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Lindheimer v. Baylor

APRIL 19, 1972.

LIONEL LINDHEIMER, JR. ET AL., PLAINTIFFS-APPELLANTS,

v.

JAMES BAYLOR, DIRECTOR OF INSURANCE, DEFENDANT-APPELLEE.



APPEAL from the Circuit Court of Cook County; the Hon. JOHN J. LUPE, Judge, presiding.

MR. PRESIDING JUSTICE DIERINGER DELIVERED THE OPINION OF THE COURT:

Rehearing denied May 17, 1972.

This is an appeal from an order of the Circuit Court of Cook County sustaining a motion to dismiss a class action for a declaratory judgment. Plaintiffs are creditors of Lake States Casualty Company and Multi-State Inter-Insurance Exchange, whose claims have been allowed or approved for allowance by the defendant Director. Both insurers are mutual and reciprocal companies with assessable policies which were in liquidation prior to August 7, 1969, and plaintiffs bring the action for themselves and on behalf of all other creditors of insolvent mutual and reciprocal insurers with assessable policies in liquidation prior to August 7, 1969.

The issues on appeal are whether the Director acted properly in refusing to make assessments against policyholders of defendant companies, and whether the actions of the Director of Insurance as liquidator may only be challenged by action in the liquidation proceedings rather than by plenary suit.

The defendant, James Baylor, Director of Insurance of the State of Illinois, pursuant to the provisions of the Illinois Insurance Code, is acting as statutory liquidator of Multi-State Inter-Insurance Exchange, Lake States Casualty Company, and Bell Mutual Casualty Company, all of which are in liquidation proceedings in the Circuit Court of Cook County.

The policies of insurance issued by the insurers each contained a provision for an additional contingent liability of the policyholders, of which the Lake States clause is representative:

"Contingent Liability: The named insured agrees that his liability is for payment of the premium deposit specified in this policy plus a contingent several liability in an amount equivalent only to such premium deposit."

Section 207 of the Illinois Insurance Code (Ill. Rev. Stat., ch. 73, par. 819), in effect at the time of the issuance of the policies and in effect at the time of the initiation of the liquidation proceedings in the estates in question, provided in part that the Director may levy such assessments against policyholders "as may be necessary to pay all allowed claims in full."

Plaintiffs sought a declaration that the repeal of par. 207 did not deprive the Director of his authority to continue making assessments, and the defendant filed his motion to dismiss, which was sustained by the Circuit Court.

On August 7, 1969, Public Act 76-715 of the 76th General Assembly repealed par. 207 of the Illinois Insurance Code. The Director takes the position that the repeal of section 207 applies to insurance companies already in liquidation and on which assessments have already been made or ordered made, except as to cases where judgment had already been obtained. We do not agree. The repealing act, par. 819.1, reads:

"Upon the entry of an order of liquidation any provision in the policies of a company providing for a contingent liability of the policyholders shall become void."

• 1 We construe this act to be prospective only. It would be manifestly inequitable to allow the Director to assess and collect from some policyholders and not others of the same company in liquidation before the act was passed. Such would be the situation here if the Director's position is permitted. We think it is the Director's duty to treat everyone alike and the act cannot be construed as retroactive. The rights of the creditors under the statute at the time of liquidation must be protected and cannot be eliminated at a later date.

The defendant contends the liquidation court must retain jurisdiction and other courts must not interfere.

In Count I of the amended complaint, plaintiffs brought suit for themselves, setting forth their claims and allowance thereof, and on behalf of all other claimants and creditors of Multi-State Inter-Insurance Exchange and its estate in liquidation in Case No. 64 CH 5262. In Count II of the amended complaint, plaintiffs brought suit for one plaintiff, setting forth his claim and the allowance thereof, and on behalf of all other claimants and creditors of Lake States Casualty Company and its estate in liquidation in Case No. 65 CH 5381. In Count III of the amended complaint, plaintiffs alleged that the defendant was the liquidator of Bell Mutual Casualty Company as well as the above-mentioned companies and ...


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