Rhino Energy, LLC v. DOWCP: Presuming the Most Recent Employer’s Financial Capability Absent a “Coverage Statement” Under 20 C.F.R. § 725.495(d)

I. Introduction

In Rhino Energy, LLC v. Director, Office of Workers' Compensation Programs, the Fourth Circuit reviewed a Benefits Review Board decision assigning Black Lung Benefits Act (“BLBA”) payment liability to Rhino Energy, LLC (“Rhino”) rather than the miner’s later employer, Wildcat Energy, LLC (“Wildcat”). The miner, Robert B. Rule, worked in coal mining for nearly 40 years and last worked for Wildcat for part of 2015 after Wildcat took over payroll for work at the Eagle #3 mine. Rule’s entitlement to BLBA benefits was not disputed; the dispute was solely which operator should pay.

The case presented three interlocking questions: (1) what counts as a “year” of employment under 20 C.F.R. § 725.101(a)(32); (2) whether Wildcat’s status as a possible successor operator mattered; and (3) critically, how financial capability is proven (or presumed) when the district director does not file the “Coverage Statement” described in 20 C.F.R. § 725.495(d).

The majority (Judge Novak, joined by Senior Judge Floyd) granted Rhino’s petition, vacated the Board’s order, and remanded with instructions that the Black Lung Disability Trust Fund (the “Fund”) pay benefits—despite concluding Wildcat should have been designated as responsible operator. Judge Wilkinson dissented, warning the decision improperly shifts costs to an already indebted Fund and misreads the regulatory burden.

II. Summary of the Opinion

The Fourth Circuit held:

• Employment “year”: Under Baldwin on behalf of Baldwin v. Dir., Off. of Workers' Comp. Programs, United States Dep't of Lab., a “year” can be established by at least 125 working days within a one-year period, without requiring a continuous calendar-year employment relationship. Because Rule had at least 125 working days with Wildcat, Wildcat satisfied the one-year employment requirement.
• Financial capability presumption: Under the plain text of 20 C.F.R. § 725.495(d), when the record lacks the district director’s “Coverage Statement,” “it shall be presumed that the most recent employer is financially capable of assuming its liability for a claim.” The court treated this presumption as applicable here and unrebutted, so Wildcat was deemed financially capable.
• Responsible operator consequence: Wildcat was the most recent potentially liable operator and therefore should have been designated. But under the Fourth Circuit’s understanding of the regulatory scheme (as described in Hobet Mining, Inc. v. Dir., Off. of Workers' Comp. Programs), the court could not re-designate Wildcat at the appellate stage; liability shifts to the Fund.

The court did not decide the successor-operator question because its holdings on the employment-year definition and the financial-capability presumption were dispositive.

III. Analysis

A. Precedents Cited (and How They Shaped the Decision)

1. Allocation of liability and the “responsible operator” system

• Hobet Mining, Inc. v. Dir., Off. of Workers' Comp. Programs (4th Cir. 2025): The majority relied on Hobet Mining, Inc. for two structural propositions: (i) the district director’s identification process is designed to fix operator liability early, and (ii) if the district director designates the wrong responsible operator and the designated operator ultimately prevails, benefits are paid by the Fund rather than by reassigning liability to another operator later in the process. This principle drove the remedy: even though Wildcat should have been the responsible operator, the court ordered payment by the Fund.
• Dir., Off. of Workers Comp. Programs, U.S. Dep't of Lab. v. Consolidation Coal Co. (4th Cir. 1991): Cited to explain the Fund’s purpose: paying benefits when no responsible operator can be found or made to pay. The majority treated Fund payment here as a regulatory consequence of misdesignation (a point further reinforced by Hobet Mining, Inc.).
• Marfork Coal Co. v. Weis (4th Cir. 2007) (unpublished): Used to contextualize the 2000 regulatory commentary and the importance of the district director “mak[ing] the right decision.” The majority’s opinion builds on this theme by criticizing the thinness of the Statement of Reasons and urging more complete consideration of all § 725.494 factors.
• Westmoreland Coal Co. v. Dir., Off. of Workers' Comp. Programs, United States Dep't of Lab. (4th Cir. 2017) (per curiam) (unpublished): Cited for the proposition that when the most recent employer is not designated, the record must contain the Statement of Reasons and, when applicable, the Coverage Statement required by § 725.495(d).
• Rockwood Cas. Ins. Co. v. Dir., Off. of Workers' Comp. Programs, U.S. Dep't of Lab. (10th Cir. 2019): Quoted via Hobet Mining, Inc. for the rule that even if the district director incorrectly identifies the responsible operator, a new one may not later be named after ALJ referral—supporting the “Fund pays” remedial endpoint.
• RB&F Coal, Inc. v. Mullins (4th Cir. 2016): Cited for the proposition that DOL placed the burden on the district director to correctly designate the responsible operator; reinforces the majority’s view that the district director’s omissions can have Trust Fund consequences.
• Three H Coal Co., Inc. v. Dir., Off. of Workers' Comp. Programs (4th Cir. 2025) (per curiam) (unpublished): Cited for the same “if the designated responsible operator prevails, the Fund assumes liability” point.

