Inner Harbor Warehouse, Inc. v. Myers

COLE, Judge. In this case we are asked to decide four issues that relate to Maryland’s workers’ compensation law as embodied in Md.Code (1957, 1985 Repl.Vol., 1989 Cum.Supp.), Article 101: 1 (1) whether the president, who is also the sole stockholder and chief executive officer of a close corporation, is an individual intended to benefit from the protection of Article 101, § 62 as an employee of an uninsured subcontractor; (2) whether that individual who had not purchased workers’ compensation insurance had thereby elected not to avail his company of the protections of the workers’ compensation article; (3) whether a principal contractor is obligated to file an employer’s first report of injury for any injuries sustained by its subcontractors’ employees; and (4) whether the Respondent’s claim was barred by the applicable statute of limitations. The facts of the case are not disputed. At the time of the accident, Inner Harbor Warehouse & Distribution, Inc. (Inner Harbor), was under retainer by Eluma International, U.S.A.

(Eluma) to transport Brazilian engine blocks from their point of arrival at the Port of Baltimore to Inner ³⁶⁶ Harbor’s warehouse for future distribution on an ongoing basis. Inner Harbor did not own trucks capable of handling the job, so it retained truck owners and their drivers to haul the engine blocks. G.K. Myers, & Son, Inc. (G.K. Myers), a close corporation whose president, sole stockholder 2 and chief executive officer was Gordon Myers, was in the business of retaining truck drivers for companies such as Inner Harbor. The drivers of G.K. Myers, in fact, drove almost exclusively for Inner Harbor.

Respondent was a truck driver by trade who, along with other drivers, performed truck driving services for Inner Harbor under G.K. Myers’ retainer agreement. On October 18, 1984, Myers was hauling the Brazilian engine blocks from the Port of Baltimore to Inner Harbor’s warehouse. While travelling along a ramp in downtown Baltimore, the load shifted in the truck. As a result thereof, the container and the tractor trailer fell over the side of the ramp and landed on the railroad tracks below.

Myers suffered serious injuries including the amputation of one leg below the knee and the partial amputation of several of his fingers. At the time of the accident G.K. Myers was not covered by workers’ compensation insurance. The parties do not dispute the fact that sometime in April of 1984 Myers had communicated with Reese Bean, the president and chief executive officer of Inner Harbor, about having the latter company provide workers’ compensation insurance to the employees of G.K. Myers. The parties disagree on Bean’s ultimate response to the request.

It is clear, however, that as of the time of the accident, G.K. Myers & Sons was not covered by workers’ compensation insurance. The extent of Inner Harbor’s cognizance of that fact is unknown, but Inner Harbor has made no allegation of fraud or misrepre ³⁶⁷ sentation on the part of G.K. Myers about its uninsured status. Shortly after the accident, Myers notified representatives of Inner Harbor of his injuries. He then filed a claim with the Workers’ Compensation Commission (WCC) on December 22, 1986 naming Inner Harbor as his employer.

He argued he was entitled to compensation because he was Inner Harbor’s employee, or, in the alternative, that Inner Harbor was his statutory employer. The WCC found Myers to be an independent contractor rather than an employee and therefore denied the claim. Myers moved for a rehearing which motion was denied. On appeal to the Circuit Court for Baltimore City, Myers filed a Motion for Partial Summary Judgment alleging he was entitled to insurance coverage under Inner Harbor’s policy by virtue of Article 101, § 62 of the Code.

The motion was granted by the court, and Inner Harbor appealed. The judgment of the circuit court was affirmed by the Court of Special Appeals which held that: (1) Myers did not elect to exempt himself from workers’ compensation insurance coverage merely because he did not procure that insurance for his company; (2) Myers was a "statutory employee” of Inner Harbor within the meaning of § 62; and (3), an employer’s duty to file a report of injury upon receiving notice of an employee’s injury, and the consequence of failing to so file, apply to a § 62 "statutory employer” when an accidental injury befalls a "statutory employee;” since Inner Harbor failed to file the report with regard to Myers, the statute of limitations period applicable to Myers’ claim was tolled pursuant to Article 101, § 38(c). Inner Harbor v. Myers, 80 Md.App. 1 , 559 A.2d 376 (1989). We granted certiorari to conduct our own examination of the issues presented.

