Industrial Com'n v. Old Republic Ins.

• Decision Date: 03 November 2009
• Docket Number: No. 1 CA-CV 08-0289.,1 CA-CV 08-0289.
• Citation: Industrial Com'n v. Old Republic Ins., 219 P.3d 285 (Ariz. App. 2009)
• Parties: The INDUSTRIAL COMMISSION OF ARIZONA, a state government entity, Plaintiff/Appellant/Cross-Appellee, v. OLD REPUBLIC INSURANCE COMPANY, a foreign corporation; Zurich American Insurance Company, a foreign corporation, Defendants/Appellees, and Liberty Insurance Corporation, a foreign corporation, Defendant/Appellee/Cross-Appellant.
• Court: Arizona Court of Appeals

219 P.3d 285

The INDUSTRIAL COMMISSION OF ARIZONA, a state government entity, Plaintiff/Appellant/Cross-Appellee, v. OLD REPUBLIC INSURANCE COMPANY, a foreign corporation; Zurich American Insurance Company, a foreign corporation, Defendants/Appellees, and Liberty Insurance Corporation, a foreign corporation, Defendant/Appellee/Cross-Appellant.

No. 1 CA-CV 08-0289.

Court of Appeals of Arizona, Division 1, Department A.

November 3, 2009.

Haralson, Miller, Pitt, Feldman & McAnally, P.L.C. by Jose de Jesus Rivera, Kathleen Hale, Phoenix, Gerald S. Maltz, Rebecca A. Reed, Tucson, Attorneys for Plaintiff/Appellant/Cross-Appellee.

Renaud Cook Drury Mesaros, PA by Steven G. Mesaros, Kevin R. Myer, Phoenix, Attorneys for Defendants/Appellees Old Republic Insurance Co. and Zurich American Insurance Co.

Low & Cohen, PLLC by Charles R. Cohen, Phoenix and Barger & Wolen, LLP by Gary A. Bresee, Pro Hac Vice, San Francisco, CA, Attorneys for Defendant/Appellee/Cross-Appellant Liberty Insurance Corp.

OPINION

PORTLEY, Judge.

¶ 1 The Arizona Legislature has provided that an employer who purchases a deductible workers' compensation insurance policy is entitled to pay a reduced premium pursuant to Arizona Revised Statutes ("A.R.S.") section 23-963.01 (Supp. 2008).¹ We are asked to decide whether the trial court erred when it concluded that workers' compensation insurance carriers do not have to pay taxes on the difference between a full premium and the reduced premium charged for a deductible policy under A.R.S. § 23-961(J) (Supp. 2008). In its cross-appeal, Liberty Insurance Corporation ("Liberty") asks us to find that the trial court erred when it limited Liberty's award of attorneys' fees to the statutory rate of seventy-five dollars per hour. Because we find that the difference between a full premium and the reduced premium charged for a deductible workers' compensation insurance policy should not be taxed under the applicable statutes, we affirm the judgment. Similarly, we find that the trial court did not abuse its discretion when it limited Liberty's fee award to the statutory rate.

PROCEDURAL HISTORY

¶ 2 The Industrial Commission of Arizona ("ICA") filed a declaratory judgment complaint against three insurance carriers, Liberty, Old Republic Insurance Company ("Old Republic"), and Zurich American Insurance Company ("Zurich") (collectively "the Carriers"), and requested that the superior court require the insurers to pay increased taxes on deductible compensation insurance policies. Liberty filed a motion to dismiss. Old Republic and Zurich joined Liberty's motion and filed a separate joint motion to dismiss. The Carriers argued that the Complaint should be dismissed for lack of jurisdiction, failure to state a claim under Arizona Rule of Civil Procedure 12(b)(6), failure to join indispensable parties, and violation of equal protection rights.

¶ 3 The trial court, after oral argument, found that it had subject matter jurisdiction under the Declaratory Judgment Act, A.R.S. § 12-1831 (2003), and dismissed the Complaint for failure to state a claim under Arizona Rule of Civil Procedure 12(b)(6). The court did not address the other issues.

¶ 4 Liberty subsequently filed an application for costs and attorneys' fees. Liberty requested fees at a higher hourly rate than the statutory rate of seventy-five dollars. See A.R.S. § 12-348(A)(1), (E)(2) (2003). Specifically, it asked the court to find that cost of living increases and the limited availability of qualified attorneys for the proceeding justified a higher fee. Zurich and Old Republic also filed fee applications and argued that they qualified for a fee award higher than the rate prescribed by statute. The Carriers were awarded fees at the statutory rate. ICA filed its appeal and Liberty cross-appealed the award of attorneys' fees. We have jurisdiction pursuant to A.R.S. §§ 12-2101(B) (2003) and 12-348(D) (2003).

DISCUSSION

¶ 5 ICA contends that the trial court erred by dismissing the Complaint. It argues that the two statutory provisions, A.R.S. §§ 23-961(J) and 23-963.01, require workers' compensation carriers to be taxed on the difference between a full premium and the reduced premium charged for a deductible policy.

