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

• Decision Date: 01 September 1988
• Docket Number: No. 31,31
• Citation: 570 A.2d 323,319 Md. 1
• Parties: WORKMEN'S COMPENSATION COMMISSION v. PROPERTY & CASUALTY INSURANCE GUARANTY CORPORATION. ,
• Court: Maryland Court of Appeals

Page 1

319 Md. 1

570 A.2d 323

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

No. 31, Sept. Term, 1988.

Court of Appeals of Maryland.

March 1, 1990.

Julia M. Freit, Asst. Atty. Gen. (J. Joseph Curran, Jr., Atty. Gen., both on brief), Baltimore, for petitioner.

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

Argued before MURPHY, C.J., and ELDRIDGE, COLE, RODOWSKY, McAULIFFE, ADKINS and BLACKWELL ^*, JJ.

ELDRIDGE, Judge.

The issue in this case is whether assessments, which are levied against employers or their insurers for the purpose of funding the Subsequent Injury Fund (SIF) and the Uninsured Employers' Fund (UEF), are "taxes" or "fees" within the meaning of Maryland Code (1957, 1986 Repl.Vol.), Art. 48A, § 515.

I.

The SIF was created to insure that an employer, who has hired a handicapped worker, will be subject to worker's compensation liability only for the effects of an injury which the worker suffers while in the employer's service, and not for the combined effects of the previous handicap and the subsequent injury. The legislative policy of limiting the employer's worker's compensation liability to that payable for the subsequent injury was designed to encourage the hiring of handicapped persons. See generally Code (1957, 1985 Repl.Vol., 1989 Cum.Supp.), Art. 101, § 66; McKenzie v. C. C. Kottcamp & Sons, 311 Md. 54, 57, 532 A.2d 703 (1987); Subsequent Injury Fund v. Kraus, 301 Md. 111, 117, 482 A.2d 468 (1984); Anchor Motor v. Sub. Injury Fund, 278 Md. 320, 324-325, 363 A.2d 505 (1976); Subsequent Injury Fund v.Thomas, 275 Md. 628, 633-634, 342 A.2d 671 (1975). In order to raise monies for the SIF, the Workmen's Compensation Commission assesses 6 1/2% of all awards rendered against an employer, or the employer's insurance carrier, for permanent disability or death, and of all settlements approved by the Commission. Art. 101, § 66(2)(a). ¹

The UEF was created in 1967 to provide for the payment of workers' compensation awards against uninsured employers. Ch. 152 of the Acts of 1967, codified as Art. 101, §§ 90-102. The UEF is funded by, inter alia, a 1% assessment upon all awards rendered against an employer, or the employer's insurance carrier, for permanent disability or death, and upon all settlement agreements approved by the Commission. Art. 101, § 91(d)(3). ²

The assessments to fund the SIF and UEF are paid in addition to any payment of compensation to employees or their dependents. Art. 101, §§ 66(2)(c), 91(d)(3)(iii). All funds received by the SIF and the UEF are held, managed and disbursed by the State Treasurer. Art. 101, §§ 66(2)(d), 92.

The Property and Casualty Insurance Guaranty Corporation (PCIGC) was created by the General Assembly as a non-profit corporation intended "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...." Code (1957, 1986 Repl.Vol.), Art. 48A, § 504. ³ PCIGC is funded by member insurers who are required to "be and remain members of the Corporation as a condition of their authority to transact insurance in this State." Art. 48A, § 506(b). PCIGC is obligated to pay, inter alia, the "full amount of any covered claim arising out of a workmen's compensation policy." Art. 48A, § 508(a)(1)(i). PCIGC is exempt, however, "from payment of all fees and all taxes levied by this State ... except taxes levied on real or personal property." Art. 48A, § 515.

After repeated attempts by the Workmen's Compensation Commission to collect from PCIGC for SIF and UEF assessments on awards PCIGC had paid to injured workers, PCIGC filed a complaint in the Circuit Court for Baltimore County for declaratory relief. PCIGC contended that the assessments for the SIF and UEF are taxes or fees and that, therefore, it is exempt from paying the assessments pursuant to Art. 48A § 515. The Commission took the position that the SIF and UEF assessments are not taxes but are part of the "covered claims" which PCIGC is obligated to pay pursuant to Art. 48A, § 508.

The circuit court (Jacobson, J.) rendered a declaratory judgment holding that the assessments are taxes or fees within the meaning of Art. 48A, § 515, and that PCIGC is, consequently, exempt from paying the assessments. The Court of Special Appeals affirmed, Workmen's Comp. Comm'n v. Property Ins., 74 Md.App. 99, 536 A.2d 714 (1988). Thereafter we granted the Commission's petition for a writ of certiorari to decide this important issue of statutory construction.

