PRESSMAN, ADMINISTRATOR OF ESTATE OF HARRIS v. Accident Fund

Hammond, C. J., delivered the opinion of the Court. The administrator of a deceased workman named Harris (both the a.dministrator and the workman are hereinafter referred to as Harris) has appealed from a summary judgment that the State Accident Fund was not the insurer of the employer of the workman at the time of the accidental injury (death was from a cause unrelated to the injury). The decisive question is whether the Fund had effectively cancelled its coverage before the happening of the accident. Harris was a truck driver who injured his back on June 27, 1963, while on a truck belonging to K. & H. Steel Transportation, Inc. but leased to George W. Brown, Inc. The Fund had issued a workmen’s compensation policy to K. & H. on December 13, 1961, and claims that on April 25, 1963, it sent K. & H. a notice that the policy would be cancelled as of May 25, 1963, because of an unpaid premium.

On May 3, 1963, the Fund delivered to the Workmen’s Compensation Commission a notice dated May 1, that it intended to cancel K. & H.’s policy on May 25. Harris filed a claim with the Commission in October 1963 and K. & H. through one of its officers filed an issue as to whether the injury arose “out of and in the course of” the employment, as to the sustaining of a hernia, and as to the nature and extent of disability. On February 18, 1964, Harris amended his claim to include one Bower as an additional employer, and the attorneys for K. & H. filed issues as to whether the Fund was the insurance carrier of K. & H. with respect to Harris’ claim, and as to whether Harris was an employee of George W. Brown or of K. & H. at the time of the accident. On March 6 the Fund filed an issue asking whether K. & H.’s issue as to the Fund’s being an insurance carrier was “a frivolous and harassing issue,” entitling the Fund to be reimbursed for its attorney’s fees. ⁴⁰⁹ On March 17 the Commission sent all parties (but not the Fund) notice of a hearing scheduled for April 3, 1964.

A hearing was held on the scheduled day. At the outset of the proceeding, at which the Fund was not represented, the hearing commissioner said that in regard to the issue of whether “he” (which must have meant K. & H. or Harris, or both) was insured by the State Fund, “We will see what testimony develops and then set it in specially and send them [the Fund] notice so they can defend themselves.” No evidence was introduced at the hearing of April 3 as to whether the Fund was the insurer on the critical date. The Commission held that Harris was an employee of K. & H. (and of no one else), and on April 28, 1964, made an award for temporary total disability of $48 a week.

Harris took an appeal to the Court of Common Pleas of Baltimore City on the aggrievement that Brown had been his sole employer or at least a co-employer with K. & H. This appeal has never been prosecuted or decided. On March 26, 1965, Harris’ lawyer wrote the Commission as follows: “The following Issue was raised in this case, but was not passed upon and reserved for future determination by Commissioner Valle: ‘Is the State Accident Fund, 301 W. Preston Street, Baltimore, Maryland 21201, the insurance carrier insuring the K. & H. Steel Transport Company, with respect to this claim ?’ “Kindly set it for hearing for a determination of the above issue.” The Commission held a hearing on July 12, 1965, on the issue as to insurance coverage, at which there was offered in evidence the notice of cancellation dated May 1, 1963, filed with the Commission on May 3, 1963. On August 23 the Commission ruled that the Fund was the insurance carrier for K. & H. at the time of the accidental injury to Harris on June 27, 1963, and revoked its order of April 28, 1964, and ordered payment by the Fund of temporary total disability at the rate of ⁴¹⁰ $48 a week from August 19, 1963. The Fund appealed this order to the Circuit Court for Baltimore County.

