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Date: 12-20-2020
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Appellants, Glenn Hegar, Comptroller of Public Accounts of the State of Texas and Ken Paxton, Attorney General of the State of Texas// Cross-Appellant, Health Care Service Corporation, A Mutual Legal Reserve Company, d/b/a Blue Cross and Blue Shield of Texas v. Appellee, Health Care Service Corporation, A Mutual Legal Reserve Company, d/b/a Blue Cross and Blue Shield of Texas// Cross-Appellees, Glenn Hegar, Comptroller of Public Accounts of the State of Texas and Ken Paxton, Attorney General of the State of Texas
Case Number: 03-19-00864-CV
Judge: Jeff Rose
Court: Austin, TX
Plaintiff's Attorney: Mr. Ethan Glenn
Ms. Alison Andrews
Mr. Jack Hohengarten
Mr. Ray H. Langenberg
Mr. Ethan Glenn
Mr. Jack Hohengarten
Ms. Alison Andrews
Mr. Ray H. Langenberg
Defendant's Attorney:
OR
Just Call 855-853-4800 for Free Help Finding a Lawyer Help You.
Description:
Austin, TX - Tax attorney represented Health Care Service Corporation, A Mutual Legal Reserve Company, d/b/a Blue Cross and Blue Shield of Texas with stop-loss policies in question here limiting the self-insured employer’s liability by providing coverage for employee health-benefit costs that exceed a certain amount charged.
Appellee and cross-appellant Health Care Service Corporation, A Mutual Legal
Reserve Company, d/b/a Blue Cross and Blue Shield of Texas (BCBS), sells “stop-loss” policies
to businesses that self-insure, meaning the businesses provide their employees with health
insurance by directly funding the employees’ healthcare benefits. The stop-loss policies in
question here limit the self-insured employer’s liability by providing coverage for employeehealth-benefit costs that exceed a certain amount. In other words, a stop-loss policy caps the
employer’s healthcare costs at a set level, insuring the employer against any unusually high
healthcare costs in a particular year. Appellant and cross-appellee Glenn Hegar, Comptroller of
2
Public Accounts of the State of Texas, conducted an audit and determined that BCBS owed
$3,005,270.13 in premium taxes and $68,691.89 in maintenance taxes on the stop-loss policies it
had sold to self-insured employers in 2012. See Tex. Ins. Code §§ 222.002, 257.003.
BCBS paid the taxes under protest and then filed the underlying taxpayer suit
against the Comptroller and Ken Paxton, Attorney General of the State of Texas (collectively,
the Comptroller). The Comptroller filed a counterclaim arguing that if the stop-loss policies are
not health or accident insurance, BCBS was not authorized to write the policies and was thus
liable for damages. The parties filed competing motions for summary judgment, the trial court
granted BCBS’s motion and denied the Comptroller’s, and the Comptroller then nonsuited his
counterclaim. The question we must decide in this appeal is whether the premiums BCBS
collected on its stop-loss policies were from a contract or policy covering risks on individuals or
groups and arising from the business of health insurance so as to be subject to premium taxes,
see id. § 222.002, or from writing health insurance so as to be subject to maintenance taxes, see
id. § 257.003. Alternatively, the Comptroller argues that if BCBS would otherwise be entitled to
a refund, it submitted insufficient evidence to support its asserted refund calculations. In its
cross-appeal, BCBS argues that in granting summary judgment, the trial court also granted
summary judgment on BCBS’s sought amount of refund. We affirm the trial court’s order
granting BCBS’s motion for summary judgment and need not address BCBS’s cross-appeal.
STANDARD OF REVIEW
When, as here, both parties move for summary judgment and the court grants one
motion and denies the other, we conduct a de novo review, considering the evidence presented,
determining all questions presented, and, if we determine that the trial court erred, rendering the
3
judgment the trial court should have rendered. Valence Operating Co. v. Dorsett, 164 S.W.3d
656, 661 (Tex. 2005). The construction of a statute is an issue we review de novo. Railroad
Comm’n v. Texas Citizens for a Safe Future & Clean Water, 336 S.W.3d 619, 624 (Tex. 2011).
Our primary objective when construing a statute is to determine and give effect to the
Legislature’s intent. Texas Dep’t of Ins. v. American Nat’l Ins. Co., 410 S.W.3d 843, 853 (Tex.
2012). We begin with the words chosen by the Legislature and, if the statute is clear and
unambiguous, apply the common meaning of the statutory language unless a different meaning is
apparent from context or the plain meaning leads to absurd results. See id. (quoting First Am.
Title Ins. Co. v. Combs, 258 S.W.3d 627, 631 (Tex. 2008)); Marks v. St. Luke’s Episcopal Hosp.,
319 S.W.3d 658, 663 (Tex. 2010). If a statute is ambiguous, we consider the construction
applied by the administrative agency charged with its enforcement, giving that construction
serious consideration, as long as that construction is reasonable and does not contradict the plain
statutory language. American Nat’l Ins., 410 S.W.3d at 853 (quoting Tarrant Appraisal Dist. v.
Moore, 845 S.W.2d 820, 823 (Tex. 1993)).
However, “agency deference does not displace strict construction” when we are
asked whether a tax statute applies. TracFone Wireless, Inc. v. Commission on State Emergency
Commc’ns, 397 S.W.3d 173, 182-83 (Tex. 2013). Instead, we apply “an ancient pro-taxpayer
presumption: The reach of an ambiguous tax statute must be construed ‘strictly against the taxing
authority and liberally for the taxpayer.’” Id. at 182 (quoting Morris v. Houston Indep. Sch.
Dist., 388 S.W.3d 310, 313 (Tex. 2012) (per curiam)). “In other words, a tax must apply
unequivocally.” Id. Ambiguous or imprecise tax statutes “must be interpreted ‘most strongly
against the government, and in favor of the citizen,’” and “we will not extend the reach of an
4
ambiguous tax by implication, nor permit tax collectors to stretch the scope of taxation beyond
its clear bounds.” Id. at 183 (quoting Gould v. Gould, 245 U.S. 151, 153 (1917)).
DISCUSSION
Section 222.002 provides in relevant part that an annual tax is imposed on “each
insurer that receives gross premiums subject to taxation under this section,” and that in
determining its taxable gross premiums, the insurer shall include all premiums received from
“any kind of . . . insurance policy or contract covering risks on individuals or groups located in
this state and arising from . . . the business of” health insurance. Tex. Ins. Code § 222.002(a),
(b). Section 257.003 imposes maintenance taxes on, as relevant to this case, “gross premiums
collected from writing life, health, and accident insurance in this state.” Id. § 257.003(a). The
Comptroller insists that the premiums BCBS collected on its stop-loss policies are subject to
premium or maintenance taxes.
BCBS has a certificate of authority, issued by the Texas Department of Insurance
(TDI), allowing it to transact “the business of Accident; Health; Reinsurance on all lines
authorized to be written on a direct basis; and the authority to transact business as a Health
Maintenance Organization offering Basic Health Care Service Plans.” The Comptroller argues
that the fact that the certificate does not list stop-loss as a separate category, along with BCBS’s
assertions in its summary judgment evidence that TDI does not offer separate certificates of
authority for stop-loss insurance and instead allows for the issuance of such policies “under the
category of health insurance,” must mean that BCBS’s issuance of stop-loss policies falls within
“the business of health insurance.” The Comptroller further notes that BCBS lists stop-loss
insurance and premiums on its Annual Statements under “Health Business” and sought an
5
exemption from certain insurance-form requirements that apply only to “group and individual
accident and/or health policies,” arguing that those facts show that BCBS itself considers stoploss policies to be group policies arising from the business of health insurance. Finally, the
Comptroller contends that we “should interpret the premium tax statutes in the Insurance Code to
avoid gaps in coverage.”
DOES THE PREMIUM TAX APPLY?
We begin by asking whether the premium tax, which is assessed against
premiums received from insurance that covers “risks on individuals or groups” and that arise
from the business of health insurance, applies to the stop-loss policies in question. Id.
§ 222.002(b).
1
The Comptroller argues that the stop-loss policies (1) should be viewed and
treated as health-insurance policies that cover risks on groups, consistent with TDI’s treatment of
such policies,2
and (2) arise from the business of health insurance.
Chapter 1701 of the insurance code, titled “Policy Forms,” governs the forms that
insurers may use in transacting their business, explaining how the forms are approved or
disapproved and providing remedies against insurers who use misleading or noncomplying
1 Stop-loss policies are mentioned in section 222.002 only in a provision explaining that
an insurer need not include in its taxable gross premiums amounts it receives for stop-loss
policies issued to health maintenance organizations. Tex. Ins. Code § 222.002(d). Such policies
are to be “considered reinsurance,” and reinsurance premiums are excluded from taxable gross
premiums. Id. § 222.002(c)(3), (d).
2 The Comptroller does not argue that “individuals” should be read to encompass
companies or corporate entities, and we note that the word “individual” generally refers to a
human being, as opposed to “person,” which in legal usage often includes corporations or other
such entities. See, e.g., Colorado County v. Staff, 510 S.W.3d 435, 449 n.59 (Tex. 2017); First
Cash, Ltd. v. JQ-Parkdale, LLC, 538 S.W.3d 189, 196 (Tex. App.—Corpus Christi–Edinburg
Jan. 11 2018, no pet.); Global Evangelism Educ. Ministries, Inc. v. Caddell, No. 04-08-00686-
CV, 2009 WL 398255, at *1 (Tex. App.—San Antonio Feb. 18, 2009, no pet.) (mem. op.); City
of Corinth v. NuRock Dev., Inc., 293 S.W.3d 360, 370 (Tex. App.—Fort Worth 2009, no pet.).
6
forms. See generally id. §§ 1701.001-.151. A form that is subject to chapter 1701 must be filed
with and approved by TDI, id. § 1701.051, and TDI is authorized to exempt certain documents
from the chapter’s requirements, id. § 1701.005(b). Section 1701.002, “Applicability of Chapter
to Forms of Certain Documents,” provides that chapter 1701 applies to certain enumerated
documents, including “a policy, contract, or certificate” of “accident or health insurance,
including group accident or health insurance.” Id. § 1701.002(1)(A).
Acting under its chapter 1701 authority, TDI promulgated a rule requiring “[a]ll
life and accident and sickness policy forms and annuity contract forms intended for use in this
state, including application forms, rider or endorsement forms not specifically exempted by these
sections,” to be approved before use. 28 Tex. Admin. Code § 3.4002 (2020) (Tex. Dep’t of Ins.,
All Forms To Be Filed For Review Unless Specifically Exempted). Another rule exempts from
review and approval “group and individual accident and/or health policies, contracts, certificates,
applications, enrollment forms, riders, amendments, endorsements, and related forms (including
but not limited to outlines of coverage, notices, rates, and conditional receipts) applicable
thereto,” that provide certain coverages, including “group stop loss/excess loss policies
containing an attachment point of $5,000 or more.”
3
Id. § 3.4004(e)(2)(J) (Tex. Dep’t of Ins.,
Exempt Forms).
The Comptroller asserts that those agency rules establish that TDI “plainly
considers stop-loss policies to be ‘group and individual accident and/or health policies.’”
Additionally, the Comptroller notes, BCBS sought and obtained for its stop-loss policy forms an
3 An “attachment point” is the threshold to which a self-insured employer’s healthcare
costs must rise before the stop-loss policy will reimburse the employer for further costs.
7
exemption from further review that “applies only to ‘group and individual accident and/or health
policies,’” thus confirming that the policies arose from the business of health insurance.
The Comptroller also points to the Texas Supreme Court’s decision in American
National for support in categorizing stop-loss as health insurance subject to the premium tax.
However, American National was not deciding what stop-loss insurance was; it was considering
whether TDI could regulate stop-loss insurance at all, more specifically, whether stop-loss
insurance sold to self-insured employers was “direct health insurance”—and thus subject to
regulation by TDI and the imposition of an assessment paid to the now-abolished Texas Health
Insurance Risk Pool—or was instead “reinsurance,” which is not regulated by the state and was
not subject to an assessment. 410 S.W.3d at 845. The court discussed the difference between
reinsurance and direct insurance, noting that self-insured employers “are clearly not insurance
companies,” although they “perform a similar service.” Id. at 848. The court further observed
that TDI had for years categorized stop-loss coverage as direct insurance subject to assessment
for the risk pool under former article 3.77, which defined an “insurer” subject to an assessment
as “[a]ny entity that provides health insurance in this state, including stop-loss or excess loss
insurance.” Id. at 850 (quoting former Tex. Ins. Code art. 3.77, § 13(a), repealed by Act of June
21, 2003, 78th Leg., R.S., ch. 1274, § 26(a)(1), 2003 Tex. Gen. Laws 3611, 4138). The court
explained that TDI, as the agency charged with enforcement of the insurance code, had
“concluded that stop-loss insurance purchased by a plan does not involve two insurers and is
therefore not reinsurance. It is instead direct insurance in the nature of health insurance because
the stop-loss policies are purchased by the plans ultimately to cover claims associated with their
health-care expenses.” Id. at 855. Because the agency’s interpretation was reasonable, formally
8
promulgated, and not expressly contradicted by the insurance code, the court deferred to TDI’s
construction and held that stop-loss insurance was direct insurance subject to TDI regulation. Id.
First, we note that article 3.77, which defined “insurer” to include an insurer that
issued stop-loss insurance, has been repealed.
4
Further, American National asked whether stoploss policies were subject to state regulation, an inquiry that could appropriately consider and
defer to the agency’s interpretation, rather than whether premiums on such policies could be
subject to tax, a question that must be strictly construed in favor of the taxpayer. Compare id. at
845, with TracFone Wireless, 397 S.W.3d at 182. Indeed, all of the Comptroller’s arguments as
to whether stop-loss policies cover risks on groups require that we defer to TDI’s or the
Comptroller’s interpretation or infer a conclusion based on TDI’s administrative rules or on
filings BCBS made with TDI to comply with such rules. In a tax case, however, we cannot rely
on such information and instead must look at the plain statutory language and construe it strictly
in favor of BCBS, finding in favor of taxation only if the tax applies “unequivocally.” See
TracFone Wireless, 397 S.W.3d at 182.
4 Article 3.77 and the Texas Health Insurance Risk Pool itself have been abolished. See
Act of June 21, 2003, 78th Leg., R.S., ch. 1274, § 26(a)(1), 2003 Tex. Gen. Laws 3611, 4138;
Act of May 21, 2013, 83d Leg., R.S., ch. 615, 2013 Tex. Gen. Laws 1640, 1640-42. The
insurance code currently mentions stop-loss insurance a total of sixteen times, such as in
allowing the administrator of the Healthy Texas Small Employer Premium Stabilization Fund to
“purchase stop-loss insurance or reinsurance” as deemed necessary, Tex. Ins. Code § 1508.261;
providing certain stop-loss requirements for multiple employer welfare arrangements, id.
§§ 846.053(h), .153, .156; or allowing TDI’s commissioner to obtain stop-loss coverage for risks
incurred by the Temporary Health Insurance Risk Pool, id. § 1510.005(b). In the context of
health-insurance contracts with municipalities, the insurance code defines an “insurer” as “an
insurance company, including a company providing stop-loss or excess loss insurance,” and bars
an insurer that “provides stop-loss or other insurance coverage for health benefits” to
municipalities from excluding certain individuals. Id. §§ 1550.051, .053. On the other hand, in
the portions of the code governing managed care, multiple employer welfare arrangements,
healthcare quality insurance, and the Health Insurance Portability and Availability Act, stop-loss
insurance is specifically excluded from the definition of “health benefit plan.” Id.
§§ 846.001(3)(M), 847.003(2)(J), 1274.001(2)(O), 1501.002(5)(M).
9
Black’s defines a “group policy” as an “insurance policy that covers multiple
insureds under a group-insurance plan.” Group Policy, Black’s Law Dictionary (11th ed. 2019).
The insurance code bears that out. For instance, in the chapter pertaining to “Group and Blanket
Health Insurance,” “group accident and health insurance” is defined as “accident, health, or
accident and health insurance covering a group” of individuals, Tex. Ins. Code § 1251.001(2),
such as a policy obtained by an employer for its employees or an association for its members, id.
§§ 1251.051-.056.5
And section 1252.003 states that “health benefit plan coverage is provided
on a group-type basis” if the plan provides coverage under an insurance policy to a class of
employees or members of an association, determined by the individuals’ employment or
membership; coverage is not available to the general public and can only be obtained through the
covered individual’s employment or membership status; the plan is sponsored by the employer
or association; and premiums are paid to the insurer on an aggregate or bulk-payment basis. Id.
§ 1252.003(a). Thus, the insurance code, when it discusses “group” coverage or policies in the
relevant context, refers to health insurance provided to individual members of a group, whether
through their employment or membership in various kinds of associations.
Noting that BCBS’s forms use language like “employer group name,” the
Comptroller asserts that stop-loss insurance is insuring risk on groups. We disagree. Stop-loss
insurance touches on and involves a group policy but does not cover risks to the individual
members of the group—in this case, the self-insured employer’s employees—and is not an
individual accident and health insurance policy. Instead, it covers the employer’s risk, providing
5 Chapter 1201, titled “Accident and Health Insurance,” on the other hand, concerns
individual policies and defines an “accident and health insurance policy” as “any policy or
contract that provides insurance against loss resulting from” sickness or accidental bodily injury
or death, specifying that the chapter applies “only to an individual accident and health insurance
policy.” Id. §§ 1201.001(1), .003(a), (b).
10
a cap for the employer’s costs in paying for its employees’ medical care. In other words, stoploss insurance insures the employer against the excess risk the employer assumes when it takes
responsibility for its group members’ medical costs—it does not insure the group of members
against individual medical costs or losses. Indeed, the Comptroller has taken this very position
in administrative proceedings, asserting that a “stop loss policy’s coverage is primarily for the
employer/trust that is seeking to limit its own financial risk and not to obtain health insurance,
which is provided under a separate policy.” Tex. Comptroller of Pub. Accts., Comptroller
Docket Nos. 109,354-355, 2016 WL 3469269, at *6 (Mar. 8, 2016). The Comptroller’s staff
noted that a stop-loss policy protects the employer from economic loss—the contract is between
the insurer and the employer, not the employee group members; plan participants rely on their
employer, not the insurer, for benefit payments; and the insurer has no direct contractual
obligation to the participants. Id. (quoting White Paper: “Stop Loss Insurance, Self Funding &
the Affordable Care Act,” National Association of Insurance Commissioners (2015): 14-38,
http://www.naic.org/documents/PRC-ZS-15-02_Vol2.pdf). The Comptroller agreed that “stoploss policies should not be considered health insurance,” pointing to case law that supported
distinguishing between stop-loss insurance and the underlying group health policies to which
they are anchored and noting that in American National, the Texas Supreme Court held that the
stop-loss policies were direct insurance “in the nature of direct health insurance” but not that the
policies were health insurance policies. Id. at *7-8 (quoting 410 S.W.3d at 854-55).
The Comptroller also urges us to interpret the statute to “avoid gaps in coverage,”
noting that throughout much of the insurance code, the legislature used expansive language in
imposing premium taxes. See, e.g., Tex. Ins. Code §§ 221.002(b), (c) (property and casualty
insurance premium tax assessed against premiums received “from any kind of insurance written
11
by the insurer on each kind of property or risk located in this state,” except for certain
enumerated premiums, including those received “from the business of . . . health and accident
insurance”), 226.003(b), (g) (unauthorized insurance premium tax assessed against “any
premium for insurance on a subject resident, located, or to be performed in this state,” except for
“premiums on a contract of insurance written by an insurer that holds a certificate of authority in
this state and that is authorized to write the contract”). However, as the supreme court has
explained, “Tax policy gap-filling—specifically, deciding who is taxed—is best left to
legislators, not courts or agencies.” TracFone Wireless, 397 S.W.3d at 176. And we cannot
ignore the language used in this particular statute, which rather than simply providing in broad
terms that the tax should be assessed against any premiums from policies arising from the
business of health insurance, adds a narrowing provision limiting the tax to premiums from
insurance policies that “cover[] risks on individuals or groups.” Tex. Ins. Code § 222.002(b).
After applying common meanings of the statutory language within the context of
the insurance code, we strictly construe the language of section 222.002(b) against taxation to
conclude that a stop-loss policy issued to a self-insured employer is not an “insurance policy or
contract covering risks on individuals or groups.” See id. § 222.002(b). Because we so hold, we
need not consider whether the stop-loss policies arise from the business of health insurance—the
other requirement for a policy to be subject to the premium tax. We overrule the Comptroller’s
first issue on appeal.
DOES THE MAINTENANCE TAX APPLY?
As for the maintenance tax, section 257.003 imposes the tax on “gross premiums
collected from writing life, health, and accident insurance in this state,” except for exceptions not
12
applicable here. Id. § 257.003(a)(1). The Comptroller argues that the stop-loss premiums should
be considered to be “from writing health insurance” and that such an interpretation promotes the
purpose of the maintenance tax—”to pay the expenses during the succeeding year of regulating
life, health, and accident insurers.” Id. § 257.003(b). He notes that every other type of insurance
is taxed to pay for these costs and that it would be unfair for stop-loss policies to go without
paying their fair share of maintenance taxes. However, as explained earlier, we cannot apply a
“gap-filling” interpretation that is not supported by the plain language of the statute, which we
strictly construe in favor of the taxpayer. TracFone Wireless, 397 S.W.3d at 176, 183.