II.

This Court long ago defined the statutory term "taxes" to mean "burdens, charges or impositions, put or set upon persons or property for public uses...." Mayor and City Council of Baltimore v. Greenmount Cemetery, 7 Md. 517, 535 (1855). Later this Court defined "tax" as "a charge imposed upon the taxpayer as an act of sovereignty, without his consent, and for the public use...." Baltimore v. Fine, 148 Md. 324, 328, 129 A. 356, 358 (1925), citing Bonaparte v. State, 63 Md. 465, 470-471 (1885). See also, e.g., Comptroller v. Russell, 284 Md. 174, 178, 395 A.2d 488 (1978) (quoting with approval the definition of a "tax" set forth in the Greenmount Cemetery case).

Moreover, the Legislature's use of the word "assessment" in no way indicates that a governmental charge imposed for a public purpose is not a "tax." As Chief Judge Le Grand observed for the Court in the Greenmount Cemetery case, supra, 7 Md. at 535:

"The distinction, if any, between a tax and an assessment is not very palpable. The meaning of the words is the same in our laws. When a man is assessed to pay a certain sum, it is equivalent to, and nothing more than, the imposition of a tax on him to that amount. This is the popular understanding of the signification of the terms, as well as that of philologists. Thus, Webster: Tax--'a rate or sum of money assessed on the person or property of a citizen by government for the use of the nation or State.' So, also, 'an assessment is a valuation made by authorized persons, according to their discretion, as opposed to a sum certain or determined by law. It may be a direct charge of the tax to be paid.' In principle, we are unable to discover any difference between the meaning of the words...."

Under the above definition, the assessments to fund the SIF and UEF are "taxes." They are involuntary charges imposed by the State upon insurers and employers. They are intended to raise revenue for public purposes. As previously discussed, the purpose of the SIF is to limit an employer's compensation liability to that payable for the subsequent injury occurring while in the employer's service, thereby encouraging the hiring of handicapped persons. The SIF helps to insure job availability for the handicapped, full compensation for injuries received on the job, and a fair apportionment of liability to the employer. The primary objective of the UEF is to insure that injured employees receive the compensation to which they are entitled. The benefit of the general public is served by both of these funds because the burden of the circumstances they are intended to relieve would otherwise be shouldered in part by the general public. Accordingly, the assessment proceeds which fund the SIF and the UEF constitute government revenue raised by legally required payments to be expended for public purposes. As such, they are "taxes."

Moreover, the assessments to fund the SIF and UEF are similar to other assessments which have been viewed as taxes. In Allied American Co. v. Comm'r, 219 Md. 607, 616, 150 A.2d 421, 427 (1959), this Court held that assessments to the Unsatisfied Claim and Judgment Fund, which were virtually identical to the assessments in the case at bar, were an exercise of the State's taxing power. Later, in State Insurance v. Nationwide, 241 Md. 108, 116-117, 215 A.2d 749, 754 (1966), the Court held that assessments to the Unsatisfied Claim and Judgment Fund were in fact similar in character to both taxes and licenses for purposes of a credit on a retaliatory tax return.

Assessments and contributions to the SIF and UEF are like employer contributions to fund unemployment compensation, and this Court has specifically held the latter to be taxes. In STD. Properties v. Emp. Security Bd., 201 Md. 1, 7, 92 A.2d 459, 462 (1952), the Court stated:

"The Unemployment Compensation Law, which imposes upon employers the obligation to pay a certain percentage of their pay rolls into the unemployment compensation fund, is an exercise of the taxing power of the State. The contribution demanded of the employer by this statute is an excise tax imposed by the Legislature...."

See Compensation Board v. Albrecht, 183 Md. 87, 89, 36 A.2d 666, 667 (1944) (the contribution "demanded from the employer is an excise tax imposed by the Legislature in the exercise of the police power of the State"). See also, e.g., Carmichael v. Southern Coal & Coke Co., 301 U.S. 495, 57 S.Ct. 868, 81 L.Ed. 1245 (1937); State v. Thayer, 118 N.H. 819, 822, 395 A.2d 500, 502 (1978).

The United States Court of Appeals for the First Circuit recognized that contributions to unemployment compensation are taxes, and the Court specifically likened them to workers' compensation assessments, which were held to be taxes as well. In re Pan American Paper Mills, Inc., 618 F.2d 159, 162 (1st Cir.1980) (concludes that premiums to a governmental fund pursuant to the Puerto Rico Workmen's Accident Compensation Act should be treated as taxes because, like contributions made pursuant to a state unemployment compensation law, "they are pecuniary obligations imposed by the government for the purpose of defraying the expenses of an undertaking which it authorized"). See State Industrial Accident Commission v. AEBI, 177...