January 2003
ALJs address criteria for a “knowing violation” and timeliness requirements for MSHA investigations.
By Adele Abrams, Esq., CSMP
A civil penalty imposed by MSHA against a mining company “agent,” pursuant to Section 110(c) of the Mine Act, was dismissed after the agency failed to prove aggravated conduct by the individual. In Secretary of Labor v. William Eugene Averette (ALJ Melick, October 2002), Judge Melick held that a lack of “due diligence” does not rise to the level of a “knowing violation.”
Averette, the “owl shift foreman,” was charged with failing to report hazardous conditions (substantial amounts of coal dust present in a longwall section) while he was responsible for conducting the preshift mine examination. He maintained that he did perform the inspection and that he had personally “rock dusted” to prevent explosions while conducting the inspection. The union safety committeeman accompanying the inspector testified that the area was dark-black in color when he observed it several hours after Averette’s alleged dusting of the tailgate entry.
To demonstrate liability under Section 110(c), MSHA has the burden of proving that the corporate agent knew, or had reason to know, of a violative condition. An agent acts “knowingly” when he is “in a position to protect employee safety and health [and] fails to act on the basis of information that gives him knowledge or reason to know of the existence of a violative condition.” Section 110(c) liability is predicated on “aggravated conduct constituting more than ordinary negligence.”
After hearing testimony in the case, the ALJ ruled that nothing directly contradicted the agent’s testimony concerning his activities, and the “speculation testimony” of the union rep and the MSHA inspector about what might have occurred was not sufficient to meet the Secretary’s burden of proving a “knowing” violation. Similarly, ALJ Melick rejected the Secretary’s alternative theory that Averette should have known that a violative accumulation of coal dust was likely to occur since production continued after his preshift examination. The judge credited the defendant’s testimony that all equipment was working correctly at the time of his inspection and that rock dust bags were located in the cited area and available if needed.
“Late” Penalty Cases
ALJ Zielinski refused to dismiss proposed penalties against Paiute Aggregates Inc., (ALJ Order, October 2002), which the operator claimed were not issued within a “reasonable time” after completion of MSHA’s investigation into a fatal accident at the Nevada mine. The accident occurred on Feb. 16, 2001, and MSHA immediately began its investigation, issuing eight citations/orders on March 20, 2001. The final investigative report was issued on April 12, 2001, and the citations/orders were transmitted to MSHA’s assessments office on May 29, 2001. A related special investigation was completed on Aug. 2, 2001. MSHA finally issued one set of proposed penalty assessments on Jan. 4, 2002 — approximately 11 months after the incident at issue — and a second set on May 31, 2002 — approximately 13 months after the incident.
In denying the company’s Motions to Dismiss, the ALJ noted that the delay was due to “staffing constraints” at the agency… “too much work for too few employees.” The findings were based on an affidavit from MSHA’s Director of Assessments, which stated that in calendar year 2001, MSHA considered 2,153 citations and orders for “routine” special assessments, 217 fatal/serious injury-related special assessments, and 204 assessments for Section 110(c) violations. In calendar year 2002 through Sept. 30, the office considered 1,949 citations/orders for routine special assessments, 183 fatality/serious injury assessments, and 158 assessments for Section 110(c) violations. In total, more than 2,500 special assessment referrals were processed in 2001, and the office estimated that about 3,000 such requests would be handled during 2002.
With respect to the timeliness issue, Section 105(c) of the Mine Act, 30 U.S.C. §815(a), provides that if a citation or order is issued, the Secretary “shall, within a reasonable time after the termination of such inspection or investigation, notify the operator by certified mail of the civil penalty proposed to be assessed.” The statute does not establish a specific timeframe within which such penalties must be issued, and the judge reviewed the legislative history of the Act which states: “the [congressional] Committee does not expect that the failure to propose a penalty with promptness shall vitiate any proposed penalty proceeding.” The statutory term has not been defined by Commission rules. However, MSHA’s Program Policy Manual states that assessments issued within 18 months of the completion of an investigation satisfy the “reasonable time” standard.
ALJ Zielinski held that, even if the delay in this case did not fall within the “reasonable time” standard, the Secretary had demonstrated adequate cause for the delay. Moreover, the company failed to demonstrate a colorable claim of prejudice associated with the delay. The judge observed that the mine operator was involved with the investigation, was served with the citations/orders, and had engaged in discovery during the pendency of the contest proceedings. However, he cautioned MSHA that “chronic understaffing” might be the result of “deliberate choices” that could, under different circumstances, fail to establish adequate cause.
