Title: Alfa Mutual Insurance Company, Alfa Mutual General Insurance Company, and Alfa Mutual Fire Insurance Company v. City of Mobile and the City of Mobile, Alabama, Police and Firefighters Retirement Plan
Citation: N/A
Docket Number: 1051747
State: Alabama
Issuer: Alabama Supreme Court
Date: September 28, 2007

REL:  06/08/2007 - Alfa v. City of Mobile
rel:  09/28/2007 - As modified on denial of rehearing
Notice: This opinion is subject to formal revision before publication in the advance
sheets of Southern Reporter.  Readers are requested to notify the Reporter of Decisions,
Alabama Appellate Courts, 300 Dexter Avenue, Montgomery, Alabama 36104-3741 ((334)
229-0649), of any typographical or other errors, in order that corrections may be made
before the opinion is printed in Southern Reporter.
SUPREME COURT OF ALABAMA
OCTOBER TERM, 2006-2007
____________________
1051747
____________________
Alfa Mutual Insurance Company, Alfa Mutual General Insurance
Company, and Alfa Mutual Fire Insurance Company
v.
City of Mobile and the City of Mobile, Alabama, Police and
Firefighters Retirement Plan
Appeal from Mobile Circuit Court 
(CV-01-2246)
STUART, Justice.
The City of Mobile ("the City") and the City of Mobile,
Alabama, Police and Firefighters Retirement Plan ("the
Retirement Plan") sued Alfa Mutual Insurance Company ("AMIC"),
1051747
2
Alfa Mutual General Insurance Company ("AMGIC"), and Alfa
Mutual 
Fire 
Insurance 
Company 
("AMFIC") 
(collectively 
referred
to as the "Alfa companies") in the Mobile Circuit Court,
alleging that the Alfa companies failed to pay certain license
taxes from 1995 through 1998 and failed to make required
contributions to the Retirement Plan from 1995 through 1999.
The trial court entered a summary judgment in favor of the
City and the Retirement Plan, and the Alfa companies now
appeal.  We reverse and remand.
I.
Municipalities in Alabama are permitted by § 11-51-90,
Ala. Code 1975, to impose a license tax on businesses
operating within their corporate limits and by § 11-51-91,
Ala. Code 1975, to impose a license tax on businesses
operating within their police jurisdictions.  However, the
legislature has specifically capped the rate at which such a
license tax may be imposed upon insurance companies.  Section
11-51-120, Ala. Code 1975, caps the rate of the license tax
municipalities may impose on "any fire or marine insurance
company" at 4%:
"No license or privilege tax or other charge for
the privilege of doing business shall be imposed by
1051747
3
any municipal corporation upon any fire or marine
insurance 
company 
doing 
business 
in 
such
municipality except upon a percentage of each
$100.00 of gross premiums, less return premiums, on
policies issued during the preceding year on
property located in such municipality.  Such
percentage shall not exceed four percent on each
$100.00 or major fraction thereof of such gross
premiums ...."
Section 11-51-121, Ala. Code 1975, caps the license tax
municipalities the size of Mobile may impose on "any insurance
company, other than fire and marine insurance companies" at 1%
(plus $50):
"(a) No license or privilege tax or other charge
for the privilege of doing business shall be imposed
by any municipal corporation upon any insurance
company, other than fire and marine insurance
companies, doing business therein or its agents
which shall exceed for the company and its agents
the following amounts:
"....
"(4) Each such insurance company, in
cities and towns having a population of
more than 50,000, $50.00 and $1.00 on each
$100.00 and major fraction thereof of gross
premiums, less return premiums, received
during the preceding year on policies
issued during said year to citizens of said
cities and towns."
Thus, these two statutes (hereinafter collectively referred to
as "the license-tax statutes") set a maximum tax rate of 4%
for fire and marine insurance companies and a maximum tax rate
1051747
4
of 1% (plus $50) for insurance companies other than fire and
marine insurance companies.  
In 1994, the City, pursuant to the authority granted it
in §§ 11-51-90 and 11-51-91, passed Ordinance No. 34-085 ("the
license-tax ordinance"), which imposed the following license
taxes upon insurance companies operating in Mobile:
"(a) Fire and marine insurance.  Each person,
firm or corporation doing business in the City of
Mobile shall pay $4.00 on each $100.00 and major
fraction thereof of the gross premiums on policies
issued for the preceding calendar year on property
located 
in 
the 
City 
of 
Mobile 
and 
police
jurisdiction thereof, less premiums returned by
cancellation ....
"(b) Other insurance.  Each person, firm or
corporation doing any other kind of business than
those specified in subdivisions (a), (c), and (e)
shall pay $50.00 and $1.00 on each $100.00 and major
fraction thereof of gross premiums received, less
the premiums returned by cancellation, received
during the preceding year on policies issued during
the preceding year to citizens of the City of Mobile
and police jurisdiction thereof.
"(c) Mutual aid association.  Same as fire and
marine insurance.
"(d) Persons, firms, 
or 
corporations 
writing 
own
insurance shall pay same license as other agents or
agencies.  Provided, that this shall not apply to
Knights 
of 
Pythias, 
Odd 
Fellows 
and 
such
incorporated fraternal orders.
"(e) Auto, fire, theft, or collision insurance.
Same rate as fire and marine insurance."
1051747
In 1996, AMFIC transferred all of its fire-insurance
1
policies to AMIC.
5
Thus, the license-tax ordinance placed no import on whether a
company was a "fire or marine insurance company" or an
"insurance company, other than fire and marine insurance
companies," as those terms are used in the license-tax
statutes.  Rather, the license-tax ordinance placed a 4% tax
on premiums for fire and marine insurance and a 1% tax on
premiums for other insurance, regardless of the nature and
character of the insurance company issuing the insurance and
collecting the premiums.  The City reenacted the license-tax
ordinance throughout the period in question.
