In re Cont'l Cas. Co.
| Decision Date | 04 October 1920 |
| Docket Number | No. 33273.,33273. |
| Citation | 179 N.W. 185,189 Iowa 933 |
| Parties | IN RE CONTINENTAL CASUALTY CO. APPEAL OF GREAT AMERICAN INS. CO. ET AL. |
| Court | Iowa Supreme Court |
OPINION TEXT STARTS HERE
Appeal from District Court, Polk County; Thos. J. Guthrie, Judge.
The controversy herein was submitted in the district court upon an agreed statement of facts under the provision of chapter 13, tit. 21, of the Code (sections 4377-4384). It involves the construction of section 1333 of Code Supplement 1913 as to what shall be deemed the “gross amount of premiums received” for the purpose of collecting the 2 1/2 per cent. taxes thereon. Upon trial had there was a judgment for the Continental Casualty Company against the state of Iowa to recover back an excess amount of tax paid under protest. Judgments were entered respectively against the last named two companies in favor of the state of Iowa for a balance due of premium tax. From the first-named judgment the state of Iowa has appealed, and from the second judgment the Great American Insurance Company and the American Alliance Insurance Company have respectively appealed. Affirmed on the appeal of the state, and reversed on the two other appeals.H. M. Havner, Atty. Gen., and B. J. Powers, Asst. Atty. Gen., for the State.
Stipp, Perry, Bannister & Starzinger, of Des Moines, for intervener.
Jesse A. Miller, of Des Moines, amicus curiæ.
George R. Sanderson, of Chicago, Ill., for appellee.
All the above-named companies are insurance companies. The first-named company, as indicated by its name, is a casualty company, and, for the sake of brevity, will be so referred to herein. The other two companies are fire insurance companies, and will be designated as such. The casualty company has no interest in the controversy of the Fire Companies, nor have the Fire Companies any interest in the controversy of the Casualty Company. The controversy between the state and the two Fire Companies involves precisely the same question of construction as to each company. We have before us, therefore, the equivalent of two cases, and we shall deal with them in separate divisions hereof, taking up first the case of the Casualty Company.
1. Section 1333 of the Code, as amended, was as follows:
This was amended by the Thirty-Second General Assembly (chapter 56) by adding thereto the following proviso:
“Provided, however, that companies doing a fire insurance business may deduct from the gross amount of premiums received, the amount of premiums returned upon canceled policies issued upon property situated in this state.”
The question is what items should be included and what excluded in ascertaining the “gross amount of premiums received” for the particular year in question.
The concrete case is that the Casualty Company received and retained as earned premiums for the particular year approximately the sum of $51,000. This item presents no dispute. It was claimed by the state of Iowa in the district court that two other items, amounting approximately to $22,000 and $20,000, respectively, should have been included as gross premium.
The item of $22,000 was made up of charges appearing upon the books of the company for premiums upon policies issued but not yet delivered. The fact is conceded that such policies never were delivered, and that no part of the $22,000 thus charged as premiums was ever earned or received. The claim upon this item, however, has been abandoned by the state, and we have no occasion to give it further consideration.
The item of $20,000 claimed by the state represents premiums actually received in the first instance by the company, but afterwards returned to the policy holders upon cancellation of their policies before the expiration of their terms.
The contention for the state is that, inasmuch as these premiums were received, they became part of the gross premiums regardless of their subsequent return; whereas the Casualty Company contends that, though it received the premiums in question, it received the same under the law subject to the right of the policy holder to demand the return of all unearned premiums upon cancellation of the policy; that its right to any premium received was not complete until it had earned the same; and that no premium should be deemed “received,” within the meaning of the statute, until the legal right of the company to retain it is complete and irrevocable. The district court sustained this latter contention.
[1] The argument for the state rests upon two general grounds. The first is that the item in question is covered by the literal terms of the statute, and that there is no fair room for a different construction. We cannot adopt this view. While it is true in a literal sense that the company did receive these premiums from the policy holders in advance of their earning, it is also true in a legal sense that it received the same subject to the right of the policy holders to demand the return upon a cancellation of their policies at any time before the earning of the premium. Until such time, therefore, as the premium should be fully earned, the right of the insuring company thereto was a qualified one, and, speaking broadly, was impressed with a trust created by the statute. Until the premium was earned by the insuring company, it was a quasi trustee for the policy holder as to the unearned portion. The only fair construction of the statute, therefore, is that “premiums received” can refer only to those premiums which the company has a right to retain as its own absolute property. There is a quality of unreasonableness in the contrary contention which forbids its adoption unless required by the clear direction of the statute. We have little hesitancy in sustaining the trial court at this point. The construction which we thus put upon our statute is in accord with the holding of other courts in the construction of similar statutes. German Alliance Co. v. Van Cleave, 191 Ill. 410, 61 N. E. 94;People v. Miller, 177 N. Y. 515, 70 N. E. 10;State v. Continental Insurance Co. (Ind.) 116 N. E. 929;State v. Fleming, 70 Neb. 523, 529, 97 N. W. 1063;State v. Wilson, 102 Kan. 752, 172 Pac. 41, L. R. A. 1918D, 955;Mutual Benefit Life Ins. Co. v. Commonwealth, 128 Ky. 174, 107 S. W. 802.
No case is cited to us to the contrary. In People v. Miller, 177 N. Y. 515, 70 N. E. 10, supra, the question was fully discussed in the opinion. The following quotation therefrom is illustrative of the argument in all the cited cases:
“The consideration for the tax is the insurance business done during an entire year, ascertained after the expiration of the year, and expressed in the gross amount of premiums received during the year. * * * Every * * * insurance policy in this state, by its terms, is subject to cancellation, and in that event it is provided, both by the policy and by statute, that the unearned premium shall be refunded by the company. Ins. Law, Laws 1892, p. 1981, c. 690, § 122. Thus a policy for a specified time continues in force no longer than both parties elect, for either may end it at will. If a policy is written for one year, but is canceled after it runs six months, the business done by means of that policy is insurance of the property affected for six months. That period covers the entire life of the policy, and the company furnishes no insurance after it has expired. It then ceases to do business, so far as that policy is concerned; and, if all its policies were canceled at the same time, it would cease to do business altogether. * * *
It may be asked, why does the statute say ‘gross premiums' unless it means all premiums received, whether refunded or not? We think the use of the word ‘gross' was intended to include all premiums that remain in the treasury of the company, and to exclude all deductions for the commissions of agents or the expenses of doing business. The gross amount collected from canceled policies means the gross amount collected and retained by the company. The amount paid back is not collected for...
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