Commerce & Industry Insurance v. Department of Treasury
301 Mich. App. 256
Mich. Ct. App.2013Background
- C&I filed a 2003 tax refund suit against Michigan Dept. of Treasury seeking $2,787,358, alleging Michigan’s retaliatory tax should exclude three New York charges.
- Consolidated with AIU and AHA claims, each asserting NY Board charges, Special Disability Fund, and Reopened Cases Fund assessments are not burdens on New York insurers doing business in New York.
- Trial court granted summary disposition for plaintiffs, finding charges either borne by policyholders or excluded under MCL 500.134(5)-(6).
- Michigan retaliatory tax (MCL 500.476a) taxes foreign insurers by the difference between burdens in the foreign state and Michigan; statutory exclusions were at issue.
- New York statutes 151(2)(b), 15(8)(h), 25-a(3), and 151(2)(c) imposed assessments on insurers but required surcharges to be collected from policyholders, creating separate payments.
- New York cases (Selective Ins Co) held assessments and surcharges were historically distinct; post-2009 amendments equalized methods, but the core issue was whether assessments remained burdens on insurers.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Are NY assessments a burden on foreign insurers for retaliatory tax? | C&I/AIU/AHA contend the three NY charges are borne by policyholders, not insurers. | Department argues charges are burdens on insurers under NY law and thus parts of the retaliatory tax. | Yes; NY assessments are burdens on insurers and includable. |
| Do MCL 500.134(5)-(6) exclude the NY charges as similar to Michigan associations or facilities? | Charges are similar to Michigan associations/facilities and should be excluded. | NY boards/charges are not similar to Michigan associations or nonprofit insurer groups. | No; NY charges are not similar and are not excluded. |
| Are NY assessments and policyholder surcharges two separate payments, affecting burden calculation? | Assessments paid by insurers and surcharges collected from policyholders should be treated as distinct; assessments are the burden. | Two-payment mechanism complicates burden; focus on overall NY burden. | Two separate payments exist; assessments on insurers are burdens includable. |
| Does constitutional equal protection or Dormant Commerce Clause rationale limit the retaliation tax here? | Tax scheme could be overbroad or unconstitutional. | Retaliatory tax upheld as rational basis and permissible under McCarran-Ferguson framework. | No constitutional violation; rational basis and commerce considerations satisfied. |
Key Cases Cited
- TIG Ins Co v Dep’t of Treasury, 464 Mich 548 (2001) (retaliatory tax constitutionality; equal burdens between states)
- Selective Ins Co of Am v NY Workers’ Compensation Bd, 102 AD3d 72 (N.Y. App. Div. 2012) (assessments vs surcharges—historical distinctness prior to 2009 amendment)
- First American Title Ins Co v Combs, 258 S.W.3d 627 (Tex. 2008) (pass-through not a direct burden; distinction from NY scheme)
- Saginaw Co v John Sexton Corp of Mich, 232 Mich. App. 202 (1998) (true pass-through statutory scheme vs direct insurer burden)
- Western & Southern Life Ins Co v State Bd of Equalization of California, 451 U.S. 648 (1981) (equal protection and interstate tax policy principles for retaliatory taxes)