During this time, the Alfa companies operated in the City
and sold various types of insurance to customers within the
City and its police jurisdiction.  Each of the Alfa companies
was licensed by the City and paid annual license taxes based
on the gross insurance premiums collected.  AMFIC sold
policies in 1995 and 1996 and paid the City license taxes at
the rate of 4% on the premiums collected for all those
policies, the rate applicable to fire-insurance companies.1
AMIC and AMGIC sold policies throughout the period from 1995
through 1998 and paid the City license taxes at the rate of 1%
1051747
6
(plus $50) on the premiums collected for all those policies,
the rate applicable to insurance companies other than fire and
marine insurance companies. 
Since 1951, Alabama law has also required certain
insurance companies operating in Mobile to make contributions
to the Retirement Plan.  Act No. 91-701, Ala. Acts 1991 ("the
1991 Pension Act"), states that requirement as follows:
"Each insurance company writing fire insurance on
property within the city limits of the city of
Mobile and its police jurisdiction on or before the
first day of March of each year, shall pay to the
city of Mobile a sum equal to four percent (4%) of
its gross amount of premiums, including all renewal
premiums, less return premiums, collected by such
companies on policies in effect during the preceding
year 
in 
such 
municipality 
and 
its 
police
jurisdiction.  One-half (1/2) of said sum shall be
credited to said pension fund."
The 1991 Pension Act did not define "fire insurance," and the
Alfa companies took the position that the term meant only
actual fire-insurance policies, not any insurance policy that
provided any coverage against the risk of loss by fire.  Only
AMIC and AMFIC issued fire-insurance policies in Mobile
between 1995 and 1997, and they made contributions to the
Retirement Plan during that period in accordance with their
interpretation of the 1991 Pension Act.  AMGIC did not issue
1051747
7
fire-insurance policies; it accordingly made no contributions
to the Retirement Plan.
In 1997, the legislature enacted Act No. 97-689, Ala.
Acts 1997 ("the 1997 Pension Act"), which was substantially
identical to the 1991 Pension Act but which contained in Art.
6, § 6.03(d), an additional provision stating:
"For purposes of this section, 'fire insurance'
means any line which insures property against the
risk of loss by fire, including homeowners' and
vehicle polices.  Where a policy issued has more
than one type of coverage, the company shall pay
only on that portion of the premium attributable to
the fire coverage."
In spite of this language defining the term "fire insurance,"
the Alfa companies in 1998 and 1999 continued to make
contributions to the Retirement Plan as they had under the
1991 Pension Act, i.e., AMIC making contributions and AMGIC
not, based only on the value of actual fire-insurance policies
sold.
The City and the Retirement Plan thereafter discovered
that the Alfa companies were not paying all the license taxes
and making all the contributions to the Retirement Plan that
the City and the Retirement Plan believed were required by
law.  In June 2001, the City and the Retirement Plan sued the
1051747
8
Alfa companies seeking to recover the allegedly unpaid sums,
plus interest and penalties.  In their final amended nine-
count complaint, the City claimed in counts one through four
("the license-tax claims") that AMIC and AMGIC owed additional
license taxes for the years 1995, 1996, 1997, and 1998.   In
counts five through nine ("the pension-fund claims"), the City
and the Retirement Plan claimed that the Alfa companies were
obligated to make additional contributions to the Retirement
Plan for the years 1995, 1996, 1997, 1998, and 1999.  The Alfa
companies denied liability on all counts and counterclaimed to
recover license taxes and contributions to the Retirement Plan
they alleged they overpaid or paid under the license-tax
ordinance, which they alleged was invalid.
In November 2004, the City and the Retirement Plan moved
for a partial summary judgment on the pension-fund claims.
After the Alfa companies responded and a hearing was held, the
trial court granted the City and the Retirement Plan's motion
and entered a partial summary judgment in their favor.
Thereafter, AMIC and AMGIC moved for a summary judgment on the
license-tax claims, as did the City.  On July 27, 2006, the
trial court granted the City's motion for a summary judgment
1051747
9
on the license-tax claims.  On September 6, 2006, the trial
court entered a final judgment in favor of the City and the
Retirement Plan on all claims.  The Alfa companies appeal the
judgment entered on all the license-tax claims and on the
pension-fund claims for the years 1995, 1996, and 1997.  They
do not appeal the judgment entered on the pension-fund claims
for the years 1998 and 1999, after the enactment of the 1997
Pension Act.
II.
The relevant facts in this case are not disputed.
Rather, the Alfa companies argue that the judgment entered by
the trial court is premised on an erroneous interpretation of
the relevant statutes and acts.  "This Court reviews de novo
a trial court's interpretation of a statute, because only a
question of law is presented."  Scott Bridge Co. v. Wright,
883 So. 2d 1221, 1223 (Ala. 2003).  
III.
We first consider the judgment entered for the City on
the license-tax claims.  The Alfa companies argue that the
license-tax statutes, as well as the caselaw interpreting
those statutes, indicate that for license-tax purposes an
1051747
10
insurance company must be classified as either: 1) a fire and
marine insurance company, or 2) an insurance company other
than a fire and marine insurance company.  Once classified,
the Alfa companies argue, an insurance company cannot be taxed
at a rate greater than the cap set by the legislature –– 4%
for fire and marine insurance companies and 1% for other types
of insurance companies.  The City, however, disputes that an
insurance company must absolutely be classified either as a
fire or marine insurance company or as an insurance company
other than a fire or marine insurance company.  Rather, the
City argues, every insurance company is a fire-insurance
company to the extent it sells fire insurance.  Thus, even if
an insurance company is not, generally speaking, a fire-
insurance company, the City argues that that company is still
subject to the 4% license tax on the fire insurance that it
does issue.  For the reasons that follow, we disagree.
