Case Name: AUDUBON INSURANCE COMPANY Louisiana Farm Bureau Mutual Insurance Company, Southern Farm Bureau Casualty Insurance Company, Cumis Insurance Society, Inc., MFA Mutual Insurance Company, Allstate Insurance Company and State Farm Mutual Automobile Insurance Company v. Sherman H. BERNARD, As Commissioner of Insurance and as Ex-Officio Chairman of the Louisiana Insurance Rating Commission, State of Louisiana, through the Honorable William J. Guste, Jr., Attorney General, Mary Evelyn Parker, Treasurer, and Shirley McNamara, Secretary of the Department of Revenue and Taxation; AETNA CASUALTY AND SURETY CO., et al. v. Sherman H. BERNARD, et al.
Court: Louisiana Supreme Court
Jurisdiction: Louisiana
Decision Date: 1983-06-27
Citations: 434 So. 2d 1072
Docket Number: No. 82-CA-2744
Parties: AUDUBON INSURANCE COMPANY Louisiana Farm Bureau Mutual Insurance Company, Southern Farm Bureau Casualty Insurance Company, Cumis Insurance Society, Inc., MFA Mutual Insurance Company, Allstate Insurance Company and State Farm Mutual Automobile Insurance Company v. Sherman H. BERNARD, As Commissioner of Insurance and as Ex-Officio Chairman of the Louisiana Insurance Rating Commission, State of Louisiana, through the Honorable William J. Guste, Jr., Attorney General, Mary Evelyn Parker, Treasurer, and Shirley McNamara, Secretary of the Department of Revenue and Taxation. AETNA CASUALTY AND SURETY CO., et al. v. Sherman H. BERNARD, et al.
Judges: MARCUS, J., dissents and assigns reasons.
Reporter: Southern Reporter, Second Series
Volume: 434
Pages: 1072–1078

Head Matter:
AUDUBON INSURANCE COMPANY Louisiana Farm Bureau Mutual Insurance Company, Southern Farm Bureau Casualty Insurance Company, Cumis Insurance Society, Inc., MFA Mutual Insurance Company, Allstate Insurance Company and State Farm Mutual Automobile Insurance Company v. Sherman H. BERNARD, As Commissioner of Insurance and as Ex-Officio Chairman of the Louisiana Insurance Rating Commission, State of Louisiana, through the Honorable William J. Guste, Jr., Attorney General, Mary Evelyn Parker, Treasurer, and Shirley McNamara, Secretary of the Department of Revenue and Taxation. AETNA CASUALTY AND SURETY CO., et al. v. Sherman H. BERNARD, et al.
No. 82-CA-2744.
Supreme Court of Louisiana.
June 27, 1983.
Ben C. Toledano, Gerald J. Gallinghouse, Margaret A. Bretz, Porteous, Toledano, Hainkel & Johnson, New Orleans, Louis D. Curet, D’Amico & Curet, Baton Rouge, for plaintiff-appellees.
Ben L. Day, Owen, Richardson, Taylor, Matthews & Atkinson, William G. Whatley, Law Firm of Theodore L. Jones, Jr., Baton Rouge, for intervenors-appellees.
William C. Toadvin, John L. Avant, Daniel Avant, Wallace A. Hunter, Baton Rouge, for defendants-appellants.

Opinion:
DENNIS, Justice.
The plaintiff insurance companies sue for judgment declaring unconstitutional Act 434 of the 1979 Regular Session of the Legislature. They claim that Act 434 is a nullity because the circumstances of its enactment violated the constitutional requirements that a statute levying a new tax or increasing an existing tax (1) be enacted by a vote of two-thirds of the elected members of each house, and (2) not be enacted during a regular session held in an odd-numbered year. La. Const.1974, Art. 3 § 2; Art. 7 § 2. Interventions were filed by 35 additional insurance companies for the same purpose. Defendants are the state, the commissioner of insurance, the Firefighters' Retirement System and other state officials.
The district court agreed with the plaintiffs' argument and held that Act 434 of the 1979 regular session is unconstitutional. The defendants appeal directly to this court as is their right in a case in which a state law has been declared unconstitutional. La. Const. 1974, Art. 5 § 5(D)(1).
The 1974 Louisiana Constitution places limitations on the power of taxation vested in the legislature. La. Const. 1974, Art. 7 § 1. Among these are prohibitions against the levy of a new tax or an increase of an existing tax by a vote of less than two-thirds of the elected members of each house of the legislature, Id. Art. 7 § 2, or the enactment of a law levying a new tax or increasing an existing tax during a regular session held in an odd-numbered year. Id. Art. 3 § 2.
It is undisputed that Act 434 of 1979 was enacted during a regular session held in an odd-numbered year and by a vote of less than two-thirds of the elected members of each house. Accordingly, if the statute levies a new tax or increases an existing tax, it is unconstitutional and was correctly struck down. On the other hand, if the statute does not levy a tax, but merely constitutes an exercise of police power, or a dedication of revenues from an existing tax, it was properly enacted, because the constitution contains no special requirements for such legislation.
It is well settled generally and in Louisiana that not every imposition of a charge or fee by the government constitutes a demand for money under its power to tax. If the imposition has not for its principal object the raising of revenue, but is merely incidental to the making of rules and regulations to promote public order, individual liberty and general welfare, it is an exercise of the police power. City of Lake Charles v. Wallace, 247 La. 285, 170 So.2d 654 (1965); Ewell v. Board of Supervisors, Etc., 234 La. 419, 100 So.2d 221 (1958); 4 Cooley, The Law of Taxation, § 1784 (4th Ed.1924). In similar fashion, the police power may be exercised to charge fees to persons receiving grants or benefits not shared by other members of society. Southern Pacific Transp. Co. v. Parish of Jefferson, 315 So.2d 619 (La.1975); City of Lake Charles v. Wallace, supra; Louisiana Ry. & Navigation Co. v. Madere, 124 La. 635, 50 So. 609 (1909); Griggsby Constr. Co. v. Freeman, 108 La. 435, 32 So. 399 (1902); Cf. National Cable Television Ass'n, Inc. v. United States, 415 U.S. 336, 94 S.Ct. 1146, 39 L.Ed.2d 370 (1974); Cooley, supra. But if revenue is the primary purpose for an assessment and regulation is merely incidental, or if the imposition clearly and materially exceeds the cost of regulation or conferring special benefits upon those assessed, the imposition is a tax. Acorn v. City of New Orleans, 407 So.2d 1225 (La.1981); Ewell v. Board of Supervisors, Etc., supra; City of New Orleans v. Heymann, 182 La. 738, 162 So. 582 (1935); State v. Wilson & Co., Inc. of Louisiana, 179 La. 648, 154 So. 636 (1934).
Applying these precepts, we conclude that the imposition of Act 434 of 1979 has for its primary object the raising of revenue. The legislative history and the provisions of Act 434 itself indicate that it is a tax and not just an incident of regulation for an assessment on persons for grants or special benefits.
Act 434 of the 1979 regular session sought to amend a pre-existing statutory scheme. The Louisiana Insurance Rating Commission is charged with the responsibility of insurance ratemaking for fire, marine and transportation (inland marine), title insurance and casualty insurance, including automobile theft, general liability and worker's compensation coverages. La.R.S. 22:1403. Originally, the commission was authorized to assess each insurer doing business in the state and subject to its jurisdiction, an amount not to exceed one percent of its gross retained premiums received in the state in the previous year, in order to pay the costs of the commission's operations and the enforcement of the laws under its supervision. La.R.S. 22:1419. This basic scheme was amended in 1973 and 1974 to provide that, in addition to the assessments necessary for the commission's operations, the commission shall collect from the insurers and pay into the state treasury an amount equal to 4/10 of 1% of such premiums for the Municipal Police Employees' Retirement System and 1/10 of 1% of such premiums for the Sheriffs' Pension and Relief Fund. See Act 323 of 1974; Act 188 of 1973.
