                IN THE COURT OF APPEALS OF TENNESSEE
                            AT NASHVILLE
                                  April 23, 2014 Session

GREAT AMERICAN INSURANCE COMPANY OF NEW YORK v. STATE
                    OF TENNESSEE

                Appeal from the Tennessee Claims Commission
   No. X20091124 Robert N. Hibbett, Commissioner, Tenn. Claims Commission
                              (Middle Division)




                No. M2013-00896-COA-R3-CV          - Filed July 31, 2014



Claimant insurance company challenges the state’s calculation of the retaliatory tax. It filed
claims for refunds in the claims commission. The commission ruled for the state. Claimant
appealed, alleging that New York law required the charges at issue to be passed on to the
policy holder, so the charges should not be included in the retaliatory tax calculation. We
find that four of the charges should be included in the retaliatory tax calculation and two
should not. Claimant also raises several constitutional challenges, all of which we reject.


    Tenn. R. App. P. 3 Appeal as of Right; Judgment of the Claims Commission
                        Affirmed in Part, Reversed in Part

A NDY D. B ENNETT, J., delivered the opinion of the court, in which F RANK G. C LEMENT,
J R., P.J., M.S., and R ICHARD H. D INKINS, J., joined.

Patricia Head Moskal and Brett R. Carter, Nashville, Tennessee, for the appellant, Great
American Insurance Company of New York.

Tracy D. Williams, William M. Sneed, Peter D. Edgerton, and Lisa E. Schwartz, pro hac
vice, Chicago, Illinois, for the appellant, Great American Insurance Company of New York.

Robert E. Cooper, Jr., Attorney General and Reporter; Joseph F. Whalen, Associate Solicitor
General; and Jonathan N. Wike, Senior Counsel; for the appellee, State of Tennessee.
John Brister Burns and Warren Davidson Broemel, Nashville, Tennessee, as the Amicus
Curiae.

                                              OPINION

                                F ACTS AND P ROCEDURAL H ISTORY

       The relevant facts of this case are undisputed. Great American Insurance Company
of New York1 (“Claimant”) is a New York-domiciled company that is authorized to provide
insurance, including workers’ compensation and property and casualty insurance, in
Tennessee. The State of Tennessee, through the Tennessee Department of Commerce and
Insurance (“the Department”), imposes retaliatory taxes2 on foreign insurance companies
doing business in Tennessee. Tenn. Code Ann. § 56-4-218. This appeal concerns the
Department’s assessment of retaliatory taxes on Claimant.

       By letter dated November 7, 2008, the Department informed Claimant it was
conducting an audit for tax years 2005, 2006, and 2007. The letter stated that the issues in
this audit are “mainly retaliatory in nature.” The Department requested Claimant to
recalculate its Tennessee retaliatory taxes to include certain New York workers’
compensation surcharges, file amended premium tax returns, and remit payment of the
additional retaliatory taxes. Claimant disputed the applicability of Tennessee’s retaliatory
tax statute to the New York workers’ compensation surcharges, but eventually paid the
disputed taxes under protest.

      On November 24, 2009, Claimant filed a complaint with the Tennessee Claims
Commission (“the Commission”) seeking a refund of retaliatory taxes paid under protest.
Pursuant to Tenn. R. Civ. P. 56, Claimant and the Department filed cross-motions for
summary judgment. A hearing was held on January 22, 2013. On March 8, 2013, the
Commission issued a final judgment granting the Department’s motion for summary


        1
           Five separate groups of New York-domiciled insurance companies filed claims with the Tennessee
Claims Commission seeking a refund of retaliatory taxes paid under protest. The cases proceeded
concurrently through the Claims Commission and were heard jointly. The five New York cases, which were
jointly briefed and argued on appeal but not consolidated, are: Chubb Indemnity Insurance Company, et al.
v. State, No. M2013-00894-COA-R3-CV; American Home Assurance Company, et al. v. State, No. M2013-
00875-COA-R3-CV; Northern Insurance Company of NY, et al. v. State, No. M2013-00874-COA-R3-CV;
Zurich American Insurance Company, et al. v. State, No. M2013-00872-COA-R3-CV; Great American
Insurance Company of New York v. State, No. M2013-00896-COA-R3-CV.
        2
           We will provide an overview of retaliatory insurance taxation in the Analysis section of the
opinion, infra.

