Attorney General's Opinion

Attorney General, Richard Blumenthal

December 22, 2005

Pam Law
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 Conn. Gen. Stat. §§ 31-328 to 31-339 (“Mutual Association Statutes”) are “insurance companies” within the meaning of Conn. Gen. Stat. §12-201(4) and are therefore subject to the Connecticut insurance premium tax, Conn. Gen. Stat. §§12-201 to 12-212a (“Connecticut Premium Tax”).  For the reasons that follow, 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 not subject to the Connecticut Premium Tax.


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.

Conn. Gen. Stat. §31-284(b).

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.”  Conn. Gen. Stat. §31-328.

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.  Conn. Gen. Stat. §12-202.


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.”  Conn. Gen. Stat. §1-2z.  In interpreting statutes, the presumption is that “laws are enacted in view of existing relevant statutes . . . and that statutes are to be interpreted with regard to other relevant statutes because the legislature is presumed to have created a consistent body of law.” Hatt v. Burlington Coat Factory, 263 Conn. 279, 315, 819 A.2d 260 (2003) (internal quotation marks omitted).

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. Ramos, 271 Conn. 785, 796, 860 A.2d 249 (2004).  General Statutes § 38a-1(10) defines “insurance” as

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.

Conn. Gen. Stat. §38a-1(10).

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 Conn. 442, 724 A.2d 481 (1999), for example, our Supreme Court found that a workers’ compensation self-insurer was not an insurer for purposes of the Connecticut Insurance Guaranty Association Act (“Guaranty Act”).  In reviewing section 38a-1(10), the court stated that “the legislature defines insurance as the assumption of another’s risk for profit.”  Id. at 456.  Furthermore, the fact that a self-insured employer chooses to “insure its own workers’ compensation risk rather than purchase insurance does not transform a company’s business to that of insurance, that is, the employer is not ‘doing any kind or form of insurance business’ within the meaning of §38-1(11).”  Id. at 457. 

The court in Doucette recognized that self-insurance is not insurance at all because there is no transfer of risk.  Id. at 458.  While Doucette involved only an individual employer, the court considered instructive a report submitted to the National Association of Insurance Commissioners (“NAIC”) concerning self-insured workers’ compensation groups, which are separate entities formed by many employers to assume their workers’ compensation risks.  The court applied the report’s reasoning to conclude that a self-insured workers’ compensation group is more like a self-insurer than an insurer. Id. at 463. 

Subsequently, in Sims v. Stamford Hospital, 2004 Conn. Super. Lexis 3300 (Conn. Super., Nov. 9, 2004), the court followed this reasoning in finding that a for-profit employers’ mutual association was not an insurer for purposes of the Guaranty Act.2

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.”  Conn. Gen. Stat. §31-331.  The phrase referring to the Insurance Commissioner’s jurisdiction would be unnecessary if workers’ compensation mutual insurance associations were deemed to be insurers or insurance companies as the Insurance Commissioner would already have the authority to examine them and to take action if business were not conducted properly.  “Every word and phrase is presumed to have meaning, and we do not construe statutes so as to render certain words and phrases surplusage.”  Vibert v. Board of Education, 260 Conn. 167, 176, 793 A.2d 1076 (2002) (citations omitted; internal quotation marks omitted).

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.  Conn. Gen. Stat. §38a-1001(8).  Both the Mutual Association Statutes and Group Self-Insurance Act accomplish the same result: employers that are in the same or similar type of business may form an association to comply with their workers’ compensation liabilities.  They both require a certificate of approval issued by the Insurance Commissioner. 

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. Stat. §38a-1000.  Because they are not insurance companies, they are not subject to tax under §12-202.  Those that are formed under the Group Self-Insurance Act are, however, required to pay a premium tax under General Statutes §38a-1011, which applies only to employer associations under the Group Self-Insurance Act.4

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 Conn. at 465. General Statutes §12-202 imposes a net direct premium tax on domestic insurance companies.  Non-profit mutual insurance associations are not insurance companies, and thus §12-202 does not apply to them.



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,



Dinah J. Bee

Assistant Attorney General


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. . . .” Conn. Gen. Stat. § 38a-1(11).  “‘Person’ means an individual, a corporation, a partnership, a limited liability company, an association, a joint stock company, a business trust, an unincorporated organization or other legal entity.”  Conn. Gen. Stat. §38a-1(14).

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.  Id. at 9-10. General Statutes § 31-349g provides that for purposes of assessing employers for Second Injury Fund liabilities for the period from October 1, 2004 through December 31, 2004, self-insured employer shall include an employer mutual association organized prior to June 6, 1996, with a membership composed exclusively of health care providers and whose premium base is derived entirely from health care organizations.  Conn. Gen. Stat. §31-349g(c)(2).  After January 1, 2005, insured employer includes such employer mutual associations composed exclusively of health care providers and whose premium base is derived entirely from health care organizations.  Conn. Gen. Stat. §31-349g(c)(1).  The mutual association in Sims met the requirements of General Statutes §31-349g to qualify as a self-insured employer for purposes of the Second Injury Fund.  Id. at 7.

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).  Conn. Gen. Stat. §38a-1000.


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 market The committee hearings include a statement from the Insurance Association of Connecticut (“IAC”) that the private employer workers’ compensation group self-insurance act was based on the NAIC’s Model Act and that proponents of the act recommended adoption to further competition in the market.  The IAC stated that the only way group self-insurers can present true competition to the standard insurance market is if they are subject to the same costs, such as taxes, that standard insurers pay.  Conn. Joint Standing Committee Hearings, Insurance & Real Estate, 1996 Sess., pp. 694-95 (March 5, 1996).

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