New York State Seal
STATE OF NEW YORK
INSURANCE DEPARTMENT
25 BEAVER STREET
NEW YORK, NEW YORK 10004

David A. Paterson
Governor

Eric R. Dinallo
Superintendent

The Office of General Counsel issued the following opinion on April 7, 2008, representing the position of the New York State Insurance Department.

RE: Foreign Fire Tax Proceeds

Question Presented:

Who is an “active member” of a fire company with respect to a fire department’s pro rata distribution of foreign fire tax monies to its fire companies?

Conclusion:

An “active member” of a fire company is a member who participates in firefighting and is subject to call for whatever duties may be assigned to him under the rules and regulations of the fire department or company of which he is a member.

Facts:

The inquiry read as follows:

I read the opinion [dated May 31, 2007] that was posted on the DOI website [http://www.ins.state.ny.us/ogco2007/rg070522.htm] regarding the pro rata distribution of the foreign insurance tax funds and had one question. The opinion states that the pro rata shares should be distributed based on the “active” membership of each company. Most fire departments in NY have a different definition of “active member” for voting purposes or running for office. However that doesn’t preclude members who are below that level to participate in firefighting or attending meetings. Should the term “active” include any members who are attending meetings, drills or alarms despite their lower level of attendance? When I look at the laws under [New York Insurance Law §§] 9104 and 9105 it seems the intent was to benefit all members of the department including the members who are no longer active and may be at the FASNY firefighters home. This seems to me that members who may be older but still “contribute” to the fire department through meetings and drills, should be included in the distribution of the foreign insurance tax.

Analysis:

Pursuant to N.Y. Ins. Law §§ 9104 and 9105 (McKinney 2000), foreign and alien stock and mutual insurance companies that are authorized to transact fire insurance business in New York are required to pay annually a two percent tax on the fire insurance premiums written on New York risks. Of the fire tax monies collected, ninety percent must be re-distributed to the fire departments providing fire protection to the cities, villages, fire districts, fire alarm districts, or fire protection districts where the fire insurance was written. If a fire department consists of more than one fire company, Insurance Law §§ 9104 and 9105 require the fire department to further distribute the tax proceeds to the fire companies.

As noted in the inquiry, the Insurance Department’s Office of General Counsel stated in a May 31, 2007 opinion that fire tax proceeds must be distributed to fire companies in proportion to the number of “active members” in each company. Additionally, a portion of the Department’s website’s Frequently Asked Questions – Foreign Fire Tax page reads:

Question: How should the fire tax proceeds be distributed:

Answer: The general rule for distribution of the fire tax funds for a multi-company fire department is: the foreign fire tax moneys distributed should be allocated between and among the fire companies proportional to the number of active members in each fire company. If a department is comprised of both paid and volunteer members, each group would be entitled to fire tax proceeds and moneys should be distributed on a pro rata basis.

Although Insurance Law §§ 9104 and 9105 do not reference pro rata distribution to fire companies based on their number of “active members,” case law interpreting each of these sections do. In determining whether paid firemen are eligible to receive a portion of the foreign fire tax monies, the Court of Appeals stated in Renn v. Kimbark, 51 N.Y.2d 189, 195 (1980): “As active members of the ‘Fire Department of the City of Kingston,’ . . . the paid firemen have a primary responsibility of providing fire protection to the city. To deprive these firefighters of the benefits afforded them by the Insurance Law without a clear direction to do so from the Legislature is contrary to the avowed purpose of the statute to assist those affording fire protection. Therefore, all firemen in the City of Kingston should share proportionately in the tax moneys generated by sections 553 and 554 of the Insurance Law.”1 Five years later, the Appellate Division determined the proportion to which paid and volunteer fire fighters should share in the foreign fire tax monies in Renn v. Kimbark, 115 A.D.2d 112 (3rd Dep’t, 1985). The Appellate Division there confirmed the lower court’s decision that “the tax proceeds should be allocated as between paid and volunteer fire fighters strictly on a pro rata basis from their respective active membership rosters.” Id. at 113.

Based on the 1980 Renn v. Kimbark decision, an “active member” of a fire company is a member who participates in firefighting. There, the Court of Appeals – New York’s Court of last resort – acknowledged that the legislative purpose of Insurance Law §§ 553 and 554 (now, sections 9104 and 9105) was to assist those affording fire protection. Those affording fire protection are the fire company members who participate in firefighting. Hence, when the 1985 Renn v. Kimbark decision stated that “the tax proceeds should be allocated as between paid and volunteer firefighters strictly on a pro rata basis from their respective active membership rosters,” the court was referring to fire company members who participate in firefighting.

The New York State Office of the State Comptroller (“OSC”), as the agency authorized to conduct financial audits of fire departments, regularly responds to inquiries regarding permissible distribution and use of foreign fire tax monies. The Insurance Department consulted with OSC’s legal department regarding this inquiry and was referred to OSC opinions dated July 3, 1997 (Opinion 97-13) and August 2, 1994 (Opinion 94-33) as representative of OSC’s interpretation of the term “active member.” Although these opinions interpret the term “active member” in the context of determining which members are eligible to participate in a fire company’s service award program, OSC’s legal department confirmed that it interprets the term “active member” in the same manner regardless of the context in which it arises.

OSC Opinion 94-33 states: “The distinguishing characteristic of currently active members of a fire department or company is that they are subject to call for whatever duties may be assigned to them under the rules and regulations of the department or company. . . . if under the rules and regulations of the fire department in question either ‘active life retired members’ or ‘life retired members’ are not subject to being called to duty, it is our opinion that they may not be considered ‘active volunteer firefighters[.]”

Hence, an “active member” of a fire company is a member who participates in firefighting and is subject to call for whatever duties may be assigned to him under the rules and regulations of the fire department or company of which he is a member.

For further information you may contact Associate Attorney Sally Geisel at the New York City Office.

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1 New York Insurance Law §§ 553 and 554 were renumbered as sections 9104 and 9105, respectively, when the Insurance Law was re-codified in 1985.