The Comptroller also cites the chapter 1201 definition of “accident and health
insurance policy” as “any policy or contract that provides insurance against loss resulting from”
sickness or accidental bodily injury or death. Id. § 1201.001(1). Because stop-loss policies
insure self-insured employers against loss resulting from abnormally high healthcare costs, the
Comptroller insists, those policies should be considered health insurance under the chapter 1201
definition. However, chapter 1201, which is intended to standardize and simplify “terms and
coverages in individual accident and health insurance policies” and promote public
understanding of insurance coverages, id. § 1201.002, applies to “an accident and health
insurance policy” and, more specifically, “only to an individual accident and health insurance
policy,” id. § 1201.003(a), (b).
6
Stop-loss policies do not provide health insurance to individual
insureds as contemplated by chapter 1201 and, thus, the chapter 1201 definition of “accident and
health insurance policy” cannot be read as applying to the stop-loss policies at issue in this case.
6 To that end, chapter 1201 imposes various requirements on what health insurance
policies must cover, what such policies must state, and who may be covered. See generally id.
§§ 1201.001-.702.
13
Similarly, stop-loss policies do not fit within the definition of group health policies discussed
earlier and found in chapter 1251. See generally id. §§ 1251.001-.451.
It is true that BCBS is a health-insurance company and, therefore, many of the
policies it sells will be subject to the maintenance tax. However, not every policy it sells is
necessarily subject to the tax—only policies that fit within section 257.003. It would strain the
plain statutory language of section 257.003 to conclude that stop-loss premiums, which are
collected in exchange for insuring an employer’s risk arising out of its employees’ healthcare
costs, are “collected from writing” health insurance. Indeed, the stop-loss policies in question
protect an employer from risk incurred from deciding to pay its employees’ healthcare costs
rather than obtain health insurance. In other words, BCBS sells the policies to employers who do
not ask an insurer to write health insurance. The stop-loss premiums thus are not subject to the
section 257.003 maintenance tax. We overrule the Comptroller’s second issue on appeal.
ISSUES RELATED TO THE REFUND AMOUNT
The Comptroller’s third issue and BCBS’s cross-appeal concern the amount of the
refund and the sufficiency of the evidence produced by BCBS to establish that amount. The
Comptroller argues that even if BCBS is entitled to a refund, it did not submit sufficient evidence
to support its asserted refund amount. BCBS explains that it filed its notice of appeal “to provide
the initial clarification to this Court, in that ‘all parties and claims have been disposed of,’” and
that it “seeks clarification that the summary judgment addresses the refund amount proven in” its
motion for summary judgment. It further argues that it produced sufficient evidence to support
its requested refund and that in ordering that BCBS’s “Motion for Summary Judgment is
GRANTED and [the Comptroller’s] Motion for Summary Judgment is DENIED,” the trial court
14
effectively ordered that BCBS was entitled to a refund totaling $3,072,232.17, as requested in
BCBS’s motion for summary judgment and accompanying evidence.
A judgment is final “if it disposes of all pending parties and claims in the record.”
Lehmann v. Har-Con Corp., 39 S.W.3d 191, 195 (Tex. 2001). A final order need not have a
particular form or language, and instead we determine whether an order is final from its language
and, if necessary, the record in the case. Id.; see Bella Palma, LLC v. Young, 601 S.W.3d 799,
801 (Tex. 2020) (“a clear and unequivocal statement of finality must be ‘given effect’ even if
review of the record would undermine finality”). If the judgment or order is vague, the appellate
record may be considered in determining finality. See M.O. Dental Lab v. Rape, 139 S.W.3d
671, 674-75 (Tex. 2004) (citing Lehmann, 39 S.W.3d at 206). Thus, there must be some “clear
indication that the trial court intended the order to completely dispose of the entire case.”
Lehmann, 39 S.W.3d at 205. The certainty of a final judgment “is not dissipated” if a trial-court
clerk must take some additional step determinable by ministerial act before a writ of execution
may be produced. International Sec. Life Ins. Co. v. Spray, 468 S.W.2d 347, 350 (Tex. 1971).
In its motion for summary judgment, BCBS concluded, “This court should grant
BCBS’s motion for summary judgment and rule that the premiums received from the sale of
stop-loss insurance are exempt from premium and maintenance taxes, and grant BCBS a refund
of the taxes at issue.” BCBS stated that the “[a]mount of tax paid on stop-loss premiums is
$3,072,232.17” and referenced an affidavit by Alfred Trotter, BCBS’s Director of Corporate
Tax, who averred that BCBS sought a total refund of $3,072,232.17, explaining his calculations
in relevant part as follows:
15
On December 30, 2016, BCBS filed with the [Comptroller] an amended Texas
Annual Insurance Premium Tax Report, the Computation of Non-Taxable
Premiums form, The Texas Annual Maintenance, Assessment and Retaliatory
Report, the Retaliatory Worksheet, and a reconciliation of the change from the
original filed returns for tax year 2012.
The amended returns reflect a request for refund of overpaid taxes based on the
inclusion, for tax purposes, of BCBS’s contributions for its employee benefits
plan, as well as premiums on stop-loss insurance insuring legal entities.
The amendments to the 2012 returns resulted in refund requests of $3,005,270.13
in premium taxes and $68,691.89 in maintenance taxes for a combined refund of
$3,073,962.02.
The Comptroller allowed an adjustment based on the contributions for the
employee benefit plan but disallowed the adjustment for the stop-loss premiums.
The disallowed refunds total $3,072,232.17.
BCBS’s Texas stop-loss premiums for calendar year 2012 totaled $171,633,082.
BCBS’s Corporate Tax Department calculated the tax refund due.
The starting point for the reporting of 2012 tax year premiums for tax purposes
began with the premium reported in the Annual Statement filed with the National
Association of Insurance Commissioners (“NAIC”).
Premiums received from group policies and individuals are allocated to Texas
based on the residence of each subscriber. . . . The stop-loss premiums were
allocated to Texas on this same basis although the insured on such policies were
not the subscribers but instead the employee benefit plan sponsors, with a situs at
the headquarters of each employer.
After the filing and payment of taxes, it was determined that the Texas insurance
tax statutes no longer include stop-loss related premiums in the tax base. To
amend the tax returns and request a refund of overpaid taxes, the premiums used
on the original filing had to be adjusted.
16
To determine the situs for each insured entity for each stop-loss policy, the
address of the plan sponsor was identified, and the stop-loss ledger account was
adjusted to reflect a premium amount for stop-loss premiums for Texas tax
purposes. Premiums received under stop-loss contracts and originally included as
Texas accident & health premiums for tax purposes were the basis for the 2012
refund request.
In his motion for summary judgment, arguing that the premium and maintenance
taxes apply, the Comptroller stated that if the court held that the taxes did not apply, “the parties
will litigate the refund amount.” The trial court held a hearing on the motions for summary
judgment in January 2019 and in March signed an order stating, “IT IS THEREFORE
ORDERED, ADJUDGED, AND DECREED that Plaintiff’s Motion for Summary Judgment is
GRANTED and Defendants’ Motion for Summary Judgment is DENIED. This is not a final
judgment, because Defendants’ counterclaim remains pending.”
BCBS next filed a motion to dismiss the Comptroller’s counterclaim for lack of
jurisdiction, the parties filed several replies, and the trial court heard the motion in late May
2019. About two weeks later, BCBS filed a supplemental reply brief stating that in that May
hearing, the Comptroller had “claimed that Plaintiff has not proven the refund amount and that
despite prevailing on the underlying suit on cross-motions for summary judgment and regardless
of the outcome of this jurisdictional dispute, Plaintiff must still have a hearing or trial to prove
the refund amount. This is unsupported by the evidence.”
7
BCBS again referred to Trotter’s
affidavit, his calculations, and his explanations of the source documents from which the sums
were gathered. BCBS noted that in his response to BCBS’s motion for summary judgment, the
Comptroller did not dispute the sought refund amount, and that the trial court’s order specified
7 The parties have provided reporter’s records from the January and October 2019
hearings but not from the May 2019 hearing.
17
further proceedings only as to the Comptroller’s counterclaims, not as to the refund amount.
Thus, BCBS asserted, the “assertion that the refund amount is still in dispute is not supported by
the evidence.” About two months later, the Comptroller filed a notice of nonsuit of its
counterclaim and a motion for new trial, again arguing that the premium and maintenance taxes
applied. In the motion for new trial, the Comptroller did not take issue with BCBS’s evidence
related to the refund amount or with whether the trial court had determined the refund amount in
the first place. In his response to BCBS’s motion for entry of a final judgment, filed in
September 2019, however, the Comptroller asserted that BCBS had not satisfied the
requirements of section 112.151(f) to produce contemporaneous records and supporting
documentation to establish the amount of any refund, contending that the amount of any
potential refund “is still in question and must be litigated.” BCBS filed a reply, attaching a
fourth affidavit by Trotter, which presented the same assertions of refund amounts and attached
the various source documents he had cited in his earlier affidavits.
In October 2019, the trial court heard argument on BCBS’s motion to enter final
judgment. In that hearing, BCBS argued that the only reason the earlier order on summary
judgment was not final was because “we had to carve out the counterclaim.” The Comptroller
stated, “You granted summary judgment. The outstanding—an outstanding issue was
unauthorized insurance,” but then argued that the amount of the refund was still live, asserting
that the only issues argued in BCBS’s motion were whether the two taxes applied. Thus, the
Comptroller claimed, the trial court “did not resolve the amount of the refund as a result of your
decision on those two issues, and so, Your Honor, there is no summary judgment on that.”
BCBS disagreed, referring the trial court to its motion, in which it pled the specific refund sought
and asked for judgment on that amount, and noting that the Comptroller had not disputed the
18
pled amount in its summary judgment response. In February 2020, the trial court signed an order
granting the Comptroller’s nonsuit. It did not sign further orders mentioning the refund amount.
BCBS’s motion for summary judgment argued that the two tax statutes did not
apply and specifically sought a refund of $3,072,232.17. The trial court’s order on summary
judgment granted BCBS’s motion without reserving any issues or fact questions raised in the
motion, explicitly stating that the order was not final only because of the Comptroller’s pending
counterclaim. The reporter’s record from the initial summary judgment hearing does not show
that the parties discussed the amount of refund sought by BCBS, although they did refer in
passing to Trotter’s affidavit, which clearly stated the amount of refund BCBS requested, as did
BCBS’s motion for summary judgment. In hearings held after the trial court granted summary
judgment, the parties and the court discussed whether the court had intended to award BCBS’s
sought amount, and after those later hearings, the trial court opted not to sign any further orders
other than one granting the Comptroller’s nonsuit. The record supports a conclusion that in
granting BCBS’s motion for summary judgment in its entirety, the trial court intended to also
grant BCBS’s request for a refund of $3,072,232.17. See Lehmann, 39 S.W.3d at 205. Further,
although the summary judgment order does not recite a refund amount, the prayer of BCBS’s
motion, which was granted in whole, states the specific refund amount sought, an amount that
was not challenged by the Comptroller until months later. It would require a mere ministerial act
for a trial-court clerk to refer to BCBS’s motion for the specific amount when proceeding with a
writ of execution. See In re Blankenhagen, 513 S.W.3d 97, 99 (Tex. App.—Houston [14th Dist.]
