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insured, the commissioner had the burden of showing that the insured had
notice of the provision in the company's charter authorizing an assessment.
Illinois
Collins v. Bolton, 287 F. Supp. 393 (N.D. Ill. 1968). A group of policyholders
sued the insurance commissioner, seeking injunctive relief declaring they were
denied due process in that the commissioner's assessments, although
approved by court order, were levied without notice to the plaintiffs. The
court noted that the Illinois law provides for notification to each policyholder
of any actual assessment who are then given the opportunity to object to the
necessity or amount of the assessment and may intervene in the liquidation
proceeding to question the proprietary of the assessment and seek
reconsideration. Furthermore, each individual shareholder may raise defenses
peculiar to himself in the course of the collection proceeding. Without
rendering a decision on the constitutionality, the court noted that the practical
convenience of commencing liquidation proceedings and allowing assessment
without notice to policyholders must be weighed against the argument that
policyholders need prior notice or else they have the difficult burden of
overturning an assessment after it is levied.
Mallen v. Longworthy, 70 Ill. App. 386 (1897). Although members of an
insolvent mutual fire insurance company were not parties in the proceedings in
which the assessment was made, they were still bound by the assessment for
losses and expenses incurred prior to cancellation of the policy.
People ex rel. Baylor v. Bell Mutual Casualty Co., 2 Ill. App. 3d. 17, 276 N.E.2d 113
(1971) affirmed, 54 Ill. 2d 433. The court held that an order authorizing the
liquidator to take all steps necessary to enforce collection of assessments
against policyholders was final and conclusive as to parties and to amount and
cannot be collaterally attacked by policyholder in an action by liquidator to
collect amount assessment. However, where policyholders were not
represented in liquidation proceedings except by liquidator and had no
opportunity to contest levy of assessment or amount thereof, the
policyholders were entitled to intervene in the liquidation proceedings, as such
intervention is not inconsistent with liquidation article of the Illinois insurance
code, which does not preclude intervention to expedite litigation by disposing
of the entire controversy in one action.
Ross v. Knapp, Stout & Co., 77 Ill. App. 424 (1898), appeal dismissed, 181 Ill.392,
55 N.E. 127. The policyholders of a mutual fire insurance company are bound by
the proceeding appointing the receiver in assessing them, although they are
not made parties to the proceeding.
Swing v. American Glucose Co., 123 Ill. App. 156 (1905). Member of insolvent
Ohio insurer was liable for assessment even though it was not a party to the
proceeding on the theory that the members are an integral part of the
company and as such, they are represented in court by the company. Thus, the
assessment is not subject to collateral attack by the members, and further that
the domiciliary court order is binding upon Illinois residents in an action to
recover the assessment.
Tarnow v. Hershey, 91 Ill. App. 2d 124, 234 N.E.2d 409 (1968). Although
approved by court order, members and policyholders alleged that the
insurance code prevented the insurance commissioner from levying an
assessment on the notice given in the proceedings because it was not given
within one year after the termination of the policies. The court held that the
liquidation law demonstrates that the legislature intended to have a strong
system for the protection of the public when mutual insurance companies
require liquidation. This purpose dictates that the commissioner in carrying