OLLIE RICHARD COOPER v. WICOMICO COUNTY, DEPARTMENT OF PUBLIC WORKS ET AL.
No. 65, September Term, 1978.
Court of Appeals of Maryland
March 12, 1979
284 Md. 576 | 398 A.2d 1237
Theodore B. Cornblatt and Alfred M. Porth, with whom were Smith, Somerville & Case on the brief, for appellees.
In Cooper v. Wicomico County, 278 Md. 596, 366 A. 2d 55 (1976) (Cooper I) we were asked to determine whether a supplemental award of workmen‘s compensation to the appellant Cooper, which increased the amounts payable to him under a prior award for permanent total disability, unconstitutionally disturbed the contractual or other vested rights of the appellees — Cooper‘s employer and the employer‘s insurer. Because of deficiencies in the record, we remanded the case for further proceedings under Maryland Rule 871, including the taking of additional testimony. Further proceedings having been conducted in accordance with our mandate, the issue raised in Cooper I is once again before us, this time on a record adequate to permit adjudication of the question.
The pertinent facts, as outlined in Cooper I, disclose that on February 7, 1969, Cooper sustained an accidental injury in the course of his employment with Wicomico County. On March 17, 1971, the Commission found Cooper to be totally and permanently disabled and ordered that he be paid compensation at the rate of $45.33 per week, not to exceed $30,000 in total, the maximum payable at that time under Maryland Code (1957, 1964 Repl. Vol.),
Chapter 832 also amended
The insurer and employer appealed the award of supplemental benefits to Cooper, claiming that ch. 832 was unconstitutional and invalid. The Circuit Court for Wicomico County agreed; it concluded that ch. 832 could not constitutionally be applied retrospectively since to do so would divest or otherwise adversely affect contractual or other vested rights of the appellees by increasing their obligation under the basic award to pay the maximum fixed by the law at the time of the injury. After Cooper appealed from that judgment, we granted certiorari prior to decision by the Court of Special Appeals. We said in Cooper I, 278 Md. at 598-99, that:
“[T]he lower court was correct if the operational effect of ch. 832 requires an employer or insurer to
pay more than it was required to pay under the law in effect at the time of the injury. It is generally held that the basis of a compensation award is contractual and that the amount payable thereunder by an employer or insurer cannot be increased retrospectively.”
We considered the pertinent case authority, including decisions of the Supreme Court, and concluded that to give effect to a legislative enactment increasing the amount payable to an employee to a sum greater than that payable at the time of the injury would impermissibly alter a substantial term of an existing contract between an employer and an employee (and derivatively to an insurer). 278 Md. at 600.
In view of the reimbursement provisions of ch. 832, we were unable to determine whether any substantial vested right of either appellee was divested or any obligation either had was substantially increased. In resolving that question we deemed it essential to consider the principles set forth by the United States Supreme Court in Gange Lumber Co. v. Rowley, 326 U. S. 295, 66 S. Ct. 125, 90 L. Ed. 85 (1945). That case involved a Washington statute which was described as neither an employers’ liability act nor an ordinary workmen‘s compensation law, but rather as an industrial insurance statute “having all the features of an insurance act” (a characterization applicable to the Subsequent Injury Fund).
The Washington statute provided a state fund created by annual assessments on employers. Awards were paid solely from the fund and neither the employer nor the employee had a vested interest in the fund because “the moneys when collected are public moneys, held and administered by the state, albeit pursuant to the statutory purpose they constitute a ‘trust fund’ for the benefit of injured workmen and their dependents.” 326 U. S. at 301. The controversy in Gange Lumber stemmed from a Washington statute which increased the time within which an employee could apply for additional compensation for an injury for which a prior final award had been made. The employee applied after limitations had expired under the former law but within the period set by the
The Supreme Court rejected the employer‘s claim of unconstitutionality on the ground that no substantial injury had been shown on the record by the employer. It said that although the employer claimed that it would have to pay the award, “it is not asserted that this burden will result from an increase in appellant‘s rate or in fact that any increase necessarily will follow from allowance and payment of the award.” 326 U.S. at 303-04. The Court said further, id. at 305, that “in the absence of all evidence showing the facts concerning the other factors, it is entirely problematical whether an increase will follow or, if so, whether it will be wholly mathematical and infinitesimal or substantial in its ultimate effect upon the appellant. This being so, appellant‘s complaint comes down, on the record, to nothing more than the bare possibility of some injury in the future.”
