State Farm Mutual Automobile Insurance v. Carpenter

NOURSE, P. J.

Plaintiff had a permanent injunction restraining the defendant, as insurance commissioner, from including membership fees collected by plaintiff in the annual report of “gross premiums” for tax purposes. The cause was heard upon answer filed and the record contains the evidence on this issue of fact. The parties waived findings. On this record we assume that the evidence supports the judgment on all issues of fact raised.

The controversy rests on section 14 of article XIII of the Constitution and sections 900-909 of the Insurance Code, which take the place of the Political Code sections in force at the time, but which are of the same purport and hence referred to for convenience. The constitutional provision reads in part: “Every insurance company . . . shall annually pay to the state a tax, . . . upon the amount of the gross premiums received from its business done in this state. ...” Section 909 provides that the annual statement required by section 905 of the code shall show the income of the company during the preceding year specifying: “(1) Cash premiums received. (2) Notes received from premiums. (3) Interest money received, specifying the source. (4) Income received from all other sources, specifying the source.” The question thus arises whether the company may specify the income received from membership fees separately from the “cash premiums received”, and whether the former should be included in the “gross premiums” and thus become subject to the constitutional tax.

In resolving the issue in favor of the respondent the learned trial judge expressed his reasons in a memorandum opinion with which we are in full accord and which we adopt as our reasons for an affirmance of the judgment. This reads: “Are the membership fees here involved a part of the gross premiums of plaintiff within the meaning of California Constitution, Section 14, Article XIII?

“There can be no question that in ordinary usage ‘the word “premium” in the law of insurance . . . means the

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amount paid to the company as consideration for insurance ’. (32 C. J., p. 1192, Sec. 324; 14 Cal. Jur., p. 469, Sec. 42.)

“Under the testimony in this ease (affidavit of Beedle admitted by stipulation) and the language of the application and policy I am satisfied that the membership fee is no part of the consideration for the insurance.