People ex rel. Cont'l Ins. Co. v. Miller

Decision Date23 February 1904
Citation177 N.Y. 515,70 N.E. 10
PartiesPEOPLE ex rel. CONTINENTAL INS. CO. v. MILLER, State Comptroller.
CourtNew York Court of Appeals Court of Appeals


Appeal from Supreme Court, Appellate Division, Third Department.

Certiorari by the people, on the relation of the Continental Insurance Company, against Nathan L. Miller, comptroller of the state of New York, to review refusal of defendant to revise a tax assessed against the relator. From an order of the Appellate Division (85 N. Y. Supp. 1142), confirming such order, relator appeals. Modified.

Haight, J., dissenting.

John S. Sheppard, Jr., for appellant.

John Cunneen, Atty. Gen. (William H. Wood, on the brief), for respondent.


The relator, a domestic fire insurance corporation, is subject to taxation at the rate of 1 per cent. per annum of the gross amount of premiums received during the calendar year for business done in this state. Tax Law, § 187 (Laws 1896, p. 859, c. 908, as amended by Laws 1901, p. 297, c. 118, § 1). The comptroller, in computing the gross amount of its premiums for the year 1901, included the sum of $49,280.81 refunded to policy holders upon canceled policies, and refused to deduct the sum of $13,149.40 paid by the company for reinsurance. Upon due application made, he declined to readjust the tax by deducting either of the sums named, and a writ of certiorari, issued to review his determination, resulted in the affirmance thereof by the Appellate Division, one of the justices dissenting.

The questions presented require us to construe section 187 of the tax law, which, so far as applicable to the case in hand, is as follows: ‘An annual state tax for the privilege of exercising corporate franchises or for carrying on business in their corporate or organized capacity within this state equal to one per centum on the gross amount of premiums received during the preceding calendar year for business done in this state, whether such premiums were in the form of money, notes, credits, or any other substitute for money, shall be paid annually into the treasury of the state, on or before the first day of June by the following corporations: ‘(1) Every domestic insurance corporation, incorporated, organized or formed under, by, or pursuant to a general or special law. * * * (3) * * * The term ‘gross premiums' as used in this article shall include, in addition to all other premiums, such premiums as are collected from policies subsequently canceled and from reinsurance. * * *’ Laws 1901, p. 297, c. 118, § 1; Tax Law, Laws 1896, p. 859, c. 908, § 187. When the law was passed in 1896, as well as after it was amended in 1897, the last sentence above quoted did not appear, but in 1901 the section was revised and enlarged in many respects, and that sentence was then added. Laws 1896, p. 859, c. 908, § 187, as amended by Laws 1897, p. 630, c. 494, § 1.

Two questions are presented for decision: (1) Should unearned premiums, paid in advance, but refunded upon the cancellation of policies, be included in ‘the gross amount of premiums received * * * for business done’? (2) Should the sum paid by the relator to other companies for reinsuring its risks be deducted from such gross amount?

The tax under consideration is an annual tax imposed upon a corporation for the privilege of exercising its corporate franchises and carrying on business in a corporate capacity within this state. People ex rel. Mutual Trust Co. v. Miller, 177 N. Y. 51, 54,69 N. E. 124. It is measured by business done during the calendar year ending on the 31st of December, and is payable on June 30th of the following year. Tax Law, Laws 1901, pp. 297, 298, c. 118, §§ 187, 189. As an aid to the comptroller in fixing the amount of the tax, each corporation subject to taxation under section 187 is required ‘on or before March 1st in each year’ to make a written report ‘stating the entire amount of premiumsreceived on business done thereby in this state during the year. * * *’ Tax Law, § 189. 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. The gross premiums embrace, in addition to all others, such as are collected from policies subsequently canceled. Id. § 187. The statute does not expressly include in the gross premiums those received, but those collected from canceled policies. What is the business done through a canceled policy? It is the insurance made or indemnity furnished during the period that the policy is in force. That is the only business that a fire insurance company can do. Every fire 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 has run 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.

What is the amount collected, within the meaning of the act, upon such a policy, assuming that the premium for one year was paid in advance, and that the proper proportion was refunded upon cancellation? The time of viewing the transaction, as is apparent from the time when the report to the comptroller is made and the tax fixed, is not the date of the policy, but the date of cancellation, when the contract ends and insurance ceases. As the tax is paid for business done, and the business done is insurance for six months, the amount collected is either the sum collected and retained, or else it includes something for business not done, or unrealized anticipationsof business. While, in a certain sense, it may be said that payment of the premium in advance for one year involves insurance made for one year, notwithstanding the fact that according to its terms the policy is subsequently canceled, a majority of the court is of the opinion that this is inconsistent with the fair meaning of the words ‘business done,’ when looked back upon at the end of the year. The premium which represents business done is the amount that the company has the benefit of and furnishes an equivalent for. If is the money earned by the policy, for the rest is a liability. Ins. Law, Laws 1892, p. 1979, c. 690, § 118. When part of the premium is refunded, it is the same in effect as if it had never been paid. The contract is...

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