Download PDF - Goodmans

People ex rel. Bolton v. Progressive General Ins. Co., 44 Ill.2d 392, 256 N.E.2d
338 (1969). The general agent of an insolvent insurer was ordered to give the
receiver certain accounts receivable, including premium trust funds. The agent
refused to produce the records. The court held that because the rehabilitator
stood in the shoes of the insolvent insurer pursuant to the rehabilitation
proceedings, the rehabilitator was entitled to constructive possession of all
property held in trust by the insurer's fiduciaries.
Smith v. Binder, 75 Ill. 492 (1874). Where an insured has paid to an agent of an
insurance company a premium which has not yet been accounted to the
insolvent insurer, the company, which prior to inception of the policy becomes
insolvent, cannot maintain an action for recovery of the premium from the
agent. Although the coverage had been in effect for approximately one
month, the agent had not yet remitted the premium to the company and the
insured has the right to demand the premium back from the agent.
Indiana
Iowa
Kentucky
Bushnell v. Krafft, 133 Ind. App. 474, 183 N.E.2d 340 (1962). In rejecting the
receiver's action to recover from the agents of an insolvent insurer for the
agent's unearned commissions on policies canceled when the insurer was
placed into liquidation, the court held that the insureds were entitled to
unearned premiums and therefore the agents could properly apply their
unearned commission for the insured's replacement insurance. The court
noted that insolvency of an insurance company which results in the
cancellation of policies is a material breach of contract to its policyholders. As
a result, it is not in a position to recover premiums due for future coverage, nor
is it in a position to recover commissions in the hands of agents, and
policyholders are entitled to an unearned premium claim and the insolvent
insurer is devoid of any right to secure the commissions retained by its agents.
The agency agreement in issue also provided that the company made no direct
refunds to policyholders of the "gross" return premium but instead remitted
net to its agents who then added their unearned commission to the return
premium.
Hager v. Doubletree, No. 88‐581 (S. Ct. Iowa, May 17, 1989) (WESTLAW, IA‐CS,
52259). The insurance commissioner, as liquidator of an insolvent carrier, sued
several nonresident defendants to recover unpaid premiums. The defendants
argued that the statute conferring personal jurisdiction on the court was
unconstitutional. In upholding the statute and reciting the minimum contacts
that the defendants had with the State of Iowa, the Supreme Court of Iowa
reasoned: "This situation is a little like a marriage: while it was [the in‐state
company] who proposed, the [out‐of‐state company] accepted, and the
resulting relationship makes it relatively insignificant which party started it all."
Kentucky Home Life Ins. Co. v. Miller, 268 Ky. 271, 104 S.W.2d 997 (1937). The
court held that insolvency of life insurance company did not excuse insured
from paying premiums when receiver was authorized to accept premiums
falling due pending reorganization of the company.
Magnet Coal Co. v. Donaldson, 197 Ky. 831, 248 S.W. 195 (1923). The court held
that policyholders are liable to receiver for amount of premium earned before
insolvency of insurer.
Massachusetts Comm. of Ins. v. Jankowski Ins. Agency, LLC, 61 Mass. App. Ct. 305 (2004).
Where the broker refused to return unearned commissions to the estate of the
insolvent insurer, the court held that unearned commissions are assets of the
insurer’s estate and must be returned to the liquidator.