Workmen's Compensation Com'n v. Property & Cas. Ins. Guar. Corp.

• Decision Date: 04 February 1988
• Docket Number: No. 645,645
• Citation: 536 A.2d 714,74 Md.App. 99
• Parties: WORKMEN'S COMPENSATION COMMISSION, v. PROPERTY & CASUALTY INSURANCE GUARANTY CORPORATION. Sept. Term 1987.
• Court: Court of Special Appeals of Maryland

Page 99

74 Md.App. 99

536 A.2d 714

WORKMEN'S COMPENSATION COMMISSION, v. PROPERTY & CASUALTY INSURANCE GUARANTY CORPORATION.

No. 645 Sept. Term 1987.

Court of Special Appeals of Maryland.

Feb. 4, 1988.

Julia M. Freit, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen. and Mary C. Keane, Staff Attorney, on the brief), Baltimore, for appellant.

Albert J. Mezzanotte, Jr. (J. Norris Byrnes, Philip B. Barnes and Whiteford, Taylor & Preston, on the brief), Towson, for appellee.

Argued before GILBERT, C.J., and BLOOM and POLLITT, JJ.

POLLITT, Judge.

The Property and Casualty Insurance Guaranty Corporation (PCIGC) is a private, nonprofit, nonstock corporation created by the Legislature "to provide a mechanism for the prompt payment of covered claims under certain insurance policies and to avoid financial loss to residents of Maryland who are claimants or policyholders of an insurer, including surety, which has become insolvent...." Maryland Code (1957, 1986 Repl. Vol.), Art. 48A, § 504. All insurers writing any kind of direct insurance, except life insurance, health insurance and annuities, are required to be members of the corporation as a condition of their authority to transact insurance business in the State. ¹ PCIGC is "exempt from payment of all fees and all taxes levied by this State or any of its subdivisions except taxes levied on real or personal property." Art. 48A, § 515.

Under the provisions of the Worker's Compensation law, the Subsequent Injury Fund (SIF), Article 101, § 66, and the Uninsured Employers' Fund (UEF), Article 101, § 90 et. seq., are partially funded by assessments levied against employers and their insurers. When an employee is granted a worker's compensation award, the employer or insurer paying the claim is charged with SIF and UEF assessments, which are computed as percentages of the award.

After the Workmen's Compensation Commission ² (WCC) invoiced PCIGC for SIF and UEF assessments in cases where PCIGC had paid claims of injured workers because the employer's insurer had become insolvent, PCIGC filed a complaint for injunctive and declaratory relief against WCC in the Circuit Court for Baltimore County. That court (Jacobson, J.) determined

that the assessments required by [A]rt. 101[,] §§ 66 and 91 are such "taxes or fees" as are contemplated by [A]rt. 48A[,] § 515.... [and] that PCIGC is not liable for the payment of such assessments.

From that judgment, the Commission appeals, asserting two questions, which it states as:

1. Whether the Circuit Court erred in holding that the Article 101 assessments are fees or taxes within the meaning of Article 48A, § 515.

2. Whether the Circuit Court erred in construing Article 48A, § 515 so as to create a conflict between that provision and other provisions governing the obligations of the PCIGC, and in leaving unresolved the question of who is responsible for the payment of the Article 101 assessments after an insurer becomes insolvent.

We agree with the trial judge that the sole issue before him was whether the SIF and UEF assessments constitute "fees or taxes." If so, under the plain language of Article 48A, § 515, PCIGC is exempt from paying them. ³

As Judge Jacobson observed, a review of a multitude of authorities attempting to define "fees" and "taxes" reveals no clear rule, the definitions varying from case to case in accordance with the particular facts in controversy. We have been referred to no appellate decision specifically holding that the assessments levied to support the Subsequent Injury Fund and the Uninsured Employers' Fund are or are not "fees or taxes." In his dissenting opinion in Cooper v. Wicomico County, 284 Md. 576, 585, 398 A.2d 1237, 1242 (1979), Judge Eldridge characterized the SIF assessments as 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.

