Attorney General's Opinion
Attorney General, Richard Blumenthal
December 22, 2005
Commissioner of Revenue Services
25 Sigourney Street
Hartford, CT 06106
Dear Commissioner Law:
You have asked for an opinion whether non-profit employers’ mutual insurance associations under
The Mutual Association Statutes are part of the Workers’ Compensation Act, Chapter 568 of the Connecticut General Statutes. Under the Workers’ Compensation Act, employers must prove that they are financially able to meet their liabilities in one of three ways:
(1) by filing with the Insurance Commissioner in form acceptable to him security guaranteeing the performance of the obligations of this chapter by the employer; or
(2) by insuring his full liability under this part, exclusive of any liability resulting from the terms of section 31-284b, in any stock or mutual companies or associations that are or may be authorized to take such risks in this state; or
(3) by any combination of the methods provided in subdivisions (1) and (2) of this subsection as he may choose, subject to the approval of the Insurance Commissioner.
The Mutual Association Statutes authorize mutual associations to assume an employer’s workers’ compensation liability under Section 31-284(b)(2). Section 31-328 provides, in part, that “[w]ith the approval of the Insurance Commissioner, employers who are subject to this chapter and are bound to pay compensation to their employees thereunder may associate themselves, in accordance with the law for the formation of corporations without capital stock, for the purpose of establishing and maintaining mutual associations to insure their liabilities under this chapter; but no such association shall be formed to include employers not in the same or similar trade or business or in trades or businesses with substantially similar degrees of hazard of injury to employees.”
The Connecticut Premium Tax imposes a tax on the total net direct premiums received by domestic insurance companies, which are defined as insurance companies chartered by or organized or constituted within or under the laws of this state under Conn. Gen. Stat. §12-201(5), from policies written on property or risks located or resident in this state. It is a franchise tax on premium income for the privilege of doing business in this state.
Because the questions presented turn on the meaning of statutory terms, we are guided by the rules of statutory interpretation. “The meaning of a statute shall, in the first instance, be ascertained from the text of the statute itself and its relationship to other statutes.”
Under General Statutes §12-201(4), “insurance company” is defined as “any corporation, limited liability company, association, partnership or combination of persons doing any kind or form of insurance business other than a fraternal benefit society. . . .” Conn. Gen. Stat. §12-201(4).1“Insurance” is not defined in the tax statutes, but is defined in the insurance statutes, which can provide guidance in determining the meaning of that word. State v.
any agreement to pay a sum of money, provide services or any other thing of value on the happening of a particular event or contingency or to provide indemnity for loss in respect to a specified subject by specified perils in return for a consideration. In any contract of insurance, an insured shall have an interest which is subject to a risk of loss through destruction or impairment of that interest, which risk is assumed by the insurer and such assumption shall be part of a general scheme to distribute losses among a large group of persons bearing similar risks in return for a ratable contribution or other consideration.
Whether a mutual association is an “insurer” or “insurance company” for purposes of the Connecticut Premium Tax has not been addressed by the courts. However, guidance can be found in analogous contexts. In Doucette v. Pomes, 247
The court in Doucette recognized that self-insurance is not insurance at all because there is no transfer of risk.
A non-profit employers’ mutual insurance association is even more like a self-insurer than an insurer. Applying the Doucette court’s definition of insurance, a non-profit employers’ mutual insurance association does not sell insurance to the public, is not in the business of insurance and is therefore not an insurance company. While there may be some risk transfer or assumption involved in a non-profit employers’ group mutual insurance association, it would not be for consideration, as the definition of insurance in section 38a-1(10) requires. Doucette, at 456.
Employers’ mutual insurance associations are “subject to the same regulation and control as is or may be imposed by law upon other corporations or associations taking similar risks in this state, and over them the Insurance Commissioner shall have all the jurisdiction given him by sections 38a-14 and 38a-17 over insurance companies.”
Further support that non-profit mutual insurance associations are not insurance companies can be found in the Private Employer Workers’ Compensation Group Self-Insurance Act, Conn. Gen. Stat. §§38a-1000 to 38a-1023 (“Group Self-Insurance Act”). This act permits private employers to form not-for-profit associations of employers, who are engaged in the similar or same type of business, to enter into agreements to pool their liabilities for workers’ compensation benefits and employers’ liability.
The workers’ compensation self-insurance groups are not deemed to be insurers or insurance companies and are not generally subject to the provisions of Title 38a, Insurance.3 Conn. Gen.
The Mutual Association Statutes do not specify that the associations must be non-profit. You have requested an opinion only regarding non-profit mutual associations. Non-profit mutual associations are not insurance companies because they are not in the business of insurance. Doucette, 247
For the forgoing reasons, we conclude that non-profit employers’ mutual insurance associations are not insurance companies within the meaning of Conn. Gen. Stat. §12-201(4) and are therefore not subject to the Connecticut Premium Tax.
Very truly yours,
1 Under General Statutes §38a-1(11), an “‘insurer’ or ‘insurance company’ includes any person or combination of persons doing any kind or form of insurance business other than a fraternal benefit society. . . .”
2 The court also based its decision on the legislative purpose of the Guaranty Act, which is to protect those outside of the insurance industry from losses due to the insolvency of a member of that industry, and the assessment of employers for Second Injury Fund liabilities.
3 Workers’ compensation self-insurance groups are subject to General Statutes §§38a-14 (examination of financial condition of insurance companies) and 38a-17 (authority of commissioner when business is not conducted properly).
4 The legislative history of the Group Self-Insurance Act indicates that the premium tax on group self-insurers was enacted to prevent them from having an advantage over their competition in the standard insurance