This issue is primarily one of statutory interpretation
and, as this Court has previously stated, "[t]he cardinal rule
of statutory interpretation is to determine and give effect to
the intent of the legislature as manifested in the language of
the statute."  Ex parte State Dep't of Revenue, 683 So. 2d
1051747
11
980, 983 (Ala. 1996) (citing Gholston v. State, 620 So. 2d 719
(Ala. 1993)).  We think it sufficiently clear from the
language used in the license-tax statutes that the legislature
intended to create two mutually exclusive categories in which
to place insurance companies for license-tax purposes.
Section 11-51-120 states that it applies to "any fire or
marine insurance company," and § 11-51-121 states that it
applies to "any insurance company, other than fire and marine
insurance companies."  These two categories are all inclusive,
that is, every insurance company must fit within one of the
two classifications.  Although what constitutes a "fire-
insurance company" is not defined, the fact remains that every
insurance company either is a fire-insurance company or is not
a fire-insurance company.  Or, to use the statutory language,
every insurance company is either a "fire or marine insurance
company" or an "insurance company, other than fire and marine
insurance companies."
This Court has recognized the above dichotomy in previous
cases 
interpreting 
the forerunners to the license-tax
statutes.  In Motors Insurance Corp. v. City of Birmingham,
269 Ala. 339, 341, 113 So. 2d 147, 148 (1959), this Court
1051747
12
prefaced its opinion by stating that "[i]n regard to municipal
licenses, the legislature has divided insurance companies into
two classifications, (1) fire and marine insurance companies
and (2) insurance companies other than fire and marine."
Moreover, in City of Birmingham v. State Farm Mutual
Automobile Insurance Co., 382 So. 2d 1111 (Ala. 1980), this
Court considered the same statutes at issue in this case and
reaffirmed that every insurance company is either a fire and
marine insurance company or an insurance company other than a
fire and marine insurance company.
City of Birmingham v. State Farm is particularly
instructive on this point because the same issues were
involved.  This Court stated then:
"The basis of the lawsuit is Birmingham's
assertion that § 11-51-120 applies to State Farm,
not § 11-51-121; that is, that State Farm Mutual
Automobile Insurance Company (not to be confused
with its subsidiary company, State Farm Fire and
Casualty Company) is a 'fire insurance company'
issuing 
policies 
'on 
property 
located' 
in
Birmingham, and therefore that State Farm is obliged
to pay a privilege tax of four percent on each
$100.00 of its gross premiums earned in Birmingham.
State Farm's position is that it is a 'casualty
insurance' company and therefore is an insurance
company 'other than fire and marine,' and thus is
obligated to pay the lesser privilege tax of one
percent on each $100.00 (plus $50.00) called for
under § 11-51-121.
1051747
13
"Having been unable to resolve the question
administratively, State Farm brought this action to
have the Jefferson County Circuit Court declare that
it 
should 
be 
taxed 
under 
§ 
11-51-121. 
 
By
counterclaim Birmingham sought to make State Farm
liable 
for 
privilege 
taxes 
for 
1978 
and
retroactively to 1973, plus penalties and interest
for State Farm's refusal to pay the amount allegedly
owed.  Following an evidentiary hearing the trial
court declared that State Farm was not a fire
insurance company under § 11-51-120, but was a
company 'other than [a] fire and marine insurance
compan[y]' 
and 
thus 
subject 
to 
§ 
11-51-121.
Birmingham appeals.
"The issues presented by the parties focus
initially upon the interpretations to be given these
two statutes.  Birmingham insists that these
statutes and their predecessors, Act No. 163, Acts
of Alabama, 1927, pp. 150-151; Act No. 194, Acts of
Alabama, 1935, pp. 552-553; Tit. 37, §§ 736 ('other
than fire and marine insurance companies') and 739
('any 
fire 
or 
marine 
insurance 
company'),
established classifications based upon 'property' or
'people.' 
 
There 
is, 
states 
Birmingham, 
one
classification authorizing a tax measured by four
percent of premiums received from policies 'on
property located in [the] municipality' (see § 11-
51-120), while another classification authorizes a
tax measured by one percent of premiums received
from policies issued 'to citizens of said cities and
towns' (see § 11-51-121(a)(4)).  According to
Birmingham, these are separate classifications which
relate to the business conducted, and the business
conducted 
by 
State 
Farm 
is 
the 
selling 
of
'automobile physical damage insurance.'  That kind
of insurance, Birmingham contends, is 'property'
insurance which is a class of 'fire insurance,'
making State Farm a fire insurance company."
1051747
That categorization is, in turn, dependent on "the
2
character of the company itself," that is, "the nature of
[its] principal business endeavor, as manifested by its
charter, its activities and its operations."  City of
Birmingham v. State Farm, 382 So. 2d at 1114-15.
14
382 So. 2d at 1112-13.  After considering the parties'
arguments, this Court ultimately accepted the position
advocated by State Farm and affirmed the judgment of the trial
court.  In doing so, this Court acknowledged that classifying
insurance companies using only the two categories created by
the legislature was not easy, "because of the historical
development of insurance companies, the gradual expansion of
coverages, and the fact that companies organized for one type
of risk (e.g., fire) might actually write other coverages
partially or exclusively."  382 So. 2d at 1114.  Thus, this
Court in City of Birmingham v. State Farm was cognizant of the
fact that an insurance company other than a fire-insurance
company might write some fire insurance, but the Court
nevertheless recognized that it was obligated to use the
classification system provided by the legislature and to
categorize an insurance company as either a "fire and marine
insurance company" or an "insurance company, other than fire
and marine insurance companies."   Since City of Birmingham v.
