurance contract a mine operator is

i!

5

:

i

4

pneumoconiosis. 30 U.S.C. § 933(a), referencing 30 U.S.C.

§ 932." Finally, the Act’s requirement that all relevant

evidence be considered in the adjudication of claims, mak-

ing mention of many of the particular types of evidence

that are relevant in determining whether the miner had

or was seriously disabled by pneumoconiosis, does not per-

‘It is not unimportant that DOL’s insurance regulations prescribe

an endorsement that must be attached to every commercial insurance

policy sold to cover the federal risk. The black lung endorsement, which

aj

a

i

i

E

10

mit an adjudication in which evidence that is germane to

these issues is simply ignored. See 30 U.S.C. § 923(b); Mul-

lins Coal Co., 484 U.S. at 49-50.

It does not seem likely that the reference to SSA’s

“criteria” in section 402(f(2) was intended to repeal so

many of the Act’s specific provisions, or require a con-

struction of them that deprives their plain words of or-

dinary meaning. As a general rule, these related provisions

of a statute should be construed harmoniously. See Addison

v. Holly Hill Fruit Products, Inc., 322 U.S. 607, 614-17

(1944). The Act directed the Secretary of Labor to write

insurers when a coal mine employee of the operator suf-

fered total disability or death due to pneumoconiosis. The

Secretary wrote such rules and was required ude

among the rules provisions like those in R.

§ 727.203(bX3), (4). This should enough to sustain the

validity of these rules.

Pittston Coal Group v. Sebben, 488 U.S. 105 (1988), sug-

gests that a review of SSA’s “criteria” is required before

bringing the question to closure. Perhaps that is true, but

the question decided in Pittston Coal Group was much

simpler than the questions presented here. The offending

criterion in DOL’s presumption examined in Pittston Coal

Group related only to the methods available for obtaining

presumptive entitlement in the case of a miner who had

not worked in the industry for at least ten years. SSA

allowed presumptive entitlement under its interim pre-

sumption if the claimant established pneumoconiosis by x-

ray, biopsy, or autopsy evidence and had ten years of

employment or otherwise proved the connection between

the test findings and coal mining exposure. By not allowing

the shorter-term miner equivalent access to the presump-

tion, DOL wrote a more restrictive rule. Pittston Coal

Group, 488 U.S. at 119.

11

The Act, apart from section 402(fX2), was, according to

this Court, silent on the precise question presented in

Pittston Coal Group. That is not the case here. The Act

is not silent. It clearly mandates the consideration of

whether the miner has pneumoconiosis, is totally disabled

by it or died due to pneumoconiosis as an absolute pre-

requisite to eligibility and liability. The Secretary of Labor

ensured that these matters would be appropriately consid-

ered in the adjudication of individual claims, in accordance

with the unambiguous mandate of the Act. The challenged

rules are valid for this reason.’ The word “criteria” must

be construed in keeping with the statute as a whole.

A thorough examination of SSA’s criteria does not de-

tract from the conclusion compelled by the Act. The ex-

amination reveals mostly that SSA was not very careful

in drafting its regulations. It is, nevertheless, reasonably

clear that SSA required the claimant to prove the exist-

ence of pneumoconiosis before its interim presumption could

be invoked. That is, once the claimant met the medical

criteria of 20 C.F.R. § 410.490(b\1), it still had to be proven

that the (bX1) evidence demonstrated a condition arising

out of coal mine employment. 20 C.F.R. § 410.490(b\2),

incorporating by reference id. §§ 410.416, 410.456. As a

statutory matter, a medical finding is not a finding of

pneumoconiosis \inless the condition found is a disease or

impairment arising out of coal mine employment. 30 U.S.C.

§ 902(b). Since SSA’s rule requires inquiry into whether

the health impairment triggering section 410.490(b\1) also

arose out of coal mine employment, it, like DOL’s pre-

sumption, directs the adjudicator to determine whether the

miner has pneumoconiosis in every case. DOL conducts

“There is nothing in the legislative history to indicate a contrary

intention, and it appears that Congress made a special effort to impress

upon the Secretary of Labor the need to write regulations ensuring

the thorough and complete litigation of cases. H.R. Rep. No. 864, 95th

Cong., 2d Sess. 16, reprinted in 1978 U.S. Code Cong. & Admin. News

309.

