Download PDF - Goodmans

New Mexico
South Carolina
Insurance Inc. v. Furneaux, 62 N.M. 249, 308 P.2d 577 (1957). A local agent
sued the managing general agent of an insolvent Texas insurer for the return
of unearned premiums. The general agent asserted that if there was any
liability for return of premiums, the insolvent insurer would be the responsible
party, so that such an action should be brought against the receiver of the
company. The court held that where there was no evidence of any contractual
relationship between the local agent and the insolvent company, and the only
evidence of contractual relationship was between local agent and general
agent, action would lie against general agent.
Gambrell v. Cox, 250 S.C. 228, 157 S.E.2d 233 (1967). It was held that unearned
premiums collected by an agency are, upon the insolvency of the company,
owed to the policyholders and not to the agency.
Op. Att'y. Gen. 158 (S.C. 1917). Insolvency is a breach of contract by the insurer.
As a result, policyholders are entitled to recover a portion of their unearned
premium.
Tennessee Davis v. Amra Grotto M.O.V.P.E.R., 169 Tenn. (5 Beeler) 564, 89 S.W.2d 754
(1936). The court held that policyholders of insolvent company are entitled to
recover the value of their policy, as opposed to the amount of premiums paid.
Gleason v. Prudential Fire Ins. Co., 127 Tenn. 8, 151 S.W. 1030 (1912). It was held
that the appointment of a receiver for an insolvent mutual fire insurance
company terminates all of its contracts and members of the company, as both
insurers and insureds, have no right to the return of premium until all creditors
have been paid.
Virginia
Johnson v. Button, 120 Va. 339, 91 S.E. 151 (1917). The court held that the
insolvency of the company automatically cancelled the outstanding policies
and thus return premiums would be calculated upon the pro‐rata basis, and
that because this cancellation was without any fault on the part of the agents,
the agents had no obligation to return any part of the commissions received on
the policies cancelled. The receiver of the insolvent company asserted that as
the policies had not been cancelled by the company, but had rather been
replaced by agents for their clients, the short‐rate premium schedule should
apply, and also that the amount due the agents should be offset by the
commissions the agents had earned on the premiums.
Universal Life Ins. Co. v. Cogbill, 71 Va. (30 Gratt.) 72 (1878). A foreign life
insurance company became insolvent. The plaintiff had purchased policy for
benefit of his wife. The court held that the plaintiff could sue in his own name
to recover premiums paid, and that claims could be paid out of bonds of the
insurer held by the state treasurer.
Wisconsin
Atlas Paper Company v. Seamans, 82 Wis. 504, 52 N.W. 775 (1892). The court
held that an unearned premium claim against an insolvent mutual insurance
company should be disallowed because the policy was cancelled by the
insolvency of the company and not pursuant to the actions of either the
insurance company or the insured.
Cheese Makers Mutual Casualty Co. v. Duel, 247 Wis. 485, 19 N.W.2d 889
(1945). One insurer filed a claim against the estate of an insolvent insurer for
unearned premiums due on a reinsurance contract terminated by the
liquidation order. The court upheld the disallowance of the claim because the
contract was cancelled by operation of law, rather than by either the insured
or insurer.