Long v. Injured Workers' Insurance Fund
123 A.3d 562
Md. Ct. Spec. App.2015Background
- Patrick Long, sole proprietor of Long Floor Works, elected coverage under Maryland Workers’ Compensation Act and was the sole worker for his business.
- He suffered a severe work-related back injury on July 24, 2011 and stopped working after November 2011; he filed a claim with the Workers’ Compensation Commission (the Commission).
- Long’s 2011 Schedule C showed gross receipts of $44,606, business expenses of $27,727, and net profit of $16,879; he reported no wages on his personal tax return.
- The Commission initially used a preliminary AWW, later recalculated AWW using Long’s net business income divided by the weeks he worked in 2011, yielding an AWW of about $496.44.
- Long sought judicial review arguing AWW should be based on gross receipts (or alternatively on the gross figure IWIF used to set premiums); the circuit court affirmed the Commission. The Court of Special Appeals affirmed.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether a sole proprietor’s AWW must be calculated from gross receipts (pre-expense) or net profit (after business expenses) | Long: AWW should be based on gross receipts/gross wages of the proprietorship | IWIF/Commission: AWW should reflect net profits (gross receipts minus ordinary business expenses) because gross receipts include business costs not personal earnings | Court: Use net profit as the ordinary basis for AWW where business expenses reflect actual costs; gross receipts would inflate AWW absent special circumstances |
| Whether insurer premium basis (if insurer used gross receipts) requires AWW to match that premium basis | Long: If IWIF used gross income to set premiums, AWW should be based on same gross figure | IWIF: Premium methodology does not control statutory AWW calculation; premiums may be set on estimates and are not dispositive | Court: Rejected a rule equating premium basis with AWW; premiums do not compel using gross receipts for AWW |
Key Cases Cited
- Gross v. Sessinghause & Ostergaard, 331 Md. 37 (Md. 1993) (standard of review and Commission discretion on AWW period)
- Stephen v. Avins Const. Co., 478 S.E.2d 74 (S.C. Ct. App. 1996) (rejecting use of gross receipts and endorsing net profit as AWW basis)
- Vite v. Vite, 377 S.W.3d 453 (Ark. Ct. App. 2010) (upholding AWW calculation using net profit after business expenses)
- In re Carnahan, 821 A.2d 1122 (N.H. 2003) (criticizing absurd results from using gross income and supporting net profit approach)
- Mail Boxes, etc. v. Industrial Comm. of Arizona, 888 P.2d 777 (Ariz. 1995) (alternative approach using market value of services where business had no profit)
- Little Suwannee Lumber Co. v. Fitzgerald, 322 S.E.2d 347 (Ga. Ct. App. 1984) (case cited by plaintiff favoring gross receipts, but treated as distinguishable)
- Mayflower Corp. v. Davis, 655 So.2d 1134 (Fla. Dist. Ct. App. 1994) (insurance-policy-rate may be used in narrow circumstances when reasonably related to actual wages and claimant otherwise would get no benefits)