                                                   2
judgment. Claimant appeals.

                                    S TANDARD OF R EVIEW

       Summary judgment is appropriate where the moving party is entitled to judgment as
a matter of law on the undisputed facts. Tenn. R. Civ. P. 56.04. Where the facts are
undisputed, this court reviews the grant of summary judgment de novo with no presumption
of correctness. City of Tullahoma v. Bedford Cnty., 938 S.W.2d 408, 412 (Tenn.1997).

                                           A NALYSIS

                                     The Retaliatory Tax

       “[T]he principal purpose of retaliatory tax laws is to promote the interstate business
of domestic insurers by deterring other States from enacting discriminatory or excessive
taxes.” W. & S. Life Ins. Co. v. State Bd. of Equalization of Cal., 451 U.S. 648, 668 (1981).

       Generally, such statutes provide that whenever the laws of a particular state
       impose greater burdens and limitations upon companies organized in the
       enacting state, and doing business in such other state, than are imposed by the
       laws of the enacting state upon foreign companies doing business in that state,
       then the same burdens and prohibitions imposed by the foreign state will be
       imposed by the enacting state upon such companies of the foreign state.

43 A M. JUR.2d Insurance § 54 (2014).

        Tennessee has enacted a retaliatory tax law, Tenn. Code Ann. § 56-4-218(a), which
states in pertinent part:

       When, by the laws of any other state or foreign country, any premium or
       income or other taxes, or any fees, fines, penalties, licenses, deposit
       requirements or other obligations, prohibitions or restrictions are imposed
       upon Tennessee insurance companies doing business in the other state or
       foreign country, or upon their agents in the other state or foreign country, that
       are in excess of the taxes, fees, fines, penalties, licenses, deposit requirements
       or other obligations, prohibitions or restrictions imposed upon the insurance
       companies of the other state or foreign country doing business in this state, or
       that might seek to do business in this state, or upon their agents in the state, so
       long as the laws continue in force, the same premium or income or other taxes,
       or fees, fines, penalties, licenses, deposit requirements or other obligations,

                                               3
       prohibitions and restrictions of whatever kind shall be imposed upon the
       companies of the other state or foreign country doing business in this state, or
       upon their agents in this state.

Consistent with Western and Southern Life Insurance Company, 451 U.S. at 668, the
Tennessee Supreme Court has said that:

       [t]he legislative purpose of the retaliatory insurance tax statute, as noted above,
       is to protect Tennessee insurance companies by encouraging foreign
       jurisdictions not to impose heavier burdens on Tennessee companies than
       Tennessee imposes upon their companies who come here to do business.

Republic Ins. Co. v. Oakley, 637 S.W.2d 448, 451 (Tenn. 1982).

        Thus, the issue under the retaliatory tax statute is whether any fees, fines, penalties,
licenses, deposit requirements or other obligations, prohibitions or restrictions are imposed
upon Tennessee insurance companies doing business in New York that are in excess of the
taxes, fees, fines, penalties, licenses, deposit requirements or other obligations, prohibitions
or restrictions imposed upon the insurance companies of New York doing business in
Tennessee.

                                  New York Charges at Issue

       There are several New York charges at issue. The Commissioner maintains that each
charge in each statute constitutes a fee, fine, penalty, license, deposit requirement or other
obligation, prohibition or restriction imposed upon Tennessee insurance companies doing
business in New York that, together, are in excess of the taxes, fees, fines, penalties, licenses,
deposit requirements or other obligations, prohibitions or restrictions imposed upon the
insurance companies of New York doing business in Tennessee. The following New York
charges are at issue:

      1. New York Workers’ Compensation Board Surcharge under N.Y. Workers’ Comp.
Law § 151(2)(a). The charge covers the administrative expenses of the Workers’
Compensation Board. The statute provides that “[t]he chair shall assess upon and collect a
proportion of such expenses as hereinafter provided from each insurance carrier, . . . .” N.Y.
W ORKERS’ C OMP. L AW § 151(2)(a).

