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Franklin County Files Class Action Compliant Regarding Insurance Premiums Tax

09.05.2008

In Franklin County v. Hartford Casualty Insurance Co., et. al., Case No. CV-44-DCR (E.D.Ky.), Franklin County filed a Class Action Complaint with jury demanded (“Complaint”) on July 12, 2008, in the Eastern District of Kentucky for itself and a class of similarly situated Kentucky local taxing jurisdictions, including counties and cities, (“Plaintiff Class”) against the Hartford Casualty Insurance Company and several of its affiliates (“Hartford Companies”). The Complaint alleges (i) violations of KRS § 91A.080, imposing local government insurance premium license tax, (“LGPT”), (ii) conversion, and (iii) negligence. Franklin County also claims a right to an accounting of all non-exempt insured risks within the various geographical boundaries of each of the members of the Plaintiff Class to be provided by the Hartford Companies.

The Complaint alleges that the action should be certified as a Class because at least 30 Kentucky local taxing jurisdictions, including counties and cities, have been damaged by the Hartford Companies’ failure to properly collect and remit the LGPT. The Complaint also alleges that the Hartford Companies are interrelated and that one of more of the affiliates control the calculation, collection and remittance of the LGPT, and also alleges that a common scheme or practice makes it appropriate to join multiple defendants in the action.

Franklin County alleges three specific causes of action arising from the Hartford Companies’ conduct related to the LGPT. First, it claims violations of KRS § 91A.080 and ordinances enacted pursuant to that statute. KRS § 91A.080 authorizes and governs license fees or taxes imposed and collected by local taxing jurisdictions upon premiums paid on life insurance policies of persons residing within a municipality’s corporate limits and policy premiums paid for insured business risks located within the municipality, but not upon worker’s compensation premium payments. Franklin County alleges that the Hartford Companies failed to remit LGPT on all insured risks taxed under a Franklin County Ordinance and similar ordinances of the other Class members. It also claims that Franklin County and other Class members may receive damages for these alleged violations pursuant to KRS 446.070.

Second, Franklin County alleges that damages may be recovered under two conversion theories. Franklin County alleges that the Hartford Companies’ failure to remit the LGPT due was a wrongful exercise of dominion and control of personal property or, alternatively, that the LGPT due was wrongfully directed to unrelated third parties.

Third, Franklin County claims that the Hartford Companies’ actions constitute negligence for which the Plaintiff Class is entitled to damages. Franklin County alleges that the Hartford Companies have a duty imposed by KRS § 91A.080 and ordinances promulgated under that statute to exercise due care in calculating, collecting, and remitting LGPT, and that the Hartford Companies breached that duty.

If you have questions about this topic or any other legal issue, please contact any member of the firm's State and Local Tax Team.

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