State Insurance Commissioner v. Nationwide Mutual Insurance Company

Prescott, C. J., delivered the opinion of the Court. The Baltimore City Court affirmed a decision of the Maryland Tax Court, which abated an assessment of retaliatory insurance taxes or obligations by the Insurance Commissioner against Nationwide Mutual Insurance Co., and the Commissioner has appealed. One question only is presented for determination: “Is a foreign insurance company doing business in Maryland entitled to a credit on its retaliatory tax return filed pursuant to Article 48A, Section 46 of the Code for those amounts paid by it for support of the Unsatisfied Claim and Judgment Fund assessed under Article 66j£, Section 151 of the Code?” Nationwide is an Ohio corporation, duly qualified and admitted to do business in this state. As a foreign insurance company, it is required to file, each year, a “Maryland Premium Tax Report” with the Commissioner for taxes and obligations, etc., imposed by Code (1957), Article 48A, Section 46, which is popularly known as the “Retaliatory Tax Statute.” 1 ¹¹¹ Ordinarily, three steps are taken in calculating the tax or obligations, if any, due under the statute.

First, it is determined, in the aggregate, the total “premium or income or other taxes * * * or other obligations” which a Maryland company writing, in premiums, the same volume of insurance in Ohio as Nationwide writes in Maryland would be required to pay to the State of Ohio. Second, the total, in the aggregate, of all “premium or income or other taxes,” etc., which Nationwide is required to pay to the State of Maryland is calculated. Third, if the aggregate amount of taxes or obligations computed on the Ohio basis exceeds the aggregate amount thereof computed on the Maryland basis, the difference is the net retaliatory tax or obligation due and payable to Maryland. 2 Ohio has a higher basic premium tax rate than Maryland, and, as a result, Ohio companies, after the yearly aggregate totals are calculated, usually find themselves indebted, in varying amounts, to the State of Maryland. In stating the tax due on its reports filed for 1959, 1960, and 1961, Nationwide included in the aggregate of “premium * * * or other taxes * * * or other obligations” exacted by Maryland, payments of some $78,000 made by it to the Unsatisfied Claim and Judgment Fund (Fund), as required by Code (1957), Article 66}i, Section 151 (Section 151).

The Commissioner, by letter, approved this method of calculation, but ¹¹² later reversed his position relative thereto as a result of an opinion from the Attorney General’s office, and asserted a claim against Nationwide for additional retaliatory taxes of $77,062.56. Nationwide requested a ruling by the Commissioner to the effect that it was entitled to take credit for the payments made to the Fund, and, when this request was not complied with, it appealed to the Maryland Tax Court, where the ruling of the Commissioner was reversed. On appeal to the Baltimore City Court, the Maryland Tax Court was affirmed, as noted above, and this appeal followed. The briefs on both sides have been prepared with commendable care, skill and ability, and have been very helpful to the Court in its determination of the case.

Nationwide was required by Section 151, a statute of the State of Maryland, to make the payments; hence, under the explicit language employed in Section 46, our question narrows to whether such payments were encompassed within the terms “taxes, fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions or restrictions.” It is conceded by the parties that if they were Nationwide should prevail, and if they were not the Commissioner should. We shall not take up each of the terms and consider them separately. For the purposes of this opinion, we shall assume, without deciding, that the payments did not come within the purview of “taxes, fees, fines, penalties, licenses [or] deposit requirements.” (In Allied Amer. Mut.

Fire Ins. Co. v. Comm’r, 219 Md. 607 , we referred to such payments as a “tax,” but we were discussing the constitutionality of the assessments on insurance companies for the support of the Fund and not the specific nature of such payments in the context of the statute. Although not excluding the possibility that the payments may properly be classified as “taxes,” we find it unnecessary to base our conclusion herein on such a classification.) This leaves for our consideration the terms “or other obligations.” To sustain his position, the Commissioner relies principally upon two rulings of the Attorney General of Maryland’s office, the familiar rule of construction (or maxim) ejusdem generis, and the cases of Comonwealth v. Fireman’s Fund Ins. Co., 87 A. 2d 255 (Pa.); Indemnity Ins.

