Opinion ID: 1304571
Heading Depth: 2
Heading Rank: 1

Heading: The Director's Authority as Receiver

Text: As receiver, the Director has authority to recover Common Market's property for the benefit of its creditors, including its insureds. 19A J. APPLEMAN, supra § 10692, at 131-38; 2A M. RHODES, COUCH ON INSURANCE § 22:44, at 624 (rev. ed. 1984). If he is seeking to recover the insurer's assets, the Director may step into the insureds' shoes and assert the insureds' rights. 2A M. RHODES, supra § 22:44; 3 R. CLARK, A TREATISE ON THE LAW AND PRACTICE OF RECEIVERS § 765 (3d ed. 1959). Thus, if the agents' liability for the commissions and the unpaid claims that the Director seeks to recover are assets of Common Market, the Director has authority as receiver to prosecute these actions. See, e.g., Robertson v. Malone, 190 F.2d 756 (5th Cir.1951) (receiver may sue agents to recover unearned premiums); United Benefit Fire Insurance Co. v. Earl, 186 Neb. 175, 181 N.W.2d 841 (1970) ( unearned premiums and commissions are held by agents in a fiduciary capacity and may be recovered in liquidation proceedings). The court of appeals held that the Director lacked authority to prosecute the claims action as Common Market's receiver because [t]he rights created by § 20-402(B) belong solely to the insureds and do not constitute an asset of Common Market.  154 Ariz. at 55, 739 P.2d at 1372 (emphasis added). Although the court of appeals did not discuss whether the commissions were recoverable as assets of Common Market, the same analysis obviously is applicable. Absent an agreement to the contrary, [the] agent[s'] commission[s were] earned [4] at the time the[ir] customer[s were] insured by Common Market. Humphrey, 109 Ariz. at 286, 508 P.2d at 1148 (footnote added). Once the commissions were earned, they were no longer part of Common Market's assets; consequently, under the court of appeals' analysis, the Director lacks authority in his capacity as receiver to recover the commissions in a liquidation proceeding. We agree that because neither the unpaid claims nor the commissions are the insurer's property, the Director, in his capacity as receiver, lacks authority to assert the insureds' rights. 154 Ariz. at 55, 739 P.2d at 1372; see also 19A J. APPLEMAN, supra § 10681, at 117-18. Significant considerations of public policy persuade us, however, that the Director has sufficient authority as Director of Insurance to prosecute this action.