Appeal from the Circuit Court of Cook County; the Hon. GEORGE
L. LEIGHTON, Judge, presiding. Affirmed upon filing remittitur
within 30 days; otherwise, reversed and remanded with directions.
MR. PRESIDING JUSTICE STAMOS DELIVERED THE OPINION OF THE COURT.
Defendants, Gibraltar Mutual Casualty Company and its successor, Gibraltar Insurance Company, *fn1 appeal from a judgment of $29,413.31 entered in favor of plaintiffs, Frederic Z. Lorsch and Bernard Miller, d/b/a Insurance Budget Plan (IBP) for unearned premiums on cancelled insurance policies.
IBP was in the business of financing premiums on automobile insurance policies, and financed the 199 policies written by defendants from August, 1960, to May, 1961, involved in this dispute. IBP's method of operation was to deal indirectly with the insured-borrowers through various insurance brokerages and agencies (hereinafter referred to as producers) which solicited business for insurance carriers on a commission basis. The producers soliciting the accounts involved in this dispute were Schoeneman Insurance Service and Major Insurance Service (both operated by Bernard Schoeneman), Gene W. Fawcett Agency, Triangle Insurance Agency, Inc., Certified Insurance Agency, Vulcan Insurance Agency and Fremac Insurance Agency.
When a prospective insured contacted a producer for automobile coverage and desired to finance the premiums, the producer would first submit the application for insurance to the defendants. If the application were approved, the issuing agent, Aero Marine Management Co. *fn2 would send a "daily" (Memorandum of coverage) covering the insured to the producer.
The insured would then sign a form premium finance contract supplied the producer by IBP. The finance contract provided for assignment of the insurance policy to the producer along with the right of policy cancellation upon default of loan payments. The contract also provided that the producer would have the right to any return premiums. However, in the case of the Fawcett Insurance Agency, the producer would enter the insured's name on the finance contract without obtaining his signature.
The producer would then assign the finance contract to IBP and also provide them with a copy of the insured's policy. IBP then issued a coupon payment booklet for the loan installments to the insured and notified defendants of the assignment and premium financing, and of IBP's assignment rights. The notice provided that if the assignment were unsatisfactory, the defendants were to notify IBP within ten days.
Defendants presented testimony to show that when they received a notice of assignment from a finance company, the original of the notice was placed with the policy in the files and the attached duplicate was sent back to the finance company stamped with the following limitation:
"The assignment will not be honored unless the premium finance check is made payable to Gibraltar Mutual Casualty Company."
However, plaintiff Bernard Miller testified that IBP never sent a duplicate copy of the notice to the carriers in the instances here involved and that IBP never received a return memorandum stamped with the above limitation.
After the ten-day period had elapsed without notice of objection from defendants, IBP would draft a check payable either to the producer or defendants for the financed portion of the premium. *fn3 In the case of premium financing on policies issued by Schoeneman and Fawcett, the checks were made payable to the producer. As it turned out, these amounts were never forwarded by Fawcett and Schoeneman to defendants, and that basically is the reason for this litigation. However, where the policies were issued through Triangle, Fremac, Vulcan and Certified, the checks were made payable to defendants pursuant to defendants' specific instructions.
Plaintiff Frederic Lorsch testified that only in a few instances was he required by the carriers to pay them directly but that he was never so instructed in the cases of Fawcett and Schoeneman. However, Mr. Casati, president of the defendants, testified that he instructed Miller to make all Fawcett policy checks payable directly to defendants.
On April 10, 1961, after most of the policies here involved had been issued, IBP requested defendants to confirm the fact that both Schoeneman and Fawcett were direct agents of the carrier. Defendants confirmed as to both, but on May 2, 1961, they notified IBP that Fawcett was a "producer-subagent" being an agent of Aero Marine.
Both Schoeneman and Fawcett were authorized by IBP to act as collecting agents for the loan installments. When subsequent checks for premium financing were made payable to them, the amount of the unremitted loan installments collected by them were deducted to balance accounts. In all other cases the insured borrowers would make their installment payments directly to IBP.
When an insured-borrower defaulted on the loan payments, IBP would send a cancellation notice to defendants who in all cases here involved cancelled the policy pursuant to IBP's request. However, instead of remitting any amounts of unearned premiums to IBP, defendants would credit the producer's account.
After IBP's repeated requests for the return premiums on the cancelled policies, they filed this suit in equity praying for an accounting and payment of the return premiums. Defendants filed a jury demand which was subsequently stricken and the cause was referred to a Master in Chancery.
The Master concluded that the producers were either agents or subagents of the defendants and that, therefore, they had received payment of premium from IBP on behalf of defendants who were now liable to plaintiffs for repayment of the unearned portions.
Defendants filed 23 objections to the Master's Report which were denied, and, standing as exceptions, they were subsequently overruled by the Chancellor who approved and adopted the Report as submitted. Judgment was entered in ...