Thursday, September 03, 2009

California court rejects submitting E&S carriers to double taxation

A California court released its ruling on Wednesday in Silvers v. State Board of Equalization that surplus lines insurers should not be subject to both surplus lines taxes and gross premium taxes. In the decision, Judge Holly Kendig rejected arguments to require surplus lines insurers with California insureds to pay both the 2.35% tax on gross premiums written and the 3.0% surplus lines premium.

The case involved a claim that, based upon a constitutional provision that imposed a tax on companies "doing business" in California, the State Board of Equalization should have been collecting from Lexington Insurance Co. and numerous other unnamed surplus lines carriers both the gross premium and surplus lines premium taxes as they were doing business in California.

Lexington argued that the legislative history and case law showed that the surplus lines premium tax was in lieu of gross premium tax. NAPSLO, the Surplus Lines Association of California, and others submitted amicus briefs supporting Lexington's position.

In a decision reached on Aug. 28, the Court rejected the plaintiffs' argument and held that the 2.35% tax only applies to admitted insurers doing business in the state and does not apply to surplus lines insurers such as Lexington.

No comments: