Chartis Cas. Co. v. State

• Decision Date: 02 October 2015
• Citation: 475 S.W.3d 240
• Parties: Chartis Casualty Company et al. v. State of Tennessee ACE American Insurance Company et al. v. State of Tennessee Old Republic Insurance Company et al. v. State of Tennessee Valley Forge Insurance Company v. State of Tennessee American Casualty Company of Reading, Pennsylvania v. State of Tennessee
• Court: Tennessee Supreme Court

475 S.W.3d 240

Chartis Casualty Company et al.

v.State of Tennessee

ACE American Insurance Company et al.

v.State of Tennessee

Old Republic Insurance Company et al.

v.State of Tennessee

Valley Forge Insurance Company

v.State of Tennessee

American Casualty Company of Reading, Pennsylvania

v.State of Tennessee

Supreme Court of Tennessee, AT NASHVILLE.

June 3, 2015 Session

Filed October 2, 2015

Bradley A. Lampley and Tricia Thor Olson, Nashville, Tennessee; and Peter D. Edgerton, Lisa E. Schwartz, William M. Sneed, and Tracy D. Williams, Pro Hac Vice, Chicago, Illinois; for the appellants, Chartis Casualty Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, and New Hampshire Insurance Company.

Bradley A. Lampley and Tricia Thor Olson, Nashville, Tennessee, for the appellants, Valley Forge Insurance Company and American Casualty Company of Reading, Pennsylvania.

Brett R. Carter and Patricia Head Moskal, Nashville, Tennessee, for the appellants, ACE Property and Casualty Insurance Company, ACE American Insurance Company, ACE Fire Underwriters Insurance Company, Indemnity Insurance Company of North America, Old Republic Insurance Company, Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company, and Pennsylvania Manufacturers Indemnity Company.

Herbert H. Slatery III, Attorney General and Reporter; Andrée S. Blumstein, Solicitor General; and Jonathan N. Wike, Senior Counsel, for the appellee, State of Tennessee.

Gary R. Wade, J., delivered the opinion of the Court, in which Sharon G. Lee, C.J., and Cornelia A. Clark, Jeffrey S. Bivins, and Holly Kirby, JJ., joined.

OPINION

Gary R. Wade, J.Five groups of Pennsylvania-domiciled insurance companies filed complaints in the Tennessee Claims Commission seeking a refund of retaliatory taxes paid under protest. The Commissioner entered judgments denying the requested refunds, and the insurance companies appealed. The Court of Appeals affirmed the judgments. We granted permission to appeal to consider whether certain Pennsylvania workers' compensation assessments result in a financial burden on Tennessee insurance companies doing business in Pennsylvania, thereby triggering the imposition of retaliatory taxes against the Pennsylvania insurance companies doing business in Tennessee. Because the workers' compensation assessments must be paid by employer-policyholders in conjunction with their premium payments, the administrative task of collecting and remitting those payments does not qualify as a burden on the insurance companies for purposes of the retaliatory tax. The judgments of the Court of Appeals are, therefore, reversed.

I. Facts and Procedural History

Five separate groups of Pennsylvania-domiciled insurance companies, listed below and collectively referred to as the "Claimants," are authorized to provide workers' compensation coverage in Tennessee: (1) Chartis Casualty Company, Granite State Insurance Company, Insurance Company of the State of Pennsylvania, and New Hampshire Insurance Company; (2) ACE American Insurance Company, ACE Fire Underwriters Insurance Company, ACE Property and Casualty Insurance Company, and Indemnity Insurance Company of North America; (3) Old Republic Insurance Company, Pennsylvania Manufacturers' Association Insurance Company, Manufacturers Alliance Insurance Company, and Pennsylvania Manufacturers Indemnity Company; (4) Valley Forge Insurance Company; and (5) American Casualty Company of Reading, Pennsylvania. By letter dated November 7, 2008, the State of Tennessee, through the Tennessee Department of Commerce and Insurance (the "State"), notified the Claimants of its intention to perform audits, "mainly retaliatory in nature," for the years 2005, 2006, and 2007. See Tenn. Code Ann. § 56–4–218 (2008) (authorizing the State, under certain circumstances, to impose retaliatory taxes on foreign insurance companies). Later, as a result of the audit, the Claimants were required to recalculate their Tennessee taxes to include certain Pennsylvania workers' compensation charges, file amended tax returns, and remit payment of the additional taxes totaling more than $16 million. The Claimants disputed the applicability of Tennessee's retaliatory tax statute to the Pennsylvania workers' compensation charges but ultimately paid the disputed taxes under protest.

