               FOR PUBLICATION

  UNITED STATES COURT OF APPEALS
       FOR THE NINTH CIRCUIT


SSA TERMINALS AND HOMEPORT               No. 13-72929
INSURANCE COMPANY,
                    Petitioners,           BRB No.
                                           12-0601
                v.

ROBERT CARRION; DIRECTOR,
OFFICE OF WORKERS’
COMPENSATION PROGRAM,
                    Respondents.



ROBERT CARRION,                          No. 13-72948
                         Petitioner,
                                           BRB No.
                v.                         12-0601

SSA MARINE TERMINALS, LLC;
HOMEPORT INSURANCE COMPANY;               OPINION
DIRECTOR, OFFICE OF WORKERS’
COMPENSATION PROGRAM,
                     Respondents.


       On Petition for Review of an Order of the
                Benefits Review Board
2       SSA TERMINALS & HOMEPORT INS. V. CARRION

                  Argued and Submitted
        November 17, 2015—San Francisco, California

                        Filed May 11, 2016

    Before: M. Margaret McKeown, Johnnie B. Rawlinson,
            and Andre M. Davis,* Circuit Judges.

                  Opinion by Judge McKeown


                           SUMMARY**


    Longshore and Harbor Workers’ Compensation Act

    The panel denied an employer/insurer’s petition for
review, and granted a claimant’s cross-petition for review of
a decision by the Benefits Review Board, in an action brought
by a claimant seeking disability benefits under the Longshore
and Harbor Workers’ Compensation Act.

    The administrative law judge (“ALJ”) determined that
claimant’s claim was timely filed under the Longshore Act,
and determined that the disability was temporary because the
claimant was contemplating knee replacement surgery that
would likely alleviate his symptoms. The Benefits Review
Board affirmed.


    *
   The Honorable Andre M. Davis, Senior Circuit Judge for the U.S.
Court of Appeals for the Fourth Circuit, sitting by designation.
  **
     This summary constitutes no part of the opinion of the court. It has
been prepared by court staff for the convenience of the reader.
      SSA TERMINALS & HOMEPORT INS. V. CARRION              3

    The panel held the claimant timely filed his claim against
his employer. In determining whether the one-year statute of
limitations on disability claims was met, pursuant to 33
U.S.C. § 913(a), the panel held that the ALJ and the Benefits
Review Board correctly looked to the date when the claimant
became aware that his work for the employer caused a
second, cumulative traumatic injury resulting in an
impairment of his earning power.

    The panel held that claimant’s knee injury was a
permanent, rather than a temporary, disability. The panel
held that evaluating an individual’s condition based on the
presumed effect of a theoretical future treatment was error.
The panel held that the appropriate question is not whether a
future surgery would ameliorate claimant’s knee condition,
but whether there was actual or expected improvement to his
knee after a normal and natural healing period.

    Finally, the panel held that the doctrines of exhaustion
and waiver were inapplicable because claimant presented his
claim of permanent disability well before the conclusion of
the administrative process and neither the employer nor the
agency was blindsided by the argument.
4     SSA TERMINALS & HOMEPORT INS. V. CARRION

                        COUNSEL

Gursimmar Sibia (argued) and Judith Leichtnam, Bruyneel &
Leichtnam, San Francisco, California, for Petitioners/Cross-
Respondents.

Joshua T. Gillelan, II (argued), Longshore Claimants’
National Law Center, Washington, D.C.; Eric A. Dupree,
Dupree Law, Coronado, California, for Respondent/Cross-
Petitioner.

Matthew W. Boyle (argued), Attorney, M. Patricia Smith,
Solicitor of Labor, Rae Ellen James, Associate Solicitor,
Mark A. Reinhalter, Counsel for Longshore, Gary K.
Stearman, Appellate Counsel, United States Department of
Labor, Washington, D.C., for Federal Respondent.


