Baltica Ins. Co. v. Carr

• Decision Date: 23 June 1928
• Docket Number: No. 17626.,17626.
• Citation: 162 N.E. 178,330 Ill. 608
• Parties: BALTICA INS. CO. v. CARR, County Collector.
• Court: Illinois Supreme Court

330 Ill. 608

162 N.E. 178

BALTICA INS. CO.

v.CARR, County Collector.

No. 17626.

Supreme Court of Illinois.

June 23, 1928.

Bill by the Baltica Insurance Company against Patrick J. Carr, County Collector. Decree for plaintiff, and defendant appeals.

Affirmed.Appeal from Superior Court, Cook County; M. L. McKinley, judge.

Francis X. Busch, Corp. Counsel, Robert E. Crowe, State's Atty., Leon Hornstein, William H. Duval, C. E. More, C. Paul Tallmadge, Samuel A. Ettelson, and Harris F. Williams, all of Chicago (Hiram T. Gilbert, of Chicago, of counsel), for appellant.

Hicks & Folonie and Silber, Isaacs, Silber & Woley, all of Chicago, for appellee.

DUNCAN, J.

This is an appeal from a decree of the superior court of Cook county finding that appellee, the Baltica Insurance Company, a corporation of the kingdom of Denmark, organized for the purpose of engaging in the business of insurance, has established the material allegations of its bill of complaint, and decreeing that appellant, Patrick J. Carr, as county treasurer and ex officio county collector of Cook county, Ill., be and is, and his deputies, clerks, agents, and attorneys are perpetually enjoined and restrained from demanding, receiving, and collecting any taxes levied, assessed, or spread on account of any net receipts of appellee for the year beginning May 1, 1922, and ending April 30, 1923, and from attempting in any manner to enforce the payment of the same or any part thereof. There was a hearing before the chancellor upon the bill and the answer thereto by appellant and upon facts not controverted and established by stipulations of the parties, the testimony of one witness for appellant and certain exhibits offered by appellee.

The material facts are in substance the following: Appellee is a corporation existing under the laws of the kingdom of Denmark. It was licensed and authorized to transact business under the statutes of Illinois as a fire, marine, and inland navigation insurance company. Prior to May 1, 1922, and from then to the time ending April 30, 1923, it was authorized to transact business in Illinois, and had, in accordance with the statutes of the state, done all things required of it, and had thereupon received a certificate from the department of insurance of Illinois authorizing it to transact business as such insurance company within the state. It designated the director of trade and commerce at Springfield, Ill., as agent for service of process, and also designated James B. Tallman, with his office at 175 West Jackson boulevard, Chicago, as agent for the transaction of its authorized business of insurance. It maintained no office in the state of Illinois. The sole business conducted and transacted by it was that of reinsuring risks written by direct writing insurance companies in the state of Illinois. Such reinsurance was effected under treaties of reinsurance existing between it and other foreign insurance companies, whereby it, in consideration of payment to it of a specified portion of the premium on each risk, reinsured the liability of the direct writing company to the extent of such treaty of reinsurance upon risks assumed in the state of Illinois by such direct writing company or companies. None of such business of reinsurance was done within the state of Illinois. All of it was done by reinsurance ‘treaties,’ in writing, entered into outside the state of Illinois. All reinsurance premiums were paid outside the state of Illinois, and all books and records were kept at the principal office of appellee in Newark, N. J., from which office all correspondence issued and all return premiums were paid. It entered into no contract to insure any property in Illinois. Tallman did not negotiate any contracts of reinsurance or other insurance in Illinois for appellee and knew nothing concerning such contracts by appellee.He did not execute for appellee any contract of any kind within the state. He did not collect any premium for appellee in Illinois. He paid out no money for appellee in refunding unearned premiums upon canceled reinsurance. He performed no act of any kind as agent of appellee. Appellee designated him as its agent for the transaction of its authorized business of insurance in Illinois, and caused him to be licensed as such agent in order that it might enter into reinsurance contracts with companies who were licensed to do business in Illinois and who did a direct writing insurance business in the state. Appellee had no other agent of any kind in Illinois. It had no property or funds of any kind within Illinois and had no bank account or deposit of money within the state. It did pay a privilege tax of 2 per cent. of its gross premiums received outside of the state upon risks reinsured in the state under the Illinois act of 1919 for the right to come into the state and to transact business, if it so desired. It did file a statement showing the risks written and the premiums received therefor, the gross premiums received, the gross premiums refunded on canceled risks, and net premiums received attributable to business written, and that said reports of net receipts so made and filed by appellee in Illinois were based entirely upon net receipts of reinsurance affected, as above set forth, upon Illinois risks directly written by other insurance companies.