        2. Special Disability Fund Surcharge under N.Y. Workers’ Comp. Law § 15(8)(h)(4).
This fund pays supplementary coverage to previously injured workers. The statute provides
that “the chair of the board shall assess upon and collect from . . . all insurance carriers,” their

                                                 4
proportion of the compensation payments and other expenses. N.Y. W ORKERS’ C OMP. L AW
§ 15(8)(h)(4).

       3. Reopened Case Fund Charge under N.Y. Workers’ Comp. Law § 25-a(3). This
fund covers claims filed by injured workers after the expiration of their policies. The statute
provides that “the chairman shall assess and collect from all insurance carriers, in the
respective proportions established in the prior fiscal year . . . , an amount sufficient to restore
the fund to the prescribed minimum.” N.Y. W ORKERS’ C OMP. L AW § 25-a(3).

       4. Workers’ Compensation Security Fund Charge under N.Y. Workers’ Comp. Law
§§ 107, 108. This fund pays claims of insolvent insurance companies. “For the privilege of
carrying on the business of workers’ compensation insurance in this state,” each carrier pays
one per cent of its net premiums, less dividends paid to policyholders, into the fund. N.Y.
W ORKERS’ C OMP. L AW § 108(2).

       5. Fire Insurance Fee pursuant to N.Y. Ins. Law § 9108 and N.Y. State Fin. Law §
54-g. The fee is paid in to an account which helps local governments defray expenses of fire
code activities. “Every insurance company authorized to do business in this state shall
collect, . . . a fire insurance fee, separately identified and charged to each policyholder.”
N.Y. INS. L AW § 9108(a).

       6. Charges for the Motor Vehicle Law Enforcement Account and the Motor Vehicle
Theft and Insurance Fraud Prevention Fund under N.Y. Ins. Law § 9110, N.Y. Fin. Law §
89-d, and N.Y. State Fin. Law § 97-mm. The former account funds state police activities
related to auto theft and the latter fund pays for grants. The money for both comes from a
fee charged to each holder of a policy for motor vehicle liability insurance coverage collected
by each insurance company authorized to do business in the state. N.Y. INS. L AW § 9110(a).

  The New York Workers’ Compensation Board Charge for Administrative Expenses,
       the Special Disability Fund Charge, and the Reopened Case Fund Charge

       These three charges can be discussed together. Each has language, quoted above, that
assesses charges against insurance carriers. Regarding these three charges, N.Y. Workers’
Comp. Law § 151(2)(c) states that “[a]ll insurance carriers, including the state insurance
fund, shall collect such assessments from their policyholders through a surcharge based on
premium in accordance with rules set forth by the New York workers’ compensation rating
board. . . .” Claimant argues that these charges are not “imposed upon” insurance companies
doing business in New York as required by Tenn. Code Ann. § 56-4-218(a). Rather,
Claimant argues that the charges are imposed upon the policyholders who ultimately pay the
charge. Because Tenn. Code Ann. § 56-4-218(a) requires that the charges be imposed “by

                                                5
the laws of any other state,” we must look to New York law to determine upon whom these
charges are imposed.3

       A recent Michigan case found Selective Insurance Company v. New York Workers’
Compensation Board, 953 N.Y.S.2d 368 (N.Y. App. Div. 2012), instructive. See Commerce
& Indus. Ins. Co. v. Dept. of Treasury, 836 N.W.2d 695 (Mich. Ct. App. 2013). In the course
of describing the funding of the New York workers’ compensation system, the New York
court stated:

        Pursuant to the self-supporting mechanism for the workers’ compensation
        system, the Workers’ Compensation Board collects assessments from carriers
        in order to fund the Board’s administrative and operational expenses (see
        Workers’ Compensation Law § 151), the Special Disability Fund (see
        Workers’ Compensation Law § 15[8][h] ) and the Special Fund for Reopened
        Cases (see Workers’ Compensation Law § 25-a). The carriers recover, or
        offset, these assessments from their insured policyholders through a surcharge,
        which is included in the insured’s premiums (see Workers’ Compensation Law
        §§ 15[8][h]; 25–a [3]; 151[2][a] ). The assessments charged to the carriers are
        calculated by the Board based upon the statutory methodology contained in the
        Workers’ Compensation Law and without regard to the amount of surcharges
        collected by the carriers from their policyholders. . . .

Selective Ins. Co., 953 N.Y.S.2d at 369. The assessments did not necessarily match the
surcharges. Id. The Michigan Court of Appeals concluded that, “Selective Ins. Co. confirms
that, at least during the tax years at issue in our case, the assessments paid by insurers were
separate from the surcharges paid by policyholders.”4 Commerce & Indus. Ins. Co., 836
N.W.2d at 704. We agree with that conclusion. It follows, then, that the pertinent statutes
impose the assessments upon the insurance companies.5

        3
         New York courts use rules for interpreting statutes that are similar to those of Tennessee. Under
New York case law, a court “should attempt to effectuate the intent of the Legislature, and where the
statutory language is clear and unambiguous, the court should construe it so as to give effect to the plain
meaning of the words used.” Patrolmen’s Benevolent Ass’n of the City of N.Y. v. City of N.Y., 359 N.E.2d
1338, 1340 (N.Y. 1976) (citations omitted); compare Lee Med., Inc. v. Beecher, 312 S.W.3d 515, 526 (Tenn.
2010).
        4
          In oral argument, Claimant’s counsel maintained that the Selective Insurance Company case was
never briefed or argued before the Michigan court and that its holdings were in a different context from
retaliatory taxes. We, like the Michigan Court of Appeals, find the case instructive.
        5
        The 2009 and 2010 amendments to the New York workers’ compensation laws do not alter our
conclusion. These amendments do not address the so-called “shortfall carriers.” Thus, a difference between

                                                    6
        Claimant argues that the assessments and surcharges create a “pass through” situation
in which the policy holder bears the ultimate burden of the assessment on the company so
that the assessments cannot be said to be “imposed upon” the insurance company. Claimant
cites First American Title Insurance Company v. Combs, 258 S.W.3d 627 (Tex. 2008) in
support of its pass through argument. Texas taxed insurance premiums. Combs, 258 S.W.3d
at 628. The agent kept 85% of the premium; the insurance company kept 15% of the
premium. Id. at 630. The insurance company acted as a conduit for the entire tax payment
by collecting the agent’s portion of the tax and remitting the entire tax to the state. Id. at 634.
The Combs court held that, “[t]his administrative burden of acting as a conduit for the agents’
tax payments does not rise to the level of a ‘direct imposition’ and therefore cannot be
counted as a burden meriting inclusion in the retaliatory tax calculation.” Id.

        We find Combs distinguishable from the case before us. Under the Texas statutes,
85% of the premium tax was placed on the agent, who was required to send his or her taxes
to the insurance company for transmittal to the state. Here, New York never directly taxes
the policyholders. There are two distinct charges, the assessment and the surcharge. New
York law allows a surcharge to be paid by the policyholders to the insurer, which may or may
not cover the insurer’s entire assessment. The surcharge is a recognition that most expenses
of a company are passed on to consumers and represents an attempt to regulate that
transaction. It is not an administrative pass through of the tax. We find the other authorities
cited by Claimant distinguishable as well.

        We hold that these three charges should be included in the computation of the
retaliatory tax as to the State of New York.