Co. v. Stowell, 174 ¹¹³ N. E. 2d 536 (Oh.); and Farm Bureau Mut. Ins. Co. v. Neel, 55 Dauphin Cty. Rep. 325, 335 (Pa.).

We do not find these authorities persuasive to the extent of controlling our decision herein. The first opinion from our Attorney General’s office (44 Op. A. G. 197) dealt with the converse of the situation in the case at bar. New Jersey had an U. C. & J. F. and related funds to which foreign corporations were required to contribute a percentage of their premium income.

During the period of time involved in the opinion, Maryland had no Fund. The question was whether payments made to the New Jersey funds by Maryland companies should be included in the calculation, for retaliatory purposes, of the amounts due Maryland from New Jersey companies under Section 46. Mainly upon the ground that the New Jersey funds were “in the nature of [trusts],” the Assistant Attorney General concluded there was “serious doubt” that the assessments paid into such funds were intended to come within the purview of “other obligations” as the phrase was used in Section 46, and, since the doubt should be resolved in favor of the taxpayer, the Commissioner should not invoke the statute as to the assessments paid to the New Jersey funds. In the second opinion, the case at bar was the subject matter of the opinion.

The Assistant Attorney General felt that the prior opinion from his office was controlling, and “consistency require[d]” that he be governed by the conclusion there reached. No mention was made of the “serious doubt” feature of the first opinion, and that in the later opinion, the doubt, if any, was, on this occasion, being resolved against the taxpayer. 48 Op. A. G. 220. Our reading of the opinion in Commonwealth v. Fireman’s Fund Ins.

Co., supra, leads us to the conclusion that it lends as much support to appellee’s cause as to the appellant’s. It points out that the purpose of its retaliatory tax statute, drawn in terms very similar to ours, was “to bring about equality of treatment between domestic and foreign corporations * * and states “the charge imposed [by the statute] is in the nature of a license fee levied under the police power.” (See also Philadelphia Fire Ass’n v. New York, 119 U. S. 110 , where the Supreme Court held that a similar retaliatory charge imposed by ¹¹⁴ New York was “an entrance fee” or “license fee.” The Attorney General of New York reached the same conclusion in his opinion of 1944, infra, which reads as follows: “these [payments required by statute to be made to the Fire Patrol] are obligations * * * imposed, by statute, for the privilege of doing business in the State.”) (Emphasis added.) It then went on to hold that when its statute spoke of “taxes, fines, penalties, licenses, fees or other obligations,” the phrase “or other obligations” meant “or other obligations of similar [not identical] nature.” (Thus, it will be noted that full and accurate consideration was given to the rule of ejusdem generis, which we deal with below.) The Court further held that payments made by the insurance company to a “Fire Insurance Patrol,” whose members stood by damaged property and property exposed to damage after firemen had left it, were in no way similar to the specific items named in its statute, because the assessment was “not levied by the Commonwealth [although it was authorized by statute] but by the Patrol itself and it is collected and disbursed by that organization, a private body and not a part of the government. The Commonwealth in no way controls the amount, collection or use of the funds.” The Court concluded by stating that the payments made to the Patrol were no more than a quid pro quo for the benefits received from it. And we are unable to find anything of substantial solace to ■appellant’s contentions in the opinion rendered in the Stowell case, supra.

The Court simply held that under the Ohio retaliatory tax statute, taxes, license fees and “fees to be paid the county recorders” should be aggregated, and, since the terms “or other obligations” in its statute comprehended and included only obligations “similar to those specified” (just as the Pennsylvania Court held as above noted), one of the insurance companies involved was not entitled to take credit for the “expense of publishing its certificate of compliance as required by Section 3905-11,” or other costs with