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03/24/95 ALLIANCE ACCEPTANCE COMPANY v. YALE

March 24, 1995

ALLIANCE ACCEPTANCE COMPANY, AN ILLINOIS CORPORATION, AND ALLIANCE GENERAL INSURANCE COMPANY, AN ILLINOIS CORPORATION, PLAINTIFFS-APPELLANTS,
v.
YALE INSURANCE AGENCY, INC., AN ILLINOIS CORPORATION, AMERICAN AMBASSADOR CASUALTY COMPANY, AN ILLINOIS CORPORATION, INTERSTATE BANKERS MUTUAL CASUALTY COMPANY, AN ILLINOIS CORPORATION, HORIZON INSURANCE AGENCY, AN ILLINOIS CORPORATION, SAFEWAY INSURANCE COMPANY, AN ILLINOIS CORPORATION, CORONET INSURANCE COMPANY, INC., AN ILLINOIS CORPORATION, AMERICAN SERVICE INSURANCE COMPANY, INC., AN ILLINOIS CORPORATION, GENERAL STAR INDEMNITY COMPANY, A CONNECTICUT CORPORATION, NATIONAL UNDERWRITERS-ILLINOIS AGENCY, INC., AN ILLINOIS CORPORATION, DEFENDANTS-APPELLEES.



APPEAL FROM THE CIRCUIT COURT OF COOK COUNTY. HONORABLE ALBERT GREEN, JUDGE PRESIDING.

Rehearing Denied March 24, 1995.

The Honorable Justice Gordon delivered the opinion of the court: Cousins, Jr., P.j., and McNULTY, J. concur.

The opinion of the court was delivered by: Gordon

JUSTICE GORDON delivered the opinion of the court:

The Plaintiffs instituted the instant action pleading several theories of recovery. The counts of Plaintiffs' complaint, which are the subject of the instant appeal are those seeking declaratory judgment (Count I) and accounting (Count III) and alleging breach of contract (Count VI) and unjust enrichment (Count VII). Counts I, III and VI were directed by Alliance Acceptance Company (Alliance Acceptance) against all Defendants (hereinafter referred to collectively as Defendants) except Yale Insurance Agency, Inc.; and Count VII was directed by Alliance Acceptance and Alliance General Insurance Company (Alliance General) against all Defendants. The trial court entered judgment on the pleadings for the Defendants on Counts I and III and later entered summary judgment in favor of the same Defendants on Counts VI and VII. *fn1 Pursuant to Supreme Court Rule 304(a) (134 Ill. 2d R. 304(a)), the Plaintiffs appeal from these orders and from the trial court's denial of the Plaintiffs' cross-motion for summary judgment on Counts VI and Counts VII.

Plaintiff, Alliance Acceptance, is an insurance premium finance company that financed premiums due the Defendant insurers from their insureds under nonstandard automobile liability and physical damage policies. A premium finance company advances the loan portion of the insurance premium to the insured's agent who submits the premium to the insurance company issuing the policy. The premium finance company then collects monthly installment payments from the insured in an amount equal to the premium loan principal plus interest. See Ill. Rev. Stat. 1991, ch. 73, par. 1065.61(2) now 215 ILCS 5/513a2(c) (West 1992).

Plaintiff, Alliance General, issued nonstandard automobile liability insurance policies; and the Defendants, excluding Horizon Insurance Agency and National Underwriters-Illinois Agency, Inc., issuednonstandard automobile physical damage insurance policies. The latter two Defendants wrote and issued nonstandard automobile physical damage insurance policies as agents of the Defendant insurance companies and other undisclosed insurers.