Adele L. Abrams is a Maryland attorney who represents mine operators and contractors nationwide in MSHA and OSHA litigation, and provides safety and health training and consultation services. For more information, write to safetylawyer@aol.com or call 301-595-3520.
Covering Your Insurance Liability
Communication between safety and risk management builds successful health and safety insurance strategies.
By David Farber
Many mining companies separate their health and safety professionals from their insurance/risk management departments. Health and safety professionals, however, typically do not have a good understanding of the role insurance can play in assisting the management of risk at the mine site, and insurance departments do not understand the critical knowledge that safety professionals can bring to managing an insurance claim.
To put the issue in perspective, consider the following scenario. Your mid-size crushed stone operation has contracted out its blasting operations. Unfortunately, the shot you were planning near your property line prematurely detonated, seriously injuring one of the contract blasters and propelling shot rock onto your neighbor’s property. The shot rock has destroyed the neighbor’s warehouse roof and other shot rock on a second warehouse roof is threatening its collapse. Believing that you were responsible for the damage, you fix the second warehouse roof and avoid the possible collapse. You also retain counsel, whose investigation reveals that there was a serious manufacturing problem in the detonating cord that caused the accident. How can insurance respond? Depending upon the coverage that you purchased, it may cover all your costs.
Notice, Notice, Notice. It is a serious mistake not to provide each of your insurers at every level of coverage (primary, excess, and umbrella) with notice of the event. Whether or not you believe there will be third-party claims, most policies require that notice be given both at the time of a “claim,” as well as when an “occurrence” takes place. Your notice can be short and simple — “We are writing to inform you that an accident occurred at x time on y day, which may result in third-party claims against our company. Please investigate” — and can be done through your insurance broker. If you experience any reportable or other accident, you should call your broker as soon as you finish calling MSHA.
The consequences of late notice can be very serious. In many states, the failure to notify your insurer in a timely manner can be a defense to coverage. While most states require the insurer to demonstrate some “prejudice” as a result of the late notice, in certain states (such as New York) late notice can be an absolute coverage defense even if the insurer has no prejudice.
Optimize Defense Costs. It is wise for operators to retain counsel following an accident, both to assist in the accident investigation and to respond to regulators. Oftentimes, however, the third-party suits will not come for months, if not years. Insurance companies try taking advantage of the gap in time between the investigation and the “suit,” and operators typically do not ask for reimbursement of the attorneys’ and experts’ fees incurred before suit was filed. This is a mistake, as insurers should pay for these costs as well.
While there is little decided law on the subject, in the last two decades courts have begun to recognize that by the time the third party actually initiates the law suit against you, the case is likely over, as the investigation has either preserved the facts that make up your defense or the lack of investigation has allowed that evidence to be destroyed. Thus, do not hesitate to seek reimbursement of counsel and expert fees incurred before the third-party suit was brought, or to seek pre-approval of those expenses at the time you incur them even before a suit has been filed or threatened. Often, everyone (including the insurer) recognizes that there are going to eventually be third-party claims and the expense of pre-litigation fees will provide the best (and maybe only) defense you have.
Obtain Coverage for Mitigation Efforts. Like defense costs, in recent years the courts have recognized that policyholders often take actions to mitigate damages, which directly benefit the insurer who would otherwise have to pay for those damages. While insurers typically argue that these policyholder costs were “self-imposed,” and are not “damages” for which a court has ruled the policyholder is “liable,” more modern decisions have rejected this shortsighted argument and found that insurers are responsible to indemnify the policyholder for such costs.
While the operator in our example above has a valid claim for the costs of removing the shot rock from the neighbor’s property and avoiding collapse of the neighbor’s second warehouse, not all self-imposed costs can be claimed as mitigation expense. While the case law is not yet fully developed, it can generally be said that mitigation costs should be covered if: (1) some third-party property damage has already occurred; (2) the possibility of further similar damage is imminent; and (3) the action taken was reasonably required to mitigate additional damage. Courts are divided as to whether actions required by regulatory authorities that would also mitigate further third-party damage fall within the mitigation doctrine, although the better reasoning suggests that these costs should also be covered.
David Farber is a safety and health attorney with Patton Boggs LLP in Washington, D.C. He can be reached at 202-457-6516 or dfarber@pattonboggs.com.