See also Cooper v. Wicomico County, 278 Md. 596, 607, 366 A.2d 55, 62 (1976) (Eldridge, J., dissenting). Although that statement is contained in a dissenting opinion, the nature of the assessment was not the point of disagreement with the majority.

In Allied American Co. v. Comm'r, 219 Md. 607, 150 A.2d 421 (1959), insurers challenged the assessments imposed upon them to partially finance the Unsatisfied Claim and Judgment Fund--a fund designed to "indemnify the innocent victims of financially irresponsible owners and operators of motor vehicles." Allied, supra, 219 Md. at 612, 150 A.2d at 424.

In determining the validity of the fund, the Court addressed the power and authority of the State to create such a fund and its authority to require private entities to finance it. In upholding the State's authority to create the fund and impose assessments on insurers, the Court stated:

We think insurers have no sound ground on which to challenge the right of the State to levy the small percentage of the Maryland premiums they are required to pay annually to the fund. It is clearly established that the State may raise funds by taxation to expend for general welfare, and it is for the Legislature and not the taxpayers or the courts to choose the methods and subjects of taxation. It is no proper objection to a scheme of taxation that the benefits paid and those to whom they are paid are unrelated to the persons taxed and the amount they pay, or that those who have to pay may not have contributed to the conditions requiring the tax and may not be benefitted by the expenditure of the tax money.

Allied, supra, 219 Md. at 616, 150 A.2d at 427.

The Court concluded that the assessments and other obligations imposed under the Unsatisfied Claim and Judgment Fund were justified as an exercise of the State's taxing power and the State's police power. Allied, supra, 219 Md. at 623, 150 A.2d at 431. The Court reasoned that

[a]utomobile liability insurers make their profits because motorists use the roads and need protection both from paying claims and from not being able to collect if they are injured or damaged. It is reasonably conceivable, therefore, that insurers should be a group to pay taxes to be used to give protection to those who use the roads--those who are their paying customers.

Allied, supra, 219 Md. at 623-24, 150 A.2d at 431.

Appellant asserts, correctly, that the Court in Allied did not say such assessments are "taxes," but merely held them to be constitutionally valid under the State's taxing power. Appellant relies upon State Insurance v. Nationwide, 241 Md. 108, 215 A.2d 749 (1966), in which the Court held that the Unsatisfied Claim and Judgment Fund assessment constituted an "obligation" which statutorily justified a credit on an insurer's retaliatory tax return. The Court did not decide whether such payments are taxes, but said:

For the purposes of this opinion, we shall assume, without deciding, that the payments did not come within the purview of "taxes, fees, fines, penalties, licenses [or] deposit requirements." (In Allied Amer. Mut. Fire Ins. Co. v. Comm'r, 219 Md. 607, , we referred to such payments as a "tax," but we were discussing the constitutionality of the assessments on insurance companies for the support of the Fund and not the specific nature of such payments in the context of the statute. Although not excluding the possibility that the payments may properly be classified as "taxes," we find it unnecessary to base our conclusion herein on such a classification.)

State Insurance, supra, 241 Md. at 112, 215 A.2d at 752 (bracketed material in original).

At the same time, the Court did not say that the assessments are not taxes, and, in fact, concluded that the UCJ assessments are similar to taxes.

The exactions imposed by Section 151 are, we think, similar in character to both "taxes" and "licenses," specific items named in the statute preceding "or other obligations." Their payment is a prerequisite to the continuance of a foreign corporation's doing business in this state, and, at least to that extent, are in the nature of license fees.... And license fees are, in reality, taxes.

State Insurance, supra, 241 Md. at 116-17, 215 A.2d at 754 (citations omitted) (emphasis added).

We conclude that SIF and UEF assessments imposed by Article 101, §§ 66 and 91 constitute "fees or taxes" within the meaning of Article 48A, § 515, and appellee is exempt from payment of those assessments.

Appellant next asserts that § 515 is in conflict with the stated legislative purpose that PCIGC is to provide payment of "covered claims" made against...