                         OPINION

McKEOWN, Circuit Judge:

    In 1987, Robert Carrion sustained a severe knee injury
while working as a chassis mechanic. Although Carrion
returned to his physically demanding job and worked for the
next fifteen years, his knee continued to deteriorate. He took
early retirement in 2002, when his pain became so great that
he could walk only with difficulty. After Carrion’s former
employer ceased paying for treatment, he filed for disability
under the Longshore and Harbor Workers’ Compensation Act
(“LHWCA” or “the Longshore Act”), 33 U.S.C. § 901 et seq.

   By the time he filed his claims in 2008, Carrion had
endured decades of persistent pain without any actual or
      SSA TERMINALS & HOMEPORT INS. V. CARRION              5

expected improvement. Without doubt, he was disabled, and
his doctors unanimously concluded that he eventually would
require total knee replacement surgery. Even though no
surgery was on the horizon, his employer classified the injury
as a temporary disability. The question we address is
whether, after such a protracted period of disability, the
prospect of a hypothetical future surgery and its anticipated
benefits can transform an otherwise permanent disability into
a temporary one for purposes of the Longshore Act. We hold
that it cannot.

                       BACKGROUND

    Carrion tore his right medial meniscus and right anterior
cruciate ligament in January 1987 while working for Matson
Terminals, Inc. (“Matson”). Although Carrion returned to
work, his knee continued to deteriorate and he has endured
persistent pain ever since. After Carrion’s injury, SSA
Marine Terminals (“SSA”) took over Matson. Carrion
became an SSA employee, but Matson continued paying for
his knee treatments. Carrion took early retirement in 2002.
At that point, the medial joint space in his knee was
“completely gone.” His treating physician, Dr. Caldwell,
advised him that he would eventually require a total knee
replacement, but recommended that Carrion forgo the surgery
until his symptoms worsened.

    Four years later, Matson stopped authorizing payments
for Carrion’s knee treatments. In the spring of 2008, Carrion
filed claims against both Matson and SSA seeking benefits
under the LHWCA. He listed the date of his cumulative knee
injury as February 28, 2002—his retirement date.
6     SSA TERMINALS & HOMEPORT INS. V. CARRION

    Dr. Stark, an expert hired by Matson, examined Carrion
in September of 2008. Like Dr. Caldwell, Dr. Stark
concluded that Carrion required total knee replacement
surgery. Dr. Stark also diagnosed Carrion’s knee condition
as the result of both a “natural progression of [his]
degenerative arthritis and also [the] cumulative trauma” he
experienced in his physically demanding work. One year
later, SSA hired Dr. von Rogov, who similarly concluded,
after examination, that Carrion would need total knee
replacement surgery. In Dr. von Rogov’s view, Carrion’s
condition was solely the result of the “natural progression of
the January [8], 1987 injury,” since he would have required
a total knee replacement after that trauma even if he had only
undertaken sedentary activities since that time. At the time
of the administrative hearing in 2009, Carrion was in pain “all
day and all night,” but had not yet received a knee
replacement.

    The Administrative Law Judge (“ALJ”) determined that
Carrion did not learn of the causal connection between his
work for SSA and his cumulative trauma injury until he
received Dr. Stark’s 2008 report. Carrion thus filed his claim
against SSA within the one-year statute of limitations
governing claims under the LHWCA. Noting that “[a]t first
blush, it seems [Carrion’s] injury is permanent,” and
acknowledging that Carrion’s “condition has lasted for a long
period of time,” the ALJ nevertheless concluded that
Carrion’s disability was temporary. The ALJ reasoned that
Carrion was contemplating knee replacement surgery, which
his doctors agreed would likely alleviate his symptoms, and
thus “medical improvement through the knee replacement
was available” once “his pain became too much.” The ALJ
noted, however, that if Carrion decided against surgery and
      SSA TERMINALS & HOMEPORT INS. V. CARRION              7

opted to “live with the knee pain indefinitely, he would be
found permanently disabled.”

