969 F.3d 316
6th Cir.2020Background
- Marlin Rice, a former coal miner, pursued multiple claims under the Black Lung Benefits Act (BLBA); the ultimate ALJ award credited Rice with at least ten years of coal-mine employment (including off‑the‑books work), triggering the statutory causation presumption.
- Two related corporate entities were involved: Karst Robbins Coal Co. (KRCC, operator of the mine) and Karst Robbins Machine Shop, Inc. (KRMS, on‑paper employer). They shared management, office space, and allegedly used an employee‑leasing arrangement to reduce KRCC’s payroll exposure.
- Bituminous Casualty Corp. insured KRCC; Bituminous contends KRCC’s arrangement with KRMS was fraudulent and that it should not be liable for BLBA benefits paid for Rice.
- In Rice’s early proceedings an ALJ identified KRMS as the responsible operator and denied benefits on the merits; the Director did not cross‑appeal that responsible‑operator finding. Later claims and a 2013 modification proceeding produced a benefit award and a subsequent Board decision holding KRCC/Bituminous responsible.
- Bituminous appealed to the Benefits Review Board and then to this Court, arguing (1) collateral estoppel bars naming KRCC the responsible operator, (2) Bituminous may rescind its insurance for fraud, and (3) DOL’s omission of claims‑examiner call notes and resulting delay violated Bituminous’s due process rights. The Board rejected those arguments; this Court denied Bituminous’s petition for review.
Issues
| Issue | Bituminous' Argument | DOL / Rice / Board Argument | Held |
|---|---|---|---|
| Whether collateral estoppel bars DOL from designating KRCC the responsible operator | Earlier ALJ and Board action naming KRMS as responsible precludes relitigation | Prior finding was not necessary to the earlier denial on the merits, so issue preclusion does not apply | Collateral estoppel does not apply; DOL may designate KRCC now |
| Whether Bituminous can rescind its BLBA insurance policy based on alleged fraud by KRCC/KRMS | The employee‑leasing scheme was fraudulent; rescission renders the policy void ab initio so Bituminous is not liable | DOL regs and Kentucky law bar retroactive rescission of such policies; only prospective cancellation is allowed; insurer slept on rights | Rescission unavailable—precluded by DOL regulations and Kentucky public‑policy principles; Bituminous also forfeited timely rescission by waiting decades |
| Whether DOL’s failure to include claims‑examiner ex‑parte call notes and resulting remand violated Bituminous’s due process rights | Omission and remand caused delay and gave Rice an extra opportunity to obtain benefits, prejudicing Bituminous | Bituminous cannot show prejudice: the ultimate modification that produced benefits was a separate filing and Bituminous had notice of the contested employment facts long before | No due process violation—Bituminous failed to show actual prejudice from the omission/delay |
| Whether Bituminous forfeited challenges to Rice’s entitlement (length of employment) | (Bituminous raised factual attack in briefing) | Bituminous expressly disclaimed challenging Rice’s entitlement on appeal; issues not raised below are waived | Court treats the merits challenge as waived and does not disturb ALJ’s factual findings |
Key Cases Cited
- Ark. Coals, Inc. v. Lawson, 739 F.3d 309 (6th Cir. 2014) (issue preclusion in BLBA context; prior operator finding not binding when not necessary to earlier denial)
- Lovilia Coal Co. v. Williams, 143 F.3d 317 (7th Cir. 1998) (BLBA/regulatory scheme requires insurer endorsement to cover operator liabilities regardless of premium calculation)
- United States v. Simpson, 538 F.3d 459 (6th Cir. 2008) (Kentucky law disfavors rescission of workers’ compensation coverage where public‑policy would leave third parties uncompensated)
- Progressive N. Ins. Co. v. Corder, 15 S.W.3d 381 (Ky. 2000) (Kentucky Supreme Court rejects insurer rescission to defeat recovery by innocent third parties)
- Taylor v. Sturgell, 553 U.S. 880 (U.S. 2008) (elements and scope of collateral estoppel / issue preclusion)
- Auer v. Robbins, 519 U.S. 452 (U.S. 1997) (deference to agency interpretations of their own regulations)
- Island Creek Coal Co. v. Young, 947 F.3d 399 (6th Cir. 2020) (standard of review for Board legal conclusions and deference principles)