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Docket NO. INS-04-100


Sharkey Builders, Inc., has filed a petition with the Superintendent of Insurance, contending that the Maine Employers’ Mutual Insurance Company (“MEMIC”) inappropriately included Joseph Sharkey, the owner, in the Sharkey Builders payroll for rating purposes, even though Mr. Sharkey neither asked for nor wanted coverage for his own risk of injury. For the reasons discussed more fully below, I find that the disputed premium charges were appropriate.

In the alternative, Mr. Sharkey has requested a ruling that if the premium charge is valid, then MEMIC should be obligated to reimburse him for his shoulder operation. However, that is beyond the Superintendent’s jurisdiction, because the Workers’ Compensation Board has exclusive jurisdiction to determine whether a worker is entitled to benefits.1 MEMIC has stipulated that it is responsible for payment if the Board determines that Mr. Sharkey is entitled to benefits and that the applicable date of injury is during the period of time that MEMIC provided coverage to Sharkey Builders, Inc.

An adjudicatory hearing to consider Sharkey Builders’ petition was held before the Superintendent on February 9, 2004.2 Mr. Sharkey testified that he went into business for himself as a sole proprietor in March of 1999. At that time, he bought coverage from MEMIC for his employees, but not for himself. However, in October of 1999 he incorporated his business. He continued to carry the insurance in his own name, but testified that his payroll service made several attempts to straighten the records out. A policy was eventually issued in the name of Sharkey Builders, Inc. effective March 1, 2001, was renewed effective March 1, 2002, and cancelled for nonpayment of premium effective June 27, 2002. It is the premium for the period of coverage between March 1, 2001 and June 27, 2002 that is in dispute in this case.

Under Maine’s workers’ compensation laws, coverage for working sole proprietors is on an “opt-in” basis, while coverage for working owners of corporations is on an “opt-out” basis. That is, the law defines a sole proprietor to be an “employee” only if he or she affirmatively elects to be covered under his or her workers’ compensation policy and the policy explicitly provides for coverage; by contrast, anyone who works for a corporation is defined to be an “employee” unless he or she is eligible to waive coverage and files an affirmative written waiver of coverage with the Workers’ Compensation Board. 39 A M.R.S.A. §§ 102(11)(A)(4) & 102(11)(B). Mr. Sharkey, as the sole owner of the corporation, is eligible to waive coverage, but did not file his waiver of coverage until March of 2003, after the policies in question had terminated.

It is undisputed that from March 1, 1999 until March 1, 2001, MEMIC billed Mr. Sharkey as a sole proprietor and did not include him in the payroll. For most of that time, this arrangement was erroneous, as MEMIC acknowledges. Indeed, MEMIC has provided documentation demonstrating that it was aware at least as early as May of 2000 that Sharkey Builders was no longer a sole proprietorship. In effect, what Sharkey Builders is arguing is that this establishes an implicit contract under which MEMIC had agreed not to cover Mr. Sharkey and not to charge him for that coverage. As evidence of this understanding, Mr. Sharkey points to shoulder surgery which he paid for out of his own pocket rather than filing a claim with MEMIC. He testified that he had no idea that there might be a problem until June of 2002, when he received his final audit bill on Sharkey Builders’ 2001–02 policy.

MEMIC agrees up to a point, conceding that Mr. Sharkey was covered under the 2000–01 policy but that MEMIC was not entitled to collect the additional premium for that coverage. However, MEMIC has provided copies of documents from the March 2001 renewal. By way of background, a renewal quote addressed to Sharkey Builders’ producer, dated 2/7/01, advised that “this is now a corporation. Please confirm FEIN. If Joseph Sharkey wants to be excluded from coverage a wavier [sic] must be submitted to the State for approval. As a corporation officers are automatically included.”

This was followed by a letter on the producer’s letterhead, addressed to Mr. Sharkey and dated 2/12/01, explaining that “We need to make a decision regarding your worker compensation. In my today’s mail I received your renewal. The premium has increased due to rate increase and loss run. They want me to have you complete the supplemental questionnaire-contractor, a wavier if you don’t want to be included in your workers compensation and because you’re a corporation they need for me to confirm your FEIN, which I think is your federal ID number?” The letter lists the “wavier” as one of the three enclosures. Based on the documentation and the witnesses’ testimony, I find it more probable than not that Mr. Sharkey did receive this letter and the enclosed waiver form. Even if he might have had some basis before that time for relying on his prior dealings with MEMIC, he was now on notice that the situation had changed and he had a responsibility to follow through if he wished to waive coverage.

Order and Notice of Appeal Rights

It is therefore ORDERED that the Petition is hereby DENIED.

This Decision and Order is a final agency action of the Superintendent of Insurance within the meaning of the Maine Administrative Procedure Act. It is appealable to the Superior Court in the manner provided in 24-A M.R.S.A. § 236 (2000) and M.R. Civ. P. 80C. Any party to the hearing may initiate an appeal within thirty days after receiving this notice. Any aggrieved non-party whose interests are substantially and directly affected by this Decision and Order may initiate an appeal on or before March 23, 2004. There is no automatic stay pending appeal; application for stay may be made in the manner provided in 5 M.R.S.A. § 11004.



FEBRUARY 11, 2004 _______________________

1 There was some discussion at the hearing of whether any claim might be barred by the 90-day notice requirement set forth in 39-A M.R.S.A. § 301, which provides: “The notice must be given to the employer, or to one employer if there are more employers than one; or, if the employer is a corporation, to any official of the corporation; or to any employee designated by the employer as one to whom reports of accidents to employees should be made. It may be given to the general superintendent or to the supervisor in charge of the particular work being done by the employee at the time of the injury. Notice may be given to any doctor, nurse or other emergency medical personnel employed by the employer for the treatment of employee injuries and on duty at the work site. If the employee is self-employed, notice must be given to the insurance carrier or to the insurance carrier’s agent or agency with which the employer normally does business.” As noted, however, the Superintendent does not have jurisdiction to decide whether Mr. Sharkey would be considered a self-employed individual or an employee of Sharkey Builders, Inc. for purposes of the Workers’ Compensation Act.

2 Pursuant to 24-A M.R.S.A. § 210, the Superintendent has appointed Bureau of Insurance Attorney Robert Alan Wake to serve as hearing officer, with full decisionmaking authority.



Last Updated: January 16, 2014