Indemnity Ins. Co. of North America v. Stowell

• Decision Date: 26 April 1961
• Docket Number: No. 36699,36699
• Citation: 174 N.E.2d 536,172 Ohio St. 167
• Parties: , 15 O.O.2d 321 INDEMNITY INS. CO. OF NORTH AMERICA et al., Appellees, v. STOWELL, Supt. of Insurance, Appellant.
• Court: Ohio Supreme Court

Page 167

172 Ohio St. 167

174 N.E.2d 536, 15 O.O.2d 321

INDEMNITY INS. CO. OF NORTH AMERICA et al., Appellees, v. STOWELL, Supt. of Insurance, Appellant.

No. 36699.

Supreme Court of Ohio.

April 26, 1961.

Syllabus by the Court

1. Section 3905.41, Revised Code, does not authorize retaliation against a Pennsylvania insurance company doing business in Ohio merely on a showing that the license fees imposed by Pennsylvania on such an Ohio company doing business in Pennsylvania would be greater than those imposed by our statutes on the Pennsylvania company.

2. Where it appears that the aggregate burden of Pennsylvania taxes and license fees on such an Ohio company would be less than the aggregate burden of Ohio taxes and license fees on the Pennsylvania company and no other reason for retaliation is advanced (except that the license fees imposed by Pennsylvania on such an Ohio company doing business in Pennsylvania would be greater than those imposed by our statutes on the Pennsylvania company), Section 3905.41, Revised Code, does not authorize any retaliation against such Pennsylvania company. (State ex rel. New England Mutual Life Ins. Co. v. Reinmund, 45 Ohio St. 214, 13 N.E. 30, approved and followed.)

3. The words 'other obligations' in Section 3905.41, Revised Code, do not include the obligations imposed upon a foreign insurance company to pay the costs and expenses, other than any filing fees to be paid county recorders, in complying with Sections 3905.10, 3905.11 and 3927.01, Revised Code.

This action for a declaratory judgment was instituted by several Pennsylvania insurance companies, that are licensed to do business in Ohio, against the Ohio Superintendent of Insurance to determine the obligations and duties of plaintiffs and defendant under Section 3905.41, Revised Code, which reads:

'When by the laws of any other state, district, territory, or nation, any taxes, fines, penalties, license fees, deposits of money, securities, or other obligations or prohibitions are imposed on insurance companies of this state doing business in such state, district, territory, or nation, or upon their agents therein, the same obligations and prohibitions shall be imposed upon insurance companies of such other state, district, or nation doing business in this state and upon their agents.'

Pursuant to Section 3905.01, Revised Code, Ohio imposes a $2 annual 'fee' on a foreign or domestic insurance company for a license for each of its agents in Ohio. Pennsylvania imposes on an Ohio insurance company licensed to do business in Pennsylvania a $3 annual fee for a license for each of its agents in Pennsylvania.

Pursuant to Section 5729.03, Revised Code, Ohio imposes upon the business done by Pennsylvania companies in Ohio a 'tax' of 2 1/2% on net premiums. Pennsylvania imposes, as to Ohio insurance companies, such a tax of 2%.

The superintendent contends that, by reason of Section 3905.41, Revised Code, each Pennsylvania company was obligated to pay an additional $1 for each of its agents in Ohio in addition to the $2 fee for a license for each such agent required by Section 3905.01, Revised Code. Plaintiffs contend that, since Ohio required payment of 2 1/2% on their Ohio net premiums and that was 1/2% more than Pennsylvania imposed as a tax on Pennsylvania net premiums of Ohio companies, a Pennsylvania company should not be required to pay more than the $2 fee specified for each of its Ohio agents by Section 3905.01, Revised Code, if the amount of the additional 1/2% tax required of it by Ohio on its Ohio premiums exceeded the amount of the $1 difference between Pennsylvania's imposition of $3 and Ohio's imposition of $2 for each agent.

As to the periods involved in this case, the excess of the Pennsylvania license fees in the amount of $1 for each agent's license is greatly exceeded as to each company except Eureka Casualty Company by the 1/2% difference between the Ohio premium tax and the Pennsylvania premium tax.

As to the Eureka Company, Eureka contends that other obligations imposed by Ohio made the Ohio burden on Eureka exceed in the aggregate that imposed by Pennsylvania on a similar Ohio company.

The Common Pleas Court by its judgment determined that the superintendent 'had no authority to * * * attempt to collect from' plaintiffs for the periods involved 'fees for licenses for their agents in excess of the $2 fee provided by Section 3905.01.'

That judgment was affirmed by the Court of Appeals.

The cause is now before this court on appeal from the judgment of the Court of Appeals and pursuant to allowance of a motion to certify the record.

Mark McElroy, Atty. Gen., Gerald J. Celebrezze, Cleveland, and William P. Meehan, Columbus, for appellant.

