      TEXAS COURT OF APPEALS, THIRD DISTRICT, AT AUSTIN


                                      NO. 03-13-00619-CV



     Argonaut Insurance Company and Argonaut Great Central Insurance Company,
                                    Appellants

                                                 v.

   Glenn Hegar, Comptroller of Public Accounts of the State of Texas; and Ken Paxton,
                  Attorney General of the State of Texas, Appellees


     FROM THE DISTRICT COURT OF TRAVIS COUNTY, 98TH JUDICIAL DISTRICT
     NO. D-1-GN-11-001584, HONORABLE LORA J. LIVINGSTON, JUDGE PRESIDING



                            MEMORANDUM OPINION


               Argonaut Insurance Company and Argonaut Great Central Insurance Company

(jointly Argonaut) appeal from the trial court’s summary judgment in favor of Glenn Hegar,

Comptroller of Public Accounts of the State of Texas, and Ken Paxton, Attorney General of the State

of Texas (jointly the Comptroller).1 Argonaut filed suit in Travis County to recover taxes paid under

protest. See Tex. Tax Code §§ 112.001, .051, .052. The parties filed competing motions for

summary judgment. The trial court granted the Comptroller’s motion, denied Argonaut’s motion,

and rendered judgment that Argonaut take nothing by its claims. For the reasons that follow, we

affirm the trial court’s judgment.


       1
          We substitute Glenn Hegar, in his official capacity, as successor to Susan Combs as
Comptroller of Public Accounts and Ken Paxton, in his official capacity, as successor to Greg Abbott
as Attorney General. See Tex. R. App. 7.2(a).
                     FACTUAL AND PROCEDURAL BACKGROUND

               Argonaut provided insurance to the Texas Association of Public Educators Interlocal

Agreement Self-Insurance League (TAPE) and the Texas Association of Political Subdivisions

Interlocal Agreement Self-Insurance League (TAPS). TAPE and TAPS are self-funded risk pools

created by political subdivisions under the authority of Chapter 172 of the Local Government Code.

See generally Tex. Loc. Gov’t Code §§ 172.001–.015 (providing for uniform group benefits

programs for employees of political subdivisions). Political subdivisions, including counties and

school districts, may establish risk pools or enter into interlocal agreements with other political

subdivisions to establish risk pools. Id. §§ 172.003(3), .005; see generally Tex. Gov’t Code

§§ 791.001–.035 (authorizing local governmental units to contract with one another); see also Tex.

Loc. Gov’t Code § 119.002 (authorizing county governments to create risk management pool).

TAPE and TAPS were formed under interlocal agreements to pool the self-insured risks of the

participating political subdivisions and provide insurance to participating members. They are

organized as tax exempt civic leagues for the promotion of the common governmental interests of

their members under section 501(c)(4) of the Internal Revenue Code and are not companies licensed

by the Texas Department of Insurance. See 26 U.S.C. § 501(c)(4). TAPE and TAPS provide several

types of coverage, including general liability, automobile liability, property damage, and inland

marine. They collect premiums from the members and are directly liable to the members for

covered losses.

               TAPE entered into a contract with Argonaut Insurance Company entitled Texas

Association of Public Educators Reinsurance Program; likewise, TAPS entered into a contract with



                                                2
Argonaut Great Central Insurance Company entitled Texas Association of Political Subdivisions

Reinsurance Program. Under the terms of the contracts, Argonaut agreed to indemnify TAPE and

TAPS for losses under certificates, or policies, issued to participating members under the interlocal

agreements. TAPE and TAPS agreed to cede to Argonaut 100% of the premiums received on

policies issued to their members. For accounting purposes, Argonaut booked all premiums, losses,

and expenses associated with the agreements with TAPE and TAPS as reinsurance income and

expense. While premiums received for direct insurance are taxable, certain premiums received for

reinsurance are excluded from the determination of an insurer’s taxable premium receipts. See Tex.

Ins. Code §§ 221.002 (governing property and casualty insurance), 222.002 (governing life, health,

and accident insurance).

