Interlocutory appeal from the Circuit Court of Cook County;
the Hon. CORNELIUS J. HARRINGTON, Judge, presiding. Order
MR. JUSTICE BRYANT DELIVERED THE OPINION OF THE COURT.
Rehearing denied and opinion modified July 5, 1967.
This is an appeal from an interlocutory order of the Circuit Court of Cook County restraining Progressive General Insurance Company (hereinafter referred to as Progressive General) from engaging in the following activities: opening bank accounts other than those already in existence and from dissipating present bank accounts; pledging premiums due on policies issued by the company; making payments of advance commissions in any manner whatsoever in connection with such policies; transferring property, funds or securities from Progressive General; from making disbursements other than in the ordinary and normal course of business for the payment of claims and for the maintenance of general and administrative functions; converting or pledging any assets and from increasing any salaries or expense accounts.
The issue presented on this appeal is whether the chancellor erred in entering the injunction against Progressive General. Defendant claims that it was error for the chancellor to have issued an injunction because there was no urgency, and because the injunction was based on an outdated record and changed the status quo.
The facts leading up to the issuance of the injunction are as follows: In September 1964, the then Director of Insurance, Harry B. Hershey, was appointed liquidator of Multi-State Inter Insurance Exchange. In August, 1965, John Bolton, successor to Mr. Hershey, as Liquidator of Multi-State, filed an action against the present defendant, Progressive General, and other defendants in which he sought money damages against Progressive General, all of Progressive General's stock, and the appointment of a receiver for Progressive General pending disposition of the case. The largest claim for damages against Progressive General arose out of the cancellation of a contract between Multi-State and Progressive General.
Hearings were held before the chancellor during September 1965 on the motion for the appointment of a common-law receiver pendente lite. Progressive General moved to dismiss the motion for receiver upon the ground that section 201 of the Illinois Insurance Code expressly prohibits appointment of common-law receivers for domestic insurance companies. The chancellor denied this motion whereupon Progressive General filed an original petition for writ of mandamus in the Supreme Court of Illinois.
Before Progressive General's brief on the merits in the mandamus case was filed, the present action against Progressive General was instituted by the Director of Insurance, John Bolton, seeking appointment of himself as rehabilitator of the defendant, as well as an injunction as provided by section 801 of the Insurance Code. The chancellor referred the cause of action to Master in Chancery, Louis M. Friedman.
On November 17, 1965 the master's original and supplemental reports were filed with the chancellor. The master found several serious violations of the Illinois Insurance Code, but refused to recommend the issuance of an injunction. Some of the more serious violations are as follows:
(1) Loans in the aggregate amount of $812,000 were made indirectly to Charles Hoffman, personally, as president of Progressive General by Progressive General in violation of Insurance Code, section 124.2.
(2) Immediately prior to the issuance of quarterly reports by Progressive General, Hoffman secured bank loans, which aggregated close to $1,000,000, executed by Progressive Agency and secured by all of the uncollected premiums due to Progressive General on policies outstanding, in violation of section 505 of the Insurance Code.
(3) The master found that misleading financial statements were issued by Progressive General.
(4) The master found that premiums were transmitted in bulk instead of being identified to individual policies in violation of Rule 9.08 of the Department of Insurance.
(5) The arrangement between Progressive General and its sole agency was found to be that of an exclusive (emphasis added) agency but the agreement establishing that relationship had not been submitted to the Director for approval as required by section 141 of the Insurance Code.
(6) Progressive Agency failed to obtain a license to operate as an agency, but so operated in 1964. Charles Hoffman countersigned all insurance policies as a licensed ...