12

this inquiry after the burden of persuasion shifts to the

operator, but DOL’s rule on this account is not more re-

strictive than SSA’s.

The other DOL rebuttal rule invalidated by the court

below permits a factual inquiry into whether the miner’s

disability or death was caused by his occupational disease.

20 C.F.R. § 727.203(bX3). DOL permits an award if the

disease contributes, in whole or in part, to the total dis-

ability or death. Jd. SSA’s disability causation standard is

in 20 C.F.R. § 410.426(a) and it is a “primary reason’”’

standard. While the primary reason standard is not stated

in section 410.490’s rebuttal provisions, it is cross-refer-

enced. 20 C.F.R. § 410.490(cX2), incorporating by reference

id. § 410.412(aX1), incorporating by reference id. § 410.426.

SSA’s death causation standard is at 20 C.F.R. § 410.450

and it is simply a “death due to” rule. It is not cross-

referenced, but it could be construed to apply in this very

complex scheme. See Farmer v. Weinberger, 519 F.2d 627

(6th Cir. 1975).

In sum, SSA’s criteria fail to compel the conclusion that

they preclude the fact inquiries prescribed in DOL’s third

and fourth rebuttal rules. The same type of cross-refer-

encing exercise that revealed the invalidity of DOL’s ten-

year rule in Pittston Coal Group demonstrates the validity

of DOL’s rebuttal rules. If there is ambiguity here, DOL

did not exceed the bounds of ‘permissible’ in conforming

SSA’s confusing scheme to the clear requirements of the

Act."

‘* In an amici curiae brief filed by the insurance industry in Pittston

Coal Group, the industry accepted the holdings of several courts of

appeals stating that the SSA interim presumption, once invoked by x-

ray, biopsy, autopsy or ventilatory test evidence could be rebutted only

if it was proven that the miner was working or able to work. In these

decisions, the existence of pneumoconiosis or a link between the disease

and total disability was not relevant in determining entitlement. See

e.g., Broyles v. Director, Office of Workers’ Compensation Programs,

13

D. Special Insurance Industry Concerns

Beyond the traditional legal arguments, the workers’

compensation insurance industry’s perspective on the prin-

ciples presented in this case make it difficult to accept the

theory reflected in the decisions below. Congress harbored

no intent to lure the industry into writing insurance cov-

erage for an uninsurable risk. Total disability or death due

to occupational pneumoconiosis is an understandable and

insurable risk. A workers’ compensation program mas-

querading as an unemployment, general disability, retire-

ment or life insurance program for coal miners, is not.

The history of the insurance industry’s involvement dem-

onstrates Congress’s special concern for insurability and

strongly supports DOL’s understanding that in designing

section 727.203, the agency was required to preserve fair-

ness for the private parties involved.

Mine owners are required to obtain adequate insurance

coverage, 30 U.S.C. § 933, but the insurance industry is

not required to sell it. In 1973, when the insurance in-

dustry was approached by the Department of Labor and

asked to provide coverage for federal liabilities, many in

the industry felt that the risk they were invited to un-

derwrite was either unacceptable or that coverage could

not be affordably provided.’ Given repeated assurances by

the Department and Congress during the period from 1973

to the present day that the black lung claims process would,

824 F.2d 327, 329 (4th Cir. 1987), aff'd in part, Pittston Coal Group,

488 U.S. at 121; Haywood v. Secretary of Health and Human Services,

699 F.2d 277, 283 (6th Cir. 1983). The decision in Pittston Coal Group

focused attention more closely on the precise words of SSA's criteria

leading now to the conclusion that they fairly clearly do not state what

the courts of appeals had believed. There is no indication that SSA

itself advocated the views of the Haywood court, for example, and the

argument presented here by NCCI is refined accordingly.