¶ 6 We review motions to dismiss de novo. See Baker v. Rolnick, 210 Ariz. 321, 324, ¶ 14, 110 P.3d 1284, 1287 (App.2005) (citing Fairway Constructors, Inc. v. Ahern, 193 Ariz. 122, 124, ¶ 6, 970 P.2d 954, 956 (App.1998)). We also review the trial court's interpretation of a statute de novo. State v. Peek, 219 Ariz. 182, 183, ¶ 6, 195 P.3d 641, 642 (2008). When interpreting a statute, our goal is to give effect to the legislature's intent. Id. at 184, ¶ 11, 195 P.3d at 643. We will first consider the statutory language, which provides "the best and most reliable index of a statute's meaning." Janson v. Christensen, 167 Ariz. 470, 471, 808 P.2d 1222, 1223 (1991); see also Zamora v. Reinstein, 185 Ariz. 272, 275, 915 P.2d 1227, 1230 (1996).

¶ 7 "[W]here the language is plain and unambiguous, courts generally must follow the text as written." Canon Sch. Dist. No. 50 v. W.E.S. Constr. Co., 177 Ariz. 526, 529, 869 P.2d 500, 503 (1994). If the language is clear and unambiguous, we need not resort to other methods of statutory construction. Wells Fargo Credit Corp. v. Tolliver, 183 Ariz. 343, 345, 903 P.2d 1101, 1103 (App.1995). We will give effect to each word or phrase and apply the "usual and commonly understood meaning unless the legislature clearly intended a different meaning." Bilke v. State, 206 Ariz. 462, 464-65, ¶ 11, 80 P.3d 269, 271-72 (2003) (quoting State v. Korzep, 165 Ariz. 490, 493, 799 P.2d 831, 834 (1990)). Unless clear indication of legislative intent to the contrary exists, we will not "construe the words of a statute to mean something other than what they plainly state." Canon Sch. Dist. No. 50, 177 Ariz. at 529, 869 P.2d at 503.

¶ 8 If the statutory language is ambiguous, however, "we look to the `rules of statutory construction,'" Stein v. Sonus USA, Inc., 214 Ariz. 200, 201, ¶ 3, 150 P.3d 773, 774 (App.2007) (quoting Lewis v. Ariz. Dep't of Econ. Sec, 186 Ariz. 610, 614, 925 P.2d 751, 755 (App.1996)), and "consider the statute's context; its language, subject matter, and historical background; its effects and consequences; and its spirit and purpose." Hayes v. Cont'l Ins. Co., 178 Ariz. 264, 268, 872 P.2d 668, 672 (1994). We will also "read the statute as a whole, and give meaningful operation to all of its provisions." Wyatt v. Wehmueller, 167 Ariz. 281, 284, 806 P.2d 870, 873 (1991). Different sections of a single statute should be interpreted consistently. Id.

¶ 9 The Arizona Workers' Compensation Act ("the Act") requires all employers to have workers' compensation insurance for their employees. See A.R.S. § 23-961(A). Employers may meet the statutory requirement in one of three ways. Id. First, an employer may purchase an insurance policy through the State Compensation Fund ("SCF"). A.R.S. § 23-961(A)(1). Second, the employer can purchase insurance from an authorized insurance carrier. Id. The insurance policy purchased may be for full coverage or may include a deductible. See A.R.S. §§ 23-963, -963.01(A). Under a deductible policy, the carrier pays the entire compensable claim, but is reimbursed by the employer for any amount paid up to the amount of the deductible. A.R.S. § 23-963.01(B). Finally, an employer may qualify to be self-insured to pay the compensation directly or enter into a pool with other self-insured employers to ensure that any claim can be paid. See A.R.S. §§ 23-961(A)(2), -961.01 (Supp. 2008).

¶ 10 Workers' compensation carriers are taxed pursuant to § 23-961(J).² Every insurance carrier is required to pay taxes on all premiums "collected or contracted for" during the year. Id. Self-insured employers are taxed based on a calculation on the amounts they would have paid in premiums if they were fully insured with the SCF. Id.

I.

¶ 11 An insurance carrier naturally charges a lower premium for deductible insurance than for coverage under which there is no deductible. Because carriers receive lower premiums for deductible insurance policies, the amount they pay in taxes on those policies is correspondingly smaller. The ICA contends that the Carriers should be taxed on deductible policies as if the premiums they received on those policies were the same as on policies containing no deduction. It argues that the plain meaning of the requirement that taxes be paid on "all premiums collected or contracted for" in § 23-961(J) includes premium discounts granted by carriers to employers who purchase deductible policies. Specifically, ICA argues that the contracted-for premium is "the premium that the employer actually pays combined with the premium that is `treated as paid'" or the "premium without reduction for the deductible." ICA asserts that its construction of § 23-961(J) is required by § 23-963.01(B), which provides that on a deductible policy "[t]he payment ... of deductible amounts ... shall be treated under the policy in the same manner as the payment ... of premiums."

¶ 12 The Carriers, on the other hand, contend that § 23-963.01(B) refers to the insurance carrier's right to cancel a policy for nonpayment of deductible amounts in the same manner as nonpayment of premiums, and does not relate to the issue of taxation. They argue that their interpretation is supported by A.R.S. § 23-963.01(C), which clarifies that the cancellation of an insurance policy may not be retroactive for the nonpayment of a deductible.³

¶ 13 The language of § 23-961(J) provides that "[e]very insurance carrier ... shall pay to the state treasurer ... a tax of not more than three per cent on all premiums collected or contracted for during the year." There is no dispute between the parties that the language is clear. ICA argues, however, that there is ambiguity in § 23-963.01. We disagree.

¶ 14 Both §§ 23-963.01 and 23-961(...