THE ATTORNEY GENERAL 

OF TEXAS 

February 13, 1989 

Honorable Bob Bullock Opinion No. JM-1016 

Comptroller of Public Accounts 

L.B.J. State Office Building Re: Whether certain activiAustin, Texas 78774 . ties of an independent 

claims investigator or adjustor constitute a taxable 

.' insurance service under 

section 151.0039 of the 

Insurance Code, and related 

questions (RQ-1564) 

Dear Mr. Bullock: 

The second called session of the 70th Legislature 

amended the Texas Limited Sales, Excise, and Use Tax Act, 

chapter 151 of the Tax Code, to create several new 

categories of taxable~ services, including insurance 

services. Tax Code 8 151.0101(a)(9). See Acts 1987, 70th 

Leg. I 2d C.S., ch. 5, a*. 1, pt. 4, f 12. 

The legislature defined "insurance service" as follows: 

(a). 'Insurance service# means insurance 

loss or damage appraisal, insurance inspection, insurance investigation, insurance 

actuarial analysis or research, insurance 

claims adjustment or claims processing, or 

insurance loss prevention service. 

(b) 81nsurance service' does not include 

nsurance coveraae for which a vremium is 

d or commissions paid to insurance agents 

for the sale of insurance or annuities. 

(Emphasis added.) 

Tax Code 8 151.0039, as added by Acts 1987, 70th Leg., 2d 

C.S., ch. 5, art. 1, pt. 4, 8 6. 

In your letter requesting an opinion, you note that a 

number of businesses 

claims investigations 

specialize in providing independent 

and adjustments for insurance 

companies, individuals pursuing claims against insurance 

p. 5241 
companies, and attorneys representing insurance companies or 

claimants. You also note that such firms investigate 

whether an accident covered by insurance or workmen's 

compensation occurred and the cause and extent of the 

damages covered by an insurance or workmen's compensation 

policy. 

You first ask: 

If these services are retained by an insurance company in connection with the resolution of an insurance claim, is this a taxable 

insurance service under S 151.0039 of the Tax 

Code? 

We think that the exclusion of %overage for which a premiums is paid" from the definition of "insurance service" 

simply means that a transaction that consists of the payment 

of a premium for insurance coverage is not a taxable event. 

It does not mean that any expenditure for which the premium 

is ultimately used by the insurer is not a taxable event. 

Further, the definition of "insurance service" 

expressly includes the items you ask about. Thus, the 

suggested reading of the plain language of the Tax Code 

would render the provision making insurance services a 

taxable item meaningless. The legislature cannot have 

intended such an absurd result. See. e.a., Citv of Houston 

y. Allred, 71 S.W.2d 251 (Tex. 1934). 

You next ask: 

If question 1 is answered \yesr8 if these 

services are retained by an insurance company 

after it has made an offer of claims settlement and has been sued by the insured, would 

this still be a taxable insurance service 

under 8 151.0039 of the Tax Code? 

We do not believe that the timing of the engagement of an 

insurance service firm makes any difference. 

You next ask: 

If these services are retained by the insured 

as an aid to his determination of whether he 

has a valid claim or should accept an insurance company's settlement offer rather 

than being retained by the insurance company I would this be a taxable insurance 

p. 5248 
Honorable Bob Bullock - Page 3 (JM-1016) 

service under 5 151.0039 of the Tax Code? 

(Our emphasis.) 

The statute provides no basis for distinguishing among 

purchasers of insurance services. 

Finally, you ask: 

Does taxability turn on whether the services 

are retained by a private individual, by an 

attorney, or by an insurance company? 

Again, the statute provides no ground for the distinctions 

you suggest. 

SUMMARX 

The exclusion of "insurance coverage for 

which a premium is paid" from the definition 

of "insurance coverage" simply means that a 

transaction that consists of the payment of 

a premium for insurance coverage is not a 

taxable event. It does not mean that any 

expenditure for which the permium is 

ultimately used by the insurer is not a 

taxable event. 

Very truly yo , 

J hJ& k 

JIM MATTOX 

Attorney Genera.1 of Texas 

MARYRELLER 

First Assistant Attorney General 

Lou MCcREARY 

Executive Assistant Attorney General 

JUDGE ZOLLIE STBARLBY 

Special Assistant Attorney General 

RICK GILPIN 

Chairman, Opinion Committee 

Prepared by D. R. Bustion, II 

Assistant Attorney General 

p. 5249