                   New York Workers’ Compensation Security Fund Charge

       The Workers’ Compensation Security Fund is created by N.Y. Workers’ Comp. Law
§ 107. This fund pays claims of insolvent insurance companies. “Such fund shall consist of
all contributions received and paid into the fund by carriers, as herein defined, . . . .” N.Y.
W ORKERS’ C OMP. L AW § 107. New York Workers’ Compensation Law § 108(2) also
discusses the payment: “For the privilege of carrying on the business of workers’
compensation insurance in this state, every carrier shall pay into the fund for deposit in the
workers’ compensation security fund payment account established pursuant to section eighty-
nine-f of the state finance law, . . . .” The statute also requires that policy holders pay a
surcharge based upon a recoupment rate adopted by the state “which shall enable each carrier
to recoup over a reasonable length of time a sum reasonably calculated to recover the
payments by the carrier under this section . . . .” N.Y. W ORKERS’ C OMP. L AW § 108(4).


the assessments and the surcharges collected from policyholders still exists.

                                                     7
        Claimant considers the Workers’ Compensation Security Fund charge to be a pass
through as well. For the reasons expressed above regarding the first three charges, we
respectfully disagree. The Workers’ Compensation Security Fund charge should be included
in the computation of the retaliatory tax as to the State of New York.

     The Fire Insurance Fee and the Charges for the Motor Vehicle Law Enforcement
       Account and the Motor Vehicle Theft and Insurance Fraud Prevention Fund

        The Fire Insurance Fee is established as follows: “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.” N.Y.
INS. L AW § 9108(a). ” New York Insurance Law § 9108(b) imposes the fee “at the rate of
one and one-quarter per centum on the gross direct premium written on property or risks
located in this state . . . .” Similarly, as to the Motor Vehicle Law Enforcement Account and
the Motor Vehicle Theft and Insurance Fraud Prevention Fund, “Every insurance company
authorized to do business in this state shall annually collect, in addition to the applicable
premium charge, a motor vehicle law enforcement fee charged to each holder of a policy
issued in the state or for delivery in the state for motor vehicle liability insurance coverage.”
N.Y. INS. L AW § 9110(a). The annual fee is ten dollars per insured motor vehicle. N.Y. INS.
L AW § 9110(b). “Each fiscal year, the first four million seven hundred thousand dollars shall
be paid to the motor vehicle theft and insurance fraud fund . . . .” N.Y. INS. L AW §
9110(e)(1).

       The claims commissioner determined that “any obligation placed on an insurance
company that is payable to the state falls under the definition found in the statute just cited
[Tenn. Code Ann. § 56-4-218(a)] and would be part of the aggregate total of taxes imposed
on the insurer.” Thus, the commissioner interpreted the language “any premium or income
or other taxes, or any fees, fines, penalties, licenses, deposit requirements or other
obligations, prohibitions or restrictions . . . imposed upon Tennessee insurance companies
doing business in the other state,” in Tenn. Code Ann. § 56-4-218(a), as including the
obligation on the part of the insurer to collect and forward to the state a fee placed on a
policyholder. We do not interpret the term “obligation” this broadly. The statute addresses
state actions that cost an insurance company money. As the Texas Court of Appeals
observed in Combs, where the insurance company merely collected the tax from its agents,
“[a]t most, the only compulsion or obligation required of the insurer with regard to 85% of
the premium tax [the portion owed by the agents] is to write a check drawn on money
remitted by the agent—at the end of the day, the insurer’s bank account is not negatively
impacted.” Combs, 258 S.W.3d at 634. The essentially ministerial act of forwarding the
policyholder’s fee to the state is not an activity that falls within the retaliatory tax statute.



                                               8
         The New York statutes upon which these fees are based are unlike the statutes
discussed earlier in this opinion. There is no assessment against the insurers and separate
surcharge to policyholders. Rather, there is a direct statement that the insurance companies
shall collect the fees and that the fees are charged to each policy holder. Based on this
significant difference in language and the natural and ordinary meaning of the words used,
we conclude that New York has indeed set up a pass through as to these fees.