Plaintiffs' complaint alleged that Alliance Acceptance financed premiums for numerous nonstandard insurance policies issued by the Defendants and by Alliance General which Yale sold to its insured customers. After certain insured's failed to make their monthly installment payments, Alliance Acceptance notified the Defendants of the nonpayment and requested that they cancel their applicable policies. According to the Plaintiffs' complaint, the Defendants did cancel the policies but refused, upon Alliance Acceptance's request, to refund the unearned premiums to Alliance Acceptance. (The Plaintiffs alleged that the Defendants credited the amount of unearned premiums to Yale's account and that Yale also has refused to return the unearned premiums to Alliance Acceptance.) It is the Defendants' refusal to issue refunds to Alliance Acceptance that is the basis for the relief sought in Counts I, III, VI and VII of the Plaintiffs' complaint and which is the subject of the instant appeal.

At issue are the Defendants' motions to dismiss the declaratory judgment (Count I) and accounting counts (Count II); the Plaintiffs' motion for summary judgment on all four counts (Counts I, II, VI and VII); and the Defendants' cross-motions for summary judgment on the breach of contract count (Count VI) and the unjust enrichment count (Count VII). The trial court granted Defendants' motions to dismiss the declaratory judgment and accounting counts as well as the Defendants' motions for summary judgment on the breach of contract count based on the failure of Alliance Acceptance to establish a valid written premium finance agreement between that Plaintiff and the insureds as required by section 521 of the Insurance Code (Ill. Rev. Stat. 1991, ch. 73, par. 1065.68). Summary judgment also was granted to the Defendants with respect to the breach of contract count because the court found that Alliance Acceptance's cancellation requests were not in compliance with section 521 of the Insurance Code and because those cancellation requests could not form the basis of enforceable contracts between Alliance Acceptance and the Defendants. The trial court granted the Defendants' motions for summary judgment on the unjust enrichment count because the Plaintiffs violated the Illinois Insurance Code by failing to establish the existence of a premium finance agreement and that this violation of state law barred recovery.

On appeal, the Plaintiffs argue that the trial court erred in construing section 521 of the Insurance Code to require a writtenpremium finance agreement and that the trial court erred in granting summary judgment to the Defendants and denying summary judgment to the Plaintiffs on the breach of contract and unjust enrichment claims based solely on the absence of a written premium finance agreement. The Plaintiffs also contend that the trial court should have imposed liability upon Defendants Horizon Insurance Agency and National Underwriters-Illinois Agency, Inc. as agents for undisclosed principals.

In accordance with the Illinois Insurance Code and the provisions therein governing premium finance companies (Ill. Rev. Stat. 1991, ch. 73, par. 1065.60 et seq. now at 215 ILCS 5/513a1 et seq. (West 1992)), a premium finance agreement shall be dated and signed by or on behalf of the insured and must set forth several monetary items not here relevant (Ill. Rev. Stat. 1991, ch. 73, par. 1065.66). Section 521 of the Insurance Code provides for the method of cancellation of the underlying insurance policy by the premium finance company and states in relevant part:

"When a premium finance agreement contains a power of attorney enabling the premium finance company to cancel any insurance contract or contracts listed in the agreement, the insurance contract or contracts shall not be cancelled by the premium finance company unless such cancellation is effectuated in accordance with this Section.

(4) Whenever a financed insurance contract is cancelled, the insurer shall return whatever gross unearned premiums are due under the insurance contract to the premium finance company effecting the cancellation for the account of the insured * * *." Ill. Rev. Stat. 1991, ch. 37, par. 1065.68. *fn2

The provisions of section 521 of the Insurance Code were recently considered by this court in Coronet Insurance Co. v. Schacht (1994), 264 Ill. App. 3d 359, 636 N.E.2d 895. *fn3, 201 Ill. Dec. 463 In that case, the premium finance company, Money Payment Plan, filed a complaint with the Director of Insurance charging that Coronet had violated section 521 of the Insurance Code by failing to remit to Money Payment Plan the unearned premiums on policies Coronet had issued to insureds who defaulted on their payments to Money Payment Plan required by premium finance agreements between the insureds and Money Payment Plan. The Director of Insurance found that Coronet had violated section 521 but was reversed by the circuit court on ...


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