No “Last-Exposure” Liability for Former Self-Insured Parents Under the BLBA

Fourth Circuit limits responsible-operator and carrier designations; Trust Fund must pay where § 725.494(e) is not satisfied

Introduction

In Hobet Mining, Incorporated v. Director, Office of Workers’ Compensation Programs; Horace K. Meredith, Jr., the U.S. Court of Appeals for the Fourth Circuit granted a petition for review, vacated a Benefits Review Board (BRB) decision, and remanded. The court held that neither the Black Lung Benefits Act (BLBA) nor its regulations authorize imposing liability on Arch Resources (formerly Arch Coal) for black lung benefits owed to a miner who last worked for Arch’s former subsidiary, Hobet Mining, where Arch had sold Hobet years before the claim and no longer self-insured its liabilities.

The case arises from the Department of Labor’s (DOL) post-bankruptcy attempt—after Patriot Coal (which later owned Hobet) became insolvent—to assign responsibility back to Arch based on Arch’s historical, parent-level self-insurance at the time of the miner’s last exposure. The ALJ and BRB had agreed with DOL that Hobet was the responsible operator and Arch was liable as Hobet’s “carrier” based on that past self-insurance. Writing for the court, Judge Quattlebaum (joined by Judge Agee) rejected that theory, concluding:

• Hobet cannot qualify as a “responsible operator” unless it meets one of the three financial-capability pathways in 20 C.F.R. § 725.494(e), which it does not.
• The BLBA’s self-insurance regulations do not impose occurrence-based liability tied to the miner’s last day of exposure, unlike commercial policies with federally-required endorsements.
• Chenery bars affirmance on grounds DOL first advanced in the court of appeals and that the BRB never adopted.
• When no operator can lawfully be held responsible at the adjudicatory stage, the Black Lung Disability Trust Fund pays.

Judge King dissented, aligning with the Sixth Circuit and emphasizing Congress’s design that responsible operators—not the Trust Fund—bear these costs. The majority sided with the Seventh Circuit’s contrary view in a now-deepened circuit split.

Summary of the Opinion

The Fourth Circuit vacated the BRB’s affirmance of an ALJ decision that designated Hobet as the responsible operator and Arch as the liable “carrier.” The court held:

• Responsible operator status requires financial capability under § 725.494(e). Hobet had neither commercial insurance (§ 725.494(e)(1)), nor sufficient assets (§ 725.494(e)(3)), and did not “still qualify as a self-insurer” nor have operator-posted security (§ 725.494(e)(2)).
• Arch’s historical parent-level self-insurance cannot fill § 725.494(e)’s requirements for Hobet because § 725.494(e) applies to operators, and Arch was not designated as the operator. The ALJ and BRB erred by effectively treating Arch’s past self-insurance as Hobet’s present financial capability.
• DOL’s attempt to import commercial insurance’s “last-exposure” endorsement (20 C.F.R. § 726.203(a)) into the self-insurance regime via § 726.103’s “as appropriate” clause fails under Chenery (never adopted by the BRB) and on the merits. Self-insurance and commercial insurance are structured differently; occurrence-based liability from commercial endorsements is not “appropriate” to graft onto self-insurance.
• Because the district director cannot redesignate a responsible operator after referral to the ALJ, and because Hobet does not qualify, the Trust Fund must pay.

The court endorsed the Seventh Circuit’s analysis in Apogee Coal Co. v. OWCP (2024) and declined to follow the Sixth Circuit’s contrary Apogee decision (2024). It also noted DOL’s 2025 regulatory revisions strengthening self-insurance oversight, but those post-date the events and do not alter the outcome here.

