Mut. Benefit Ins. Co. v. R. Gates Constr. Co., Civil Action No. RDB-20-0069

• Decision Date: 30 November 2020
• Docket Number: Civil Action No. RDB-20-0069
• Citation: 503 F.Supp.3d 344
• Parties: MUTUAL BENEFIT INSURANCE COMPANY, Plaintiff, v. R. GATES CONSTRUCTION CO., INC., Ronald Gajewski, and Frank Tomczewski, Defendants.
• Court: U.S. District Court — District of Maryland

503 F.Supp.3d 344

MUTUAL BENEFIT INSURANCE COMPANY, Plaintiff,

v.R. GATES CONSTRUCTION CO., INC., Ronald Gajewski, and Frank Tomczewski, Defendants.

Civil Action No. RDB-20-0069

United States District Court, D. Maryland.

Signed November 30, 2020

Ilan Rosenberg, Pro Hac Vice, Jacob C. Cohn, Pro Hac Vice, Gordon Rees Scully Mansukhani LLP, Philadelphia, PA, Kelly M. Lippincott, Gordon Rees Scully Mansukhani, Alexandria, VA, for Plaintiff.

Bradford G. Y Carney, Royston Mueller McLean and Reid LLP, Towson, MD, for Defendants R. Gates Construction Co., Inc., Ronald Gajewski.

John Amato, IV, Goodman Meagher and Enoch LLP, Baltimore, MD, for Defendant Frank Tomczewski.

MEMORANDUM OPINION

Richard D. Bennett, United States District Judge Plaintiff Mutual Benefit Insurance Company ("Mutual Benefit") brings this case against Defendants R. Gates Construction Co., Inc. ("R Gates Construction"), Ronald Gajewski ("Gajewski"), and Frank Tomczewski ("Tomczewski") seeking a declaration of its rights, duties, and liabilities under an artisan contractor's insurance policy issued to R. Gates Construction. (See Complaint at ¶ 1, ECF No. 1.) Mutual Benefit is currently providing a defense, subject to a complete reservation of rights, to R. Gates Construction and its sole owner, Gajewski, in a lawsuit captioned Frank Tomczewski v. Ronald T. Gajewski and R. Gates Construction Co., Inc. , currently pending in the Circuit Court for Baltimore County, Maryland, Case No. C-03-CV-19-002571. The case arises out of an accident that resulted in injury to Tomczewski while he was working under Gajewski's direction. (Id. at ¶ 2.) Mutual Benefit seeks a declaratory judgment that the relevant policy does not provide coverage for the underlying lawsuit, because Tomczewski was an employee of R. Gates Construction, and the policy excludes coverage for bodily injury to the insured's employees. (Id. at ¶ 3.) Additionally and alternatively, Mutual Benefit seeks rescission of the policy as of its January 28, 2019 inception, alleging repeated material misrepresentations made by R. Gates Construction and Gajewski to Mutual Benefit.

The parties’ submissions have been reviewed and no hearing is necessary. See Local Rule 105.6 (D. Md. 2018). There is no genuine issue of material fact with respect to the status of Tomczewski in this case, and Mutual Benefit is entitled to judgment as a matter of law. Additionally, in light of the status of Tomczewski as an employee of R. Gates Construction, Mutual Benefit is entitled to rescission of the subject insurance policy as a result of the clear and repeated misrepresentations made by R. Gates Construction to Mutual Benefit upon which it relied. Accordingly and for the reasons that follow, Plaintiff Mutual Benefit's Motion for Summary Judgment (ECF No. 31) is GRANTED; and Defendant Tomczewski's Cross Motion for Summary Judgment (ECF No. 33) is DENIED. Declaratory Judgment shall be entered in favor of Mutual Benefit.

BACKGROUND

A. The Relationship Between Gajewski and Tomczewski

Gajewski is the sole shareholder and president of Defendant R. Gates Construction, which is licensed as a home improvement/salesman contractor. (ECF No. 1 at ¶¶ 6-8; Rosenberg Decl., Ex. A, Gajewski Federal Dep. at 20:24, ECF No. 31-4.) Since 2000, Gajewski has owned and resided at Streamwood Farm, a 52-acre farm located at 13100 Fork Road, Baldwin, Maryland. (Id. at ¶ 6.) Streamwood Farm has a 15-acre hay field, private horse stables, and an indoor arena for Gajewski's fiancée's horses. (ECF No. 31-4 at 18:13-19:13.) R. Gates Construction has two business locations, one at Streamwood Farm, and one at another property owned by Gajewski, located at 2819 North Point Boulevard, Dundalk, Maryland. (Id. at 29:10-20.)

R. Gates Construction is also engaged in the business of property management. (Id. at 69:1-72:5; Ex. D, R. Gates Construction Trade Name Application, ECF No. 31-7.) As a result of contracts which Gajewski essentially wrote to himself, since December 1, 2000, his company R. Gates Construction "agreed to perform ‘the daily maintenance and operation’ " of Streamwood Farm, his residence. (Rosenberg Decl., Ex. C, July 26, 2019 Letter from Bradford Carney, Esquire to Mutual Benefit pp. 3-4, with attached contract at pp. 22-23, ECF No. 31-6.) Further contracts specified that R. Gates Construction was to perform a number of projects at Streamwood Farm in exchange for the payment of the costs of such projects, plus $10. (Id. at pp. 24-29.) These included pond repairs, building a heavy use area, erecting a fence, installing a masonry sign, building a horse arena and stables, and building a manure pit. (Id. ) On December 13, 2011, Gajewski created another contract pursuant to which R. Construction was to build his new residence at Streamwood Farms, again in exchange for the payment of expenses, plus $10. (ECF No. 31-4 at 64:8-65:14; ECF No. 31-6 at p. 30.) The erection of that new residence has been in progress ever since. (Id. )