                                        Due Process

       Claimant maintains that the Department changed its position as to charges to be
included in computation of retaliatory taxes without notice or a hearing. The Department
disagrees.

        Claimant argues that Tennessee’s retaliatory tax statute has remained “largely
unchanged for 60 years,” and that “in late 2008 the Department abruptly reversed its long-
standing position of not assessing retaliatory taxes against the New York surcharges.” They
liken this case to New England Mutual Life Insurance Company v. Reece, 83 S.W.2d 238
(Tenn. 1935), in which the definition of “gross premium receipts” was at issue. Since 1897
the commissioner had interpreted the term as allowing deductions for dividends. Reece, 835
S.W.2d at 238. In 1932 the commissioner determined that the term did not include
deductions for dividends. Id. The Supreme Court found that each side had legal authority
from other states to support its position, but that “the weight of the decided cases rather
favors the insurance company.” Id. at 240. The court was also influenced by the length of
time the interpretation had remained in place combined with the fact that the legislature had
reenacted the tax in numerous revenue bills since 1897 “without change of phraseology.”
Id. at 241. “When the Legislature re-enacts without change a statute that has been construed
by officers charged with its enforcement, and that official construction is within the
knowledge of the Legislature, such action of the Legislature is an adoption of that
construction.” Id. Thus, the court ruled that the 1897 interpretation of the statute was the
correct one. Id. at 242.

        It appears to us that the instant case is fundamentally different from Reece. The
retaliatory tax is self-reported: “Each foreign insurance company doing business in this state
shall furnish, over the signature and oath of its responsible officers, the necessary
information for the computation of the taxes upon forms prescribed by the commissioner.”
Tenn. Code Ann. § 56-4-218(a). As a result of an audit, which included a review of the New
York tax structure, the Department became aware that not all New York insurance companies
were reporting all the required assessments. The state presented the affidavit of the
Examiner-In-Charge of the Premium Tax Unit of the Department’s Insurance Division, Mr.
Mark Brothers, who stated that he was not aware of any policy that excluded these

                                              9
assessments from the state burden for retaliatory tax purposes. Thus, rather than changing
its position, the Department became aware of new information that required recalculation of
the tax. Just because the Department did not collect the tax before does not mean it cannot
be collected now. Failure to collect a tax “cannot work an estoppel against the State.”
Porter Brown Limestone Co., Inc. v. Olson, 648 S.W.2d 242, 244 (Tenn. 1982). We find no
due process violation. The State assessed a tax. Claimant challenged the assessment. That
is the process which Claimant is due.

        Claimant also maintains that the Department’s action violated the Uniform
Administrative Procedures Act (“UAPA”): “State executive departments must adhere to
those two fundamental precepts of the UAPA – notice and a public hearing – in formulating
and implementing new regulatory policies, rules and standards.” The Department’s claim
that it did not know of the surcharges, says Claimant, “rings hollow . . . given that both the
New York Surcharges and Tennessee’s retaliatory tax statute have been the law for many
decades.” It may be that the Department has been lax. It may be that the Department should
have become aware of the surcharges sooner, even though they are not placed together in the
New York code. The action of the Department, however, cannot be said to be based on a
new policy or rule, but rather on new information—the existence of the surcharges. The use
of new information that alters the incidence and amount of a preexisting tax is not the
equivalent of a new rule or policy. We find no violation of the UAPA.

                                    Full Faith and Credit

       Article IV, Section 1 of the United States Constitution, the Full Faith and Credit
Clause, states that, “Full Faith and Credit shall be given in each State to the public acts,
Records and judicial Proceedings of every other State.” Claimant argues that the state is
misinterpreting New York law: “To allow the Department to rewrite New York law violates
the constitutional requirement of the Full Faith and Credit Clause.”