Each of the Claimants filed a complaint with the Tennessee Claims Commission (the "Commissioner") seeking a refund of the retaliatory taxes paid under protest. Because of the common questions raised by the Claimants' refund requests, the five cases proceeded jointly before the Commissioner.¹ The Claimants and the State filed cross-motions for summary judgment and a hearing took place on January 22, 2013. On March 8, 2013, the Commissioner issued five identical judgments, each granting the State's motions for summary judgment and denying the summary judgment motions filed by the Claimants. The Court of Appeals affirmed the rulings. Chartis Cas. Co. v. State, No. M2013–00885–COA–R3–CV, 2014 WL 3807938, at *1 (Tenn. Ct. App. July 31, 2014) ; ACE Am. Ins. Co. v. State, No. M2013–00930–COA–R3–CV, 2014 WL 3807827, at *1 (Tenn. Ct. App. July 31, 2014) ; Old Republic Ins. Co. v. State, No. M2013–00904–COA–R3–CV, 2014 WL 3805830, at *1 (Tenn. Ct. App. July 31, 2014) ; Valley Forge Ins. Co. v. State , No. M2013–00897–COA–R3–CV, 2014 WL 3808910, at *1 (Tenn. Ct. App. July 31, 2014) ; Am. Cas. Co. of Reading, Pa. v. State , No. M2013–00898–COA–R3–CV, 2014 WL 3808909, at *1 (Tenn. Ct. App. July 31, 2014).² This Court granted the applications for permission to appeal and consolidated the five cases for oral argument.³

II. Standard of Review

Because the grant or denial of a motion for summary judgment is purely a matter of law, our standard of review is de novo with no presumption of correctness. Kinsler v. Berkline, LLC, 320 S.W.3d 796, 799 (Tenn. 2010). In consequence, "our task is confined to reviewing the record to determine whether the requirements of Tennessee Rule of Civil Procedure 56 have been met." Blair v. W. Town Mall, 130 S.W.3d 761, 763 (Tenn. 2004). Summary judgment is appropriate only if there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law. Tenn. R. Civ. P. 56.04. Because there are no material facts in dispute between the Claimants and the State,⁴ the core issue is whether the Commissioner and the Court of Appeals have properly applied the Tennessee retaliatory tax statute under the circumstances presented in the case before us. "Statutory interpretation, of course, presents a question of law and our review is de novo with no presumption of correctness." Kiser v. Wolfe, 353 S.W.3d 741, 745 (Tenn. 2011) (citing Carter v. Quality Outdoor Prods., Inc., 303 S.W.3d 265, 267 (Tenn. 2010) ).

III. Analysis

A. Retaliatory Tax Statutes

At issue is the scope and applicability of Tennessee's retaliatory tax statute, which provides, in pertinent part, as follows:

When, by the laws of any other state or foreign country, any premium or income or other taxes, or any fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions are imposed upon Tennessee insurance companies doing business in the other state or foreign country, or upon their agents in the other state or foreign country, that are in excess of the taxes, fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions imposed upon the insurance companies of the other state or foreign country doing business in this state, or that might seek to do business in this state, or upon their agents in the state, so long as the laws continue in force, the same premium or income or other taxes, or fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions and restrictions of whatever kind shall be imposed upon the companies of the other state or foreign country doing business in this state, or upon their agents in this state.... This section shall be applied on a retaliatory basis without consideration of any reciprocity an insurance company domiciled in another state or foreign country may claim due to lower premium or income or other taxes, or lower fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions that are imposed upon the insurance companies of other states or foreign countries doing business in this state.

Tenn. Code Ann. § 56–4–218(a). "The legislative purpose of the retaliatory insurance tax statute ... is to protect Tennessee insurance companies by encouraging foreign jurisdictions not to impose heavier burdens on Tennessee companies than Tennessee imposes upon their companies who come here to do business." Republic Ins. Co. v. Oakley, 637 S.W.2d 448, 451 (Tenn. 1982).⁵ In consequence, the dispositive question in the case before us is whether any taxes, fees, charges, fines, penalties, licenses, deposit requirements or other obligations, prohibitions, or restrictions are imposed upon Tennessee insurance companies doing business in Pennsylvania that are in excess of the taxes, fees, charges, fines, penalties, licenses, deposit requirements or other obligations, prohibitions, or restrictions imposed upon Pennsylvania insurance companies doing business in Tennessee.

B. Pennsylvania Workers' Compensation Statutes

In this instance, "the laws of [the] other state," Tenn. Code Ann. § 56–4–218(a), are three Pennsylvania workers' compensation statutes known as the Workmen's Compensation Administration Fund, 77 Pa. Stat. Ann. § 1000.2 (West 2002) ; the Subsequent Injury Fund, 77 Pa. Stat. Ann. § 517 (West 2002) ; and the Workmen's Compensation Supersedeas Fund, 77 Pa. Stat. Ann. § 999 (West 2002). The State contends that the Pennsylvania statutes impose a burden on Tennessee insurance companies doing business in Pennsylvania that is higher than the reciprocal burden imposed by...