Opinion ID: 1191335
Heading Depth: 1
Heading Rank: 4

Heading: Lending State's Credit or Taxing for a Private Purpose

Text: [10] Appellants also contend the nature of the assessments authorized by the act amount to an unconstitutional taxation. We find the assessments were not a tax and, therefore, not an unconstitutional tax. The assessments made under the act were not state revenue funds. They did not redound to the benefit of any state or municipal treasury. Rather, they were trust funds assessed by a private association to be retained in private bank accounts to carry out the purpose of the act. This court has characterized assessments under the industrial insurance act, saying that it is manifest that it is not a tax in the sense that the word is used in the sections of the constitution to which reference is here made. No accession to the public revenue, general or local, is authorized or aimed at. The purpose of the exaction is entirely different. It is to be used, not to meet the current expenses of government but to recompense employees of the industries on whom the burden is imposed for injuries received by them while engaged in the pursuit of their employment. State ex rel. Davis-Smith Co. v. Clausen, 65 Wash. 156, 203, 117 P. 1101 (1911). Our disposition of this issue forecloses appellants' other arguments premised on the assessments being a tax. Appellants make two remaining arguments. First, they argue that the act, by virtue of the mechanics of its operation, amounts to an unconstitutional impairment of contract rights. [11] In essence, their argument is that when their 1970 contracts of insurance were written they had not contemplated nor adjusted their premiums to anticipate potential assessments that might be levied against them under an act which was not effective until 1971. They argue that their obligations under those 1970 contracts are now fixed and not renegotiable with their insureds and that an assessment made against them in 1972, on the basis of the 1971 act, which is proportional to their 1970 premiums unconstitutionally impairs the value of those earlier contracts. We disagree. [11] The obligations of a contract, observed Chief Justice Hughes for the court in Home Bldg. & Loan Ass'n v. Blaisdell, 290 U.S. 398, 431, 78 L.Ed. 413, 54 S.Ct. 231, 188 A.L.R. 1481 (1934), are impaired by law which renders them invalid, or releases or extinguishes them ... and impairment ... has been predicated of laws without destroying contracts derogate from substantial contractual rights. However, he adds that, [n]ot only are existing laws read into contracts in order to fix obligations as between the parties, but the reservation of essential attributes of sovereign power is also read into contracts as a postulate of the legal order. The policy of protecting contracts against impairment presupposes the maintenance of a government by virtue of which contractual relations are worth while,  a government which retains adequate authority to secure the peace and good order of society. This principle of harmonizing the constitutional prohibition with the necessary residuum of state power has had progressive recognition in the decisions of this Court. Home Bldg. & Loan Ass'n v. Blaisdell, supra at 435. The Blaisdell decision manifests a realistic appreciation of the fact that ours is an evolving society and that the general words of the contract clause were not intended to reduce the legislative branch of government to helpless impotency. Furthermore, we take judicial notice of the fact that appellants, all of whom by their own voluntary choice continue to sell insurance in this state, may be expected, within limits, to reflect the cost to them of these assessments in premiums for insurance now being sold, thereby minimizing the effect of these assessments upon them. [12] Finally, appellants argue that the act unconstitutionally delegates legislative authority to an entity not a public body in violation of article 2, section 1 (amendment 7) of the Washington State Constitution. We do not agree. The act before us provides adequate standards and guidelines defining generally what is to be accomplished, how, when and by whom. The association is not a public body but is a private, nonprofit association created under the police powers to fulfill a needed public purpose, the protection of the general welfare. RCW 48.32A.010. The association does not legislate but is vested only with authority to render sound business judgments. The authority to make a decision as to whether the association shall assume, reinsure or guarantee insurance contracts, whether, when and how much to assess individual member insurance companies who themselves as a result of such assessment could become insolvent, depends upon many complicated factors, and such discretion as the act gives the association to exercise its business judgment in these areas is proper and is not a delegation of legislative authority. Bowles v. Willingham, 321 U.S. 503, 88 L.Ed. 892, 64 S.Ct. 641 (1944). Affirmed. HALE, C.J., and FINLEY, ROSELLINI, HUNTER, HAMILTON, STAFFORD, WRIGHT, and BRACHTENBACH, JJ., concur.