Injured Workers' Insurance Fund v. Uninsured Employers' Fund

³²⁴ DEBORAH S. EYLER, J. The Workers’ Compensation Commission (“the Commission”) awarded temporary total disability benefits to claimant Xiong Yao. Yao had two employers. The Injured Workers’ Insurance Fund (“IWIF”), the appellant, insured one of the employers. Ultimately, it paid the entire award.

Yao’s other employer was uninsured. In two orders, the Commission ruled that because one of Yao’s employers was uninsured, the Uninsured Employers’ Fund (“the Fund”), the appellee, was jointly and severally liable with IWIF for the award. It ordered the Fund to reimburse IWIF for one-half of the benefits paid. On judicial review of that decision, the Circuit Court for Baltimore County overturned the Commission orders, ruling that the Fund could not be ordered to reimburse IWIF.

IWIF appeals, presenting two questions for review, which we have combined and rephrased as follows: Did the Commission have authority to order the Fund to reimburse IWIF for benefits IWIF paid to Yao? We answer this question in the negative and shall affirm the judgment of the circuit court. FACTS AND PROCEEDINGS On June 24, 2005, Yao was working as a construction subcontractor at the Miyako Japanese Steakhouse in Ocean City when a propane gas explosion caused him to sustain burns to his entire body. Bo Hao Zhu and Qihua Chen were the owners of the restaurant.

Zhu had a workers’ compensation insurance policy issued by IWIF. IWIF is an independent, but statutorily created, insurance company that is required to provide workers’ compensation insurance to any employer in the state that is unable to obtain a policy in the private sector. See Md.Code (1991, 1999 ³²⁵ RepLVol., 2007 Supp.), §§ 10-101 et seq. of the Labor and Employment Article (“LE”). 1 Chen was uninsured. On August 29, 2007, Yao filed a claim with the Commission for workers’ compensation benefits arising out of the propane explosion accident.

He identified Zhu and Chen as his employers. On April 23, 2009, the Commission held a hearing on nine issues, including the identity of Yao’s employer(s) at the time of the accident. On May 13, 2009, the Commission issued an award of compensation to Yao (“May 2009 Award”). As relevant here, the Commission found that Yao had been temporarily totally disabled from June 24, 2005, until October 13, 2006, as a result of the accident; that Zhu was not Yao’s employer; that Chen was Yao’s employer; and that Chen was uninsured.

It ordered Chen to pay Yao’s causally related medical expenses and temporary total disability benefits (“TTD benefits”) in the amount of $417 per week for the period of disability. 2 , 3 On May 29, 2009, the Fund intervened. The Fund is a statutory fund of last resort created by LE sections 9-1001, et seq., to pay a workers’ compensation award to a covered employee whose employer is uninsured and defaults on an obligation to pay. The Fund requested a rehearing on the issue whether Zhu also was Yao’s employer at the time of the accident. Three days later, the request for rehearing was denied.

On June 10, 2009, in the Circuit Court for Worcester ³²⁶ County, the Fund filed a petition for judicial review of the May 2009 Award, and prayed a jury trial. Meanwhile, on June 4, 2009, Yao made a written demand on Chen for payment of the May 2009 Award. Chen failed to respond or make payment. Thereafter, by letter dated July 7, 2009, Yao applied to the Fund for payment of the award.

The Fund did not respond or pay the award. On September 28, 2010, the Fund’s judicial review challenge to the May 2009 Award was tried to a jury on the sole issue of whether Zhu (as well as Chen) was Yao’s employer. The jury found that Zhu and Chen were Yao’s employers at the time of the accident. Based on that finding, on October 18, 2010, the circuit court entered an order overturning the May 2009 Award and remanding the matter to the Commission to enter an amended compensation award.