      Because Tenn. Code Ann. § 56-4-218(a) requires that the charges be imposed “by the
laws of any other state,” we must look to New York law. However, the United States
Supreme Court has stated:

       [t]o constitute a violation of the Full Faith and Credit Clause . . . , it is not
       enough that a state court misconstrue the law of another State. Rather, our
       cases make plain that the misconstruction must contradict law of the other
       State that is clearly established and that has been brought to the court’s
       attention.

Sun Oil Co. v. Wortman, 486 U.S. 717, 730-31 (1988); see also Phillips Petroleum Co. v.

                                              10
Shutts, 472 U.S. 797, 834-35 (1985); W. Life Indem. Co. of Ill. v. Rupp, 235 U.S.261, 275
(1914) (“[I]t is settled that where, in a state court, the validity of an act of the legislature of
another state is not in question, and the controversy turns merely upon its interpretation or
construction, no question arises under the ‘full faith and credit’ clause of the Federal
Constitution.”). There is no violation of the Full Faith and Credit Clause in this case.

                                        Equal Protection

      Claimant also argues a violation of equal protection. In Western and Southern Life
Insurance Company v. State Board of Equalization of California, 451 U.S. at 668, the
Supreme Court decided whether California’s retaliatory tax violated the Equal Protection
Clause of the Fourteenth Amendment by applying a rational basis test:

       In determining whether a challenged classification is rationally related to
       achievement of a legitimate state purpose, we must answer two questions: (1)
       Does the challenged legislation have a legitimate purpose? and (2) Was it
       reasonable for the lawmakers to believe that use of the challenged
       classification would promote that purpose?

The Alaska Supreme Court succinctly described the Supreme Court’s holding in Western and
Southern as follows:

       In Western & Southern, the United States Supreme Court upheld California’s
       retaliatory tax as constitutional under the federal Equal Protection Clause. In
       upholding the statute, the Supreme Court reasoned that promotion of domestic
       industry by deterring barriers to interstate business is a legitimate state purpose
       and the mere fact that California was trying to promote its insurance industry
       by influencing the policies of other states through retaliatory taxation did not
       render the purpose illegitimate. It further concluded that it was reasonable for
       California to suppose that its retaliatory taxes would induce other states to
       lower the burdens on California insurers in order to spare their domestic
       insurers the cost of the retaliatory tax in California.

Premera Blue Cross v. State, Dep’t of Commerce, Cmty. & Econ. Dev., Div. of Ins., 171 P.3d
1110, 1123 (Alaska 2007) (footnotes omitted).

      The same reasoning applies to Tenn. Code Ann. § 56-4-218(a). It does not violate the
Equal Protection Clause.




                                                11
                          Commerce Clause and Uniformity Clause

       Claimant argues that the tax violates the Commerce Clause. The Supreme Court in
Western and Southern, 451 U.S. at 655, rejected the claim that California’s retaliatory tax
violated the Commerce Clause, holding that “the McCarran-Ferguson Act removes entirely
any Commerce Clause restriction upon California’s power to tax the insurance business.”

        Claimant also makes an argument based on the Uniformity Clause, found in Article
1, section 8 of the United States Constitution.6 They candidly recognize that this argument
is inconsistent with Prudential Insurance Co. v. Benjamin, 328 U.S. 408 (1946) and Western
& Southern, 451 U.S. 648. We are bound by the precedents established by the United States
Supreme Court interpreting the federal constitution. Utley v. Tenn. Dep’t of Corr., 118
S.W.3d 705, 715 (Tenn Ct. App. 2003). Therefore, we reject Claimant’s Uniformity Clause
argument.

                                          C ONCLUSION

        We affirm the Commission as to four of the charges and reverse as to two charges.
We also reject all of Claimant’s challenges to the constitutionality of the Tennessee
retaliatory tax. Costs of appeal are assessed against the Claimant, for which execution may
issue if necessary.


                                                                _________________________
                                                                ANDY D. BENNETT, JUDGE




       6
        The Uniformity Clause of Art. 1, § 8 of the United States Constitution states: “all Duties,
Imposts and Excises shall be uniform throughout the United States.”

                                                12