In view of Gange Lumber, we concluded that the record did not contain sufficient evidence from which to determine whether the appellees suffered any substantial injury from the operation of the challenged statute. We thus remanded the case under Rule 871 for the introduction of evidence as to whether ch. 832 “read with other pertinent parts of the workmen‘s compensation law requires the insurer to pay the annual assessment on the monies they temporarily pay out [under the statute] . . . [a]nd whether the supplemental payments required to be made under ch. 832 will so deplete the Fund as to require that additional assessments be made . . . .” 278 Md. at 603.
The trial following our remand was held on April 17, 1978. Based on the evidence adduced at that time, the circuit court (Simpkins, J.) held that the appellees were unconstitutionally affected by the provisions of ch. 832 because the supplemental allowances which they paid under the statute caused the balance of the Subsequent Injury Fund to remain below the $1,000,000 assessment cutoff level, thus requiring
Cooper contends that the evidence was insufficient to show the extent, if any, of the injury actually caused the appellees by the supplemental allowance payments. He argues that, at best, the testimony generally indicated that the Fund was being continually depleted by both supplemental allowance payments and payments to regular subsequent injury claimants. Cooper maintains that no inference can be drawn from the evidence that the payment of the supplemental allowances, standing alone, necessitated continuation of the 5% assessment on original awards.
As heretofore indicated,
We think the operational effect of ch. 832 requires insurers (and hence employers) to make payments for supplemental allowance benefits, which are not ultimately reimbursed, in amounts sufficient to constitute a substantial injury to constitutionally protected vested rights.
It is true, of course, as the dissent in Cooper I indicates, that all workmen‘s compensation insurers, and not just those paying supplemental allowances, are required to make the 5% contributions to the Fund, thus spreading the increased costs among all insurers. But this case is not like Gange Lumber, where the evidence showed that only a speculative or remote possibility existed that an increase in the employer‘s rate of premium or contribution would be required to fund the additional cost necessitated by the statutory enactment there involved. In that case, the formula for rate determination was based on cost experience and included a basic premium for each employee class and a separate premium rate for each employer, not to exceed a fixed maximum. Under that statute, benefit payments would affect the employer‘s rate of premium if at all for a year or years following the award based on cost experience, so that no immediate or presently
Payment of the supplemental allowances mandated by ch. 832 involves more than, as in Gange Lumber, “a mere increase in premium” not shown by evidence to result in financial injury to the employer. The 5% assessment on all insurers to provide monies to maintain the Fund‘s ability to meet its obligations, including supplemental allowance benefits, is essential to the Fund‘s solvency. That almost 12% of Fund monies was expended for supplemental allowance demonstrates the substantiality of the drain on the Fund‘s resources accountable to the provisions of ch. 832, as well as to the necessity that the 5% assessments be levied to assure a continuing source of funds to pay the awards. Notwithstanding the reimbursement provisions of the statute, the financial injury to the appellees cannot properly
It may be, as the dissent in Cooper I suggests, that the purpose of ch. 832 is to alleviate the effects of inflation which rendered future payments under prior compensation awards totally inadequate to meet an employee‘s needs. Whether such a governmental objective may be implemented in conformity with the due process requirements depends, of course, upon the provisions of the enactment and the underlying circumstances. However, simply to increase the amount of a previously finalized award of compensation to meet the employee‘s “generalized need for funds” would appear to rest on a tenuous constitutional foundation. See Usery v. Turner Elkhorn Mining Co., 428 U. S. 1, 19, 96 S. Ct. 2882, 49 L. Ed. 2d 752 (1976).
Because the evidence in this case shows that ch. 832 unconstitutionally affects the appellees’ contractual and other vested rights, the lower court correctly concluded that the supplemental award of compensation to Cooper cannot be sustained.
Judgment affirmed, with costs.