Tomczewski holds a home improvement salesman/contractor license from the Maryland Department of Labor and lists his registered trade name as "Peninsula Builders." (Rosenberg Decl., Ex. Q, Tomczewski Deposition, at 67:2-17, ECF No. 31-20; Ex. U, Tomczewski Salesman/Contractor License, ECF No. 31-24.) For the last thirty years he has performed work for Gajewski and R. Gates Construction (ECF No. 31-4 at 27:9-11; ECF 31-20 at 11:7-12:2), and for the past few years in particular, R. Gates Construction has been Tomczewski's primary source of employment. According to Tomczewski's notebook, from July 31 to December 31, 2017, he worked 593.5 hours for R. Gates Construction and only 44 hours on projects for other clients. (Rosenberg Decl., Ex. S, Tomczewski Time Entry Notebook, ECF No. 31-22; Ex. FF, Summary of Tomczewski Time Entries, ECF No. 31-35.) For the entire calendar year of 2018, Tomczewski worked 1,206 hours for R. Gates Construction, and 174 hours for other clients. (Id. ) From January 1 to June 21, 2019, he worked 282.5 hours for R. Gates Construction, and 97 hours for other clients. (Id. ) Accordingly, during the two-year time period from July of 2017 until June of 2019, Tomczewski devoted at least 87% of his time to R. Gates Construction.

Tomczewski's relationship with R. Gates Construction is distinguishable from his relationships with other clients, not only by this significant disparity in hours of work performed, but in other respects as well. First, Tomczewski never executed any contracts for R. Gates Construction or Gajewski specifying his status as a home improvement contractor, as he did with other businesses and individuals for whom he worked. (ECF No. 31-4 at 38:3-8; ECF No. 31-20 at 23:15-20, 45:10-46:1.) Second, Tomczewski's work for R. Gates Construction was not confined to home improvement. Tomczewski regularly engaged in work such as feeding feral cats (ECF No. 31-4 at 42:16-18; ECF No. 31-20 at 16:13-17:2, 19:11-16, 86:20-87:17, 125:21-127:2); collecting rent from tenants of properties owned by Gajewski (ECF No. 31-4 at 42:13-15; ECF No. 31-20 at 31:15-32:22; Ex. R, July 10, 2019 Letter from Bradford Carney, Esquire to John Amato, IV, Esquire at RTG000027, ECF No. 31-21); and sundry jobs at Gajewski's home and farm, such as bailing hay and working on Gajewski's stables (ECF No. 31-4 at 42:21-23; ECF No. 31-20 at 21:3-15, 22:5-15, 23:2-14).

It is important to note that the Maryland Workplace Fraud Act., Md. Code Ann., Lab. & Empl. §§ 3-901, et seq. , presumes that anyone who hires a person to provide "construction services" creates an employer-employee relationship, unless they provide the worker (and maintain record of) a written notice of classification as an "independent contractor." While some of Tomczewski's work for R. Gates Construction constituted "construction services" as defined by § 3-901(b) (ECF No. 31-4 at 49:7-51:24), R. Gates Construction never provided Tomczewski any notice required by § 3-914 that is to be provided to an independent contract or "exempt person" (ECF No. 31-16; ECF No. 31-18; ECF No. 31-25; Ex. HH, Form Written Notice, ECF No. 31-37). R. Gates also did not file an IRS Form 1099-MISC, which is required when a company pays an individual acting as an independent contractor an amount in excess of $600 in a calendar year, with respect to the work done by Tomczewski. (Id. )

It is undisputed that Gajewski would instruct Tomczewski on a daily basis when and where he was needed and what work would be performed. (ECF No. 11 at ¶ 29; Rosenberg Decl., Ex. K, Gajewski State Dep. at 15:6-17:9, 32:9-35:10, 40:10-44:21, ECF No. 31-14; ECF No. 31-4 at 47:23-51:24; ECF No. 31-20 at 23:2-7, 49:17-22, 50:21-51:1, 51-9-52:9.) Whenever Gajewski instructed Tomczewski that there was work to do for R. Gates Construction, Tomczewski would prioritize that work over projects for his home improvement clients and perform whatever work Gajewski instructed. (Id. ) R. Gates Construction, through Gajewski, also controlled and directed the manner in which Tomczewski performed this work. (Id. ) Gajewski sometimes worked alongside Tomczewski and, when he did, he provided specific instructions to Tomczewski throughout their work together. (ECF No. 31-20 at 49:6-22, 51:9-18, 53:1-54, 59:11-20, 61:13-62:9, 62:16-63:12, 64:10-65:24.) In performing his work, Tomczewski often used tools, equipment, and materials supplied by R. Gates Construction. (ECF No. 31-20 at 47:10-48, 52:10-20.) Tomczewski understood that Gajewski retained the power to hire and discharge him throughout their relationship. (ECF No. 11 at ¶ 37.) Significantly, he referred to Gajewski as his "employer" and his "boss." (ECF No. 31-20 at 64:22-65:24; ECF No. 31-21 at p. 10.)

Tomczewski was compensated for his work for R. Gates Construction at an hourly rate of $25. (Rosenberg Decl., Ex. M, R. Gates Construction Admission No. 1, ECF No. 31-16; Ex. O, Gajewski Admission No. 1, ECF No. 31-18; Ex. V, Tomczewski Admission No. 1, ECF No. 31-25.) According to...