    SSA appealed the ALJ’s timeliness determination to the
Benefits Review Board (“BRB” or “the Board”), and Carrion
cross-appealed the ALJ’s finding that his disability was
temporary. The BRB affirmed the ALJ on both issues. We
review the Board’s decisions “for errors of law and for
adherence to the substantial evidence standard. . . . On
questions of law, including interpretations of the LHWCA,
we exercise de novo review.” Gen. Constr. Co. v. Castro,
401 F.3d 963, 965 (9th Cir. 2005) (internal quotations and
citations omitted).

                         ANALYSIS

    The threshold inquiry is whether Carrion timely filed his
claim. The Longshore Act imposes a one-year statute of
limitations on disability claims, which begins to run once the
employee is, or should be, aware “of the relationship between
the injury . . . and the employment.” 33 U.S.C. § 913(a). We
have explained that § 913(a) contemplates an impairment of
earning power, and thus an employee only becomes aware of
an injury for statutory purposes when he becomes “aware of
the full character, extent, and impact of the harm done to
him.” Todd Shipyards Corp. v. Allan, 666 F.2d 399, 401–02
(9th Cir. 1982) (quotations omitted).

    Both the ALJ and the BRB correctly applied this standard
by looking to the date when Carrion became aware that his
work for SSA caused a second, cumulative traumatic injury
resulting in an impairment of his earning power. Substantial
evidence supports the conclusion that Carrion did not
“become aware of the full character, extent, and impact of the
8     SSA TERMINALS & HOMEPORT INS. V. CARRION

harm done to him” until he received Dr. Stark’s report,
several months after Carrion filed his claim against SSA.

    Before seeing Dr. Stark’s evaluation, Carrion had no
understanding of the medical principle of cumulative trauma.
Carrion’s treating physician, Dr. Caldwell, testified that he
never explained the concept of cumulative trauma to Carrion,
and as the ALJ noted, a layperson would not understand that
“the incremental erosion or worsening of a knee condition
can be the basis for a cumulative trauma claim.” Even after
Carrion became an SSA employee in 1999, Matson continued
paying for Carrion’s knee treatments, thus reinforcing
Carrion’s reasonable belief that his disability was solely the
result of the trauma he sustained in 1987. Indeed, SSA’s own
expert, Dr. von Rogov, initially concluded that Carrion’s
disability was solely attributable to the 1987 injury. Although
Carrion experienced ongoing pain and required ongoing
medical treatment, those circumstances alone are insufficient
to establish knowledge of a cumulative trauma. See, e.g.,
Abel v. Dir., Office of Workers’ Comp. Programs, 932 F.2d
819, 823 (9th Cir. 1991) (claimant’s recurring pain and
persistent symptoms insufficient to establish awareness of
injury for purposes of § 913(a)); J.M. Martinac Shipbuilding
v. Dir., Office of Workers’ Comp. Programs (Grage),
900 F.2d 180, 184 (9th Cir. 1990) (claimant’s pain and other
symptoms did not establish awareness of a compensable
injury). We thus affirm the BRB’s decision upholding the
ALJ’s conclusion that Carrion timely filed his claim against
SSA.

    With this issue resolved, we turn to the crux of this
appeal: whether Carrion’s knee injury was a temporary or
permanent disability. The Longshore Act creates “two
independent areas of analysis,” one assessing the nature, or
      SSA TERMINALS & HOMEPORT INS. V. CARRION               9

duration, (temporary versus permanent) and the other the
degree of the disability (partial versus total). Pac. Ship
Repair & Fabrication, Inc. v. Dir., Office of Workers’ Comp.
Programs (Benge), 687 F.3d 1182, 1185 (9th Cir. 2012)
(quoting Stevens v. Dir., Office of Workers’ Comp. Programs,
909 F.2d 1256, 1259 (9th Cir. 1990)). Four separate
disability categories stem from this framework: permanent
total disability; temporary total disability; permanent partial
disability; and temporary partial disability. 33 U.S.C.
§ 908(a)–(c), (e). Two of these qualifiers, permanent and
temporary, “go to the nature of the disability.” Benge,
687 F.3d at 1185 (quoting Stevens, 909 F.2d at 1259). Only
the nature of Carrion’s disability is at issue here.