Analysis

1) Precedents and Authorities Cited and Their Influence

• Island Creek Coal Co. v. Blankenship, 123 F.4th 684 (4th Cir. 2024): Cited for the BLBA’s adversarial administrative process and burden framework. The court applied the established multi-stage adjudication and burden-shifting architecture as it evaluated responsible-operator designation and the record constraints after ALJ referral.
• RB&F Coal, Inc. v. Mullins, 842 F.3d 279 (4th Cir. 2016): Reinforced that carriers who write BLBA coverage are bound for full liability, but in the context of commercial insurance and the mandatory policy endorsement. That distinction underscored why Arch’s past self-insurance did not function like a commercial policy.
• Rockwood Casualty Ins. Co. v. OWCP, 917 F.3d 1198 (10th Cir. 2019); Appleton & Ratliff Coal Corp. v. Ratliff, 664 F. App’x 470 (6th Cir. 2016); Westmoreland Coal Co. v. OWCP, 696 F. App’x 604 (4th Cir. 2017): These cases establish that once a claim is referred to the ALJ, the responsible-operator designation is effectively locked; if the designation fails, the claim goes to the Trust Fund rather than back for re-designation. The Fourth Circuit’s ruling tracks this line—critical here because Hobet cannot meet § 725.494(e) at the ALJ stage.
• Trace Fork Coal Co., 67 F.3d 503 (4th Cir. 1995), and Consolidation Coal Co., 923 F.2d 38 (4th Cir. 1991): Support the Trust Fund’s role as payer of last resort when no operator can be held liable.
• SEC v. Chenery Corp., 318 U.S. 80 (1943); Island Creek Coal Co. v. Henline, 456 F.3d 421 (4th Cir. 2006): The Chenery doctrine barred affirming on rationales the BRB never adopted. This blocked DOL’s new appellate theory that would have borrowed commercial “last-exposure” liability for self-insurers via § 726.103.
• Loper Bright Enterprises v. Raimondo, 603 U.S. 369 (2024) and Kisor v. Wilkie, 588 U.S. 558 (2019): The court emphasized that legal interpretations are reviewed de novo; post-Loper Bright, deference to agency interpretations of statutes is curtailed. That posture amplifies the court’s insistence on clear regulatory authorization before imposing liability.
• United States v. Bestfoods, 524 U.S. 51 (1998): Cited to note that, absent veil-piercing, a parent is not liable for a subsidiary’s obligations. While the court did not rely on corporate law to decide the case, it cautioned against conflating Arch’s finances with Hobet’s regulatory financial capability.
• The Circuit Split: Apogee Coal Co. v. OWCP, 113 F.4th 751 (7th Cir. 2024) (no liability for Arch) versus Apogee Coal Co., LLC v. OWCP, 112 F.4th 343 (6th Cir. 2024) (liability for Arch). The Fourth Circuit expressly found the Seventh Circuit’s approach more persuasive based on the text and structure of the BLBA regulations.
• Arch Coal, Inc. v. Acosta, 888 F.3d 493 (D.C. Cir. 2018): In related litigation over DOL Bulletin No. 16-01, the D.C. Circuit treated the Bulletin as an enforcement policy not subject to pre-enforcement APA review; the Fourth Circuit here did not need to reach APA issues to resolve Arch’s liability.

2) Legal Reasoning

The court’s analysis proceeds in three steps: responsible-operator law, rejection of DOL’s “last-exposure for self-insurance” theory, and the consequence of failure—Trust Fund payment.