Act 434 of 1979 purported to amend La. R.S. 22:1419 further to require that, in addition to the amounts assessed by the commission for its own operations, and the amounts collected by it for the police and sheriffs' funds, the Commission shall collect from the insurers an amount equal to 2/10 of 1% of the insurers' previous year's premiums for the Firefighters' Retirement System. The Firefighters' Retirement System is established by law for the purpose of providing retirement allowances and other benefits for firemen employed by any municipality, parish, or fire protection district of the state of Louisiana. La.R.S. 33:2151. Consequently, the assessment imposed by Act 434 is not levied for the purpose of defraying the cost of insurance regulation. Moreover, the evidence demonstrates without dispute that the police, sheriffs and firefighter assessments are in addition to the commission's assessment for its own operations and thus clearly and materially exceed the amounts assessed annually by the commission for the cost of regulation. In 1980, for example, although the assessment by the commission for its own operations and contingencies was approximately $3,203,000, the total assessments which the commission was required to make, including the firefighters, police and sheriff assessments, amounted to over $14,000,000. It is self-evident, therefore, that the principal purpose of the additional assessments, including the imposition for the Firefighters' Retirement System, is to raise revenue and that none is a mere incident of insurance ratemaking.
The attorney for the Firefighters' Retirement System argues, however, that the firefighter assessment is nothing more than a charge to persons who receive a special benefit or an imposition incidental to the commission's regulatory function. He says that a healthy Firefighters' Retirement System directly benefits casualty insurers because it makes the occupation of firefighters more attractive, assures continued employment of qualified persons, diminishes fire losses, and ultimately reduces insurance rates. Stated another way, he contends that an assessment collected to insure adequate fire protection, thus reducing insured losses and, therefore, the charge assessed to consumers is a proper and valid regulatory fee and not a tax.
Although the statute at issue addresses a legitimate state concern and its objective is a laudable one, it is nevertheless an exercise of the power of taxation. Its principal object is to raise revenues to strengthen the Firefighters' Retirement System and thereby eventually improve the quality of fire protection for the public in general. It is not an imposition limited to the extraction of fees from persons receiving a special benefit from government not shared by other members of society. All persons and entities benefit from better fire protection, not just fire insurers and their policyholders. Moreover, the imposition is made upon all casualty insurers, marine and transportation insurers, and title insurers, not just fire insurers. Since not all of these insurers would benefit from a reduction in fire insurance rates, this is another indication that the imposition is not a fee charged persons receiving a special benefit from more effective fire protection.
The assessment of charges for the purpose of improving fire protection and reducing fire insurance rates is not an incident of the insurance rating commission's regulatory function either. The commission's powers are limited to the regulation of insurance rates. La.R.S. 22:1401 et seq. This is not to say that the legislature is without the power to establish a regulatory agency with responsibilities for the improvement of fire protection and the reduction of fire insurance rates. But the statutory scheme under review is confined to ratemaking and does not encompass these concerns.
Finally, defendant argues that, even if the statute imposes a tax, it is not a new tax or an increase in an existing tax. La. R.S. 22:1419, as originally enacted, authorized the commission to make assessments in an amount sufficient to pay for its own operations and for the enforcement of the part of the insurance code relating to the commission. Now that Act 434 of 1979 has become a part of these provisions, defendant argues, the commission is simply called upon to exercise its preexisting powers of assessment and to remit the proceeds to the Firefighters' Retirement System; hence, the act does not levy a new tax or increase an existing tax, but merely directs the commission to exercise its preexisting powers to finance the retirement system. This ingenious argument will not sustain defendant's case, however. The act imposes a new tax because it obliges the commission to assess insurers 2/10 of 1% of their previous year's premiums for the firefighters' system regardless of the percentage assessed by the commission for its own operations. Consequently, the firefighters' assessment is a tax upon premiums in addition to any imposition by the commission for regulatory operations. It is a new tax, because if the commission expended all of its original assessment power for regulatory purposes, Act 434 would require a separate and additional assessment of 2/10 of 1% of insurers' premiums for the Firefighters' Retirement System.
For the reasons assigned, we conclude that Act 434 of 1979 levies a new tax during a regular session held in an odd-numbered year and was not enacted by the necessary vote of two-thirds of the elected members of each house of the legislature. Accordingly, we affirm the judgment of the trial court declaring this act unconstitutional.
AFFIRMED.
MARCUS, J., dissents and assigns reasons.
. Assessments in years subsequent to 1980 are not challenged in these suits. The substance of Act 434 of the 1979 regular session was re-enacted by Act 799 of the regular session of 1980 during a session in an even-numbered year by a vote of two-thirds of the elected members of both houses of the legislature.