I We first note that this case requires us to review the trial court’s entry of summary judgment for Respondent Myers. ³⁶⁸ In this regard, our task is to determine whether the entry of summary judgment was appropriate under the circumstances of the case. Md.Rule 2-501(e) provides that summary judgment is warranted “if the pleadings, depositions, answers to interrogatories, admissions, and affidavits show that there is no genuine dispute as to any material fact and that the party in whose favor judgment is entered is entitled to judgment as a matter of law.” In determining whether any factual issues exist, the trial court must resolve all inferences against the party moving for summary judgment. See Brady v. Ralph Parsons Co., 308 Md. 486, 495 , 520 A.2d 717 (1987); Honaker v. W.C. & A.N. Miller Development Co., 285 Md. 216, 231 , 401 A.2d 1013 (1979) (Honaker II). Upon our review we must also determine whether there is a genuine dispute as to any material fact and whether the moving party is entitled to judgment as a matter of law, which task requires resolving all inferences against the moving party.

Brady v. Ralph Parsons Co., 308 Md. at 496 , 520 A.2d 717 ; Liscombe v. Potomac Edison Co., 303 Md. 619, 621 , 495 A.2d 838 (1985). II Petitioner first alleges that Myers cannot meet the requirements of worker status in order to fall under the protection of § 62. Inner Harbor argues that Myers, as the president, sole stockholder and chief executive officer of G.K. Myers, exhibits none of the indicia of an employee for purposes of § 62. Petitioner likens the instant case to Palumbo v. Nello L. Teer Company, 240 F.Supp. 226 (D.C.Md.1965).

While noting that that case is not binding precedent on this Court, Petitioner nevertheless asks us to recognize its factual similarities. In Palumbo , the plaintiff was a truck driver for and a partner in the partnership that had subcontracted to haul loads for the general contractor, Teer. He was injured in the course of that employment. The court found that Palumbo was not an employee of his own partnership and that because he was not a worker within the meaning ³⁶⁹ of § 62, Palumbo was not a statutory employee of Teer.

By analogy to the facts of Palumbo , Inner Harbor avers that Myers, as president, sole stockholder and chief executive officer of G.K. Myers, is not its statutory employee. Myers counters by stating he is in fact a statutory employee of Inner Harbor as defined by § 62. He argues that Article 101, § 21(b) specifically confers employee status upon officers of close corporations who perform services for the corporation for monetary payment. Myers also distinguishes Palumbo from his case by pointing out that the Palumbo court recognized that by definition, a partner is not an employee under § 21.

The primary issue we must resolve is whether Myers is an individual meant to benefit from the protections of § 62. The cardinal rule of statutory construction is to ascertain and effectuate the actual intent of the legislature. Kaczorowski v. City of Baltimore, 309 Md. 505, 514 , 525 A.2d 628 (1987); Lovellette v. City of Baltimore, 297 Md. 271, 282 , 465 A.2d 1141 (1983); Howard Co. Ass’n, Retarded Cit. v. Walls, 288 Md. 526, 530 , 418 A.2d 1210 (1980); Honaker v. W.C. & A.N. Miller Development Co., 285 Md. at 229 , 401 A.2d 1013 . In order to fall under the protection of § 62, the injured person must be a worker.