2
1051747
Section 11-51-95 was amended in April 2006, "effective
3
for license years beginning after December 31, 2007."  The
15
State Farm was decided in 1980, the legislature has not
amended the license-tax statutes, and we must consider the
legislature's inaction in our decision today.  See Hexcel
Decatur, Inc. v. Vickers, 908 So. 2d 237, 240 (Ala. 2005)
("[R]egardless of how this Court might today decide this
question if writing on a clean slate, we are not doing so and
we must now decide this question in light of [our previous
decision] and the subsequent inaction of the Legislature.").
Notwithstanding the unambiguous language of the license-
tax statutes and our previous caselaw interpreting those
statutes, the City argues that insurance companies need not be
categorized as simply "fire and marine insurance companies" or
"insurance compan[ies], other than fire and marine insurance
companies" and taxed entirely at the corresponding rate.
Rather, the City argues, insurance companies should be taxed
at the 4% rate on the fire-insurance policies they sell and at
the 1% rate on the other insurance policies they sell.  In
support of this argument, the City cites § 11-51-95, Ala. Code
1975, which was not cited in City of Birmingham v. State Farm,
and which, at the times pertinent to this action, provided:3
1051747
amendment substantially rewrote § 11-51-95.
16
"Any person, firm or corporation dealing in two
or more of the articles or engaged in two or more of
the 
businesses, 
vocations, 
occupations 
or
professions for which a license is or may be
required shall take out and pay for a license for
each line of business, vocation, occupation or
profession."
In conjunction with § 11-51-95 the City argues that the Alfa
companies are engaged in two separate lines of business –– the
sale of fire insurance and the sale of insurance other than
fire insurance –– and that they may be taxed accordingly.  The
Alfa companies dispute that characterization and argue that
they are engaged in a single line of business –– the sale of
insurance. 
However, regardless of whether the sale of fire insurance
and the sale of insurance other than fire insurance constitute
separate lines of business, § 11-51-95 is inapplicable to the
present case because, "[w]here statutes in pari materia are
general and specific, the more specific statute controls the
more general statute."  Crawford v. Springle, 631 So. 2d 880,
882 (Ala. 1993) (citing Ex parte Coffee County Comm'n, 583 So.
2d 985 (Ala. 1991)).  Section 11-51-95, as it read at the
relevant time, was a general statute governing the licensing
1051747
17
of all persons, firms, or corporations engaged in "businesses,
vocations, occupations or professions for which a license is
or may be required."  The license-tax statutes, on the other
hand, are specific statutes governing the licensing of
insurance companies.  Therefore, if there was a conflict
between § 11-51-95 and the license-tax statutes, the license-
tax statutes controlled.  
The City argues that there was no conflict between the
statutes, and that the City's interpretation is consistent
with the principle that "'[s]tatutes should be construed
together so as to harmonize the provisions as far as
practical.'"  Dollar v. City of Ashford, 677 So. 2d 769, 770
(Ala. 1995) (quoting Ex parte Jones Mfg. Co., 589 So. 2d 208,
211 (Ala. 1991)).  However, this argument fails when the
language of the statutes is examined.  Section 11-51-121
forbids a municipality the size of the City from imposing upon
an insurance company, other than a fire or marine insurance
company, any "license or privilege tax or other charge for the
privilege of doing business" other than a tax not exceeding 1%
(plus $50) on premiums "received during the preceding year on
policies issued during said year to citizens of said cities
1051747
18
and towns."  Clearly, a 4% tax on fire-insurance policies
issued by that same company would have to be considered just
such an additional license, tax, or charge, even if we were to
uphold the City's argument that the tax was authorized under
§ 11-51-95.  Thus, the statutes conflicted, and § 11-51-95
must accordingly give way to the specific license-tax
statutes.
The City also argues that interpreting the license-tax
statutes in the manner the Alfa companies advocate would be
unreasonable because a fire-insurance company could lessen its
tax burden merely by expanding its offerings to include
additional lines of insurance so that the insurance company
was no longer considered only a fire-insurance company:
"The unreasonableness 
of 
Alfa's 
argument 
is 
also
exemplified by contrasting the effect of Alfa's
argument with the hypothetical set out by the trial
court.  If Delta Company sells only fire insurance
and is paid $400,000 in premiums, it would be deemed
entirely a fire insurance company and its license
tax would be $16,000 since it would all be at the 4%
rate.  In contrast, if Sigma Company receives the
same amount for the issuance of fire policies, plus
$600,000 for the issuance of other policies, under
Alfa's argument it would pay only $10,000 in license
tax at the 1% rate because it would say that it is
an 'other' insurance company.  It is completely
illogical for Sigma to get a $6,000 reduction in
license taxes because it receives $600,000 in non-
1051747
19
fire premiums on top of the same amount of fire
premiums that Delta Company receives."
The City and the Retirement Plan's brief, p. 48 (emphasis
omitted; internal citations to record omitted).  In the
alternative, the City argues that strict adherence to the two
categories created in the license-tax statutes could even
result in the unreasonable result of some premiums avoiding
taxation altogether:
"Using Alfa's interpretation, for a company
selling both fire and other insurance that is
classified as only a fire insurance company, we
would look solely to § 11-51-120.  It states that
the maximum tax is to be calculated 'upon a
percentage of ... premiums ... on policies issued
... on property located in such municipality.'  This
statute does not provide for a license tax on
premiums on policies that are not 'on property.'
Thus, regardless of the amount of premiums received
by the company for health or casualty policies,
under this statute the tax would be payable only on
the basis of the premiums for policies on property.