On January 5, 2011, the Commission issued a new award (“January 2011 Award”). In the January 2011 Award, it modified the May 2009 Award to delete the language stating that Zhu was not Yao’s employer; to add language stating that Zhu was Yao’s employer and that Zhu was insured by IWIF; to state that Chen, Zhu, and IWIF should “jointly and severally, pay” the award of compensation; and to otherwise “affirm[ ]” the May 2009 Award. In the meantime, Yao filed a request for additional TTD benefits. On November 8, 2011, the Commission held a hearing on that request. 4 The next day, it issued an award of compensation for TTD benefits for the period from October 14, 2006 though October 26, 2011, at a rate of $417 per week (“November 2011 Award”). 5 The caption of the order named IWIF and the Fund as “CO INSURER^].” In the body of the order, the Commission found that the “[Fund] and [IWIF] [were] jointly and severally liable for payment of all [TTD ³²⁷ benefits] awarded.” It directed Zhu and Chen and the “above-named insurers” to “jointly and severally pay” the award.

On November 17, 2011, the Fund requested a rehearing. It asserted that the November 2011 Award erroneously named it as Chen’s “insurer” and erroneously found it to be jointly and severally liable with IWIF for the award, when, by law, only Chen could be jointly and severally liable with Zhu for the award. A rehearing was held on September 20, 2012. By then, IWIF had paid Yao the entire benefits awarded, totaling more than $147,000. 6 At the hearing, counsel for the Fund and IWIF seemed to be in agreement that the Commission lacked authority to order the Fund to reimburse IWIF for half the benefits IWIF had paid.

Counsel for IWIF suggested that the Commission could order that IWIF be credited in that amount; find that Yao had made a legally sufficient demand upon the Fund in 2009, triggering the Fund’s liability; and order the Fund to pay Yao one-half of the benefits, i.e., the amount credited to IWIF. Counsel for Yao disagreed with this suggestion, arguing that, because the employers — Chen and Zhu — were jointly and severally liable, it did not make any difference who paid, so long as one of them did. As Yao already had been paid in full by IWIF, Zhu’s insurer, any “credit” necessarily would mean that Yao would be obligated to return part of his award to IWIF. Yao’s attorney took the position that that was not allowed by law.

The Fund agreed that a credit to IWIF was not permissible and argued that it had no liability to Yao or to IWIF because any obligation it may once have had to pay Yao was extinguished when Zhu, who had insurance, was found to be an employer of Yao. ³²⁸ On October 1, 2012, the Commission issued a new order affirming and clarifying its November 2011 Award (“October 2012 Order”). That order states in relevant part: The Commission finds that Commissioner Adams [previously] found that Mr. Chen and Mr. Zhu were co-employers of [Yao] and Ordered temporary total disability benefits to be paid. [Yao] made a legally sufficient application of Mr. Chen to pay the benefits Ordered under [the May 2009 Award] and [January 2011 Award].[ 7 ] When Mr. Chen failed to pay pursuant to [those] Orders, the [Fund] became liable. Therefore, the [Commission] does have the authority to Order the [Fund] to reimburse the [IWIF] for one-half of the benefits paid to [Yao]. The Fund and Yao each filed petitions for judicial review of that order in the Circuit Court for Baltimore County. 8 The cases were consolidated and the Fund and IWIF each moved for summary judgment. 9 The circuit court held a hearing and, on August 13, 2013, granted summary judgment in favor of the Fund, overturning the Commission’s October 2012 Order and overturning, in part, its November 2011 Award.

This timely appeal followed. DISCUSSION IWIF contends the Commission correctly found that the Fund’s liability for payment of the TTD benefits was triggered in 2009 when Yao made demand upon it after Chen ³²⁹ defaulted on his obligation to pay the May 2009 Award; that the Fund’s payment obligation was not stayed by its 2009 petition for judicial review; and therefore IWIF has a right to reimbursement for the amount of the May 2009 Award that it subsequently paid to Yao following the January 2011 Award establishing that Zhu and Chen were jointly and severally liable for payment of that award. The Fund responds that the statutory scheme is clear and requires that it pay only when there is no other responsible party — i.e., an employer or insurer — available to pay. Because IWIF is a responsible party and already has paid all of the TTD benefits awarded, “there is no role for the [Fund] to play.” The Fund argues, moreover, that it is protected from a claim for contribution by the doctrine of sovereign immunity.

Our standard of review is well settled: The Commission is an adjudicatory administrative agency. See W.M. Schlosser Co. v. Uninsured Employers’ Fund, 414 Md. 195, 204 , 994 A.2d 956, 961 (2010). Thus, in our review we look through the decision! ] of the circuit court! ] . • •, and evaluate the agency decision directly. See Frey v. Comptroller of the Treasury, 422 Md. 111, 136-37 , 29 A.3d 475, 489-90 (2011).

