ICA v. Old Rep./Liberty – 11/3/2009

November 17, 2009

Arizona Court of Appeals Division One Holds That Workers’ Compensation Insurance Carriers Do Not Have to Pay Taxes on the Difference Between a Full Premium and the Reduced Premium Charged for a Deductible Policy.

Pursuant to A.R.S. § 23-961(J), workers’ compensation insurance carriers  are required to pay taxes on all premiums “collected or contracted for.” Because the premiums for insurance policies with a deductible are lower, insurance carriers have paid a lower amount of taxes on the premiums from policies with deductibles. The Industrial Commission of Arizona (the “ICA”) filed a declaratory judgment complaint against three insurance carriers, requesting that the superior court require the insurance carriers pay increased taxes for deductible insurance policies. The ICA argued that A.R.S. § 23-963.01(B) required that the insurance carriers be taxed for deductible policies as if the premiums were the same as policies having a deductible. The superior court dismissed the ICA’s complaint for failing to state a claim, and awarded attorneys’ fees for the defendant’s insurance carriers at the statutory hourly rate of seventy-five dollars. The ICA appealed the dismissal, and Liberty Insurance Corporation cross-appealed, requesting an award of attorneys’ fees higher than the statutory hourly rate. The Arizona Appeals Court affirmed the superior court, stating that “the difference between a full premium and the reduced premium charged for a deductible workers’ compensation insurance policy should not be taxed. . . .” The Court also affirmed the award of attorneys’ fees at the statutory rate, finding that the superior court did not abuse its discretion.

Judge Portley authored the opinion; Judges Johnsen and Barker concurred.