AN ACT TO AMEND SECTIONS 2705 AND 2706, CHAPTER 27, TITLE 18, DELAWARE CODE, RELATING TO THE SPECIAL TAX ON PREMIUMS OF INSURANCE COMPANIES, THE COLLECTION OF SAID TAX, AND THE DISTRIBUTION OF REVENUE THEREFROM.
WHEREAS, at the time of its enactment in 1891 of the first Delaware Statute dealing with the taxing of fire insurance companies the insurance business was a more rigid affair than now. That is to say, a company incorporated to insure against property loss by fire was not authorized to engage in other insurance lines. However, over the intervening years Corporate Charters and Certificates of Authority for insurance companies have been broadened through liberalizing legislation. As a result, so called multiple line insurance is carried on by many old line fire insurance companies, such companies now being authorized to insure against a wide diversity of property and casualty risks; and
WHEREAS, the fire companies and departments in the state no longer limit their functions to fire protection but perform fire prevention, land and river rescue services, ambulance service, explosion, earthquake, wind storm, hail, water, flood, riot or civil commotion services and civil defense services and automobile and marine accidents, wrecks and fire services; and
WHEREAS, the Delaware Court of Chancery has ruled in the case of State Farm V. Short than an insurance company which writes automobile insurance, even though it covers the risk of loss by fire, is not subject to the special tax used for maintaining fire companies and departments in the state; and
WHEREAS, the intent of this Act is to provide better equipped and more efficient fire companies and departments and to develop for the Insurance Commissioner a reasonable formula for determining what portion of premiums paid for insurance is properly allocable to the risk of loss in Delaware for the benefit of the insurance companies and for the benefit of the citizens of this State;
Be it enacted by the General Assembly of the State of Delaware (three-fourths of all Members elected to each House concurring therein):
Section 1. Sections 2705 and 2706, Chapter 27, Title 18, Delaware Code, are amended to read:
§ 2705. Special tax on premiums of insurance companies covering the risk of loss by fire
(a) For the purpose of assisting in maintaining fire companies or departments in this State, every insurance company doing any business in this State shall annually pay to the Insurance Commissioner on or before the first day of March in addition to other taxes, fees and charges required by law and notwithstanding other provisions in this title, a tax equal to 3-1% on that portion of the gross premiums obtained for the following types of coverage: fire, extended coverage, other allied lines, homeowners (package policy), commercial multiple peril, growing crops, ocean marine, inland marine, automobile physical damage, aircraft physical damage, less return and reinsurance premiums received from other companies or by any agent or agents of such company, in cash or otherwise, from the insurance of any real or personal property within the limits of this State during the preceding calendar year. In case of a mutual company, the dividends paid or credited to members on such premiums shall be construed to be returned premiums.
(b) No insurance company shall increase the rate of insurance premiums upon any real or personal property, affected by this section because of the tax provided by this section, unless the Insurance Commissioner, after a public hearing on the matter, shall be satisfied that an increase is necessary, and in the event that the Insurance Commissioner shall be satisfied after such public hearing that an increase in the premium rate is necessary, he shall authorize such reasonable increase as he deems fair and equitable.
§ 2706. Statements by the insurance companies; distribution of the proceeds of the special tax on insurance companies covering the risk of loss by fire
(a) Every insurance company covering the risk of loss of the type of coverage lister in § 2705 of this title on any real or personal property within this State shall annually at the same time that such company files its annual report as required by law, deliver to the Insurance Commissioner a full detailed statement of the amount of gross premiums of all business done by such company in the City of Wilmington ; in the County of New Castle, outside the City of Wilmington ; in Kent County; and in Sussex County ; for the year ending on the previous Thirty-first day of December. The insurance company shall also state in the statement the amount of the portion of the gross premiums allocated and obtained for covering the risk of loss on any real or personal property within this State of the type of coverage listed in § 2705 of this title by such company in the City of Wilmington; in the County of New Castle, outside the City of Wilmington; in Kent County; in Sussex County; for the year ending on the previous Thirty-first day of December. The statement shall be verified by the oath or affirmation of the president or vice-president and secretary or other officer, and the statement shall be on the forms prepared and furnished by the Insurance Commissioner for that purpose. The Insurance Commissioner shall have the power and authority to request and receive any information regarding any insurance company's business of covering the risk of loss of the type of coverage listed in § 2705 of this title. Failure to give the Insurance Commissioner the requested information shall be good cause under section 507 of this title for revocation of any Certificate of Authority of the insurance company ignoring the request.
(b) The Insurance Commissioner shall ascertain and report to the State Treasurer, the Levy Court of the respective Counties and the City Treasurer of Wilmington, on or before the fifteenth day of May of each year, the information contained in the statements and such other information as the Insurance Commissioner has obtained from the insurance companies covering the risk of loss of the type of coverage listed in § 2705 of this title and from such report the State Treasurer shall ascertain the amount due and owing to the City Treasurer of the City of Wilmington, and to the treasurer of the respective counties of this State, under this section, and on or before the first day of June of each year, shall pay to the treasurers of the respective counties in this State, the proportionate amounts due under this section, which amounts shall be used by the Levy Court of the respective, counties, exclusively for the purpose of assisting in maintaining fire companies and departments in said counties, and shall be distributed equally among all fire companies or departments regularly organized and motorized in such county. The money realized under the provisions of this section and section 2705 of this title which under the statements is due and owing to the City of Wilmington shall be paid to the Treasurer of the City of Wilmington and shall be applied to, and become a part of the Firemen's Pension Fund of the Bureau of Fire of the City of Wilmington, and shall be used as directed in the by-laws and constitution of the Bureau.
(c) The money received, under this section and section 2705 of this title, shall be set aside as a special fund for assisting in maintaining fire companies or departments in this State and shall be paid out by the State Treasurer to the treasurer of the City of Wilmington, and to the respective treasurers of each county for the sole purpose of assisting in maintaining fire companies or departments in such counties in such manner and in such proportions as provided in this section.
(d) All active fire companies or departments in this State outside of the limits of the City of Wilmington, shall register with their respective county treasurer on or before the first day of April in each year on a form provided by the respective treasurers for this purpose giving their location, apparatus, and equipment maintained.
Approved June 10, 1965.