As we explained in Board of Physician Quality Assurance v. Banks, “[a] court’s role in reviewing an administrative agency adjudicatory decision is narrow!;] it ‘is limited to determining if there is substantial evidence in the record as a whole to support the agency’s findings and conclusions, and to determine if the administrative decision is premised upon an erroneous conclusion of law.’ ” 354 Md. 59, 67-68 , 729 A.2d 376, 380 (1999) (quoting United Parcel Service, Inc. v. People’s Counsel of Baltimore Cnty., 336 Md. 569, 576-77 , 650 A.2d 226, 230 (1994)). Additionally, “an administrative agency’s interpretation and application of the statute which the agency administers should ordinarily be given considerable weight by reviewing courts.” Banks, 354 Md. at 69 , 729 A.2d at 381 (citations omitted). ³³⁰ W.R. Grace & Co. v. Swedo, 489 Md. 441 , 452-53, 96 A.3d 210 (2014). The Fund is a “source of last resort in Maryland to provide workers’ compensation benefits to a claimant and protect that claimant from an uninsured employer who refuses to pay a workers’ compensation award.” Uninsured Employers’ Fund v. Danner, 388 Md. 649, 659-60 , 882 A.2d 271 (2005). See also W.M. Schlosser Co., 414 Md. at 211 , 994 A.2d 956 (2010) (the Fund’s purpose is “benevolent and remedial, that being ‘to protect injured workers whose employers failed, either willfully or negligently, to carry workers’ compensation insurance for them.’ ”) (citation omitted).

The Fund receives most of its money from assessments on employers and insurers and from interest and investment income derived therefrom. See LE §§ 9-1005-9-1009 (assessments); § 10-314 (interest and investment income). The Fund’s “obligation to pay workers arises not from an award of compensation by the Commission, but from [LE] § 9-1002.” Danner, 388 Md. at 661 , 882 A.2d 271 . That statute establishes the prerequisites for “[a]n award ... payable out of the Fund.” LE § 9-1002(a).

Two are relevant here. First, an employer must be in default on payment of a Commission award. LE § 9-1002(b). Default occurs when an uninsured employer fails to pay an award within 30 days after the award is made.

Id. However, if “an application for (judicial] review has been timely filed under subsection (g) of this section or a [petition for judicial review] timely served,” an employer is not in “default” within the meaning of section 9-1002. Id. After a default occurs, the Commission is supposed to give notice to the employer that the employer’s license or permit to do business in Maryland may be suspended if the award is not paid.

LE § 9-1002(c). 10 An employer ³³¹ in default has 30 days thereafter to pay or to notify the Commission of the reasons the employer objects to the award. LE § 9-1002(d). Second, the employee or his dependents must apply to the Fund for payment. LE § 9-1002(e).

Once the Fund receives an application for payment, it may “pay the award” or “apply for review under [LE section 9-1002(g) ].” LE § 9-1002(f). Pursuant to subsection (g), the Fund may “rais[e] issues,” request discovery, and request a hearing before the Commission before paying an award. If the Fund pays an award to a covered employee, it is subrogated to the employee’s rights against the uninsured employer and to the rights of the uninsured employer against a third party. LE §§ 9-1003(a) & 9-1004.

Also, it may bring a civil action against the uninsured employer, refer the matter for criminal prosecution, or both. LE § 9-1003(b). In Danner , the Court discussed the role of the Fund and interpreted LE section 9-1002 in addressing the question whether a default can occur while the Fund is litigating an issue collateral to the award itself. There, the injured worker (Danner) made a claim for compensation with the Commission.

The Commission held a hearing at which the Fund was present. The Commission found that one Timothy Stivers was Danner’s employer and that Stivers was uninsured, and awarded Danner compensation. At the Fund’s request, the Commission reserved on the issue whether Danner also had a statutory employer. 11 Neither Stivers nor the Fund filed an ³³² action for judicial review. Stivers defaulted and Danner made an application for payment with the Fund.

The Fund refused to pay. Thereafter, the Commission held a hearing on the deferred