To qualify as a worker one must also be an employee because independent contractors 3 are not covered by Article 101. See Criminal Injuries Compensation Board v. Gould, 273 Md. 486, 517 , 331 A.2d 55 (1975). The first question we must resolve is whether Myers, as president, sole stockholder and chief executive officer of G.K. Myers, may be considered an employee of that corporation. Second, we must decide whether he is a “statutory employee” of Inner Harbor by virtue of § 62. ³⁷⁰ Petitioner, relying on Palumbo , maintains that Myers cannot be an employee of his own corporation.

As we see it, Palumbo does not support Petitioner’s argument. The plaintiff in Palumbo was a partner in the firm that had been retained as the subcontractor. Defendant Teer was the general contractor. Plaintiff argued that as a partner of his own company he could not be an employee of himself.

The court agreed. The court also held that § 62 did not apply to Palumbo because he was not the “employee of another.” Palumbo v. Nello L. Teer Co., 240 F.Supp. at 230 . While those facts do seem very similar to the facts of the case at bar, the crucial difference becomes obvious when we analyze Article 101, §§ 21 and 67 together. Section 21 sets forth those people who are considered employers and employees under Article 101.

That section states in pertinent part: (b) Coverage of employees. — The following shall constitute employees subject to the provisions of this act, except as exempted under subsection (c) of this section: ****** (2) Every officer of a corporation rendering services for the corporation for monetary remuneration except: (i) An officer of a close corporation, as defined in the Corporations and Associations Article, electing not to be covered under the provisions of § 67(4) of this article; (ii) An officer owning 20 percent or more of the outstanding capital stock of a farm corporation electing not to be covered under the provisions of § 67(4) of this article. For purposes of this subparagraph (ii) a farm corporation is defined as a corporation that derives at least 75 percent of its income from farm operations; or (iii) An officer owning 20 percent or more of the outstanding capital stock of a professional services corporation (and performing professional services for that corporation as defined in the Corporations and Associations Article), electing not to be covered under the provisions of § 67(4) of his article. ³⁷¹ (3) Any employer, partner or sole proprietor electing coverage under the provisions of § 67(4) of this article. i[c * sit * * * Section 67(4) further clarifies the scope of Article 101. That definitional section states in full: (4) Sole proprietors, partners or corporate officers electing to become “employees.” — (i) If an employer is a partnership, or sole proprietorship, the employer may elect to include as an “employee” within the provisions of the act, any member of the partnership, or the owner of the sole proprietorship, devoting full time to the partnership or proprietorship business. In the event of an election, the employer shall serve upon the employer’s insurance carrier and upon the Commission written notice naming the persons to be covered and a proprietor or partner may not be an employee within this article until the notice has been served.

(ii) Any officer of a close corporation, as defined in the Corporations and Associations Article, or an officer owning 20 percent or more of the outstanding capital stock of a farm corporation, or an officer owning 20 percent or more of the outstanding capital stock of a professional services corporation (and performing professional services for that corporation), as defined in the Corporations and Associations Article, may elect to become exempt from coverage as an employee under the provisions of § 21(b) of this article. In the event of such an election, the employer shall serve upon the employer’s insurance carrier and upon the Commission written notice naming the persons electing not to be covered, and every officer of a close corporation shall be an employee within this article until such notice has been served. (Emphasis added). Clearly, officers of corporations rendering services for the corporation for monetary remuneration constitute employees under Article 101 unless they choose to be exempted from coverage.

It is undisputed that, as required to ³⁷² attain employee status under § 21, Myers is an officer of a corporation. It is obvious that he received monetary remuneration by rendering truck driving services to G.K. Myers. Although we will later return to a discussion of whether Myers implicitly exempted himself from coverage under Article 101 by not procuring workers’ compensation insurance for G.K. Myers, it is clear from the record that G.K. Myers did not serve upon the insurance carrier and the WCC written notice naming Myers as a person not to be covered. Under § 67(4)(ii), Myers would be considered an employee within the Article until such notice was served.

