Title: American National Life Insurance Company of Texas v. Director of Revenue and Director of Insurance
Citation: N/A
Docket Number: SC89064
State: Missouri
Issuer: Missouri Supreme Court
Date: November 4, 2008

Supreme Court of Missouri 
en banc 
 
AMERICAN NATIONAL LIFE  
 
) 
INSURANCE COMPANY OF TEXAS,  
) 
 
 
 
 
 
 
 
) 
Appellant,  
   
) 
 
 
 
 
 
 
 
) 
 
 
v. 
 
 
 
 
) 
No. SC89064 
 
 
 
 
 
 
 
) 
DIRECTOR OF REVENUE and   
 
) 
 
DIRECTOR OF INSURANCE, 
 
 
) 
 
 
 
 
 
 
 
) 
 
 
 
 
Respondents.  
) 
 
 
 
 
PETITION FOR REVIEW OF A DECISION  
OF THE ADMINISTRATIVE HEARING COMMISSION 
 
 
American National Life Insurance Company of Texas (American National) 
seeks review of the Administrative Hearing Commission's (AHC) decision that 
stop-loss policy premiums are subject to the direct premium tax in section 
148.340.1  This Court has jurisdiction because a state revenue statute must be 
construed.  Mo. Const. art. V, section 3. 
                                                 
1 All statutory references are to RSMo 2000, unless otherwise noted. 
Section 148.340, RSMo 2000, states: 
Every insurance company or association not organized under the laws of this state, shall, 
as provided in section 148.350, quarterly pay tax upon the direct premiums received, 
whether in cash or in notes, in this state or on account of business done in this state, for 
insurance of life, property or interest in this state at the rate of two percent per annum in 
lieu of all other taxes, except as in sections 148.310 to 148.461 otherwise provided, 
which amount of taxes shall be assessed and collected as herein provided; provided, that 
fire and casualty insurance companies or associations shall be credited with canceled or 
return premiums actually paid during the year in this state, and that life insurance 
The decision is affirmed.  The direct premium tax in section 148.340 
applies to consideration paid by an insured directly to an insurer for a contract of 
insurance. 
I. Facts and Procedure 
American National is a Texas-domiciled insurance company that sells stop-
loss insurance policies in Missouri to employers who maintain self-funded health 
benefit plans.  Under the plan, the employer pays health care expenses for 
employees.  The employee does not pay a specific amount to the employer for the 
health benefit.  The employer purchases stop-loss insurance, in which the insurer 
reimburses the employer for large expenses over a specific amount.  The policy is 
purchased to limit the employer’s liability. 
From 2001 to 2003, American National did not report stop-loss policy 
premiums as direct premiums and did not pay the direct premium tax specified in 
section 148.340.  In 2004, the department of insurance notified American National 
that the premium tax was re-certified and the amount due was $10,668 for 2001, 
$6,246 for 2002, and $7,377 for 2003.  American National paid the tax under 
protest and filed a claim for refund, which the department of revenue denied.  On 
review, the AHC found American National was not entitled to a refund because 
the stop-loss policy premiums were direct premiums and subject to the premium 
tax in section 148.340. 
                                                                                                                                                 
companies shall be credited with dividends actually declared to policyholders in this 
state, but held by the company and applied to reduction of premiums payable by the 
policyholder.  (Emphasis added).  
 
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II. Standard of Review and Rule of Statutory Construction 
AHC's interpretation of revenue laws is reviewed de novo.  President 
Casino, Inc. v. Dir. of Revenue, 219 S.W.3d 235, 239 (Mo. banc 2007).  The 
decision is upheld when it is "authorized by law and supported by competent and 
substantial evidence upon the whole record." Id.  Upon review, a tax statute is 
"strictly construed in favor of the taxpayer and against the taxing authority."  Id. 
A statute is construed to "ascertain the intent of the legislature from the 
language used, to give effect to that intent if possible, and to consider the words in 
their plain and ordinary meaning."  Id. at 240.  Only when "the language is 
ambiguous or would lead to an illogical result" may the words be construed 
outside of the plain and ordinary meaning.  Mary S. Riethmann Trust v. Dir. of 
Revenue, 62 S.W.3d 46, 48 (Mo. banc 2001).  When a statute defines a term, that 
definition is given effect.  President Casino, 219 S.W.3d at 240.  Otherwise, 
statutes concerning the same subject may be used to determine the statute's 
meaning.  Id. 
III. Analysis 
A. Direct Premium Tax 
Section 148.340 imposes a tax upon the "direct premium received" by 
insurers.  The term "direct premium" is not defined in section 148.340 or cases 
interpreting the statute.  However, the meaning of the words "direct" and 
"premium" can easily be found. 
 