    Curiously, the Longshore Act does not define
“temporary” or “permanent,” although the classification
issue arises on a continuing basis. We have held that “[a]
disability is temporary ‘so long as there [is] a possibility or
likelihood of improvement through normal and natural
healing.’” Castro, 401 F.3d at 968 (quoting Stevens,
909 F.2d at 1259) (second alteration in original). A disability
may become permanent if (1) a claimant reaches “maximum
medical improvement”—the point at which “the injury has
healed to the full extent possible” and normal and natural
healing is no longer likely, Stevens, 909 F.2d at 1257 (citing
Watson v. Gulf Stevedore Corp., 400 F.2d 649, 654 (5th Cir.
1968)); or (2) the condition has “continued for a lengthy
period, and it appears to be of lasting or indefinite duration,
as distinguished from one in which recovery merely awaits a
normal healing period.” Watson, 400 F.2d at 654.

    The Watson test clarifies that “permanent” is not
tantamount to “eternal” or “everlasting” and “does not
foreclose the possibility that [the] condition may change.” Id.
10    SSA TERMINALS & HOMEPORT INS. V. CARRION

at 654–55. In accordance with this rationale, a disability may
be categorized as permanent even if it is not medically
incurable. Pittsburgh & Conneaut Dock Co. v. Dir., Office of
Workers’ Comp. Programs, 473 F.3d 253, 259–60 (6th Cir.
2007) (upholding determination that disability was permanent
under Watson where cognitive limitations had lasted more
than a year and a half longer than typical recovery period,
despite evidence of potential for improvement with
psychotherapy). Under either test, the question is whether the
disability will resolve after a normal and natural healing
period. If the answer is yes, the disability is temporary. If the
answer is no, the disability is permanent.

    Neither the permanent nor the temporary classification is
necessarily static. In Benge, we considered whether a
disability classified as permanent could be reclassified as
temporary. Despite the “common-sense and linguistic
appeal” of “[t]he notion that a ‘permanent’ disability is
immutable,” we held that “[a] disability initially deemed
permanent is not immutably so.” 687 F.3d at 1185–86. Thus,
we reasoned, “healing related to a flare up, relapse, surgery,
or other major treatment could” transform a permanent
disability into a temporary one, as the “vicissitudes of the
individual’s responsiveness to medical treatment” lead to a
“new and unknown maximum medical improvement point.”
Id. at 1186–87. As a practical matter, the start of a new
“healing period functions as a ‘reset’ button for a disability
previously-determined to be permanent.” Id. at 1186.

    Benge’s logic dictates our answer to the question of
whether the prospect of future surgery rendered Carrion’s
disability temporary. Absent the contingency of future
surgery, Carrion’s disability would unequivocally be
permanent. From the time of his injury until his hearing,
       SSA TERMINALS & HOMEPORT INS. V. CARRION                      11

Carrion lived with constant, debilitating pain. He had no
hope of normal or natural healing, only an expectation of
further deterioration and the theoretical possibility of
improvement through a still-distant surgery. Even the ALJ
acknowledged that if Carrion “decided to forgo the surgical
option and live with the knee pain indefinitely, he would be
found permanently disabled.”

