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Combs v. Glen Falls Insurance
Citations: 237 Ark. 745; 375 S.W.2d 809; 1964 Ark. LEXIS 356Docket: 5-3278
Court: Supreme Court of Arkansas; March 2, 1964; Arkansas; State Supreme Court
The appellees, two out-of-state insurance companies operating in Arkansas, sought a judicial declaration that Act 527 of 1963 was invalid due to its passage by only a simple majority rather than the required three-fourths majority in each legislative house. The defendants, including the Insurance Commissioner and the Attorney General, argued that a simple majority sufficed. The chancellor ruled that a three-fourths majority was indeed necessary and declared the act invalid. Central to the case is whether Act 527 increased privilege tax rates on foreign insurance companies, as an increase necessitates a three-fourths majority under Amendment 19 of the Arkansas Constitution. This amendment, effective since 1934, stipulates that any rate increases for certain taxes must receive such a majority. The original tax rates for foreign life and health insurance companies were set at 2% and remained unchanged until incorporated into the Insurance Code. Act 527 explicitly raises these rates: it establishes a 3% tax for life and disability companies and maintains a 2% rate for other insurers, thus increasing the tax by 0.5%. The appellants contended that the act does not constitute a tax increase because it allows insurers to opt for the old rate if they invest in Arkansas. However, the language of the act does not describe this as a penalty, nor does it indicate that the increased rate can be avoided without investment. Furthermore, the court rejected the notion that the severability clause in the act could sustain its investment provisions independently of the tax increase. The court emphasized that the act represented a single, indivisible legislative intent, wherein both the tax increase and investment requirements were interdependent. Thus, if the tax increase is invalidated, the investment provisions cannot stand alone. The chancellor's decision to void the entire act was affirmed.