2016, orig. proceeding) (holding that trial-court judgment based on mediator’s decision was not
final because amount of damages could not be ascertained from judgment or reference to
19
mediator’s decision);8
see also Spray, 468 S.W.2d at 350 (“So long as the judgment of the court
makes the figure which the clerk is to place in the writ of execution determinable by ministerial
act, the judgment cannot be said to lack definiteness.”). Thus, the trial court’s full granting of
BCBS’s motion for summary judgment in its taxpayer refund suit, which clearly and
unequivocally specified the amount sought, must be read as granting BCBS’s request for that
refund amount. When the Comptroller nonsuited its counterclaim and the trial court signed its
order granting nonsuit, the last pending issue was resolved, rendering the summary judgment
order final.
9
8
In In re Blankenhagen, a construction contract provided that disputes about defective
work would be submitted to an architect as the “Initial Decision Maker” and then to the trial
court for entry of a judgment. 513 S.W.3d 97, 99 (Tex. App.—Houston [14th Dist.] 2016, orig.
proceeding). A dispute arose, and the homeowners obtained repair bids ranging from $366,636
to $513,216, claimed their entitlement to $10,000 as a timely-completion penalty, and then
requested $523,316 in their “Request for Initial Decision,” stating that was “the HIGHEST
amount of the estimates.” Id. The architect issued an Initial Decision that stated, “I approve the
owner’s claim,” but did not state a damages amount, and the homeowners brought the matter to
the trial court for entry of a declaratory judgment. Id. The trial court signed a judgment stating
that the contractor owed the homeowners “the amounts as set out in the Initial Decision entered
by the Architect” and that the judgment was final and appealable. Id. The court of appeals
disagreed with the homeowners’ assertion that the architect clearly intended to award them the
full amount they requested, looking to the language of the Initial Decision, which included a
discussion of the homeowners’ repair estimates, interpreting it as “generally approving the
validity of” the claim, not the amount of damages. Id. at 101. Thus, the court concluded, the
trial court’s judgment was not final because the amount of damages “has not yet been determined
and cannot be ascertained from” the judgment itself or Initial Decision. Id.
9
In In re Educap, Inc., on the other hand, the court of appeals determined that an order
granting a motion for summary judgment that included a request for attorney’s fees supported by
the attorney’s affidavit was not final. No. 01-12-00546-CV, 2012 WL 3224110, at *1 (Tex.
App.—Houston [1st Dist.] Aug. 7, 2012, orig. proceeding) (mem. op.). In that case, attorney’s
fees were not pled as a specific counterclaim, although the court of appeals held that they were
tried by consent by their inclusion in the defendant’s answer and motion for summary judgment,
and the order granting summary judgment did not include language from which the court of
appeals could determine whether an award for attorney’s fees had been made. Id. at *2-3.
Further, even if the order could be read as including an award of attorney’s fees, the court stated
that the amount of the award could not be determined. Id. at *3. The opinion does not explain
20
We now consider the Comptroller’s arguments related to the sufficiency of
BCBS’s evidence supporting its claimed refund amount.
Section 111.0041, which governs taxpayer records in general, provides that
taxpayers must keep records for certain periods of time and shall:
produce contemporaneous records and supporting documentation appropriate to
the tax . . . for the transactions in question to substantiate and enable verification
of the taxpayer’s claim related to the amount of tax, penalty, or interest to be
assessed, collected, or refunded in an administrative or judicial proceeding.
Contemporaneous records and supporting documentation appropriate to the tax
. . . may include, for example, invoices, vouchers, checks, shipping records,
contracts, or other equivalent records, such as electronically stored images of such
documents, reflecting legal relationships and taxes collected or paid.
Tex. Tax Code § 111.0041(c). In a suit for a tax refund:
A taxpayer shall produce contemporaneous records and supporting documentation
appropriate to the tax or fee for the transactions in question to substantiate and
enable verification of a taxpayer’s claim relating to the amount of the tax, penalty,
or interest that has been assessed or collected or will be refunded, as required by
Section 111.0041.
Id. § 112.151(f).
Several months after the trial court signed its order granting summary judgment,
the Comptroller argued at a hearing that BCBS had not sufficiently established the refund
amount. BCBS then filed multiple responsive documents, including a reply to the Comptroller’s
response to BCBS’s motion for entry of final summary judgment, attaching Trotter’s fourth
affidavit. In Trotter’s fourth affidavit, he referred to his earlier refund explanations and averred
whether the motion for summary judgment requested a specific amount or simply referred to the
attorney’s affidavit, nor can we tell how specific the affidavit was. See id. at *1-3.
