189 Iowa 933 | Iowa | 1920
I. Section 1333, Code Supplement, 1913, was as follows:
“Every insurance company or association organized or incorporated under the laws of any state or nation other than the United States, and every other insurance company whose charter may be owned or a majority of whose stock may be controlled or whose business shall be carried on in the interest or for the benefit of any insurance company or association incorporated under the laws of any state or nation other than the United States, shall, at the time of making the annual statements as required by law, pay into the state treasury as taxes two and one-half per cent of the gross amoúnt of premiums received by it or its agents, in cash, promissory obligation or other form of*936 settlement for business done in this state,, including all insurance upon property situated in this state and upon the lives of persons resident in this state during the preceding year. Every insurance company • incorporated under the laws of any state of the United States other than the state of Iowa, not including associations operating under the provisions of Chapter seven, Title nine of this Code, or fraternal beneficiary associations doing business in the United States, shall, at the time of making the annual, statements as required by law, pay into the State treasury as taxes two and one-half per cent of the gross a'mount of premiums received hy it for business done in this state, including all insurance upon property situated in this state and .upon the lives of persons resident in this state during the preceding year. At the time of paying said taxes, said companies and associations shall take duplicate receipts therefor, one of which shall be filed with the auditor of state, and upon filing of said receipt, and not till then, the auditor shall issue the annual certificate as provided by law. No deduction or exemption from the taxes herein provided shall be allowed for or on account of any indebtedness owing by any such insurance company or association.”
This was amended by the thirty-second general assembly, by adding thereto the following proviso:
“Provided, however, that companies doing a fire insurance business'may deduct from the gross amount of premiums received, the amount of premiums returned upon canceled policies issued upon property situated in this state.”
The question is„ What items should be included and what excluded, in ascertaining the “gross amount of premiums received” for the particular year in question?
The concrete case is that the Casualty Company received and retained as earned premiums for the particular year approximately the sum of $51,000. This item presents no dispute. It was claimed by the State of Iowa in the district court that two other items, amounting
The item of $22,000 was made up of charges appearing upon the books of the company for premiums upon policies issued, but not yet delivered. The fact is conceded that such policies never were delivered, and that no part of the $22,000 thus charged as premiums was ever earned or received. The claim upon this item, however* has been abandoned by the State, and we have no occasion to give it further consideration.
The item of $20,000 claimed by the State represents premiums actually received in the first instance by the company, but afterwards returned to the policyholders,, upon cancellation of their policies before the expiration of their terms.
The contention for the State is that, inasmuch as these premiums were received, they became part of the gross premiums, regardless of their subsequent return; whereas the Casualty Company contends that, though it received the premiums in question, it received the same, under the law, subject to the right of the policyholder to demand the return of all unearned premiums, upon cancellation of the policy; that its right to any premium received was not complete until it-had earned the same; and that no premium should be deemed “received,” within the meaning of the statute, until the legal right of the company to retain it is complete and irrevocable. The district court sustained this latter contention.
The argument for the State rests upon two general grounds. . The first is that the item in question is covered by the literal terms of the statute, and that there is no fair room for a different construction. We cannot adopt this view. While it is true, in a literal sense, that the company did receive these premiums from the policyholders in advance of their earning, it is also true, in a legal sense, that it received the same subject to the right of the policyholders to demand the return,, upon a cancellation of their policies at any time before the earning of the
No case is cited to us to the contrary. In People v. Miller, 177 N. Y. 515 (70 N. E. 10), supra, the question was fully discussed in the opinion. The following quotation therefrom is illustrative of the argument in all the cited cases:
“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 * * * Every 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 premiums shall be refunded by the company. (Ins. Law, Sec. 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*939 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. * * * It may be asked, Why does the statute say gross premiums, unless it means all premiums received, whether refunded or not? We think the use of the word ‘gross’ was intended to include all premiums that remain in the treasury of the company, and to exclude any deductions for the commissions of agents or the expenses of doing business. The gross amount collected from canceled policies means the gross amount collected and retained by the company. The amount paid back is not collected for business done, but. received for business expected to be done. The key to the construction of the statute is business done, for that is the basis of the tax. The state allows the corporation to do business and taxes it for such business as it actually does, — not for business attempted but never completed. A canceled policy does not represent business done after the date of cancellation; for no business is done through that policy after that date. The exercise of the right to cancel interrupts the business being done by the policy, and ipso facto renders the company liable to repay the unearned premium, and we think it would be unreasonable to hold that the sum refunded is, for the purpose of taxation under this statute, actually collected.”