Vorys, Sater, Seymour & Pease, Columbus, for appellees.

TAFT, Judge.

The principal question to be determined is whether Section 3904.41, Revised Code, authorizes retaliation against a Pennsylvania insurance company on a showing that license fees on such an Ohio company would be greater in Pennsylvania even though the aggregate burden of taxes and license fees on such an Ohio company would be no greater in Pennsylvania.

In State, ex rel. New England Mutual Life Ins. Co., v. Reinmund, 1887, 45 Ohio St. 214, 13 N.E. 30, it appeared that Ohio imposed an annual tax upon the gross receipts from Ohio business of every agency of a foreign insurance company at the rate of taxation on personal property in effect in the county in which the agency was located; and that Massachusetts imposed on every foreign insurance company an annual excise tax of 1/4% upon the aggregate net value of all policies held by its residents. Relying upon a statute which then read substantially the same as Section 3905.41, Revised Code, now does, the Ohio Superintendent of Insurance sought to collect from a Massachusetts insurance company an excise tax equivalent in amount to what such an Ohio company would have been required to pay in Massachusetts. This court theld that, in doing so, the superintendent should credit against the amount sought by reason of such Massachusetts excise tax the amount of the aforementioned Ohio tax that the agencies of the Massachusetts company had been required to pay upon their Ohio gross receipts. In paragraph one of the syllabus, it is stated that 'the superintendent * * * is authorized to * * * collect * * * in addition to [the Ohio tax on gross receipts of agencies of the foreign company] * * * such sum as will be sufficient to make the total equal to the amount that would be realized were the rule of taxation of the state under whose laws the foreign company is organized applied to such company's business * * * in this state, but no more.'

In the opinion by Spear, J., it is said:

'* * * The two sections * * * [that imposing the personal property tax on gross receipts of agencies of foreign insurance companies and that which is now Section 3905.41, Revised Code] [are] * * * not cumulative, but * * * [what is now Section 3905.41, Revised Code] was enacted for the purpose of equalizing burdens * * *. * * * our law is protective in its character; its purpose being to protect Ohio insurance companies from impositions which might be put upon them by other states, and not retaliatory in the sense of first imposing upon foreign companies such taxes as are imposed upon other foreign corporations under like circumstances, and then, in addition, a sum equal to what other states may impose upon our companies doing business there. * * *

'Before the defendant can justify an exaction of the character here being considered, he must make it appear that, as matter of fact, the authorities of Massachusetts require of foreign companies a greater tax than our authorities impose upon foreign companies.' (Emphasis added.)

If this court in that case had given what is now Section 3905.41, Revised Code, the same literal interpretation then and now contended for by the Ohio Superintendent of Insurance, it would have obviously reached a different decision from the one it did. The excise tax imposed by Massachusetts on foreign insurance companies obviously bore no resemblance to the personal property tax on gross receipts of their agencies imposed by Ohio. Those two taxes could hardly be described by the statutory words 'same obligations.'

In State ex rel. v. Ins. Co., 1892, 49 Ohio St. 440, 31 N.E. 658, 659, 16 L.R.A. 611, 34 Am.St.Rep. 573, this court stated that what is now Section 3905.41, Revised Code, is 'retaliatory in character, and must, therefore, be confined' in its operation. See also annotation, 91 A.L.R. 795, 803 (such statutes 'being penal in their nature, must be strictly construed').

The Reinmund case has been followed by other courts in approving the doctrine of using the aggregate burden of different kinds of taxes in the application of similar retaliatory statutes. Bankers Life Co. v. Richardson, 1923, 192 Cal. 113, 218 P. 586; Life & Casualty Ins. Co. of Tennessee v. Coleman, Aud., 1930, 233 Ky. 350, 25 S.W.2d 748; Cochrane, Com'r v. Banker's Life Co., 8 Cir., 1929, 30 F.2d 918. See also Pacific Mutua' Life Ins. Co. of California v. State, 1931, 161 Wash. 135, 296 P. 813; Commonwealth v. Fireman's Fund Ins. Co., 1952, 369 Pa. 560, 87 A.2d 255; Employers Casualty Co. v. Hobbs, Com'r, 1939, 149 Kan. 774, 89 P.2d 923; annotation, 91 A.L.R. 795.

In Pacific Mutual Life Ins. Co. v. State, supra, 161 Wash. 135, 296 P. 813, 815, it is said in the opinion by Beals, J.:

'Such a statute is wholly defensive in its purpose, is at least quasi-criminal in its nature, and should be strictly construed and applied so as to accomplish its object, and nothing further. Life & Casualty Ins. Co. of Tennessee v. Coleman, 233 Ky. 350, 25 S.W.2d 748 * * *. The act is in no sense a revenue measure, any increase in revenue accruing to the state under any application of the act being purely incidental. * * *

'Such statut...