Section 67(4)(ii), relating to officers of corporations, indicates that certain officers are covered under Article 101 until they “elect to become exempt from coverage” by serving notice of that intent. Section 67(4)(i) demonstrates the inherent difference between this case and Palumbo . That subsection states that if an employer is a partnership it may “elect to include as an ‘employee’ within the act, any member of the partnership” by serving written notice on the insurance carrier and the Commission. Unlike corporate officers who must affirmatively elect not to be covered by Article 101, partners must affirmatively elect to be covered.

No such election of coverage was served in Palumbo , so there is no doubt he was not considered the partnership’s employee. In Myers’ case, no affirmative election of non-coverage was made, so he was covered as an employee of G.K. Myers. While G.K. Myers is therefore an employer of Gordon Myers, it is conceded that G.K. Myers did not carry workers’ compensation insurance for its employees at the time of Myers’ accident. Thus, we must analyze whether Myers may be considered a “statutory employee” 4 of Inner Harbor under § 62 so as to recover under Inner Harbor’s ³⁷³ workers’ compensation insurance policy.

That section states in full: § 62. Employees of subcontractor may claim against contractor. When any person as a principal contractor, undertakes to execute any work which is a part of his trade, business or occupation which he has contracted to perform and contracts with any other person as subcontractor, for the execution by or under the subcontractor, of the whole or any part of the work undertaken by the principal contractor, the principal contractor shall be liable to pay to any workman employed in the execution of the work any compensation under this article which he would have been liable to pay if that workman had been immediately employed by him; and where compensation is claimed from or proceedings are taken against the principal contractor, then, in the application of this article, reference to the principal contractor shall be substituted for reference to the employer, except that the amount of compensation shall be calculated with reference to the earnings of the workman under the employer by whom he is immediately employed. Where the principal contractor is liable to pay compensation under this section, he shall be entitled to indemnity from any employer, who would have been liable to pay compensation to the employee independently of this section, and shall have a cause of action therefor against such employer.

Nothing in this section shall be construed as preventing a workman from recovering compensation under this article from the subcontractor instead of from the contractor. Whenever an employee of a subcontractor files a claim under this article against the principal contractor, the principal contractor shall have the right to join the subcontractor or any intermediate contractors as defendant or codefendant in the case. ³⁷⁴ We note as background that what is now § 62 was added to Article 101 in 1916, two years after that Article was first enacted to compensate employees who were injured in the course of employment. Section 62 served to broaden the definition of “employer” under the Article. The impact of § 62 was “to impose the absolute liability of an employer upon the principal contractor, when he was not in law the employer of the injured workman.

The result then is that where the prescribed conditions exist, the principal contractor becomes by the act the statutory employer of any workman employed in the execution of the work.” Brady v. Ralph Parsons Co., 308 Md. at 500-501 , 520 A.2d 717 quoting State v. Bennett Building Co., 154 Md. 159, 162 , 140 A. 52 (1928). Bennett Building, arguably the seminal case in analyzing § 62, set forth the purpose of that section at length: It is common practice in certain trades for one party to agree for a reward to complete a certain work or undertaking, and then to enter into subcontracts with various parties providing for the execution by them respectively of specified parts of the whole work or undertaking, so that the whole or part thereof would be done by such subcontractors and their assistants. In this manner the principal contractor would avoid in part the responsibility for accidents happening in the carrying out of the work or undertaking. If this responsibility were so shifted upon parties too weak financially to meet it, and who had not secured compensation to their employees in one of the ways required by the statute, an injured workman, proceeding at common law or under the Workmen’s Compensation Act, would obtain neither compensation nor damages.

Furthermore, difficult questions arose with reference to whether the workman was the servant of the principal contractor rather than of his immediate employer, depending largely upon who had power to hire and discharge, to direct and control the workmen, and a variety of other circumstances. In order to obviate these contingencies, and more certainly to assure the workman ³⁷⁵ his contemplated compensation, the statute has imposed, under a certain state of circumstances, a liability to pay upon the principal contractor, although he might not have been held at common law