1. Responsible-operator designation hinges on § 725.494(e) financial capability—and Hobet does not qualify.
   • Under § 725.495(a)(1), a responsible operator must first be a “potentially liable operator.” A core element is the ability to pay under § 725.494(e), which recognizes only three pathways:
     • Commercial insurance covering the liability (§ 725.494(e)(1));
     • Qualification as a self-insurer during the miner’s last employment provided the operator “still qualifies as a self-insurer” or the operator-posted security is sufficient (§ 725.494(e)(2));
     • Sufficient assets to secure benefits (§ 725.494(e)(3)).
   • There is no commercial policy; Hobet is defunct and has no assets; and, critically, Hobet never “still qualifies” as a self-insurer—indeed, it never was a self-insurer. Arch was the self-insurer, but Arch was not designated as the operator. Section 725.494(e) is operator-focused; it cannot be satisfied by pointing to the finances or insurance posture of a non-operator parent.
   • The ALJ’s reliance on § 725.495(b)’s presumption of financial capability was misplaced. The presumption is confined to the designated operator’s capability “in accordance with § 725.494(e).” It cannot be met by invoking a former parent’s financial wherewithal or past self-insurance unrelated to the operator’s current qualification under § 725.494(e)(2).
2. Chenery forecloses DOL’s new appellate theory; in any event, importing commercial “last-exposure” endorsements into self-insurance is not “appropriate.”
   • DOL argued for the first time in the court of appeals that § 726.103’s phrase “as appropriate” allows self-insurance to inherit commercial insurance’s occurrence-based trigger in § 726.203(a) (liability based on last day of exposure during the policy period). The ALJ and BRB did not adopt this rationale; Chenery prevents affirmance on that new ground.
   • On the merits, the court found it “inappropriate” to erase the structural differences between self-insurance and commercial insurance. The commercial-insurance subpart regulates contract terms and mandates the last-exposure endorsement. The self-insurance subpart, by contrast, emphasizes:
     • DOL authorization and reauthorization (previously every 18 months);
     • Security sufficient to cover liabilities;
     • Identification of covered mines; and
     • Ongoing supervision of the self-insurer’s posture.
     None of that suggests occurrence-based liability that lingers after divestiture when the former parent neither “still qualifies as a self-insurer” nor maintains operator-posted security for the particular operator, as § 725.494(e)(2) requires.
   • Conduct and practice underscored the point: for years, DOL named Patriot—the then-current self-insuring parent—as the “carrier” for legacy claims, even where exposure predated Patriot’s ownership. After Patriot’s bankruptcy, DOL pivoted to Arch without any textual hook. The court declined to allow a bankruptcy-driven shift to create liability that the rules did not otherwise impose.
3. Consequence of failure: the Trust Fund pays.
   • Once a claim is before an ALJ, the district director cannot notify or designate a new responsible operator. If the designated operator is not liable under the regulations, the Trust Fund covers the award. That is precisely the congressional backstop for cases where “no operator can be found liable.”

3) Impact and Prospective Significance

The opinion delivers several practical and doctrinal implications for BLBA litigation and administration:

• Clear limits on using past self-insurance to establish current liability. A former parent’s historical self-insurance at the time of last exposure does not, by itself, satisfy § 725.494(e) for a defunct operator. Absent current operator-level qualification (or operator-posted security), liability cannot be assigned through the past parent’s self-insurance umbrella.
• Reinforcement of procedural finality at the ALJ stage. The “point of no return” principle means district directors must identify a viable responsible operator, supported by concrete proof of § 725.494(e) financial capability; if that proof is missing or fails, the Trust Fund pays.
• Chenery’s discipline in BLBA adjudication. Agencies cannot salvage a designation with new legal theories on appeal. The BRB must ground its decisions in the rationales it actually adopted.
• Commercial insurance vs. self-insurance remains a live—and now sharpened—distinction. The Fourth Circuit’s reasoning repudiates attempts to collapse the two categories by importing commercial “last-exposure” endorsements into self-insurance via § 726.103’s “as appropriate” clause.
• Trust Fund exposure increases within the Fourth Circuit. Where operators are defunct, lack commercial coverage, and do not “still qualify” as self-insured with sufficient security, awards will be paid by the Trust Fund. This may motivate further regulatory or legislative reforms, as DOL’s 2025 amendments already signal.
• Deepened circuit split. The Fourth Circuit aligns with the Seventh Circuit and departs from the Sixth Circuit. Absent Supreme Court intervention or uniform regulatory text addressing the issue, forum-dependent outcomes may persist. Notably, the Supreme Court denied certiorari in the Sixth Circuit case in May 2025.
• Administrative guidance, including Bulletin No. 16-01, faces headwinds when used to assign liability beyond the regulations’ text. While the Fourth Circuit did not decide APA validity, its reasoning limits the Bulletin’s practical reach in the self-insurance context.