Using Alfa's argument, only § 11-51-120 would apply
and the remaining premiums would not even be subject
to tax, unless the words 'on property' are ignored."
The City and the Retirement Plan's brief, p. 49 (emphasis
omitted).  
However, 
regardless 
of 
this 
Court's 
view 
of 
the
reasonableness or ultimate wisdom of the language used in a
duly enacted statute, we are bound to interpret that language
1051747
20
to mean exactly what it says.  As we stated in DeKalb County
LP Gas Co. v. Suburban Gas, Inc., 729 So. 2d 270, 276 (Ala.
1998):
"It is true that when looking at a statute we might
sometimes think that the ramifications of the words
are inefficient or unusual.  However, it is our job
to say what the law is, not to say what it should
be.  Therefore, only if there is no rational way to
interpret the words as stated will we look beyond
those words to determine legislative intent.  To
apply a different policy would turn this Court into
a legislative body, and doing that, of course, would
be utterly inconsistent with the doctrine of
separation of powers.  See Ex parte T.B., 698 So. 2d
127, 130 (Ala. 1997)."
We cannot say that the license-tax statutes, when interpreted
as written, lead to an absurd result that would make it
necessary for this Court to "look beyond those words."  Id.
For that reason, we are bound to use the classification system
created by the legislature, and we therefore hold that every
insurance company is either:  1) a "fire and marine insurance
company," in which case a municipality may impose, pursuant to
§ 11-51-120, a license tax of up to 4% upon all of the
policies issued by that company on property located within
that municipality, or 2) an "insurance company, other than
fire and marine insurance companies," in which case a
municipality may impose, pursuant to § 11-51-121, a license
1051747
21
tax of 1% (plus the authorized statutory fee) upon all of the
policies issued by that company on policies issued to citizens
of that municipality.  
We now must consider whether AMIC and AMGIC should be
classified as fire and marine insurance companies or as
insurance companies other than fire and marine insurance
companies.  In making that determination we rely on the
"functional" test adopted by this Court in City of Birmingham
v. State Farm:
"It is notable that in [City of Sheffield v. Home
Insurance Co., 234 Ala. 382, 174 So. 779 (1937), and
City of Sheffield v. General Exchange Insurance
Corp., 234 Ala. 386, 74 So. 782 (1937),] and in
[Motors Ins. Corp. v. City of Birmingham, 269 Ala.
339, 113 So. 2d 147 (1959),] as well, both the trial
court and this Court looked to the evidence to
determine the nature of the insurance company.
Indeed, 
the 
emphasis 
of 
the 
statutes 
under
consideration is not upon the amount of earned
premium allocable to fire insurance, but upon the
character of the company itself.  The arguments of
counsel for both sides take this position.  Under
these statutes the amount of premium so allocable is
one, but only one, incident or element of that
character.  The record discloses that State Farm
does not in fact write a separate policy covering
only automobile physical damage risks.  Instead the
company issues one policy making available the
following coverages:  bodily injury and property
damage liability, medical payments, comprehensive,
collision, uninsured motor vehicle, automobile death
indemnity and specific disability, total disability
and loss of earnings, emergency road service, and
1051747
22
automobile rental reimbursement.  The comprehensive
coverage pays for loss to the vehicle (except from
collision) due to missiles, falling objects, theft,
larceny, explosion, earthquake, windstorm, hail,
water, flood, malicious mischief or vandalism, riot
or civil commotion, collisions with birds or
animals, and fire. (The company also writes health
and accident policies.)  This evidence justifies
State Farm's contention that it is a 'casualty'
company, the classification, incidentally, which it
occupies with the State Department of Insurance for
rate regulation as well as for State Taxation.
Examination of the evidence supports the finding of
the trial court, therefore, that State Farm falls
into the category of 'other than fire and marine.'
And because we have no legislative guidance on the
proper 
classification 
to 
be 
accorded 
to 
any
particular company, this functional test is the
appropriate test to apply in individual cases.  In
other words, the nature of the principal business
endeavor, 
as 
manifested 
by 
its 
charter, 
its
activities and its operations, will control the
application of the classifications established by §§
11-51-120, -121."
382 So. 2d at 1114-15.  In its order granting the City's
motion for a summary judgment on the license-tax claims, the
trial court purported to apply this functionality test to AMIC
and AMGIC and concluded, in a footnote, that they were both
fire-insurance companies:
"The court notes for purposes of the record that
should it solely rely on [City of Birmingham v.
State Farm Mutual Automobile Insurance Co., 382 So.
2d 1111 (Ala. 1980),] as [AMIC and AMGIC] urge, the
'functionality' test proposed by the [City of
Birmingham v. State Farm] court would dictate that
AMIC and AMGIC should be classified as 'fire
1051747
23
insurance' companies because property insurance, as
'fire' insurance is now known, is the principal
endeavor of both companies, manifested by their
charters, their activities and operations as more
fully set forth in the undisputed facts."
For the reasons that follow, we disagree with that conclusion.
In applying the City of Birmingham v. State Farm
functionality test to AMIC and AMGIC, we seek to identify the
nature of their respective "principal business endeavor[s],"
by 
examining 
each 
company's 
charter, 
activities, 
and
operations.  382 So. 2d at 1115.  In regard to AMIC's and
AMGIC's charters, it is undisputed that neither company was
chartered as a fire-insurance company.  This fact weighs in
favor of a finding that AMIC and AMGIC are insurance companies
other than fire and marine insurance companies.