“ Hearings on H.R. 10760 and S. 3183 Before the Subcomm. on Labor

of the Senate Comm. on Labor and Public Welfare, 94th Cong., 2d Sess.

479-81 (1976).

14

notwithstanding a uniquely generous entitlement scheme,

preserve both fairness and predictability in claims adju-

dications, the insurance industry provided coverage at af-

fordable rates.

Following liberalizations of entitlement rules in the Black

Lung Benefits Reform Act of 1977, Pub. L. No. 95-239,

92 Stat. 95, and largely because of the retroactive appli-

cation of section 727.203 to previously filed claims, it be-

came clear that earlier funding assumptions were no longer

viable and would produce catastrophic unfunded and un-

anticipated losses for the insurance industry and mine own-

ers. In response, the insurance industry, the Labor

Department, mine owners, representatives of workers and

claimants, and Congress worked together to revise the

Black Lung Program and its funding mechanisms to re-

store equilibrium."* House Comm. on Ways and Means,

Subcomm. on Oversight, Report and Recommendations on

Black Lung Disability Trust Fund, 97th Cong.,lst Sess.

16, 30 (Comm. Print 1981); see also H.R. Rep. No. 1410,

96th Cong., 2d Sess. 2-3 (1980) (“{T]he 1977 Amendments

were unfair in imposing... this retroactive liability. . . .

[T]he combined effect of the 1977 law requiring the au-

's This cooperative effort produced the Black Lung Benefits Revenue

Act of 1981 and the Black Lung Benefits Amendments of 1981, Pub.

L. No. 97-119, 95 Stat. 1635. But even this substantial effort proved

insuffic'ent to ensure adequate funding for the program. In 1985 and

again in 1987, Congress found it necessary to enact additional fiscal

relief for the Black Lung Disability Trust Fund by raising and then

extending the producers tax on coal that provides revenue for the

payment of claims by the Fund. 26 U.S.C. §§ 4121, 9501; Consolidated

Omnibus Budget Reconciliation Act of 1985, Pub. L. No. 99-272,

§ 13203(a), (c), 100 Stat. 312, 313 (1986); Omnibus Budget Reconciliation

Act of 1987, Pub. L. No. 100-203, § 10503, 101 Stat. 1330 (1987). The

Fund pays benefits in those cases in which no mine operator or insurer

can be found individually liable. 26 U.S.C. § 9501(d). The Fund is cur-

rently more than $3 billion in debt to the U.S. Treasury, having bor-

rowed this amount to make up the difference between coal tax revenues

and benefit payment obligations.

ee a

15

tomatic review of old (federal) claims, under new liberal-

ized eligibility criteria, and of directing that those approved

be paid by coal operators—either directly or through the

Trust Fund—has produced a harsh result on operators (and

their commercial insurers) who had no reason to anticipate

that they would be held directly liable.”’).

The partnership between Congress, many federal agen-

cies and the commercial liability insurance industry is per-

vasive. This industry is called upon frequently to assist

Congress in the implementation of national policies by pro-

viding private parties the insurance coverage they need to

be in compliance with federal laws.’* In order for this

partnership to be maintained, there must be an acceptable

level of predictability and stability in the risks Congress

creates. The partnership cannot survive if the industry is

considered merely an adjunct to the Federal Treasury.

Private insurance cannot fund entitlements that are sub-

ject to the changing whims of Congress. The financial

structure of the industry is simply not designed to and

cannot respond to endless retrospective tinkering with li-

ability concepts. NCCI believes that Congress is well aware

of this fact. It is unimaginable that Congress would, in

the black lung program, ask the insurance industry to fund

a compensation scheme for previously filed claims based

on the Fourth Circuit’s reading of 30 U.S.C. § 902(f\2).

It is equally improbable that Congress would do so without

clearly expressing such intent.

When Congress liberalized the Act in 1978, most of the

claims here in question were already insured under preex-

‘* Just a few examples are the Longshore Act, 33 U.S.C. § 932; the

Price-Anderson Act, 42 U.S.C. § 2210 (nuclear plant accidents); 42

U.S.C. §§ 5154, 5172 (nuclear disaster relief); 7 U.S.C. § 1503 (crop

insurance); 33 U.S.C. § 1321(d), (p) (maritime disasters); 30 U.S.C.