               The Comptroller has the authority to administer the insurance taxes at issue. See Tex.

Ins. Code § 201.051 (comptroller shall administer and enforce provisions of Insurance Code and

other insurance laws that relate to administration, collection, and reporting of taxes and fees imposed

under Insurance Code or other insurance law); Tex. Tax Code §§ 111.0021 (Chapter 111 of Tax

Code concerning collection procedures applies to tax or fee comptroller is required to collect under

a law not included in this title), 111.0022 (this subtitle (Enforcement and Collection) and subtitle

A of this title (General Provisions) apply to administration, collection, and enforcement of other

taxes fees and charges comptroller is required or authorized to collect or administer under other law).

Between January 2006 and December 2009, the Comptroller conducted an audit of Argonaut and

disallowed Argonaut’s classification of the premiums received from TAPE and TAPS as reinsurance

premiums on the ground that under Comptroller Rule 3.831, for premiums to qualify as paid



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for reinsurance, the transaction must occur between two licensed insurance companies. See

34 Tex. Admin. Code § 3.831(1)(A)(iii) (Tex. Comptroller of Pub. Accounts, Gross Premium

Definitions for Property and Casualty; Life, Accident, and Health; Health Maintenance

Organizations; and Title Insurance Companies; and Clarification of the Taxation on the Distribution

of Title Premiums). The Comptroller reasoned that because TAPE and TAPS are not licensed

insurance companies, the premiums they paid to Argonaut were not reinsurance but were to directly

insure risks. Consequently, the Comptroller assessed additional premium taxes against Argonaut

Insurance Company in the amount of $318,704.00 and additional maintenance taxes in the amount

of $55,011.29, plus penalties and interest, for a total of $443,312.46. The Comptroller assessed

additional premium taxes against Argonaut Great Central Insurance Company in the amount of

$490,448.00 and additional maintenance taxes in the amount of $79,807.16, plus penalties and

interest, for a total of $714,275.87.

               Argonaut paid the total amounts assessed under protest and filed this suit pursuant

to Chapter 112 of the Tax Code to recover the amounts paid under protest. See Tex. Tax Code

§§ 112.051, .052. Argonaut and the Comptroller filed competing motions for summary judgment.

The trial court denied Argonaut’s motion, granted the Comptroller’s motion, and rendered judgment

that Argonaut take nothing by its claims. This appeal followed.


                                    STANDARD OF REVIEW

               Because the parties do not dispute the relevant facts, this is a proper case for summary

judgment. See City of Garland v. Dallas Morning News, 22 S.W.3d 351, 356 (Tex. 2000). We

review a trial court’s summary judgment de novo. Travelers Ins. Co. v. Joachim, 315 S.W.3d 860,

                                                  4
862 (Tex. 2010). When the trial court does not specify the grounds for granting the motion, we must

uphold the judgment if any of the grounds asserted in the motion and preserved for appellate review

are meritorious. Provident Life & Accident Ins. Co. v. Knott, 128 S.W.3d 211, 216 (Tex. 2003).

When both parties move for summary judgment, each party bears the burden of establishing that it

is entitled to judgment as a matter of law. City of Garland, 22 S.W.3d at 356; Abbott v. Dallas Area

Rapid Transit, 410 S.W.3d 876, 879 (Tex. App.—Austin 2013, no pet.). When both parties move

for summary judgment on the same issues and the trial court grants one motion and denies the other,

we consider the summary judgment evidence presented by both sides, determine all questions

presented, and if we determine that the trial court erred, render the judgment the trial court should

have rendered. Valence Operating Co. v. Dorsett, 164 S.W.3d 656, 661 (Tex. 2005) (citing

FM Props. Operating Co. v. City of Austin, 22 S.W.3d 868, 872 (Tex. 2000)).

               Argonaut’s issues concern statutory construction, a question of law that we review

de novo. See Railroad Comm’n of Tex. v. Texas Citizens for a Safe Future & Clean Water,

336 S.W.3d 619, 624 (Tex. 2011). Our primary concern in construing a statute is the express

statutory language. See Galbraith Eng’g Consultants, Inc. v. Pochucha, 290 S.W.3d 863, 867 (Tex.