The 
City, 
however, 
argues 
that 
AMIC 
and 
AMGIC's
activities and operations are consistent with a finding that
they are both fire-insurance companies.  In support of this
argument, the City notes that both companies, in their
articles of incorporation, assumed the right to sell fire
insurance and that both companies do in fact sell such
insurance.  However, while that is true, both companies, in
their articles of incorporation, claimed broad powers and
1051747
24
simultaneously claimed the right to sell disability insurance,
automobile 
insurance, 
liability 
insurance, 
steam-boiler
insurance, use and occupancy insurance, allied lines of
insurance, and all other lawful types of insurance.  Thus, the
mere fact that AMIC and AMGIC claimed the right to sell fire
insurance is no more indicative of a finding that they are
fire-insurance companies than it is a finding that they are
"steam-boiler" insurance companies.
More relevant is the amount of fire insurance AMIC and
AMGIC did in fact sell during the years in question.  Even
that is difficult to quantify, however, because the City and
AMIC and AMGIC do not agree on what constitutes "fire
insurance."  The City argues, and the trial court agreed, that
AMIC and AMGIC's homeowner, tenant, manufactured-home, farm-
owner, 
business-owner, 
scheduled-property, 
personal-articles,
machinery and livestock floater, and watercraft-package
policies should all be considered "fire insurance" because
more than 90% of the losses paid under those policies are for
standard fire-insurance-type losses.  AMIC and AMGIC, however,
argue that only approximately 8.5% and 26.5%, respectively, of
1051747
25
the premiums they received during the time in question were
allocable to fire coverage.  
However, regardless of how fire insurance is defined, our
previous caselaw makes it clear that the sale of fire
insurance was neither AMIC's nor AMGIC's principal business
endeavor.  In City of Birmingham v. State Farm, Birmingham
claimed that State Farm was a fire-insurance company based on
the fact that State Farm sold automobile physical-damage
coverage, which, Birmingham claimed, was a type of property
insurance that is, in turn, a type of fire insurance.  382 So.
2d 1113.  However, this Court found it to be crucial that
State Farm did not, in fact, issue a policy covering only
physical damage to automobiles.  Rather, State Farm issued a
single comprehensive policy making available multiple types of
coverage, 
including 
bodily-injury 
and 
property-damage
liability, 
medical 
payments, 
comprehensive, 
collision,
uninsured motor vehicle, automobile-death indemnity and
specific disability, total disability and loss of earnings,
emergency road service, and automobile-rental reimbursement.
Coupled with the facts that State Farm was not chartered as a
fire-insurance company and had never classified itself as a
1051747
[substituted p. 26]
fire-insurance company, this Court concluded that State Farm
was an insurance company other than a fire or marine insurance
company.  382 So. 2d at 1115.
AMIC and AMGIC have submitted evidence indicating that
65% of the premiums earned by AMIC and 55% of the premiums
earned by AMGIC during the years in question come from
comprehensive automobile policies markedly similar to those
sold by State Farm in City of Birmingham v. State Farm, which
this Court determined were not fire insurance.  Thus, even if
this Court were to agree with the City's position that AMIC
and AMGIC's homeowner, tenant, manufactured-home, farm-owner,
business-owner, 
scheduled-property, 
personal-articles,
machinery and livestock floater, and watercraft-package
policies should all be considered fire insurance, it would
nevertheless be true that the majority of AMIC and AMGIC's
business was attributable to the type of automobile policies
this Court previously held were not fire insurance.  In light
of this fact, we cannot say that the sale of fire insurance
was the principal business endeavor of those companies.  Thus,
under the functionality test adopted by this Court in City of
Birmingham v. State Farm, AMIC and AMGIC are properly
1051747
We recognize that in Motors Insurance Corp. v. City of
4
Birmingham, 269 Ala. 339, 113 So. 2d 147 (1959), this Court
held that Motors Insurance Corporation could be classified as
a fire-insurance company even though the only insurance it had
ever issued was automobile insurance.  However, Motors
Insurance Corporation was also chartered as a fire-insurance
company and had represented itself to the State Department of
Insurance as a fire-insurance company in order to receive
favorable tax treatment. 
[substituted p. 27]
classified for license-tax-statute purposes as insurance
companies other than fire and marine insurance companies.4
Accordingly, the summary judgment in favor of the City and
against AMIC and AMGIC on the license-tax claims is due to be
reversed.
IV.
We next consider the summary judgment entered on the
pension-fund claims for the years 1995, 1996, and 1997.  These
claims hinge on language in the 1991 Pension Act that requires
"each insurance company writing fire insurance on property" in
Mobile or its police jurisdiction to pay the City 4% of the
gross premiums collected on that insurance with half of that
sum (2%) to be credited to the Retirement Plan.  The 1991
Pension Act does not define the term "fire insurance," and the
City and the Retirement Plan take the expansive view that the
term includes any insurance against the risk of loss by fire
1051747
28
–– regardless of the type of policy that coverage is found in
–– while the Alfa companies take the more narrow view that the
term refers only to fire-insurance policies per se.
The City and the Retirement Plan make essentially two
arguments in support of their interpretation of the 1991
Pension Act.  First, they argue that this Court endorsed their
perspective in State Farm Mutual Automobile Insurance Co. v.
Board of Trustees of Firemen's Pension & Relief Fund, 291 Ala.
250, 279 So. 2d 512 (1973), in which this Court considered Act
No. 307, Ala. Acts 1943, an act similar to the 1991 Pension
Act, in that it also provided for the funding of a
firefighters' retirement plan, albeit in the City of
Birmingham.  However, although Act No. 307 is similar in
purpose to the 1991 Pension Act, there is at least one
important difference in the language used in the two acts.
Act No. 307 states, in relevant part:
"[I]t shall not be lawful for such fire insurance
company or its agent, to take or receive any premium
for insurance against fire within such city, unless
such fire insurance company shall pay, at the time
aforesaid, to the said Firemen's Pension and Relief
Fund, the amount herein provided to be paid by such
fire insurance company ...."
