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members of the association because the only remedy available to the
association under its organization and policy for nonpayment of an assessment
by a member was the forfeiture by the member of rights under the policies for
the payment of death benefits. The contract between the member and the
benefit association was unilateral and not bilateral.
Lindheimer v. Baylor, 5 Ill. App. 3d 114, 283 N.E.2d 298 (1972) affirmed, 54 Ill. 2d
433. Creditors challenged the insurance commissioner's cessation of
assessments against policyholders. The insurance code, which had provided
that the commissioner may levy such assessments against policyholders as
may be necessary to pay all allowed claims in full was repealed in August 1969.
The court held that the repeal was prospective only and that it was inequitable
to allow the commissioner to assess and collect from some policyholders and
not others of the same company in liquidation. Further, the court held that a
creditor may intervene in a liquidation proceeding as a matter of right, the
circuit court was in error in sustaining the motion to dismiss the action.
People v. Central Mutual Ins. Co. of Chicago, 313 Ill. App. 84, 39 N.E.2d 400
(1942). Although the liquidation law makes no express provision for a levy on
policyholders by either the court or the receiver or by the independent action
of the insurance commissioner without leave of court, the court is permitted to
exercise such power upon petition of the receiver. The method of assessment
is sufficient if it is based upon a fair method of calculation, is equally applied,
and is substantially correct. The levy of an assessment on policyholders is
nothing more nor less than the exercise, by the receiver, of contractual rights
that the receiver vest by the liquidation decree, and amounts to no more than
a demand for payment of the contingent liability which the policyholder
assumed. The levy is, in essence, the collection by the receiver of assets of the
estate, title to which are vested in the receiver.
Pioneer Furniture Co. v. Langworthy, 84 Ill. App. 594 (1899). Assessments
against policyholders of an insolvent mutual fire insurance company were
proper against holders of policies that were canceled since the assessments
cover losses and expenses incurred prior to cancellation.
Thompson Lumber Co. v. Mutual Fire Ins. Co., 66 Ill. App. 254 (1896). A person
who was not a policyholder of the insolvent insurer at the time of the
appointment of a receiver and making of an assessment is not bound by the
proceeding or the assessment. However, the policyholder, albeit, receiving a
policy of insurance in violation of the insolvent insurer's charter, had the
benefit of the insurance policy and was therefore, subject to assessment.
Traer v. Consolidated Coal Co. of St. Louis, 221 Ill, App. 576 (1921). A
policyholder was not allowed to set off against the losses on policies issued by
the insolvent company the amount of the assessment the policyholder owed
the company since such assessments had been voluntarily agreed to by the
policyholder (prior to liquidation) in order to raise money to pay losses.
Further, the claim loss had been allowed in the estate on a pro rata share.
Indiana
Boland v. Whitman, 33 Ind. 64 (1870). In an action by the receiver of an
insolvent mutual fire insurance company for the collection of assessments
against policyholders, the court noted that the complaint does not need to
include a transcript of the decree appointing the receiver, and that the alleged
misrepresentations of the company's agents concerning the frequency of
potential assessments and the solvency of the company did not allege material
facts constituting fraud as a defense to the assessment. However, a
fraudulent representation relied upon by the insured about the solvency of the
company will constitute a defense to a suit on the premium note. In addition, a