2. Defining “one year” of employment (125-day rule)

• Baldwin on behalf of Baldwin v. Dir., Off. of Workers' Comp. Programs, United States Dep't of Lab. (4th Cir. 2026): This case supplied the controlling interpretation: a year may be established by 125 working days in and around a mine during a one-year period; a calendar-year-long employment relationship is not required. The majority treated Baldwin as foreclosing the ALJ’s reliance on a “ten months is not a year” approach.
• Shepherd v. Incoal, Inc. (6th Cir. 2019): Adopted in Baldwin and thus indirectly controlling here; it provided the analytic framework for the 125-day calculation.
• Armco Inc. v. Martin (4th Cir. 2002) and Daniels Co., Inc. v. Mitchell (4th Cir. 2007): The ALJ treated these as binding to require a year-long employment relationship plus 125 days; the majority, following Baldwin, characterized the relevant discussion in those cases as dicta and therefore not controlling.

3. Standard of review and interpretive method

• Harman Min. Co. v. Dir., Off. of Workers' Comp. Programs (4th Cir. 2012); Lewis Coal Co. v. Dir., Off. of Workers' Comp. Programs (4th Cir. 2004); W. Virginia CWP Fund v. Dir., Off. of Workers' Comp. Programs, United States Dep't of Lab. (4th Cir. 2018): These framed the court’s review: substantial evidence for fact findings, de novo review of legal and regulatory construction issues, and deference to ALJ fact/credibility determinations.
• Romero v. Barr (4th Cir. 2019); Milburn Colliery Co. v. Hicks (4th Cir. 1998): Cited for de novo review of legal conclusions, especially regulatory construction.
• Mohamed v. Bank of Am. N.A. (4th Cir. 2024); United States v. Moriello (4th Cir. 2020): Used to support the majority’s “plain meaning” approach to regulatory interpretation.
• United States v. Young (4th Cir. 2021): Invoked for the canon against absurd results, central to the majority’s rejection of the Director’s narrowing construction of § 725.495(d).
• Steves & Sons, Inc. v. JELD-WEN, Inc. (4th Cir. 2021): Applied to find waiver of Rhino’s undeveloped APA argument.

B. Legal Reasoning

1. “One year” of employment: rejecting the calendar-year requirement

The majority treated the ALJ’s “ten months cannot be a year” reasoning as legally erroneous after Baldwin. Because the ALJ found (and the court affirmed as supported by substantial evidence) that Rule worked at least 125 working days for Wildcat in 2015, Wildcat satisfied 20 C.F.R. § 725.494(c)’s one-year requirement as defined by § 725.101(a)(32).

This move is consequential because the district director’s designation of Rhino rested almost entirely on the mistaken premise that Wildcat could not qualify as potentially liable due to insufficient duration of employment.

2. Financial capability: the presumption created by the absence of a Coverage Statement

The majority’s most novel and practically important holding concerns 20 C.F.R. § 725.495(d). The district director did not issue a Coverage Statement and did not discuss Wildcat’s financial capability at all. The Board nonetheless faulted Rhino for failing to prove Wildcat’s financial capability under § 725.495(c)(2).

The majority rejected that approach based on the last sentence of § 725.495(d): “In the absence of such a statement, it shall be presumed that the most recent employer is financially capable of assuming its liability for a claim.” Because there was no Coverage Statement in the record, Wildcat was presumed financially capable; and because nothing rebutted the presumption, the court treated Wildcat as satisfying § 725.494(e).

The majority reinforced its reading through institutional logic: OWCP is the entity that collects and maintains insurance/self-insurance information under Part 726, making the district director the actor best positioned to establish (and document) financial incapacity. The court also emphasized the asymmetry between a “small coal mine operator” and OWCP’s access to coverage records.

3. “Absurd results” and the Director’s proposed narrowing construction

The Director argued the presumption should not apply here because no Coverage Statement was “required” in this posture. The majority rejected the argument as producing an “absurd result,” reasoning that it would make the presumption operative only in cases where the district director had already determined financial incapacity but failed to document it—creating confusion and undermining the Statement of Reasons mechanism.