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"Direct" is defined in Black's Law Dictionary as "[i]mmediate; proximate;      
. . . operating by an immediate connection or relation, instead of operating through 
a medium."  546 (4th ed. 1968).  "Premium" is defined in Black's Law Dictionary 
as a "sum paid or agreed to be paid by an assured to the underwriter as the 
consideration for the insurance."  1344 (4th ed. 1968). 
The term "premium" was considered in Fidelity Security Life Ins. Co. v. 
Dir. of Revenue as "consideration paid by an insured to an insurer for a contract of 
insurance."  32 S.W.3d 527, 531 (Mo. banc 2000) (citing Black's Law Dictionary 
1181 (6th ed. 1990); Webster's Third New International Dictionary 1789 (1981)).  
In Metro. Life Ins. Co. v. Scheufler, the term "premium received" is not "only 
those portions of the premiums received which are retained for (or used in) the 
company’s business."  180 S.W.2d 742, 744 (Mo. 1944) (emphasis in original).  
The National Association of Insurance Commissioners defines "direct written 
premium" as "the total premiums received by a property and liability insurance 
company without any adjustments for the ceding of any portion of these premiums 
to the reinsures."  http://www.naic.org/consumer_glossary.htm#D (last visited Oct. 
20, 2008). 
In this context, the meaning of the term "direct premium" is clear.  "Direct" 
means immediate, proximate, not through a medium or third party.  "Premium" 
means the consideration paid by an insured to an insurer for a contract of 
insurance.  Thus, a tax on "direct premiums received" is imposed upon the 
consideration paid by an insured to an insurer for a contract of insurance.  This is 
 
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in contrast to reinsurance premiums that are paid by the primary insurer to a 
reinsurer, after the insured directly pays the initial premium to the primary insurer.  
The primary insurer cedes the policy’s risks to a reinsurer.  See generally Colonial 
Am. Life Ins. Co. v. Comm'r, 491 U.S. 244 (1989); Reinsurance Association of 
America, http://www.reinsurance.org (last visited Oct. 20, 2008). 
This construction of the term "direct premiums received" is consistent with 
the state's general policy of not double taxing an event.  The tax is imposed when 
the insured makes the initial and direct payment to the primary insurer, but is not 
reimposed when the primary insurer cedes the risk and pays the second premium 
to the reinsurer. 
B. Reinsurance 
American National argues the stop-loss policies are reinsurance and not 
subject to the direct tax in section 148.340.  American National relies upon 
Associated Industries of Mo. v. Angoff for the proposition that stop-loss insurance 
cannot be included in the premiums taxed.  937 S.W.2d 277 (Mo. App. 1996).  
Angoff held the director of insurance lacked authority to regulate stop-loss 
insurance as medical expense insurance under chapter 376, RSMo.  Id. at 278-279, 
285.   
American National's argument misses the mark.  Section 148.340 neither 
imposes a tax upon insurance nor exempts reinsurance from tax.  It taxes "direct 
premiums received."  Here, the insured is the employer and the insurer is 
American National.  The employer does not collect any specific sums from the 
 
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employees for the benefit and no tax is imposed on the benefit by section 148.340 
upon the employer or the employees.  The first premium paid and subject to tax is 
that paid by the employer to American National. 
C. Constitutional claims 
The direct premium tax in section 148.340 does not violate the equal 
protection clauses of the federal and state constitutions.  The rational basis test 
applies because a fundamental right or suspect class is not involved.  In re Care & 
Treatment of Coffman, 225 S.W.3d 439, 445 (Mo. banc 2007).  The statute is valid 
because all insurance companies are taxed on the direct premiums received.2
American National is not subject to the privileges and immunities clause of 
article IV of the federal constitution, because it is a corporation, or the commerce 
clause, because it is an insurance company.  See Western & Southern Life Ins. Co. 
v. State Bd. of Equalization of Cal., 451 U.S. 648, 656 (1981). 
The direct premium tax is constitutional as applied to American National.  
IV. Conclusion 
The AHC decision is affirmed.  
 
_________________________________ 
 
 
 
 
 
 
WILLIAM RAY PRICE, JR., JUDGE 
Stith, C.J., Teitelman, Russell, Wolff and Breckenridge, JJ., and Newton, Sp.J., 
concur.  Fischer, J., not participating.   
                                                 
2 The state imposes a tax on direct premiums received by domestic insurance companies, section 148.320, 
and foreign insurance companies, section 148.340.     
 
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