Opinion ID: 1751879
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Heading: Direct Premium Tax

Text: 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. 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 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, 109 S.Ct. 2408, 105 L.Ed.2d 199 (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.