APPEAL from the Circuit Court of Cook County; the Hon. NATHAN
M. COHEN, Judge, presiding.
MR. PRESIDING JUSTICE JIGANTI DELIVERED THE OPINION OF THE COURT:
Rohm & Haas Company, Warren-Teed Pharmaceuticals, Inc., Whitmoyer Laboratories, Inc., and Sauquoit Fibers Company, the plaintiff corporations, seek a declaratory judgment construing their rights under section 245.21(e) of the Illinois Insurance Code (Ill. Rev. Stat. 1975, ch. 73, par. 857.21(e)). Continental Assurance Company (Continental) and Robert B. Wilcox, the Director of the Department of Insurance of Illinois (the Director) are named as defendants. Section 245.21(e) pertains to assets held by insurance companies in "separate accounts." The plaintiffs fund their employee pension plans through such separate accounts with Continental. In a motion to dismiss, the Director opposed an interpretation of that provision by the circuit court, alleging that the complaint did not meet the requirements for a declaratory judgment as governed by section 57.1 of the Illinois Civil Practice Act (Ill. Rev. Stat. 1975, ch. 110, par. 57.1). The court denied the motion and entered judgment on the pleadings. Continental acquiesces in the ruling; the Director appeals from the judgment.
Section 57.1(1) of the Illinois Civil Practice Act provides, in part:
"No action or proceeding is open to objection on the ground that a merely declaratory judgment, decree or order is sought thereby. The court may, in cases of actual controversy, make binding declarations of rights, having the force of final judgments, whether or not any consequential relief is or could be claimed, including the determination, at the instance of anyone interested in the controversy, of the construction of any statute, municipal ordinance, or other governmental regulation, or of any deed, will, contract or other written instrument, and a declaration of the rights of the parties interested. The foregoing enumeration does not exclude other cases of actual controversy. The court shall refuse to enter a declaratory judgment, decree or order, if it appears that the judgment, decree or order, would not terminate the controversy or some part thereof, giving rise to the proceeding." (Emphasis added.) (Ill. Rev. Stat. 1975, ch. 110, par. 57.1(1).)
Under that provision, the plaintiffs petitioned for a declaration of rights to funds held and administered by Continental in separate accounts. The status of separate accounts is defined in section 245.21(e) of the Insurance Code:
"Amounts allocated to a separate account under this Article are owned by the company, and the company may not be, nor hold itself to be, a trustee with respect to such amounts. The assets of any such separate account equal to the reserves and other contract liabilities with respect to such account may not be charged with liabilities arising out of any other business the company may conduct." Ill. Rev. Stat. 1975, ch. 73, par. 857.21(e).
Both Continental and the plaintiffs believe this provision operates to insulate assets in separate accounts from unrelated liabilities of the insurance company; a clause in a contract between them reflects this understanding:
"The assets of these separate accounts shall be owned by [Continental] as a part of its non-participating business and [Continental] shall not be, or hold itself out to be, a trustee with respect to such assets. However, the assets shall not be chargeable with liabilities arising out of any other business of [Continental]."
According to the plaintiffs, in the event of Continental's insolvency and liquidation, the statute immunizes their funds from distribution by a liquidator to general creditors of the insurance company; by law the liquidator is the Director of the Department of Insurance (Ill. Rev. Stat. 1975, ch. 73, par. 805).
Forty-four States and the District of Columbia have enacted laws similar to section 245.21(e). However, in States other than Illinois, an intermingling of separate account assets with other assets for liability purposes is apparently forbidden by statutory language which declares that divergent liabilities "shall not" be charged out of the separate accounts. Only Illinois varies this wording, employing "may not" in place of "shall not." Originally the Illinois statute was numbered 245.54 in the Insurance Code and read "* * * such separate account shall not be chargeable with liabilities arising out of any other business the company may conduct" (emphasis added) (Ill. Rev. Stat. 1967, ch. 73, par. 857.54). In 1971 all sections relating to separate accounts were reorganized within the Insurance Code to article XIV 1/2; the particular section was renumbered 245.21(e) and reworded to read "* * * such account may not be charged with liabilities arising out of any other business the company may conduct." (Emphasis added.) Ill. Rev. Stat. 1971, ch. 73, par. 857.21(e).
The plaintiffs claim that the wording shift from "shall not" to "may not" does not affect the intent of the law to protect separate account assets from unrelated liabilities. However, they argue the change may encourage the Director to assume discretionary powers in relation to the separate accounts, inviting him in a liquidation to claim separate account assets for distribution to general creditors. At best, the plaintiffs allege, the phrase "may not" harbors an ambiguity which does not foreclose the Director from an attempt to obtain the pension monies. The present language no longer provides the intended mandatory exemption for separate accounts in the liquidation scheme. The possibility of such action by the Director, the plaintiffs contend, severely threatens the stability of the pension plans they maintain through the separate accounts with Continental. At the end of 1975 the plaintiffs had in excess of $20 million in separate accounts with Continental; in all, Continental holds over $220 million in assets in such accounts.
The plaintiffs sought a declaration by the circuit court that section 245.21(e) prohibits the Director from charging separate account assets with liabilities arising out of unconnected business, in the event of liquidation. Continental agrees with the plaintiffs and urged the court to so hold. The Director asserted he would not take any official position concerning section 245.21(e) in order to preserve his discretion at the time of liquidation. He filed a motion to dismiss the complaint. The motion was denied; the court, on the pleadings, ruled in favor of the plaintiff and Continental. The Director appeals the judgment.
The Director argues that declaratory relief in the form of a judicial construction of rights under section 245.21(e) is inappropriate because the case does not present an "actual controversy" as required by section 57.1 of the Civil Practice Act. First, he asserts, his position is not adverse to that of the plaintiffs. He claims he has never admitted to any definitive meaning of section 245.21(e); he neither endorses nor opposes the plaintiffs' interpretation that in the event of insolvency separate account assets are not reachable by a liquidator for the benefit of general creditors. He states his refusal to issue an opinion on the section does not, in itself, place the Director in conflict with the plaintiff. Since his posture does not presently controvert the plaintiffs' claims in the case, there is no cognizable controversy. Mere curiosity as to the meaning of the section does not amount to a controversy. The right asserted by one party, the Director contends, must be denied by the other.
Second, he claims the plaintiffs' uncertainty is too remote in time from any real jeopardy to the separate account funds. If a conflict erupts, it will occur at the time of liquidation; presently, since the plaintiffs allege neither the pending insolvency of Continental nor a threat to claim the funds, such conflict is supposition. The case lacks the minimum degree of immediacy required by the ...