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Missouri
Clark v. Middleton & Riley, 19 Mo. 53 (1853). In rejecting the defense of a
policyholder to payment of premiums to an insolvent insurer, the court stated
that the mere fact of the insolvency of the company at the time of the issuance
of the policy does not render the contract void nor is the policyholder exempt
from the payment of the premium due unless there was actual fraud practiced
on the policyholder. No facts were presented by the policyholder, and further,
16 months had elapsed between effecting the insurance and the petition for
liquidation. Finally, the mere failure to file an annual statement does not
indicate insolvency at the time the policy was written.
Clay v. Eagle Reciprocal Exchange, 368 S.W.2d 344 (Mo. 1963). The receiver
pursued former agents of an insolvent insurer for premiums collected on
policies written prior to insolvency and cancelled as a result of the order of
liquidation. The court held the agents liable to the estate for both unearned
premiums and unearned commissions since to allow the agent to retain such
sums would constitute a preference over policyholders and other creditors.
Clay v. Independence Mutual Ins. Co., 359 S.W.2d 679 (Mo. 1962). The receiver
of an insolvent insurer pursued one of the insurer's former agents to recover
premiums and unearned commission on policies written prior to the
receivership and to recover attorney's fees. In rejecting the award of an
attorney's fee made in favor of the Missouri insurance commissioner as
receiver, it was held that to permit the insurance agency to use unearned
premium resulting from cancellations at the time of the insolvency to give
refunds in full to policyholders creates a preference over other insureds and
creditors, even though the premiums were used to purchase alternative
coverage for the policyholder.
Weese v. Marengo, 469 S.W.2d 873 (Mo. App. 1971). The West Virginia receiver
of and insolvent insurance company brought action against Missouri agents
who owed premiums and unearned commissions. Intervention petitions by an
insured subject to a claim and judgment creditor, were denied since there was
no relationship between the claims of agent and the claims of policyholders.
Nebraska
New Jersey
United Benefit Fire Ins. Co. v. Earl, 181 N.W.2d 841, 186 Neb. 175, (1970). The
court held that unearned premiums and unearned commissions held by an
insurance agent are held in fiduciary capacity for the company and recoverable
for a company in involuntary liquidation.
Central Penn National Bank v. New Jersey Fidelity & Plate Glass Ins. Co., 117 N.J.
Eq. S48, 177, A. 441 (1935). An insurance company does not hold unearned
premiums in trust for the purpose of effecting reinsurance. To rule otherwise
would permit preferential treatment of policyholders over creditors of an
insolvent insurer's estate. Upon the insolvency of an insurer, its assets became
trust funds for the benefit of all creditors and an international reduction of
them is a fraud upon the trust.
Bohlinger v. Ward & Co., 20 N.J. 331, 120 A.2d 1 (1956). In an action by the
liquidator of an insolvent insurance company against an agent of the company
for an accounting of premiums, the evidence did not establish that,
subsequent to the agency agreement, a course of business modified the
agreement to allow the agent to offset net return premiums on cancelled
policies against collected premiums. Nor did the evidence establish that such a
course of business substituted a creditor‐debtor relationship for the principalagent
relationship created by the agreement. Although the insurance
company permitted the agent to deduct unearned premium credits on policies
cancelled in the ordinary course of business at the request of policyholders or
the company, such treatment of unearned premiums would not apply to
policies conditionally surrendered by policyholders at the agent's request