In re Dwyer, No. 149-WDA-2016, 2017 WL 384113 (Pa. Super. Ct. Jan. 27, 2017) (Non-Precedential Decision).

At issue in this case was a reinsurance agreement obligating the reinsurer to make weekly payments to a beneficiary. The cedent was an insurance carrier that provided the beneficiary’s former employer with a workers’ compensation insurance policy. When the beneficiary was injured in the course of his employment, he filed a workers’ compensation claim under the federal Longshore and Harbor Workers’ Compensation Act (LHWCA). The claim was settled pursuant to an agreement by which the cedent would pay the beneficiary a lump sum and would enter into the relevant reinsurance agreement for weekly payments to the beneficiary. After the agreement was finalized, the beneficiary agreed to transfer its weekly payments from the reinsurer to a third party factoring company in exchange for a lump sum. The factoring company filed a petition to transfer the weekly payments, but the reinsurer opposed the transfer on the basis that it was prohibited by the anti-assignment provision in the LHWCA.

The trial court granted the petition to transfer the weekly payments to the factoring company. It relied primarily on a federal appeals court decision, In re Sloma, 43 F.3d 637 (11th Cir. 1995), which had held that monthly annuity payments to settle a LHWCA workers’ compensation claim were not subject to the LHWCA’s anti-assignment provision. However, the Pennsylvania Superior Court reversed the trial court.

In its reversal, the appeals court first acknowledged that the dispute differed from Sloma because the reinsurer’s weekly payments to the beneficiary were pursuant to a reinsurance agreement; these were not payments from an annuity. The court, however, did not rely on this difference in its reversal. Instead, the court rejected the holding of Sloma and held that the LHWCA’s anti-assignment provision prevents the assignment or transfer of structured settlement payments (whether pursuant to a reinsurance policy or otherwise) from an LHWCA workers’ compensation claimant to a third party. 

This holding denied the attempted transfer of the reinsurance policy payments and, thus, shielded the reinsurer from potential exposure to duplicative and simultaneous payment obligations to both the beneficiary/cedent and the third party factoring company.