It was the universal custom of the business of fire, marine, and other property insurance for the direct writing insurer to protect itself against a part of its liability by reinsuringsuch part that it did not desire to carry, and it was the sole business of appellee to engage in and furnish such reinsurance. The contract of reinsurance so affected was in all cases a contract of indemnity by the reinsuring company. The reinsured company retained its entire liability to the person insured, but by independent contract, to which the person insured was in nowise a party, reinsured a portion of its liability. Appellee made no return under section 30, hereinafter mentioned, to the board of assessors of Cook county of any net receipts for insurance or reinsurance transacted by it or by any agency of it in said county for the year beginning May 1, 1922, and ending April 30, 1923, but the various direct writing companies, a portion of whose direct writing business was reinsured by appellee, made returns to the taxing authorities of Cook county purporting to show the net receipts of their agencies required to be listed for taxation by section 30 of the act to incorporate and to govern fire, marine, and inland navigation insurance companies doing business in the state of Illinois, passed in 1869, and amended in 1879. The board of assessors made no assessment, but the board of review of Cook county did make an assessment of $5,000 for the year 1922 against appellee under section 30 against the protest of appellee to the effect that it was not liable for taxation thereunder, which protest was not considered by the board. Accordingly a tax of $375.50 was extended on the tax books of the county against appellee on the assessment.

Section 30 aforesaid, under which the assessment in this case is made, as amended in 1879, is in this language:

‘Every agent of any insurance company, incorporated by the authority of any other state or government, shall return to the proper officer of the county, town or municipality in which the agency is established, in the month of May, annually, the amount of the net receipts of such agency for the preceding year, which shall be entered on the tax lists of the county, town and municipality, and subject to the same rate of taxation, for all purposes, state, county, town and municipal-that other personal property is subject to at the place where located; said tax to be in lieu of all town and municipal licenses; and all laws and parts of laws inconsistent herewith are hereby repealed: Provided, that the provisions of this section shall not be construed to prohibit cities having an organized fire department from levying a tax, or license fee, not exceeding two per cent. in accordance with the provisions of their respective charters, on the gross receipts of such agency, to be applied exclusively to the support of the fire department of such city.’ Laws 1879, p. 179.

[1] One of the preliminary contentions made by appellant in this case is that the tax under section 30 is a tax on the privilege of doing business in this state, and therefore is a valid tax. It has been definitely and finally determined by this court in Hanover Fire Ins. Co. v. Harding, 327 Ill. 590, 158 N. E. 849, that the tax on net receipts is a tax on personal property and is subject to reduction, debasement, and equalization, the same as other personal property within the state. We do not consider that those contentions are in any way material to the real questions or issues in this case, and we therefore decline to further consider them at this time.

[2][3] The only business that appellee transacted, so far as this record shows, was that of reinsurance. Reinsurance is a contract between the direct insurer and the reinsurer, by which the latter agrees to protect the former from risks already assumed. The insured, unless the contract so provides, has no concern with the contract of reinsurance, and the reinsurer is not liable to the insured either as surety or otherwise. The contract is not one of insurance, but simply one of indemnity. It is not a contract against loss by fire or other hazard provided in the original policy, but is one against loss by or on account of an outstanding contract of insurance with the owner of property, or simply a contract to indemnify the original insurer for a loss he may sustain upon his contract of insurance. Vial v. Norwich Fire Ins. Society, 257 Ill. 355, 100 N. E. 929,44 L. R. A. (N. S.) 317, Ann. Cas. 1914A, 1141;Weil v. Federal Ins. Co., 264 Ill. 425, 106 N. E. 246, Ann. Cas. 1915D, 974;Allison v. Fidelity Mutual Fire Ins. Co., 81 Neb....