.Iionorabl&Ma5k W&&i‘ Opinion No. S-154
Fire Insurance Commissioner
Bpsrd of.Insurance C,om+e~l~n~rs~ RF,:Construction of Art.
Inte+atlowl. Life,-Build+ng 21.38.0~ th'eTexa6
Au.st.ti,
.Texas. 'fisurantie.Code
as to .._
papnt. of gr?SS
~&ar Mr.wWentiz:: @remlum.taJc.,
-,n(&.The a~ent's.o';icens'ea"shailre'@ort,~&ideti
.oath, to~the Bo&~'tiithln.thirty ‘(30)b&a from ':
tH&fir& dtiy~oP..J~~~,~a-.;rury'of each yeai?the.
amount of gross premiums received bg him for such
,$qsuraqcein nonlicepsed insurers, and shall pay
to .t,heBoard-a $ai of $$v&.‘(5$);per 'centthereos.
Then$eqn 'grass preniiums~~..&hill.meanthe t&al-
gro.ss.amountof premi&ns received eon'e&c&,ad..:
,every.~
such in&rance., less return@$.premlums. In ;
default.of..t.he.~~,nt~.ofany slim.yhlch'~mziybe
sue the State,under..thislaw, the:Board:may.sue ,.
,for t& same.:;,The agqnt~so licensed shall keep
a -separate r+.ord .oP.-all.',trangac.tlo;ns
ias.heFelii
-prcplded opn,at +lJl$+n~s tq..t.he Inspection of
.tlie.Boardq
provi+nti.(ofltiticle.21.38 OS'&
.:ti.~enacttng..tne
Insurance Code, the,Legislature stated in'Sectlon.1 theretif
Hon. Mark Wentz, page 2 .(S-154)'.
that It was exerolslng the powers and prlvileges available
to the State by virtue of Public Law 15, Seventy-Ninth
Congress of the United States, ChaDter 20, First Session,
S. 340, as amended (15 U.S.C.A.',Sect%ons1011-1015) which
provide and declare that the business of insurance and the
continued regulation and taxation thereof by the several
States is in the public wterest and is reserved to the
states. ." r ..'.
Numerous decisiohs by the‘Federa1 courts have'u&eld
the pow&of the'states to levy .taxesrelating to the.busi-';
nessof Insurance. It has been held that Section 1012.of Title
15, U.S~1C.A.,ex&%sly~stating that tsxation~by States of lnter-
state business oftisuranae shall continue, is an exercise bf
the right of Congress to regulate ,interstatephases of thEfIn-
.surauEe-'Ybus'lness.
'St'jetek.P~d~;~l'Insurailce Company
America:,Nevark,'N. J 64 N 2 0 affirm. 321)u.s w 3 (1945)
A license @ximposedz'~y a StaCe on piemlums collected'by a for-
eign lnsurshce.com~g.in'.~~~StatB~aher~ the tax Is applicable
to both domestlc'and:fore%grilnsurahce 'has,beenheld valid and
not constituting aburden'on'lnterstate commerce; In view of the
provisions of Section'1012 of Title"l5, U.S;CiA.,expressly stat-
'lngthat taxatiori.'of:inters~te.lnsuranbebusiniss.by:the States i
shall'continue;.-Prudential Iusur&nce Company-of America v.Murph
2OySX.324, -35 S.N;2d~'58b,affirm. 32U.U.S. 406 (1945). An lr~-~'
Burance premium ta.law'enacted by a State impesidg~a'tex on
premiums collected bJr-ddIlte'stic"~diforeign
insurai& compsnies
In the State has also been held valid on'the same tiounds. and on
the additional ground that such laws do not dlscr&nate against
interstate cdmmerce.~
Americ&. Newark,'N.J.
Section'1011 et sec. of Title.15, U.S.C.A., States may regulate
Insurance business vithin theState though~itls conducted aeross
State lines: American Universal Insurance Compat+~g:v.Sterling,
203 F.2d,159 (1953):
A Texas agent isauthorleed to place direct lines of
insurance'irithins.urersnotauthorieed to do business within
this State only when the insured has been unable, after diligent
effort, to procure from any'lioensed company ‘or compaiiies the
full amount of in&r&&e're@red to~protect the property, lia-
bility or .riskdesired-to be insured 'and.thenonly ln.such amount
as constXt.utes;
the%xcess over theamoUit so.$3+ocurablefrom li-
tensed companies: Arti 21.38'of.the Insurance.Code. 'Further,a
Texas agent may $lace ~such~'excessXrisur%.nce
in Insurers not
licensed-to transact insurance .buslness:lnthis State-only when
he possesses an excess agent's license as required;by Section 2
of Artscle..21.38of the Insuranoe Code.' It is clear, then, that
a Texas'agentso~~l,acing'such exces.sinsurtice transacts such
hon. W&k Wentz,,page 3 (S-154:)
business under and subject to..the:'provisions.of
Article 21.38
and all gross.premiums received..~b~..~~,'fo~
such Insurance are
derived under and.'byvirtue of'hfs excess agentls.license issued
to him by thIsState. The State hati:set-the:termsand conditions
for the Issuance of such Ucenses .and':has'levieda tsx on all
gross premiums received by an excess Fnsurance agent dolngbusi-
ness under and by virtue of such license.
Article 21.38 does not limit the levying of the tax
only to the-tiount of gross~miums received by the agent for
such insurance on.property.located in the-State of Texas, nor
3.6 the 1evy"bf the tax limited only on the gross ir?emiumsre-
ceived by -the,‘agent'for;suchinsurance on properby of insureds
'Vho&'-&giaetita' of Texas.; Section.2(6) of Article 21.38 de-
f.~es-the'te~~ngros~~pl*em~~," as .follows:
"The term 8gross premiums' shall mean the total..
gross amount of premiums received on each andxy
such insursnce'less returned premiums.!‘(Emphasis.
supplied.)
It appears that the Legislature has clearly and.-plainly
defined the term "gross premiums ' as Including all gross.premiums
.(le'ss
returned .premiums)received by the agent on each and every
.polioyor certificate of Insurance procured under the provisions
of Article 21.38: ~'
Cur opinion is, therefore, that all gross premiums
.received by a Texas a ent for such insurance. under the OVL-
SiOAS of Article 21.38 ) are subject to the five percent r5%) tax
provided for in Section 2(d) thereof, regardless of the situs of
the res on which the Insurance Is written and regardless of whether
the insurance policy is issued to a resident ornonresident Of this
State.
SUMMARY
A Texas agent licensed under the provisions of
Article 21.38 of the Insuranoe Code, must report,
under oath, to the Board of Insurance Commissioners
wIthIn thirty (30) days from the first day of Jan-
uary and July of each year the amount of all gross
premiums received by h?.m for all insurance placed
by lines of direct tisuranoe in Insurers not au-
thorized to do business, in this State, and must pay
to the Board a tax of five percent (5s) thereon.
Hon. Mark vents, page 4 (S-154)
The tsxi~~levled oq~all such~g$oss.qremiums
regardlea~s~of'thesitus of'5b .res on.whloh~
-the lnsuranoe'is wrltten.and regardloss.of~
whether-the insured.lrra rosiddnt 02 n6n-
resident of the State.of Texadi.:
APPROVE?r Your4 very truly,
J;'Fred.Jones JOxiN BEN StuPPmD
St~~e-'Affalre~Division ATTORNEY OENERA~J
w:6-V."Geppert'-
.i
-.R&viewer
J.'A:Amis;Jr.
Revikwer
Robert'S'i.Tr&tl
First Assistant