2009). Words that are not defined are given their ordinary meanings unless a different meaning is

apparent from the context or the plain meaning leads to absurd results. Marks v. St. Luke’s

Episcopal Hosp., 319 S.W.3d 658, 663 (Tex. 2010). “We generally avoid construing individual

provisions of a statute in isolation from the statute as a whole.” Texas Citizens, 336 S.W.3d at 628.

“Taxing statutes are construed strictly against the taxing authority and liberally for the taxpayer.”

Morris v. Houston Indep. Sch. Dist., 388 S.W.3d 310, 313 (Tex. 2012) (per curiam). If the statutory



                                                  5
language or agency rule is ambiguous, we may defer to an administrative agency’s construction of

its own statutory authority and rules as long as the construction is reasonable and does not conflict

with the language of the statute or rule. TGS-NOPEC Geophysical Co. v. Combs, 340 S.W.3d 432,

438 (Tex. 2011); Texas Citizens, 336 S.W.3d at 624; Texas Bd. of Chiropractic Exam’rs v. Texas

Med. Ass’n, 375 S.W.3d 464, 475 (Tex. App.—Austin 2012, pet. denied). “However, agency

deference does not displace strict construction when the dispute is not over how much tax is due but,

more fundamentally, whether the tax applies at all.” TracFone Wireless, Inc. v. Commission on State

Emergency Commc’ns, 397 S.W.3d 173, 182 (Tex. 2013).


                                          DISCUSSION

               In two issues, Argonaut argues that the trial court erred in denying its motion for

summary judgment and granting that of the Comptroller. Its arguments are premised on the

contention that the contracts between Argonaut and TAPE and TAPS are agreements for reinsurance.

The Comptroller agrees that the central issue is whether the premiums received by Argonaut from

TAPE and TAPS are premiums received from another insurer for reinsurance; however, the

Comptroller asserts that TAPE and TAPS are not “insurance companies” or “insurers,” and

accordingly, the premiums are not reportable as reinsurance. Based on our reading of the applicable

statutory provisions, we ultimately agree with the Comptroller.

               Argonaut focuses on the nature of its contracts with TAPE and TAPES, insisting that

they embodied all the characteristics of reinsurance and arguing that governmental risk pools are

authorized to purchase reinsurance. Argonaut further argues that the fact that TAPE and TAPS are

not licensed insurance companies is not dispositive. In light of the plain language of the applicable

                                                 6
statutes, we cannot agree. While a risk pool is expressly authorized to purchase reinsurance, it is also

expressly declared not to be insurance or an insurer. See Tex. Loc. Gov’t Code §§ 172.008 (risk pool

may purchase reinsurance to insure pool against losses), .014 (“A risk pool created under this chapter

is not insurance or an insurer under the Insurance Code and other laws of this state, and the State

Board of Insurance does not have jurisdiction over a pool created under this chapter.”); see also

Tex. Loc. Gov’t Code §§ 119.005(e) (county government risk management pool may purchase

reinsurance for risks covered by pool), .008 (county government risk management pool created under

chapter 119 is not insurance for purposes of Insurance Code and laws); Texas Dep’t of Ins.

v. American Nat’l Ins. Co., 410 S.W.3d 843, 848 (Tex. 2012) (employers who self fund employee

health benefit plans perform service similar to that of insurance companies and “operate much like

insurers” but “are clearly not insurance companies”).

                The tax exclusion at issue applies, for purposes of the property and casualty insurance

premium tax, to “premium receipts received from another authorized insurer for reinsurance,” see

Tex. Ins. Code § 221.002(c)(3) (emphasis added), and, for purposes of the life, health, and accident

insurance premium tax, to “premiums received from an insurer for reinsurance,” see id.

