Old Republic Ins. Co. v. State
| Decision Date | 31 July 2014 |
| Docket Number | No. M2013-00904-COA-R3-CV,M2013-00904-COA-R3-CV |
| Court | Tennessee Court of Appeals |
| Parties | OLD REPUBLIC INSURANCE COMPANY ET AL. v. STATE OF TENNESSEE |
Appeal from Tennessee Claims Commission
Nos. X03152011, X20120308
Robert N. Hibbett, Commissioner, Tenn. Claims Commission (Middle Division)
Five separate groups of Pennsylvania-domiciled insurance companies filed five separate tax refund claims in which each challenges the imposition of retaliatory insurance premium taxes by the Tennessee Department of Commerce and Insurance pursuant to Tenn. Code Ann. § 56-4-218. The central issue presented is whether Pennsylvania's surcharges or assessments for three Workmen's Compensation funds are imposed upon Tennessee-domiciled insurance companies doing business in Pennsylvania and, therefore, fall within Tennessee's retaliatory insurance premium tax statute. The Tennessee Claims Commission ruled in favor of the state and all of the Pennsylvania insurance companies appealed. Finding no error, we affirm.
Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission Affirmed
Patricia Head Moskal and Brett R. Carter, Nashville, Tennessee, for the appellants, Old Republic Insurance Company, Manufacturers Alliance Insurance Company, Pennsylvania Manufacturers Indemnity Company, and Pennsylvania Manufacturers' Association Insurance.
Robert E. Cooper, Jr., Attorney General and Reporter, Joseph F. Whalen, Associate Solicitor General, and Jonathan N. Wike, Senior Counsel, for the appellee, State of Tennessee.
John Brister Burns and Warren Davidson Broemel, and John Vinson Arnold, Nashville, Tennessee, as the Amicus Curiae.
OPINIONThe relevant facts of this case and four additional cases brought by separate groups of Pennsylvania-domiciled insurance companies are undisputed and the only substantive variation among all of the claimants' respective statements of facts in support of their respective motions for summary judgment is the respective amounts of the disputed taxes paid under protest for each tax year.1
The claimants in this particular case are Old Republic Insurance Company, Pennsylvania Manufacturers' Association Insurance, Manufacturers Alliance Insurance Company, and Pennsylvania Manufacturers Indemnity Company ("Claimants") are Pennsylvania-domiciled insurance companies authorized to provide property and casualty insurance, including workers' compensation coverage, in Tennessee.2
The State of Tennessee, through the Tennessee Department of Commerce and Insurance ("the Department") which administers the imposition and calculation of insurance premium taxes that may be owed the State of Tennessee, is authorized to impose retaliatory taxes on foreign insurance companies doing business in Tennessee under circumstances specified in Tenn. Code Ann. § 56-4-218, Tennessee's retaliatory tax statute. By letter dated November 7, 2008, the Department informed Claimants it was conducting an audit for the years 2005 through 2007. The letters stated that the "issues in this audit are mainly retaliatory in nature." The Department requested Claimants to recalculate their Tennessee retaliatory taxes to include certain Pennsylvania workers' compensation surcharges, file amended premium tax returns, and remit payment of the additional retaliatory taxes.
Claimants disputed the applicability of Tennessee's retaliatory tax statute to the Pennsylvania workers' compensation surcharges, but eventually paid the disputed taxes underprotest. On November 18, 2011, Claimants filed the first of two complaints with the Tennessee Claims Commission ("the Commission") seeking a refund of retaliatory taxes paid under protest for the years 2005 through 2008. In an Amended and Restated Complaint filed in June 2012, Claimants restated all allegations regarding the years 2005 through 2008 and further alleged that they had paid under protest retaliatory taxes for two additional years, 2010 and 2011. The total amount paid under protest by Claimants for the years at issue was $2,579,817.83, which is the amount at issue in this case.
Claimants and the Department filed cross-motions for summary judgment and a hearing was held on January 22, 2013. On March 8, 2013, the Commission issued a final judgment granting the Department's motion for summary judgment and denying Claimants' motion for summary judgment. This appeal followed.
Summary judgment is appropriate where the moving party is entitled to judgment as a matter of law on the undisputed facts. Tenn. R. Civ. P. 56.04. Where the facts are undisputed, this court reviews the grant of summary judgment de novo with no presumption of correctness. City of Tullahoma v. Bedford Cnty., 938 S.W.2d 408, 412 (Tenn. 1997).
"[T]he principal purpose of retaliatory tax laws is to promote the interstate business of domestic insurers by deterring other States from enacting discriminatory or excessive taxes." Western & Southern Life Ins. Co. v. State Bd. of Equalization of Cal., 451 U.S. 648, 668 (1981).
Generally, such statutes provide that whenever the laws of a particular state impose greater burdens and limitations upon companies organized in the enacting state, and doing business in such other state, than are imposed by the laws of the enacting state upon foreign companies doing business in that state,then the same burdens and prohibitions imposed by the foreign state will be imposed by the enacting state upon such companies of the foreign state.
43 AM. JUR. 2D Insurance § 54 (2014).
Tennessee has enacted a retaliatory tax law, Tenn. Code Ann. § 56-4-218(a), which states in pertinent part:
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.
Consistent with the United States Supreme Court in Western and Southern Life Insurance Company, the Tennessee Supreme Court has stated:
[t]he legislative purpose of the retaliatory insurance tax statute, as noted above, 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).
Thus, the issue under the retaliatory tax statute is whether any 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, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions imposed upon the insurance companies of Pennsylvania insurance companies doing business in Tennessee.
There are three Pennsylvania fees or surcharges at issue. The Pennsylvania surcharges identified by the Department as includable in the retaliatory tax computation are:
(1) The Workmen's Compensation Administration Fund. The Administration Fund surcharge covers the operating and administrative expenses of the Pennsylvania Department of Labor and Industry in the direct administration of the Pennsylvania Worker's Compensation Act; it is codified at 77 Pa. Cons. Stat. § 1000.2;
(2) The Subsequent Injury Fund. The surcharge provides a fund for supplementary coverage for previously injured workers for a subsequent loss - for one having suffered a previous similar loss; it is codified at 77 Pa. Cons. Stat. § 516; and
(3) The Workmen's Compensation Supersedeas Fund. The supersedeas fund surcharge provides a fund that reimburses insurers for payments of compensation that are later determined to not be payable; it is codified at 77 Pa. Cons. Stat. § 999.
The Department maintains that each of these surcharges constitutes a fee, fine, penalty, license, deposit requirement or other obligation, prohibition or restriction that is imposed upon Tennessee insurance companies doing business in Pennsylvania which, in the aggregate, are in excess of the taxes, fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions imposed upon Pennsylvania domiciled insurance companies doing business in Tennessee.
Claimants disagree, insisting that the charges are imposed upon the policyholders, who ultimately pay the charges, not the insureds. Claimants principally rely on 71 Pa. Cons. Stat. § 578 in making this argument. The statute reads:
Effective July 1, 1998, the assessments for the maintenance of the Subsequent Injury Fund, the Workmen's Compensation Supersedeas Fund and the Workmen's Compensation Administration Fund under sections 306.2, 443 and 446 of the act of June 2, 1915 (P.L. 736, No. 338), known as the "Workers' Compensation Act," shall no longer be imposed on insurers but shall be imposed, collected and remitted through insurers in accordance with regulations promulgated by...
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