21
that BCBS had on several occasions provided the Comptroller with BCBS’s 2012 amended
premium tax report; its 2012 non-taxable premiums worksheet; a 2012 Texas Annual
Maintenance, Assessment, and Retaliatory Report; a 2012 Retaliatory Worksheet; a tax return
reconciliation; and a “2012 BARS Stop Loss Premium Reconciliation to Return” form.10
He
attached those referenced documents as exhibits, along with a letter from the Comptroller—
acknowledging BCBS’s request for a refund of $3,073,962.02 in premium tax and $68,691.89
for maintenance tax and requesting further documentation—and a list of 2012 Refund Claim
Accounts with names redacted. Trotter averred that the documents “are source documents for
the refund calculation” that “allow the Comptroller to verify the refund claim” and then went
through the various documents in some detail, explaining the documents’ origins, meanings, and
import and tracing BCBS’s refund calculations through the documentation. He also stated that
although BCBS had sent the documents to the Comptroller, the “Comptroller’s auditor did not
schedule an appointment with BCBS to review any of the tendered and available
documentation.” The Comptroller has not disputed that it received those documents.
On appeal, the Comptroller argues that the documents produced by BCBS were
all created by BCBS, “no more than hearsay,” and insufficient to establish the refund amount.
However, although Trotter referred to those documents repeatedly in his first affidavit, which
specified the sought refund amount, the Comptroller did not challenge the documents’
sufficiency or veracity until September 2019, when he responded to BCBS’s motion to enter a
10 That form is a nine-page “schedule of every stop-loss premium received during the
relevant period that identifies each self-funded employer plan by name and account number, the
dollar amount of health aggregate stop-loss premium received from each plan, the health specific
stop-loss premium, the total health stop-loss premium, dental stop-loss premium, stop-loss
premium adjustments and refunds, stop-loss premiums to other states, stop-loss excess premium
reclass, unbilled premium, and net stop-loss premiums.”
22
final summary judgment.11
In that document, the Comptroller for the first time asserted that
BCBS had not satisfied its section 112.151(f) burden because it had not produced
contemporaneous and supporting documentation and that the amount of any potential refund was
“still in question and must be litigated.” The Comptroller said that there was “a variety of
potential evidence” that might satisfy BCBS’s burden and that “generally, this evidence must be
records and documents, or equivalent records, showing the items and transactions taxed, the
amounts at issue, and the taxes previously collected.” The Comptroller also stated that although
Trotter stated the amount BCBS “believes it is entitled to,” quoted “several figures he believed
establishes” the refund amount, and “mention[ed] some documents that possibly helped him to
reach that amount,” “[n]one of those documents were produced by [BCBS], and even if they
were, it is unclear if those documents would satisfy [BCBS’s] statutory burden.” The
Comptroller concluded, “Without further evidence and records to support it, Mr. Trotter’s
affidavit does not help [BCBS] overcome its burden or move it closer to prevailing on its claim.
[BCBS] has produced no other evidence to support its claimed refund amount.” BCBS
responded, noting that Trotter’s affidavit referenced several specific documents that had been
filed with the Comptroller multiple times starting in December 201612 and that the Comptroller
had never disputed BCBS’s calculations or reference documents.
11 We note that the Comptroller asserted in his motion for summary judgment that the
refund amount would have to be litigated if the trial court determined that the taxes did not apply
and that, in a footnote in his response to BCBS’s motion to dismiss his counterclaim for want of
jurisdiction, the Comptroller stated that BCBS’s motion for summary judgment “was for partial
summary judgment because BCBS would need to prove up the refund amount if the policies
were not subject to the Chapter 222 premiums tax.” However, the Comptroller did not explain
why BCBS’s evidence was insufficient or challenge its reliability.
12 Trotter averred that the documentation had been provided to the Comptroller multiple
times, in December 2016, June 2017, July 2017, and October 2018.
23
The Comptroller does not dispute that BCBS sent the enumerated documents to
the Comptroller multiple times before and after filing this refund suit, and he has not explained,
either here or below, how those source documents—which include a listing of the stop-loss
policies, BCBS’s amended 2012 tax forms and worksheets, and its calculations of the taxes it
had paid and the refunds it thus sought—are not “appropriate proof” to substantiate the requested
refund amount. The Comptroller instead selects from the list of examples set out in section
111.0041(c) “invoices . . . checks . . . contracts,” as if to argue that BCBS was required to
produce copies of each individual invoice or contract sent to each stop-loss policy holder or
canceled checks sent by each policy holder. We disagree.
As we have noted, “The plain language of [section 111.0041(c)] sets out the
taxpayer’s time period to prove its claim ‘for the transactions in question’ as being during the
administrative or judicial process, not at the outset of filing, and expressly allows flexibility as to
the appropriate proof to support a given transaction.” Hegar v. Ryan, LLC, No. 03-13-00400-
CV, 2015 WL 3393917, at *12 (Tex. App.—Austin May 20, 2015, no pet.) (mem. op.)
(emphases added). Further, this is a tax case in which the controlling question is the application
of the tax statutes in the first place, not how the taxes should be calculated. BCBS either owes
the taxes it paid, as reflected on its produced 2012 tax forms, which the Comptroller has not
challenged as incorrect or erroneous, or it does not. We have held that BCBS does not owe the
taxes. Consistent with the trial court’s grant of summary judgment, it is a straightforward
conclusion that BCBS is entitled to a refund of the premium and maintenance taxes it paid. We
further hold that BCBS sufficiently documented and supported the refund amount to which it is
entitled. We overrule the Comptroller’s third issue on appeal.
Outcome: We have overruled the Comptroller’s issues on appeal. We thus affirm the trial court’s order granting summary judgment, which determined that BCBS was entitled to a refund of $3,072,232.17. Because we conclude that the trial court has rendered a final judgment that disposes of all claims and that BCBS presented sufficient evidence to support its refund claim, we need not address BCBS’s cross-appeal, which seeks relief only in the event we were to conclude otherwise.
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