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

Heading: The Director's Authority as Director of Insurance

Text: As we explained ante, the insurance code was adopted to protect consumers, not agents. See A.R.S. § 20-106 (Supp. 1986) (historical note). Section 20-402 protects insureds who purchase insurance from unauthorized insurers by allowing insureds to enforce their policies against the insurer, and, if necessary, against the insured's agent. The clear objective is to allow insureds every opportunity to recover valid claims on policies sold by unauthorized insurers. This legislative objective would be frustrated by a requirement that each insured must sue his agent separately. If individual suits are required, many claims will go unpaid simply because they may not be large enough to make legal action economically available. This case is a good example: the average claim for medical benefits is only $632.89, and, although numerous insureds have filed claims with the Director, none has filed suit against their agent. Similarly, the value of each insured's commissions claim is almost certainly too small to justify separate lawsuits. In reality, therefore, the insureds' rights to restitution and to recovery under § 20-402(B) often will be empty promises if each insured must pursue his own claim for recovery of commissions or policy benefits. Further, requiring each insured to pursue separate actions would cause undue burden and expense to the judicial system. Thus, if the Director cannot bring the actions, there is no practical method of vindicating the consumers' rights. In our view, the Director has sufficient authority to remedy this situation by filing one lawsuit against all the agents. The insurance code states an objective; it does not limit the means by which the Director and the courts can work to achieve that objective. Indeed, the code establishes a clear legislative intent to vest the Director and the superior courts with power and authority  reasonably implied from the provisions of [title 20].... A.R.S. § 20-142(B) (Supp. 1986) (emphasis added); see also A.R.S. § 20-612. We hold that this grant of implied power is broad enough to authorize the Director to fairly and efficiently enforce the insureds' right to recover valid claims for policy benefits and commissions from their agents. It is only by such a construction that the legislative objectives can be attained. A single, unified action by the Director is particularly appropriate in this case because Common Market is being liquidated. Liquidation proceedings require all claims against the insurer to be filed with the receiver, A.R.S. § 20-628(A), and prevent individual actions against the insurer, A.R.S. § 20-630. In this situation, it makes sense to allow the Director to consolidate all the claims against the insurer and its agents in a single action. Because the doctrine of unjust enrichment and § 20-402(B) essentially impose strict liability on the agents once a valid commission or policy claim is established, it is difficult to see what can be gained by numerous individual actions. The superior court is capable of tracking the insureds' claims and ordering relief as the nature of the case and the interests of policyholders, creditors, ... or the public requires. A.R.S. § 20-613.