§ 222.002(c)(3) (emphasis added). Comptroller Rule 3.831, promulgated pursuant to authority under

Insurance Code section 201.051 and Tax Code sections 111.0021 and 111.0022, is consistent with

these statutory provisions. See Tex. Ins. Code § 201.051; Tex. Tax Code §§ 111.0021, .0022;

34 Tex. Admin. Code § 3.831(1)(A)(iii) (excluding from premium tax “premiums received from

other licensed companies for reinsurance” for property and casualty insurance) (emphasis added),




                                                   7
(2)(A)(iii) (excluding from premium tax “premiums that an insurance carriers [sic] receives from

another insurance carrier for reinsurance) (emphasis added).

               Although they vary slightly, there is no substantive difference between the key terms

used in sections 221.002 and 222.002 and Rule 3.831—“authorized insurer,” “insurer,” “licensed

company,” and “insurance carrier.” None of the terms is defined in Chapter 221 or 222; however,

their ordinary meanings and definitions of some of the terms provided elsewhere in the Insurance

Code all generally refer to a company that sells insurance and is regulated by the Texas Department

of Insurance. “Insurance company” is ordinarily defined as “a corporation or association that issues

insurance policies.” See Black’s Law Dictionary 925 (10th ed. 2014). Chapter 822 of the Insurance

Code, concerning incorporation and regulatory requirements for “each company or organization that

proposes to engage in any kind of insurance business other than a life, health, or accident insurance

company,” refers to formation of “a company for the purpose of engaging in the business of

insurance.” See Tex. Ins. Code §§ 822.001, .051(a). Similarly, Chapter 841, concerning life, health,

and accident insurance companies, defines “insurance company” and “company” as “all corporations

engaged as a principal in the business of life, accident, or health insurance.” See id. § 841.001(8).

“Carrier” is defined as an “insurer,” see Black’s Law Dictionary at 256–57, and “insurer” is defined

in Chapter 101, concerning unauthorized insurance, as


       (A) a corporation, association, partnership, or individual engaged as a principal in the
       business of insurance;

       (B) an interinsurance exchange or mutual benefit society; or

       (C) an insurance exchange or syndicate.



                                                  8
Tex. Ins. Code § 101.002(1). “Licensed” means “having permission to do something, usu. as

evidenced by a written certificate,” Black’s Law Dictionary at 1061; similarly, “authorize” means

“to give legal authority; to formally approve; to sanction.” See id. at 159. By definition, then, these

terms all describe regulated entities that are authorized or licensed to conduct the business of

insurance. Thus, all four provisions require that for premiums to be excluded from the premium tax,

they must be received from an insurer subject to regulation by the Texas Department of Insurance.

See Tex. Ins. Code §§ 221.002(c)(3), 222.002(c)(3); 34 Tex. Admin. Code § 3.831(1)(A)(iii),

(2)(A)(iii). Because TAPE and TAPS are organized as nonprofit civic leagues that are not engaged

in the business of insurance and are statutorily declared not to be insurers and not subject to the

jurisdiction of the State Board of Insurance, see Tex. Loc. Gov’t Code § 172.014, premiums

Argonaut received from them were not received from “another authorized insurer” or “an insurer”

as required by sections 221.002 and 222.002 and are thus not covered by the plain language of the

statutory exclusion. See Tex. Ins. Code §§ 221.002(c)(3), 222.002(c)(3); Marks, 319 S.W.3d at 663.

We therefore conclude that the trial court did not err in granting the Comptroller’s motion for

summary judgment and denying Argonaut’s motion and overrule Argonaut’s two issues.2


                                          CONCLUSION

               Having overruled Argonaut’s issues, we affirm the trial court’s judgment.




       2
          Although the parties join issue on whether the product Argonaut sold to TAPE and TAPS
was reinsurance, because we conclude that TAPE and TAPS are not insurers under the relevant
statutes, we do not reach their arguments on this issue. See Tex. R. App. P. 47.1.

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                                              _____________________________________________

                                              Melissa Goodwin, Justice

Before Justices Puryear, Goodwin, and Field

Affirmed

Filed: June 24, 2015




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