State Accident Fund v. Gardner

ROSALYN B. BELL, Judge. This case requires us to determine whether the cancellation notice requirements of a workers’ compensation insurance policy under Md.Code Ann. Art. 101, § 77(a) (1957, 1985 Repl.Vol.) were met. Notice was sent by the State Accident Fund (Fund) 1 by certified mail to the employer’s insurance agent instead of the employer, as required by § 77(a). But the insurance agent claimed he hand-delivered the notice to the employer, who denied receiving it.

In granting summary judgment to the employer, the trial court found that the cancellation was ineffective since it was not mailed in accordance with the statute. We hold that, although the cancellation notice was not mailed in strict ⁶⁴⁸ compliance with § 77(a), there was evidence from which a fact finder could find that the notice was received by the employer. Thus, there was a genuine dispute as to a material fact and therefore summary judgment was inappropriate. Since summary judgment was inappropriate, we need not and will not address the Fund’s second claim of error, namely, waiver, estoppel and agency arising from the prior course of dealings among the employer, the insurance agent and the Fund.

Before we explain, a brief statement of the facts is necessary as a background to the resolution of this issue. In November of 1981, the State Accident Fund (Fund) issued a workers’ compensation policy to “Fat Boys, Inc. t/a Sportsman Inn” which showed Lawrence A. Milburn as president. 2 A notice of cancellation was sent by certified mail to Milburn, in care of Penwood Insurance Services, on or about June 13, 1986, indicating the policy would be cancelled if payment was not received by July 22, 1986. John Holt, Milburn’s insurance agent and owner of Pen-wood Insurance Services, Inc., signed for the notice and stated in his affidavit that he personally delivered the notice to Milburn at his place of business. In his affidavit, Mil-burn denied ever receiving a notice of cancellation.

In September of 1986, Alphonzo Gardner, a Milburn employee, was injured on the job and incurred medical expenses. Gardner subsequently filed a claim with the Workers’ Compensation Commission (Commission). A hearing was held in October, 1988 before the Commission in which it was determined that Gardner sustained an accidental injury arising out of and in the course of his employment. The Commission found “the correct employer [to be] Lawrence A. Milburn Individually and trading as Fat ⁶⁴⁹ Boy, t/a Memories” and further found Milburn was not insured on the date of the alleged accident.

Milburn appealed to the Circuit Court for Baltimore County, alleging the Commission erred in finding that he was not insured by the Fund on the day Gardner was injured. Milburn subsequently filed a motion for summary judgment, alleging that the notice of cancellation was ineffective since the Fund failed to comply with the statutory notice requirements. The trial judge granted Milburn’s motion for summary judgment. The Fund appeals from this ruling.

THE SUMMARY JUDGMENT We enter again the familiar arena of how to evaluate a summary judgment motion. Rule 2-501(e) provides, in pertinent part, that “[t]he court shall enter judgment in favor of or against the moving party 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.” (Emphasis added.) In Laws v. Thompson, 78 Md.App. 665, 674 , 554 A.2d 1264 (1989), we stated: “The purpose of the summary judgment procedure is to dispose of cases where there is no genuine factual controversy. Summary judgment is not, however, designed as a substitute for trial, but a hearing to determine whether a trial is necessary. ‘The critical question for the trial court on the motion for summary judgment is whether there exists a genuine dispute as to a material fact and, if not, what the ruling of law should be upon those undisputed facts.’ ” (Citations omitted.) The principal question raised on the motion for summary judgment in this case is whether the worker’s compensation insurance policy was effectively cancelled. The conflict arises primarily out of the interpretation of how notice ⁶⁵⁰ is to be served under § 77(a).

Although no Maryland cases have directly addressed this issue, we find Pressman v. State Accident Fund, 246 Md. 406 , 228 A.2d 443 (1967), informative in resolving the question. In Pressman , the Fund delivered a notice to the Commission that it intended to cancel the employer’s policy because of unpaid premiums. The claimant was subsequently injured. At a hearing before the Commission, the claimant contended that the cancellation notice was defective and thus the policy was in effect on the date of his injury.

The Commission agreed but the trial court reversed on a motion for summary judgment. The Court of Appeals reinstated the Commission’s finding and held that the policy was still in effect at the time of the injury on the ground that the Fund had failed to prove that the employer had been served with the cancellation notice. The Court stated that “the problem here is not whether the critical test of the statute is merely mailing in the specified way or actual receipt. Here there was simply no proof that the Fund delivered the notice to [the employer] or sent it a registered letter containing the notice or, indeed, that a notice was ever received.

The Fund’s amended affidavit says only that notice was ‘sent.’ ” Pressman, 246 Md. at 414 , 228 A.2d 443 . Here, unlike Pressman , the Fund attempted to show that the notice of cancellation was sent and received by Milburn by offering the affidavit of the insurance agent who stated that he received the notice and personally delivered it to Milburn. Hence, we must determine whether notice mailed to the employer, in care of his insurance agent, fulfills the requirements of the statute upon the employer’s receipt thereof. We turn to the statute for our