Eldridge, J., dissenting:
When this case was previously before the Court, Judge Levine and I dissented from the order remanding the case for further proceedings. We took the position that even if the effect of the supplemental allowance provision of Ch. 832 of the Acts of 1973, Maryland Code (1957, 1964 Repl. Vol., 1978 Cum. Supp.),
The law creating the Subsequent Injury Fund provides for a mandatory compensation plan administered by the State and supported by an assessment on all insurers or employers based on prior awards against them. When the Fund becomes impaired, requiring additional payments, all insurers or self-insured employers, and not only the appellees, are required to make the additional payments. Payments to the Fund are in the nature of a general tax assessed against members of a certain group to cover expenses of administering a government program involving that group. The fact that the Legislature may choose to increase the benefits of the program in order to alleviate the severe harm from continuing inflation, having the effect of increasing the amount of contributions due from all insurers or employers, does not constitute a deprivation of any constitutional right of the employer. See Allied American Co. v. Comm‘r, 219 Md. 607, 150 A. 2d 421 (1959).
A similar legislative program, including supplemental payments to those already receiving workmen‘s compensation benefits and providing for reimbursement from a Second Injury and Contingency Fund with funds generated by an additional tax on employers and insurance carriers, was held by the Supreme Court of Delaware not to violate either the Contract Clause or the Due Process Clause in Price v. All American Engineering Company, 320 A. 2d 336 (Del. 1974). See also, e.g., Usery v. Turner Elkhorn Mining Co., 428 U. S. 1, 14-21 (1976); National Independent Coal Operator‘s Ass‘n v. Brennan, 372 F. Supp. 16 (D. D.C.), aff‘d, 419 U. S. 955 (1974); Clark v. Chrysler Corporation, 377 Mich. 140, 139 N.W.2d 714 (1966); Lahti v. Fosterling, 357 Mich. 578, 99 N.W.2d 490 (1959); Schmidt v. Wolf Contracting Co., 269 App. Div. 201, 55 N.Y.S.2d 162 (1945), aff‘d per curiam, 295 N. Y. 748, 65 N.E.2d 568 (1946). Consequently, I am of the view that the increase in costs as a result of the supplemental allowance mandated by the Legislature does not violate the appellees’ constitutional rights.
“A mere increase in premium, under a compulsory and publicly administered accident insurance plan, designed to operate at cost based upon general and individual experience rather than at an arbitrary figure, and surrounded with adequate procedural safeguards against arbitrary action, would not seem to be so obviously harsh or arbitrary in its effect upon employers generally that it could be said without question to be beyond the scope of the state‘s regulatory power or in violation of the due process prohibition of the federal Constitution.”
* * *
”Some substantial and more immediate harm must be shown to present a justiciable question concerning the state‘s power. The injury, as it appears from this record, is neither so certain nor so substantial as to justify a finding, upon that showing, that appellant‘s substantial rights have been or will be invaded by allowance and payment of the award.”
The majority reiterates the conclusion in its earlier opinion “that to give effect to a legislative enactment increasing the amount payable to an employee to a sum greater than that payable at the time of the injury would impermissibly alter a substantial term of an existing contract between an employer and an employee (and derivatively as to an insurer). 278 Md. at 600.” To support this proposition the majority relied upon Loveless v. State Workmen‘s Compensation Commissioner, 155 W. Va. 264, 184 S.E.2d 127 (1971), cited in 278 Md. at 600. It is noteworthy that this decision was explicitly overruled by the Supreme Court of Appeals of West Virginia recently in Lester v. State Workmen‘s Compensation Commissioner, W. Va., 242 S.E.2d 443, 450 n. 13 (1978). As in Gange, the court in Lester was faced with a constitutional attack on a legislative enactment extending the time for filing a workmen‘s compensation claim, which, if not for this statute, would have been barred under the earlier law. Finding no constitutional deficiency in the operation of the statute, the court upheld the action of the legislature. In so doing, the court observed (242 S.E.2d at 450-451, emphasis supplied):
“[D]espite our course of decisions in this area of the law, [we] are of the opinion that the rights and duties under our workmen‘s compensation statute are no longer contractual but grow out of the employer-employee status to which the law attaches certain duties and responsibilities. The liability of employers arises from the law itself, rather than from any agreement of the parties. The only significance adhering to the contractual relationship is the existence of an employer-employee relationship. Once the employer-employee relationship is established, the statute imposes certain duties and responsibilities on the parties to that relationship.”
Therefore, for the reasons expressed above and in the prior dissenting opinion in this case, I would reverse the judgment of the circuit court.
Judge Cole has authorized me to state that he concurs with these views.