Complex Concepts Simplified

• Responsible operator vs. potentially liable operator: The “responsible operator” is generally the miner’s most recent employer that meets certain criteria. Before naming it, the district director identifies all “potentially liable operators.” A key criterion is financial capability to pay under § 725.494(e). If none qualifies, the Trust Fund pays.
• Financial capability (§ 725.494(e)): An operator has financial capability if:
  • It has a commercial insurance policy that covers the claim;
  • It qualified as a self-insurer during the miner’s last employment and still qualifies as a self-insurer (or posted sufficient operator-level security); or
  • It has sufficient assets to secure benefit payments.
• Commercial insurance vs. self-insurance: Commercial policies must include a federal endorsement making the insurer liable for claims tied to the last day of exposure during the policy period—“occurrence-based.” Self-insurance is an authorization regime (listing mines, posting security, periodic reauthorization), not a policy with an occurrence-based endorsement. The court refused to treat self-insurance like commercial insurance for “last exposure” liability.
• Chenery doctrine: Courts may affirm agency decisions only on the reasons the agency actually gave. An agency cannot defend a decision in court by inventing new rationales it never adopted administratively.
• Trust Fund as payer of last resort: If no operator can lawfully be held liable at the adjudication stage, the Black Lung Disability Trust Fund pays the award. Benefits to the miner continue; only the payor changes.

Key Precedents Applied to the Facts

The court’s holding follows from a clean application of the regulatory text to the undisputed corporate timeline:

• Meredith’s last mining employment was with Hobet (1990–1995), during which Arch was the parent and self-insuring for itself and subsidiaries.
• Arch sold Hobet (2005) to Magnum; Patriot later acquired Hobet (2008), obtained self-insurance authorization retroactive to 1973, and DOL treated Patriot as the self-insurer for legacy claims—until Patriot’s bankruptcy.
• When Meredith filed in 2019, DOL designated Hobet but tried to pin liability on Arch’s historical self-insurance. Under § 725.494(e), Hobet could not qualify: no commercial policy, no assets, and no current operator-level self-insurance or security. The ALJ’s reliance on Arch’s financial capacity conflated parent and operator in a way the regulation does not permit.
• Because the case was before an ALJ, DOL could not name another responsible operator; the Trust Fund must pay.

Practice Pointers

• For district directors: Build and document § 725.494(e) capability at the designation stage. Confirm commercial coverage or operator-level self-insurance/security; otherwise, anticipate Trust Fund payment.
• For operators and parent companies: Provide contemporaneous notices to OWCP upon sales or restructurings; identify covered mines and the scope of self-insurance. Maintain clear records of authorization periods, posted security, and mine lists—especially under the revised 2025 rules.
• For claimants: The decision does not reduce benefits; it may change only the payor. If the designated operator cannot legally be held liable, the Trust Fund ensures continuity of payment.
• For litigators: Preserve Chenery objections when agencies introduce new theories post hoc. Challenge any attempt to use a parent’s historical self-insurance to satisfy an operator’s current § 725.494(e) obligations.

How the Fourth Circuit Resolved the Circuit Split

The Fourth Circuit adopted the Seventh Circuit’s logic in Apogee Coal Co. v. OWCP, rejecting DOL’s attempt to treat self-insuring parents like commercial insurers for “last-exposure” liability. It declined to follow the Sixth Circuit’s contrary Apogee decision, finding no textual basis in Part 725/726 to bind a former self-insured parent to claims filed years after divestiture when the operator itself does not meet § 725.494(e). The court emphasized that any perceived “gap” is for Congress or DOL to address by rulemaking (as DOL began to do with its 2025 amendments), not for agencies or courts to bridge ad hoc.

Conclusion

Hobet Mining clarifies a pivotal point in BLBA administration: past parent-level self-insurance does not create ongoing, occurrence-based liability for claims filed after the parent has divested the subsidiary and ceased self-insuring. Responsible-operator designation must be grounded in the operator’s own financial capability as defined by § 725.494(e). Attempts to backfill that requirement with a former parent’s historical self-insurance fail both textually and procedurally—and cannot be salvaged by new appellate theories under Chenery.

In practical terms, the decision shifts certain liabilities to the Trust Fund within the Fourth Circuit when designated operators cannot meet § 725.494(e) at adjudication. It also nudges agencies and stakeholders toward clearer, forward-looking solutions—such as DOL’s 2025 amendments—rather than retroactive liability assignments untethered to the regulations. By siding with the Seventh Circuit’s approach, the Fourth Circuit ensures that responsibility for BLBA payments remains grounded in the regulatory framework Congress authorized, even as it acknowledges the Trust Fund’s vital role when that framework yields no liable operator.