Prudential Insurance of America v. State Board of Equalization

This case involves liability for a tax mandated by article XIII, section 28 of the California Constitution. That provision imposes a tax on insurers, other than title insurers, doing business in this state. As pertinent, the constitutional provision provides: “[T]he ‘basis of the annual tax’ is, in respect to each year, the amount of gross premiums, less return premiums, received in such year by such insurer upon its business done in this State . . . .” (Id. subd. (c).)

Defendant, State Board of Equalization (SBE), appeals from a trial court judgment in favor of plaintiffs, Prudential Insurance Company of America and Pruco Life Insurance Company (collectively Prudential), in Prudential’s action for a refund of certain “gross premiums” insurance taxes paid by Prudential on group health insurance contracts under which employers assumed the obligation to pay their employees’ health care claims up to an annual “trigger-point” amount and Prudential assumed the obligation to pay claims above that amount. The taxes at issue in this appeal were assessed against Prudential for that aspect of the contracts dealing with claims below the trigger-point, i.e., claims which were the…