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08/22/97 LINCOLN TOWERS INSURANCE AGENCY v. MARK

August 22, 1997

LINCOLN TOWERS INSURANCE AGENCY, INC., INDIVIDUALLY AND AS REPRESENTATIVE OF ALL PERSONS SIMILARLY SITUATED, PLAINTIFFS-APPELLEES,
v.
MARK BOOZELL, AS LIQUIDATOR OF STATE SECURITY INSURANCE COMPANY, DEFENDANT-APPELLANT.



Appeal from the Circuit Court of Cook County. No. 93 CH 11373. Honorable Ellis E. Reid, Judge Presiding.

As Corrected September 22, 1997. As Corrected September 26, 1997. Released for Publication October 9, 1997. As Corrected October 18, 1997.

The Honorable Justice Zwick delivered the opinion of the court. Quinn, J., concurs. Presiding Justice Greiman, specially concurring in part and dissenting in part.

The opinion of the court was delivered by: Zwick

The Honorable Justice ZWICK delivered the opinion of the court:

This action was brought by plaintiff, Lincoln Towers Insurance Agency, Inc., on behalf of itself and other similarly situated insurance producers for State Security Insurance Company, an insurance company in liquidation. Plaintiffs sought a declaration of their right to set off claims against the insolvent insurer for commissions against premiums due the insolvent company. In addition, plaintiffs challenged the liquidator's administration of the insolvent insurance company's estate and requested a declaration that section 206 of the Illinois Insurance Code (215 ILCS 5/206 (West 1996)) is unconstitutional. Upon cross-motions for summary judgment, the trial court granted plaintiffs' motion in part, holding that they were entitled to set off the amounts of their earned commissions against premiums due the insolvent insurance company which were being held in premium fund trust accounts. Defendant, the liquidator for the insolvent insurance company, appealed the order of the trial court, and plaintiffs filed a motion to dismiss the appeal which was taken with the case.

The undisputed facts established that prior to its liquidation on June 16, 1993, State Security Insurance Company (State Security), issued property and casualty insurance policies. The plaintiffs were producers of insurance who acted as agents or brokers in soliciting insureds for State Security. State Security paid the producers a commission based upon the type of insurance sold. In the usual course of business, when the producers received an application for insurance, they collected the premiums directly from the insured and delivered the policies of insurance from State Security to the insured. Pursuant to section 508.1 of the Illinois Insurance Code (215 ILCS 5/508.1 (West 1996)), all money received by a producer for selling or renewing insurance policies was held by the producer in a fiduciary capacity for the benefit of the insurer. These funds were held in a premium fund trust account.

State Security and the producers reconciled their transactions on a monthly basis in accordance with a "written account current" system. Each month, State Security issued a statement of accounts to each producer which reflected the premiums written, commissions earned, policy cancellations, and the amount due and owing to State Security. The producers then deducted commissions owed to them, credited State Security for all unearned commissions due on canceled policies and remitted the net amount due to State Security. Prior to the liquidation, the producers paid premiums due to State Security within 45 days of the close of the month for which the account current statement was prepared, whether or not the premium had actually been collected from the insured.

Approximately five months after the entry of the agreed order of liquidation, the producers filed the instant declaratory judgment action, seeking a declaration of their right to set off earned commissions against previously collected premiums due State Security. Upon consideration of cross-motions for summary judgment, the trial court entered an order granting partial summary judgment in favor of the producers, ruling as follows:

(1) the Contract Clause in the United States Constitution governed the relationship of the parties, and the contractual agreements between the producers and State Security superseded the order of liquidation and section 206 of the Insurance Code;

(2) the producers were entitled to deduct their earned commissions from that portion of premiums held in the trust fund account that they had collected on behalf of State Security prior to the liquidation on June 16, 1993;

In accordance with these rulings, the court ordered the producers to provide a verified account statement to the liquidator within 45 days showing the status of all debits, credits and premiums held.

We initially address plaintiffs' motion to dismiss the appeal for lack of appellate jurisdiction.

Supreme Court Rule 304(b)(2) specifically provides for review of a judgment or order entered in the administration of a liquidation which finally determines a right or status of a party. A final order is one which disposes of the merits of the case, despite the fact that certain incidental matters may be reserved for consideration. McCaffrey v. Nauman, 204 Ill. App. 3d 761, 764, 562 N.E.2d 628, 150 Ill. Dec. 98 (1990). An order is not automatically rendered nonfinal merely because the trial court has retained jurisdiction over the cause for some purpose. McCaffrey, 204 Ill. App. 3d at 764. The true test of the finality of an order is met when it terminates the litigation on the merits and finally determines the rights and obligations of the parties, without leaving matters of substantial controversy for subsequent resolution. McCaffrey, 204 Ill. App. 3d at 764.

In the case at bar, the trial court's order finally determined the producers' right to set off or retain earned commissions from premiums held in the trust fund account which had been collected on behalf of State Security prior to the liquidation on June 16, 1993. The verified accounts which the producers were required to file merely documented the status of the parties and were incidental to the substantive claims asserted. The fact that the court retained jurisdiction to review such accounts did not affect the finality of the court's ruling as to the rights and obligations of the parties. Altschuler v. Altschuler, 399 Ill. 559, 569, 78 N.E.2d 225 (1948); Aetna Life Insurance Co. V. H.W. Stout & ...


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