OGC Op. No. 09-10-01

The Office of General Counsel issued the following opinion October 15, 2009, representing the position of the New York State Insurance Department.

Re: Questions Concerning the Fire Insurance Premium Tax and Fire Insurance Fee

Questions Presented:

1. Is a foreign or alien insurer required to pay a fire insurance premium tax as well as a fire insurance fee?

2. Is an insurer required to pay the fire insurance premium tax or the fire insurance fee to the Superintendent?

3. Is an insurer required to list on the policy the names and addresses of the fire departments to which the fire insurance premium tax or the fire insurance fee will be distributed?

4. Is a homeowner’s policy subject to the fire insurance fee pursuant to Insurance Law § 9108?

5. Is the fire insurance premium tax paid pursuant to Insurance Law § 9104 levied only on that portion of premium that covers the peril of fire?

Conclusions:

1. Yes, a foreign or alien insurer is required to pay both the fire insurance premium tax and fire insurance fee.

2. It depends. Pursuant to Insurance Law § 9104, the foreign or alien insurer may elect to pay such tax to the Superintendent, but pursuant to Insurance Law § 9108, the insurer must pay the fire insurance fee to the Superintendent.

3. No, an insurer is not required to list on the policy the names and addresses of the fire departments to which the fire insurance fee or the fire insurance premium tax is to be distributed.

4. It depends. A homeowner’s policy is not subject to the fire insurance fee if the policy covers only one-or two-family residential structures, but a homeowner’s policy that covers three-family or more residential structures is subject to the fire insurance fee.

5. Yes, the fire insurance premium tax paid pursuant to Insurance Law § 9104 is levied only on that portion of premium that covers the peril of fire.

Facts:

The inquiry is of a general nature, without reference to particular facts.

Analysis:

1. Foreign Insurers Pay Both the Fire Insurance Premium Tax and Fire Insurance Fee

Insurance Law § 9104(a) is relevant to the first question, which asks whether a foreign or alien insurer must pay both the fire insurance premium tax and fire insurance fee. That statute reads as follows:

Except in the cities of New York and Buffalo, there shall be paid by every foreign and alien fire insurance corporation, association or individuals which insure property against loss or damage by fire, except foreign mutual fire insurance companies, on or before the first day of March the sum of one dollar and eighty cents upon the hundred dollars, and at that rate, upon the amount of all premiums which during the year, or part of a year, ending on the last preceding thirty-first day of December, shall have been received by any such insurer for any insurance against loss or damage by fire written by it upon property situated within each city, village, fire district, or fire alarm district, or fire protection district…

The fire insurance premium tax is a tax credit that foreign or alien insurers may use as a credit towards its franchise tax. In contrast, the fire insurance fee is a fee separately identified and charged to each policyholder and is not paid by the insurer. To that end, Insurance Law § 9108 states:

Every insurance company authorized to do business in this state shall collect, in addition to the applicable premium charge, a fire insurance fee, separately identified and charged to each policyholder, from each such holder of a policy issued in the state or for delivery in the state for coverage of peril of fire, excluding a policy for protection of household furnishings and/or policies issued to protect one or two-family residential structures, schools, churches and hospitals.

The fire insurance premium tax and the fire insurance fee are two different charges. A foreign or alien insurer must pay both pursuant to Insurance Law §§ 9104 and 9108.

2. Payment of the Fire Insurance Premium Tax and Fire Insurance Fee to the Superintendent

The next question asks whether the fire insurance premium tax or the fire insurance fee must be paid to the Superintendent. Insurance Law § 9104(d) is relevant to the second question, and reads as follows:

Corporations, associations or individuals required to pay a fire insurance premium tax by this section may elect to pay such tax to the superintendent…

Thus, the fire insurance premium tax may be remitted to the Superintendent, but it need not be paid to him.

In fact, Insurance Law § 9104(a) sets forth a list of people to whom the fire insurance premium tax may be paid. A foreign or alien insurer that chooses to pay the fire insurance premium tax to the Superintendent must provide a listing of fire departments subject to the fire tax, and the amount of tax collected for each fire department. See http://www.ins.state.ny.us/firetax/ft_smff.htm.

However, with regard to whether the fire insurance fee may be paid to the Superintendent, Insurance Law § 9108(b)(1) states in relevant part:

Such fees shall be paid quarterly by insurance companies to the superintendent…

Thus, the fire insurance fee must be paid to the Superintendent in accordance with the requirements of Insurance Law § 9108, which includes, pursuant to Insurance Law § 9108(b)(2), an annual statement that shows the aggregate amount of gross premiums and premium deposits and assessments collected. But when an insurer submits the fire insurance fee to the Superintendent, the insurer does not need to provide a list of fire departments and the total fee generated for each fire department.

3. Listing the Names and Addresses of the Fire Departments on the Policy

The third question asks whether an insurer must list on the policy the names and addresses of the fire departments to which the fire insurance premium tax or fire insurance fee will be distributed. With regard to the fire insurance premium tax, pursuant to Insurance Law § 9104, an insurer is not required to list on the policy the names and addresses of the fire departments to which the fire insurance premium taxes will be distributed. However, Insurance Law § 9104(e) establishes a requirement concerning what an agent must report to an insurer:

Every agent for any such insurer writing a policy of fire insurance upon property in this state shall report to the insurer the name of the city, village, fire district or fire alarm district or fire protection district in which the property insured is situated…

With regard to the fire insurance fee, there is no requirement in Insurance Law § 9108 that an insurer must list on the policy the names and addresses of the fire departments to which the fire insurance fees are being distributed.

4. Homeowner’s Policy

The fourth question asks whether a homeowner’s policy is subject to the fire insurance fee. By its express terms, Insurance Law § 9108 specifically excludes a homeowners policy issued to protect one-or two-family residential structures from the fire insurance fee. However, the same statute provides that a homeowner’s policy is subject to the fire insurance fee if the policy covers residential structures that have three or more-family units.

5. Calculating the Fire Insurance Premium Tax

Finally, the fifth qustion asks about how to calculate the fire insurance premium tax. Pursuant to Insurance Law § 9104(a), the fire insurance premium tax is paid on all premiums received by any such insurer for “any insurance against loss or damage by fire”. Thus, the fire insurance premium tax only is levied on that portion of the premium that covers loss or damage by fire, which is similar to the fire insurance fee, which is levied only on the portion of the premium that covers the peril of fire pursuant to Insurance Law § 9108. To determine what portion of the premium covers loss or damage by fire, an insurer should follow the guidelines set forth in Circular Letter No. 19 (1982). See also Office of General Counsel Opinions 06-09-01 (September 1, 2006) and 09-06-06 (June 15, 2009).

For further information, you may contact Special Counsel Elizabeth Barrett at the New York City Office.