1051747
29
(Emphasis added.)  Importantly, instead of just using the
undefined term "fire insurance," Act No. 307 specifically
refers to "any premium for insurance against fire."  The 1991
Pension Act contains no such language.  Thus, although this
Court in Firemen's Pension & Relief Fund interpreted Act No.
307 to require the insurance company to make payments to the
retirement plan in accordance with the value of all premiums
insuring against the risk of loss by fire, not just fire-
insurance policies per se, 291 Ala. at 256, 279 So. 2d at 516-
17, that holding is of little guidance in the present case
because of the differences in the language of the two acts.
The City and the Retirement Plan next argue that the 1997
Pension Act is itself evidence that their interpretation of
the 1991 Pension Act is correct.  The 1997 Pension Act was
substantially identical to the 1991 Pension Act but contained
an additional provision explicitly stating that "[f]or
purposes of this section, 'fire insurance' means any line
which insures property against the risk of loss by fire ...."
Art. 6, § 6.02(d).  Thus, in 1997 the legislature amended the
law to explicitly comport with the position taken by the City
and the Retirement Plan.  Citing these facts, the City and the
1051747
30
Retirement Plan quote McWhorter v. State Board of Registration
for Professional Engineers, 359 So. 2d 769, 773 (Ala. 1978),
for the proposition that the 1997 Pension Act was the
legislature's 
attempt 
to 
remove 
any 
doubt 
caused 
by
ambiguities in the 1991 Pension Act:
"When statutes are amended or replaced by
succeeding legislation, the Legislature often seeks
to clarify previously ambiguous provisions.  These
subsequent 
acts 
by 
the 
legislature 
must 
be
considered in trying to determine the intent of the
legislation.  73 Am.Jur. 2d., Statutes § 178."
However, although the 1997 Pension Act might be of assistance
when interpreting the 1991 Pension Act, that is true only if,
in fact, the 1991 Pension Act is ambiguous.  We agree that the
1991 Pension Act is ambiguous insofar as what is meant by the
term "fire insurance"; however, rather than leading to the
result the City and the Retirement Plan seek, it instead leads
to the opposite result based on the principle that ambiguous
taxing statutes must be construed in favor of the taxpayer.
City of Mobile v. GSF Props., Inc., 531 So. 2d 833, 837-838
(Ala. 1988).  The City and the Retirement Plan acknowledged in
the trial court that this rule is applicable to the 1991
Pension Act, and, because the Alfa companies' construction of
the 1991 Pension Act is, at the very least, rational, this
1051747
31
principle mandates a judgment in their favor on the appealed
pension-fund claims.  Accordingly, the summary judgment
entered in favor of the City and the Retirement Plan and
against the Alfa companies on the pension-fund claims for the
years 1995, 1996, and 1997 is due to be reversed.
V.
The City and the Retirement Plan sued the Alfa companies,
alleging that they had underpaid their license taxes from 1995
through 1998 and that they had failed to make required
contributions to the Retirement Plan from 1995 through 1999.
The trial court entered a summary judgment in favor of the
City and the Retirement Plan on all counts, and the Alfa
companies appealed that judgment, arguing that the trial court
had misinterpreted the relevant statutes and acts.  We agree,
and we hereby reverse the judgment entered by the trial court
with respect to all the license-tax claims and with respect to
the pension-fund claims for the years 1995, 1996, and 1997 and
remand the case.
REVERSED AND REMANDED.
See, Woodall, Smith, Bolin, and Parker, JJ., concur.
Cobb, C.J., and Murdock, J., dissent.
Lyons, J., recuses himself.
1051747
32
MURDOCK, Justice (dissenting).
After careful consideration of the various statutes at
issue, including not only §§ 11-51-120 and -121, but also
§ 11-51-95, as it read before a recent amendment, and taking
into 
consideration 
applicable 
rules 
of 
statutory 
construction,
I am compelled to dissent from the main opinion.
I begin by noting that, in my opinion, the main opinion
gives too much import to the legislature's use of the phrase
"fire or marine insurance company" in a statute, § 11-51-120,
that places a 4% cap on the license tax that can be assessed
on premiums charged for fire-insurance policies.  This
phraseology is consistent with the fact that, until recently
in our history, insurance companies traditionally sold only
one line of insurance.  It also is consistent with an attempt
by the legislature to place a limit on the taxing of certain
types of insurance, rather than on the companies themselves.
Addressing the inefficient and unusual results achieved
by interpreting the language of these statutes as rigidly
applying to only certain types of companies, rather than
certain types of insurance, the main opinion quotes the
following passage from DeKalb County LP Gas Co. v. Suburban
Gas, Inc., 729 So. 2d 270, 276 (Ala. 1998):
1051747
33
"It is true that when looking at a statute we might
sometimes think that the ramifications of the words
are inefficient or unusual.  However, it is our job
to say what the law is, not to say what it should
be.  Therefore, only if there is no rational way to
interpret the words as stated will we look beyond
those words to determine legislative intent.  To
apply a different policy would turn this Court into
a legislative body, and doing that, of course, would
be utterly inconsistent with the doctrine of
separation of powers.  See Ex parte T.B., 698 So. 2d
127, 130 (Ala. 1997)."
(Emphasis added.)  I believe the greater concern with respect
to "turn[ing] this Court into a legislature body" follows from
an effort to interpret the statutes as imposing different tax
rates on different types of companies, rather than on
different types of insurance.