In the Circuit Court both Harris and the Fund moved for a summary judgment, and Harris further moved for a remand of the case to the Commission under Maryland Rule B12 for a hearing at which the Fund could controvert Harris’ claim against it on any defenses on the merits it desired to interpose. The Fund filed an amended affidavit in support of its motion which recited that a notice of cancellation as of May 25, 1963, dated May 1, was received from the Fund by the Commission on May 3, and that the Commission did cancel the policy as of May 25, and adding: “That on April 25, 1963, because of failure to pay premium due, a Notice of Cancellation was sent to the K & H Steel Transport, Inc., notifying it that its said workmen’s compensation insurance policy No. E-2207, issued by the State Accident Fund was cancelled, a photostatic copy is attached.” There was attached to the affidavit a carbon copy of a printed form notice of cancellation, unaddressed and unsigned, on which were blanks intended to be filled in with the pertinent dates and numbers for each case. The typewritten letters and numbers were superimposed on the printed lines instead of in the spaces in which they were supposed to be, and the result was an illegible jumble. The applicable statute as to cancellation of coverage by the Fund, Code (1964 Replacement Vol.), Art. 101, § 77 a (the statute), provides that if an employer fails to pay a premium on the “policy or contract of insurance” issued to him by the Fund, the Fund may cancel the policy “effective upon the expiration of at least thirty days after notice of intention to cancel * * * such contract or policy of insurance, on a date specified in such notice, shall be filed in the office of the Workmen’s Compensation Commission and also served on the employer.

Such notice shall be served on the employer by delivering it to him or by sending it by mail, by registered letter * * * and if the employer be a corporation then the notice may be so given ⁴¹¹ to any agent or official of the corporation upon whom legal process may be served.” The statute goes on immediately to provide that “when an employer receives notice [of cancellation] from the State Accident Fund in accordance with the provisions of this subsection * * * it shall be the duty of said employer immediately thereafter to secure compensation to his employees in accordance with one of the ways set forth in § 16 of this article, which will be in force on the date the cancellation becomes effective.” Although the only issue before the Circuit Court was whether the Commission had erred in fact or in law in finding that the Fund was the insurer of K. & H. when Harris was injured, and this issue turned on whether the Fund had given the notice to both the employer and to the Commission in the way specified in the statute, Judge Barrett seemingly assumed as a basis of decision that the statute had been complied with as far as notice to the employer was concerned, and concentrated on the validity of notice to the Commission. Neither Harris nor the Fund—in tine Fund’s case quite understandably—undertook to disturb the court’s assumption. Despite this, we think the question of the effectiveness of the notice to K. & H. necessarily was before the court. The Fund had sworn in its affidavit in support of its amended motion for summary judgment that it had timely “sent” the cancellation notice to K. & H. and Judge Barrett’s decision that the cancellation was effective had to include the conclusion, although implicitly, that there had been effective compliance by the Fund with the statute.

The parties and the court went on to assume that Moore v. London Guarantee & Accident Co., 233 Md. 425 , controlled the decision. Moore held that a cancellation notice to the Commission dated March 29 and specifying May 5 as the day of cancellation which referred to an incorrect policy number was ineffective because of the error as to the policy number and, also, that a second notice similarly dated March 29, giving the correct policy number, received by the Commission on April 16 and specifying May 5 as the cancellation date was not effective on May 5 and would not be effective until at least thirty days from the date the Commission received it, if then, and said: ⁴¹² “And since the date of the accident, May 10, 1962, was within the thirty-day 'waiting’ period, it follows that the [insurer] was still the insurer on the date the claimant was injured, and we so hold.” The cancellation notice to the employer was prima facie defective in Moore , and the Court concluded its opinion by stating; “With the aforegoing holding we need not decide in this case whether the notice of cancellation sent to the employer was sufficient to meet the requirements of § 19 (e) [of Art. 101, the counterpart for private insurance companies of § 77 (a), the Fund provision].” Judge Barrett held that by analogy to the holding in Moore- the thirty-day period began when the Commission received a proper notice of cancellation, and since the injury to Harris happened well beyond the end of that thirty-day period the Fund’s insurance had been timely cancelled and the Fund was-not K. & H.’s insurer at the critical time. We think the decisive point in the case is that reserved in Moore , the sufficiency of the notice to the employer. The statute requires notice both to the Commission and the employer and specifies the mode of serving notice on the employer—by delivery or by registered letter-—and spells out the reason for notice to the employer—so that “when an employer receives, notice” he shall immediately secure proper compensation coverage for his employees.

(Emphasis added.) We said in Moore at pp. 428-29 of 233 Md.: “Where, as here, the procedure for cancelling workmen’s compensation insurance is prescribed by statute, it is generally held that strict compliance with