§ 1257(f) (surface coal mining operations); 41 U.S.C. § 351 (government

contractors); 46 C.F.R. § 540.20 (1987) (cruise ships); 14 C.F.R. Part

205 (1987) (air carriers). The industry is now working closely with

Congress to develop insurance programs for earthquake related losses.

16

isting insurance policies. Those policies provided coverage

only for total disability or death due to black lung disease

and they cannot be rewritten. There is no proof that the

1978 amendments would rewrite these policies to require

payment for unexpected and unknown risks wholly di-

vorced from the stated of the Black Lung Act.

See 30 U.S.C. § 901(a) (“It is, therefore, the purpose of

this subchapter to provide benefits, in cooperation with

the States, to coal miners who are totally disabled due to

pneumoconiosis and to the surviving dependents of miners

whose death was due to such disease. ...”’).

In sum, there are many sound reasons why the Sec-

retary of Labor designed section 727.203 to ensure a fair

opportunity to defend, not the least of which is that the

benefit-funding mechanisms available and the rights of

claim defendants required protection.

E. There is a Significant Constitutional Problem Pre-

sented

This Court will ordinarily construe a statute to avoid

constitutional difficulty, if possible. DeBartolo Corp. v.

Florida Gulf Coast Bldg. and Const. Trades Council, 108

S. Ct. 1392, 1397 (1988). The Court may easily do so here.

Section 402(f(2) of the Act does not compe! a construction

that imposes black lung liability on an employer who caused

no disease, disability or death. But if section 402(f\2) im-

poses liability without any responsibility, the minimal ra-

tionality required by the Due Process Clause is hard to

find. See Usery v. Turner Elkhorn Mining Co., 428 U.S.

1, 15 (1976). The right to a fair hearing also guaranteed

by the Due Process Claim is similarly elusive.

The proven facts by which either DOL’s or SSA’s in-

terim presumption may be invoked give rise to, at very

best, a weak inference of total disability or death due to

pneumoconiosis. See Mullins Coal Co., 484 U.S. at 148. In

most instances the inference will not be justified at all,

particularly where the invocation criteria were intention-

17

ally set so low, that no health impairment of any kind is

really required to cause a burden of proof shift. See Pitts-

ton Coal Group, 488 U.S. at 138 n.8 (Stevens, J., dis-

senting) (quoting Dr. Herbert Blumenfeld, Chief, Medical

Consulting Staff, Bureau of Disability Insurance, SSA);

Usery v. Turner Elkhorn Mining Co., 428 U.S. at 7.

The due process test for determining the validity of civil

presumptions requires a rational connection between ‘“‘the

fact proved and the ultimate fact presumed.” Usery, 428

U.S. at 28. That essential connection cannot be demon-

strated within the Fourth Circuit’s reading of section

402(f\2).

Moreover, “the Due Process Clause grants the ag-

grieved party the opportunity to present his case and have

its merits fairly judged.” Logan v. Zimmerman Brush Co.,

455 U.S. 422, 433 (1982). The Fourth Circuit’s holding

prohibiting the defense from proving the key facts in most

claims clearly exceeds the bounds of this important pro-

tection.

However it is done, Congress may not transfer property

from one party to another, consistent with the Due Process

Clause, unless there is a rational basis for doing so. In

this country, ali litigants are entitled to a fair hearing and

to insist upon some valid reason justifying congressional

disruption of their property rights. In the two cases de-

cided by the Fourth Circuit that are being reviewed here,

the mine operators are simply not responsible for causing

any harm to the claimants. If it has any meaning left in

a civil economic rights context, the Due Process Clause

does not authorize this taking.

CONCLUSION

The decisions of the United States Court of Appeals for

the Fourth Circuit invalidating 20 C.F.R. § 727.203(bX3)

and (4) should be reversed. The decision of the United