A Maryland company subcontracted a job to a Delaware company. One of its workers was injured in Maryland. Was the Maryland company liable for his benefits?

What happened. A&B is a construction business that builds farm buildings and post frame buildings. It performs 90 percent of its work in Delaware and 10 percent in Maryland. In spring 2005, A&B signed a contract to build a pole building on a piece of property near Salisbury, Maryland. A&B subcontracted the job to a Delaware business called WMT Contracting. WMT performed 95 percent of its work in Delaware, 3 percent in Maryland, and 2 percent in Virginia.

WMT hired Josef, a Delaware resident, in early May. WMT told Josef that he would be working in Delaware most of the time, with occasional jobs in Maryland. On May 12, WMT sent Josef to Salisbury to work on the project there. He expected to finish his work there by May 17. Each day he traveled from his home in Delaware to WMT’s place of business and rode on WMT’s van with other employees to the jobsite. On May 16, while working at the Salisbury jobsite, Josef fell and was injured. He was unable to continue working on the Salisbury project. He tried to keep working for WMT on jobs in Delaware, but the company did not give him any more work.

Josef filed a workers’ compensation claim in Delaware in December 2006. In February 2007 the Delaware Industrial Accident Board found that Josef had sustained a compensable injury. WMT had been uninsured at the time of the accident, so the Board ordered it to post a bond to secure the payment of compensation. WMT failed to post the bond, but Josef failed to appear at his follow-up hearing, so the Board dismissed the claim.

Shortly after the Delaware Board issued its decision, Josef filed a workers’ compensation claim in Maryland, adding A&B and its insurer, American Zurich Insurance Company, as parties. The Maryland Workers Compensation Commission determined that A&B was Josef’s statutory employer, that Josef had sustained a compensable injury, and that Zurich’s policy should cover the claim. Zurich appealed.

What the court said. Under Maryland law, a principal contractor who is not the direct employer of the injured worker is liable to pay compensation if it uses a subcontractor to perform work that is part of the principal contractor’s business. The parties agreed that A&B was effectively Josef’s statutory employer. In this case, A&B did not have coverage in Delaware and relied on its single insurance policy to cover its workers on short-term jobs in Delaware. But Zurich claimed that it should not have been liable for Josef’s claim because A&B’s insurance policy was issued in Delaware and the injury occurred in Maryland.

The Court of Appeals disagreed with Zurich. It agreed that A&B was Josef’s statutory employer and thus liable for his workers’ compensation benefits. Under Maryland law, employers can be liable for benefits to short-term workers from another state if the worker and the employer make a contract of hire in another state, or if neither the worker nor the employer is a resident of Maryland (LE § 9-203(b)(1)). The point is to ensure that workers who cross state lines for short-term jobs are not left out of coverage. The court decided that the language of the insurance policy provided coverage for injuries that occurred outside of Maryland during temporary operations.

Zurich also argued that Josef was just a casual employee and as such was not eligible for compensation. The court disagreed. Although Josef’s employ with WMT did not last long, the business hired him as a regular employee with the intention of keeping him for an indefinite period of time. The court affirmed the decision, awarding Josef benefits. Zurich American Insurance Co. v. Uninsured Employers’ Fund, Court of Special Appeals of Maryland, No. 1509, September Term, 2009 (11/3/10).

Point to remember: Workers’ compensation exists to protect workers from severe economic loss due to work injuries while simultaneously protecting employers from lawsuits. Courts are inclined to favor employees who follow all the rules when awarding benefits.