Caps & Immunities Needless to say, workers’ compensation insurance coverage
of “statutory employers” covers their “statutory employees.” One of the most common situations in which an absence of insurance coverage occurs and in which statutory employment liability is sought is in the construction fields. Under the Act, the first contractor liable for compensation to the employees of all subcontractors below it in the chain is sometimes informally called a “general contractor” but the statute uses the term “principal contractor.”35
Te distinction
is important, because it carries with it a requirement of an additional contract. A principal contractor under the statute is liable for the payment of worker’s compensation benefits to the employees of subcontractors if:
A. Te principal contractor contracts with a party to perform any work that is part of the business, occupation or trade of the principal contractor;
B. Te principal contractor then contracts with a subcontractor for the execution by or under the subcontractor of all or part of the work undertaken by the principal contractor; and
C. A covered employee is employed in the execution of that work.36
35 Te term “principal contractor” is not limited to a general contractor, but can include an intermediate contractor. See Kegley v. Vulcan Rail & Const. Co., 203 Md. 476, 101 A.2d 822 (1954). 36 Md. Labor & Employ Art. Code Ann. Section 9-508
Te cases have noted that “statutory employer” status
requires a showing of two contracts: “[O]ne between the principal and a third party whereby it is agreed that the principal contractor will execute certain work for the third party, and another between the principal contractor and a person as a subcontractor whereby the subcontractor agrees to do the whole or part of such work for the principal contractor.”37
In short, there must be an original contract (the
principal contract) between the principal contractor and a third party for work, and a subsequent contract between the principal contractor and a sub-contractor to perform work that the principal contractor would be responsible for under the principal contract. Te Maryland Courts have grappled with the issue of
who is a principal contractor and what is a principal contract in a number of different contexts. In Para v. Richards Group of Washington Ltd Partnership,38
the Court of Appeals found that
the owner/developer of a construction site for family homes was deemed the “statutory employer” of a subcontractor’s injured employee, even though the developer owned the land on which the house was being built and entered into the subcontract before selling the lot and home to a prospective purchaser. Tus, the subcontract preceded in time the owner/
37 Brady v. Ralph Parsons Co., 308 Md. at 504 ,520 A.2d at 727-728. 38 339 Md. 241, 661 A.2d 737 (1995).
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