After using the phrase "fire or marine insurance company"
in § 11-51-120, nowhere does the legislature fulfill the
legislative function of providing a definition that will allow
us to discern which companies fall within that phrase and
which companies do not.  Accordingly, applying a company-
based, rather than a policy-based, interpretation of the
statutes puts this Court in the position of legislating what
it means to be a "fire-insurance company."  Should we consider
the company's charter, its bylaws, the dollar amount of
premiums sold for each type of insurance, profits made by the
1051747
34
company on each type of insurance, the numbers of policies
sold of each type of insurance, the percentage of a company's
budget devoted to the business of one type of insurance versus
another, the percentage of a company's employees involved in
the marketing and servicing of one type of policy versus
another, the company's history, or the company's overall
culture, including perhaps which type of policy was first
marketed by the company?  Further, once we decide which among
these factors and possibly others are to be included in the
calculus, we are put into the position of deciding what weight
to be accorded each factor.  I am more concerned that this
Court will be taking on the task of a legislative body by
deciding the answers to these questions than it would be in
giving the statutes the more reasonable interpretation urged
upon us by the City.
The City correctly points out that a company-based
interpretation of the statutes would lead to irrational
results that this Court cannot reasonably conclude were
intended by our legislature.  Among other things, the City
argues as follows:
"The unreasonableness 
of 
Alfa's 
argument 
is 
also
exemplified by contrasting the effect of Alfa's
argument with the hypothetical set out by the trial
1051747
35
court.  If Delta Company sells only fire insurance
and is paid $400,000 in premiums, it would be deemed
entirely a fire insurance company and its license
tax would be $16,000 since it would all be at the 4%
rate.  In contrast, if Sigma Company receives the
same amount for the issuance of fire policies, plus
$600,000 for the issuance of other policies, under
Alfa's argument it would pay only $10,000 in license
tax at the 1% rate because it would say that it is
an 'other' insurance company.  It is completely
illogical for Sigma to get a $6,000 reduction in
license taxes because it receives $600,000 in non-
fire premiums on top of the same amount of fire
premiums that Delta Company receives."
The City and the Retirement Plan's brief, p. 48 (emphasis
omitted; internal citations to record omitted).  The City
further argues that strict adherence to a two-category,
company-based interpretation of the statutes could even result
in the unreasonable result of some premiums avoiding taxation
altogether:
"Using Alfa's interpretation, for a company
selling both fire and other insurance that is
classified as only a fire insurance company, we
would look solely to § 11-51-120.  It states that
the maximum tax is to be calculated 'upon a
percentage of ... premiums ... on policies issued
... on property located in such municipality.'  This
statute does not provide for a license tax on
premiums on policies that are not 'on property.'
Thus, regardless of the amount of premiums received
by the company for health or casualty policies,
under this statute the tax would be payable only on
the basis of the premiums for policies on property.
Using Alfa's argument, only § 11-51-120 would apply
and the remaining premiums would not even be subject
to tax, unless the words 'on property' are ignored."
1051747
36
The City and the Retirement Plan's brief, p. 49 (emphasis
omitted).
The City's arguments have obvious merit and should weigh
heavily in our interpretation of the statutes.  "A statute
should be construed not only in light of its language, but
also in light of its purpose, its object, its relation to
other laws, and the conditions that may arise under its
provisions."  Ex parte Edwards, 816 So. 2d 98, 106 (Ala.
2001).  Furthermore, "[i]t is a well established rule of
statutory interpretation that the law favors rational and
sensible construction ...."  Crowley v. Bass, 445 So. 2d 902,
904 (Ala. 1984).
It is not necessary, however, to rely merely on the
unreasonableness 
of 
a 
company-based 
interpretation 
of
§§ 11-51-120 and -121 in order to conclude that the City's
interpretation of the statutes is correct.  This is so because
the legislature has chosen to fulfill its legislative function
in a manner that expressly guides us to this conclusion.
1051747
The legislature amended § 11-51-95 so as to substantially
5
rewrite that section.  The amendment is effective for "license
years after December 31, 2007."
City of Birmingham v. State Farm Mutual Auto Insurance
6
Co., 382 So. 2d 1111 (Ala. 1980), discussed in the main
opinion, does not compel a contrary conclusion to the one I
reach.  Among other things, the issue we must decide in the
present case was not presented to this Court in City of
Birmingham.  As the opinion in City of Birmingham noted,
37
Specifically, 
the 
legislature 
expressly 
provided 
in
§ 11-51-95  as follows:
5
"Any person, firm or corporation dealing in two
or more of the articles or engaged in two or more of
the 
businesses, 
vocations, 
occupations 
or
professions for which a license is or may be
required shall take out and pay for a license for
each line of business, vocation, occupation or
profession."
The result of this language is, in my opinion, unavoidable.
The legislature has expressly provided that a company selling
more than one line of insurance must pay business license
taxes separately on each line of insurance.  "[S]tatutes must
be construed in pari materia in light of their application to
the same general subject matter.  Our obligation is to
construe provisions 'in favor of each other to form a
harmonious plan,' if it is possible to do so."  Opinion of the
Justices No. 334, 599 So. 2d 1166, 1168 (Ala. 1992) (citations
omitted).6
1051747
"[t]he arguments of counsel for both sides [took the]
position" that it was the "character of the company itself,"
rather than the character of the insurance sold, that should
govern in that case.  382 So. 2d at 1114.  Further, as the
main opinion in this case notes, § 11-51-95 was not addressed
in City of Birmingham.  City of Birmingham, therefore, is
distinguishable from the present case.
Although not discussed in the text of this writing, I
7
also dissent from the main opinion as to the issue of the
required contribution to the City of Mobile, Alabama, Police
& Firefighters Retirement Plan.
38
Based on the foregoing, I must respectfully dissent.7
Cobb, C.J., concurs.