4. Remedial consequence: despite identifying the correct operator, the Fund pays

Having concluded Wildcat should have been designated as responsible operator, the court nonetheless held it could not shift liability to Wildcat at this stage; instead, consistent with Hobet Mining, Inc. and the 2000 regulatory commentary, the Fund must pay because the district director’s designation “proves to be incorrect.”

C. Impact

1. Practical burden allocation in responsible-operator disputes

The decision materially strengthens a designated operator’s ability to contest responsibility when the record lacks a Coverage Statement for the miner’s most recent employer. In the Fourth Circuit, the absence of the Coverage Statement can operate as an affirmative presumption that the most recent employer is financially capable—potentially reducing the need (and ability) for the designated operator to prove the more recent employer’s solvency through independent evidence.

2. Pressure on district directors to build a complete operator-liability record

The majority explicitly admonished that district directors should “show their work” and address all relevant § 725.494 criteria in the Statement of Reasons when skipping the most recent employer. While framed as guidance, this language is likely to be cited by operators seeking vacatur where Statements of Reasons are thin or single-factor.

3. Increased Trust Fund exposure from operator-designation errors

The remedy—Fund liability even though Wildcat was identifiable—creates strong incentives for responsible-operator litigation: if a designated operator can successfully show misdesignation under the procedural rules, the Fund (not the later operator) becomes the payer. The dissent underscores this as the central policy concern, particularly given the Fund’s indebtedness and Congress’s intent that operators pay “to the maximum extent feasible.”

4. Interaction with Baldwin: more recent employers may more often qualify

By applying Baldwin to reject calendar-duration reasoning, the decision will likely expand the pool of employers who meet § 725.494(c) in cases involving intermittent or shorter calendar employment but substantial working days—thereby altering responsible-operator determinations across the circuit.

D. The Dissent’s Core Critique

Judge Wilkinson’s dissent frames the dispute as straightforward burden allocation: once Rhino was designated responsible operator, Rhino bore the burden under § 725.495(c)(2) to prove Wildcat “possesses sufficient assets to secure the payment of benefits,” and Rhino offered no evidence. The dissent reads § 725.495(d)’s presumption as inapplicable unless the district director’s stated reasons included financial incapacity, arguing one cannot treat a not-required statement as “absent.”

On remedy, the dissent argues the BLBA contemplates Trust Fund payment only in limited circumstances and that shifting liability to the Fund here creates an operator “windfall” and worsens the Fund’s financial strain.

IV. Complex Concepts Simplified

• Potentially liable operator: An employer that meets regulatory criteria (including sufficient employment duration and financial ability) such that it can be made to pay BLBA benefits. See 20 C.F.R. § 725.494.
• Responsible operator: The most recent potentially liable operator that employed the miner. See 20 C.F.R. § 725.495(a).
• “One year” under the BLBA: In the Fourth Circuit after Baldwin, a “year” can be shown by 125 working days within a one-year period; it is not strictly a 12-month employment relationship.
• Coverage Statement (20 C.F.R. § 725.495(d)): A statement by the district director that OWCP searched its files and found no insurance/self-insurance authorization for the most recent employer. If present, it is “prima facie evidence” the most recent employer is not financially capable.
• Presumption vs. prima facie evidence: A presumption directs the decision-maker to assume a fact unless rebutted; “prima facie evidence” is sufficient to establish a fact unless countered. Here, the majority treated “no Coverage Statement” as creating a presumption of financial capability.
• Why the Fund pays even when the “right” operator is known: Under the cited regulatory framework, once a case is in litigation beyond certain procedural points, a wrong responsible-operator designation cannot be corrected by naming a new operator; instead the Fund becomes liable.

V. Conclusion

Rhino Energy, LLC v. DOWCP extends the Fourth Circuit’s post-Baldwin responsible-operator jurisprudence in two important ways. First, it confirms that a later employer can satisfy the “one year” requirement through 125 working days even if the miner worked fewer than 12 calendar months. Second—and most significantly—it holds that when the district director does not place a § 725.495(d) Coverage Statement in the record, the most recent employer is presumed financially capable, allowing a designated operator to rely on that presumption absent rebuttal evidence.

The decision simultaneously highlights a tension built into the regulatory scheme: correcting a misdesignation does not necessarily transfer liability to the correct operator; it can shift payment responsibility to the Black Lung Disability Trust Fund. The dissent warns that this reading may expand Trust Fund exposure and undermine Congress’s operator-liability preference, setting the stage for continued litigation over the precise operation of § 725.495(c)(2) and § 725.495(d) in future responsible-operator disputes.