“IV. It is agreed that, whenever the American Alli&nce Insurance Company issues an insurance policy on any piece of property in the state of Iowa, that the liability thereon is automatically reinsured by the Great American Insurance Company, in accordance with a contract entered into between the two companies; that said contract between said companies was executed and entered into in the state of New York, and that the American Alliance Insurance Company pays to the Great American Insurance Company on such insurance so ceded, the entire amount received therefor, less actual cost of writing same; that, in case of a loss, the amount of such loss is paid to the American Alliance Insurance Company in the state of New York, and that the contract for such reinsurance between the said two companies was made and is carried out in the state of New York. * * *
“VI. That the American Alliance Insurance Company, by contract entered into outside of the state of Iowa, and carried out outside of the state of Iowa, reinsures the excess lines of the Great American Insurance Company, and that the insurance commissioner of the state of Iowa, in making up the tax of the American Alliance Insurance Company for 1918, contended that the 2% per cent tax was due, not only upon the face of the policies written by the American Alliance Insurance Company, but upon the premiums received for reinsurance of excess lines from the Great American Insurance Company, which premiums had, for the purposes of taxation, been once charged to and the tax paid thereon by the Great American Insurance Company; that the contract for reinsurance between the Great American and American Alliance Insurance com
It is made to appear, for instance, that the American Alliance Insurance Company collected from the policyholders approximately $18,000, in round numbers. It paid the full premium tax thereon. Likewise, the Great American Insurance Company received from the policyholders a gross amount of premiums,, and paid the full premium tax thereon. To this extent, there is no dispute as between the state of Iowa and either of these companies. But, under their indemnity or reinsuring contract between each other, each ceded to the other its excess business, and paid therewith the pro rata premium collected respectively by each from the policyholders. The excess business ceded to the American Alliance Insurance Company brought with it pro rata premiums to such company amounting approximately to $13,000, in round numbers. The premium tax on these premiums had been fully paid by the ceding company. Likewise, excess business was ceded to the Great American Insurance Company, carrying with it pro rata premiums amounting to thousands of dollars, the premium tax on which had been fully paid by the ceding company. Upon the $13,000 thus received by the American Alliance Insurance Company, the state claims the premium tax. A similar claim is made against the Great American Insurance Company for the amount of premiums received by it pursuant to such distribution of business. The question presented, therefore, is whether such distribution of business between these companies, and perhaps others, amounts to a receiving of additional premiums,, upon which an additional premium tax should be paid.
It is conceded that the contract of indemnity or reinsurance in question was entered into between these com
This conclusion has the support of holdings in other states, and no contrary holding is cited to us. See State v. Continental Ins. Co., (Ind.) 116 N. E. 929; American Fid. Co. v. Leahy, 189 App. Div. 242 (178 N. Y. Supp. 511); State v. Connecticut Mut. Life Ins. Co., 106 Tenn. 282 (61 S. W. 75); City of New Orleans v. Virginia Fire & Mar. Ins. Co., 33 La. Ann. 10; Knights Templar & M. L. I. Co. v. Jarman, 187 U. S. 197.
The legal right of these companies to enter into such indemnifying contract in the state of their domicile, and to perform such contract therein, was in no manner dependent upon any Iowa statute. If the contract was legal under New York law, authority under Iowa statute was not requisite. If such authority were, in fact, given, the legality of the contract could not thereby be increased; and if such authority were withheld, its legality could not thereby be diminished.
This of itself is a sufficient reason for saying that Sections 1710 and 1711 have no application; and also that Section 1333 should not be construed as attempting to operate upon such transaction.
In holding that the premiums thus distributed between these companies in New York became subject to an additional premium tax, the trial court erred, and the judgments entered against each of these ñre companies named respectively are, accordingly,, reversed. — Affirmed on appeal of State; reversed on other two appeals.