Metropolitan Life Insurance Company v. State

• Decision Date: 20 June 1917
• Docket Number: 23,103
• Citation: 116 N.E. 579,186 Ind. 407
• Parties: Metropolitan Life Insurance Company v. State of Indiana
• Court: Indiana Supreme Court

116 N.E. 579

186 Ind. 407

Metropolitan Life Insurance Company v. State of Indiana

No. 23,103

Supreme Court of Indiana

June 20, 1917

From Marion Superior Court, sitting as a court of claims (87,202) V. G. Clifford, Linn D. Hay, W. W. Thornton, Theophilus J Moll and John J. Rochford, Judges.

Action by the Metropolitan Life Insurance Company against the State of Indiana. From a judgment for the State, the plaintiff appeals.

Affirmed.

S. D Miller, F. C. Dailey, W. H. Thompson, W. H. H. Miller and C. C. Shirley, for appellant.

Evan B. Stotsenburg, Attorney-General, Leslie R. Naftzger and Wilbur T. Gruber, for the State.

OPINION

Spencer, J.

It is provided by § 10216 Burns 1914, Acts 1891 p. 199, 222, that: "Every insurance company not organized under the laws of this state, and doing business therein, shall, in the months of January and July of each year, report to the auditor of state under oath of the president and secretary the gross amount of all receipts received in the state of Indiana on account of insurance premiums for the six months last preceding, ending on the last day of December and June of each year next preceding, and shall at the time of making such report pay into the treasury of the state the sum of three dollars on every one hundred dollars of such receipts, less losses actually paid within the state," or suffer certain penalties for failure to comply with the provisions of the statute.

During the month of January, 1912, appellant, which is an insurance company not organized under the laws of Indiana, reported to the auditor of state that during the last six months of the year 1911 it received from its policy-holders within this State on account of insurance premiums the sum of $ 883,379.54, and that during the same period of time it paid death losses in Indiana amounting to $ 205,580.71. A tax of three per cent. on the difference between these sums was thereafter duly paid into the state treasury. The report filed with the auditor, however, also showed that during the period in question a certain sum of $ 55,277.08, referred to as "dividends and industrial bonuses," had been applied by policy-holders of the company in reduction of their premiums, or in the purchase of additional paid-up insurance, and demand was made by the auditor for the payment of a three per cent. tax on this sum. To avoid the penalties prescribed by the statute appellant paid the additional tax, under protest, and instituted this action to recover the sum so paid. From an adverse finding and judgment below, appellant has prosecuted this appeal and insists that its motion for a new trial should have been sustained.

The evidence is substantially without dispute and discloses, in addition to the facts above stated, that, during the period in question and prior thereto, appellant was a stock corporation engaged in the general business of writing life insurance on what is known as the level premium plan. Under this plan the amount of the periodic premium to be paid by the insured is definitely fixed in the contract of insurance and remains unchanged throughout the history of the policy. This premium is made up of two elements: (1) The net premium, which represents the expected cost of effecting the insurance, as determined with reference to the tables of mortality and interest; and (2) the "loading," or margin, which is added to the net premium in order to provide for the expenses of the business and to meet such unusual contingencies as may arise. Whenever the insurance company experienced a more favorable mortality than was expected, or succeeded in effecting substantial reductions in its expense rates, or received good returns from its investments, there arose a surplus fund of which it was considered equitable by appellant's officers to return a part to the policy-holders. The return made to the holder of an industrial policy was termed a "bonus," while the payment made to the holder of an intermediate or ordinary policy was designated as a "dividend," whether the policy was participating or nonparticipating. However, it must be borne in mind that no legal significance attaches to the use of either term under the circumstances in this case, nor is the fact material that some, though not all, of appellant's intermediate and ordinary contracts provided for the participation by the holder in the earnings of the business.

At the end of the year 1910, the company, on the basis of its financial condition at that time, determined the amount and scale of dividends and bonuses which should be paid in the year 1911, and then appropriated and set aside that amount as a liability to be discharged through the disbursement thereof. Each policy-holder was notified of the amount of the bonus or dividend which had been allowed to him and, in the case of industrial business, the insured was given the option of accepting his bonus in cash or of having the same applied to the payment of future premiums. In the latter alternative, the company's agent would credit the policy-holder's premium receipt book with an amount equal to his bonus, without an actual payment on the part of the insured. The holder of an intermediate or ordinary policy was entitled to either of the options above referred to or he might apply his dividend to the purchase of paid-up additions to the face of his policy. In neither event was an actual payment of money made to appellant or its agent by the insured.

Under the facts as above set forth, the question arises whether the sum of $ 55,227.08, representing the amount of dividends and industrial bonuses which were thus applied during the last half of the year 1911 by policy-holders of appellant company, either in payment of obligations due under their contracts or for the purchase of additional paid-up insurance, is taxable as "receipts received in the state of Indiana on account of insurance premiums?"

Some reliance is placed by the attorney-general on the fact that for a number of years the statute in question has been interpreted by successive auditors of state as imposing a tax on funds of this character, which interpretation has been accepted by numerous foreign insurance companies, including appellant. It is true that the construction of a statute by a governmental department which, for a considerable period of time, has governed the conduct of that department in its official administration of such statute, may be judicially noticed, and such interpretation, although not of as high authority as a judicial interpretation, is, when not in conflict with the Constitution or the plain intent of the act, of great persuasive force and efficacy. Arnett v. State, ex rel. (1906), 168 Ind. 180, 80 N.E. 153, 8 L. R. A. (N. S.) 1192; Board, etc. v. Bunting (1887), 111 Ind. 143, 12 N.E. 151; Logansport Credit Exchange v. Sands (1913), 54 Ind.App. 562, 101 N.E. 19; United States v. Graham (1884), 110 U.S. 219, 3 S.Ct. 582, 28 L.Ed. 126; Bloxham v. Consumers', etc., R. Co. (1895), 36 Fla. 519, 540, 18 So. 444, 29 L. R. A. 507, 51 Am. St. 44; 15 R. C. L. 1110, § 40. But it is equally true that the aid of contemporaneous practical or departmental construction can be invoked only where the language of the statute is ambiguous or doubtful. The doctrine has no application where the language of the act and the intent of the legislature are plain. State v. Mutual Life Ins. Co. (1910), 175 Ind. 59, 79, 93 N.E. 213, 42 L. R. A. (N. S.) 256; Hord v. State (1906), 167 Ind. 622, 79 N.E. 916; Gray v. Foster (1910), 46 Ind.App. 149, 159, 92 N.E. 7; Whittemore v. People (1907), 227 Ill. 453, 470, 81 N.E. 427, 10 Ann. Cas. 44. However, since, in the present case, the interpretation placed by the auditor on the statute under consideration is in harmony with the conclusions to which we are led as a matter of law, it is unnecessary to determine the applicability of the above principles to the facts in issue.

Appellant has cited and relies on a number of authorities which hold in substance, that where a mutual insurance company, in its policy, stipulates for...