     Nevertheless, the ALJ concluded that Carrion’s
“condition is not one of lasting or indefinite duration because
the symptoms will likely be diminished through surgery,” and
found that Carrion “is temporarily disabled because he is
seeking surgery to improve his condition.”1 Evaluating an
individual’s condition based on the presumed effect of a
theoretical future treatment makes scant sense—particularly
in light of the “vicissitudes of the individual’s responsiveness
to medical treatment.” Id. at 1186–87. For example, an
anticipated surgery or course of treatment may never come to
pass if an individual develops a heart condition, becomes
immuno-compromised, or simply concludes that the risks of
the procedure outweigh the benefits. Worse yet, a claimant
might die without ever having the surgery. Alternatively,
advances in medical therapies and technologies could lead to
more successful medical interventions for chronic conditions,
which in turn could lead to new periods of healing and “a new


  1
    Both the ALJ and the Board cited several BRB decisions categorizing
disabilities as temporary where surgery was anticipated. In these cases,
however, surgery was either imminent or the claimants’ disabilities had
not persisted for prolonged periods without actual or expected
improvement. In relying on these cases, the ALJ and the Board neglected
to consider that Carrion’s disability persisted for years without any
expectation of “normal or natural healing.” Under such circumstances, the
mere prospect of eventual surgery cannot transform an otherwise
undeniably permanent disability into a temporary one.
12    SSA TERMINALS & HOMEPORT INS. V. CARRION

and unknown maximum medical improvement point” for the
patient. Id. at 1186. Accordingly, the appropriate question to
ask is not whether a future surgery would ameliorate
Carrion’s knee condition, but whether there was actual or
expected improvement to his knee after a normal and natural
healing period.

    The impact of a future knee replacement should be
assessed after the surgery, not in anticipation of such a
contingency. Importantly, the Longshore Act permits
modifications of disability awards to account for just such
changed circumstances. See 33 U.S.C. § 922 (“[O]n the
ground of a change in conditions . . . the deputy
commissioner may . . . issue a new compensation order which
may terminate, continue, reinstate, increase, or decrease”
compensation, within certain time limits).

    SSA additionally claims that Carrion waived his argument
that his disability is permanent because he did not raise it
until his post-hearing brief before the ALJ and then only as an
alternative argument. This argument need not detain us long.

    “The administrative waiver doctrine, commonly referred
to as issue exhaustion, provides that it is inappropriate for
courts reviewing agency decisions to consider arguments not
raised before the administrative agency involved.” Coal. for
Gov’t Procurement v. Fed. Prison Indus., Inc., 365 F.3d 435,
461–62 (6th Cir. 2004) (citing United States v. L.A. Tucker
Truck Lines, Inc., 344 U.S. 33, 37 (1952)). But, the doctrines
of exhaustion and waiver “are not designed to extinguish
claims which, although not comprehensively or artfully
presented in the early stages of the administrative process, are
presented fully before the process ends.” Getty Oil Co. v.
Andrus, 607 F.2d 253, 256 (9th Cir. 1979).
      SSA TERMINALS & HOMEPORT INS. V. CARRION               13

    The question of whether Carrion was permanently
disabled did not spring up on appeal. Rather, in his post-
hearing brief before the ALJ, Carrion argued that he was
permanently disabled. The ALJ devoted nearly two-and-a-
half pages to this argument. The issue was squarely
presented to the BRB, which reviewed the ALJ’s rejection of
permanent disability. If the agency “actually addressed [the]
issue, the policies underlying the exhaustion doctrine . . . are
satisfied.” W. Radio Servs., Co. v. Qwest Corp., 530 F.3d
1186, 1203 (9th Cir. 2008); see also Abebe v. Gonzales,
432 F.3d 1037, 1041 (9th Cir. 2005) (en banc) (holding that
an issue is exhausted when an agency considers and decides
it, even if petitioner failed to raise the issue before the
agency). Because Carrion presented his claim of permanent
disability well before the conclusion of the administrative
process and neither SSA nor the agency were blindsided by
the argument, we conclude that the doctrines of exhaustion
and waiver are inapplicable. See Abel, 932 F.2d at 821.

   Costs on appeal shall be awarded to Respondents.

  PETITION         DENIED       AND CROSS-PETITION
GRANTED.
