Opinion ID: 458632
Heading Depth: 1
Heading Rank: 4

Heading: propriety of grant of summary judgment

Text: 13 Facer raises many issues on appeal, but the crux of its argument is that the terms of the Agency Agreement, rather than the Illinois statutory scheme, control the dispute. Facer contends that under that agreement it is liable only for that portion of the premiums that was earned prior to the cancellation of the policies. We agree with the district court, however, that the Illinois statutory liquidation procedure expressly governs this case. Ill.Rev.Stat. Ch. 73, Sec. 818 (1981) provides: 14 No set-off shall be allowed in favor of an insurance agent or broker against his account with the company, for the unearned portion of the premium on any cancelled policy, unless that policy was cancelled prior to the entry of the Order of Liquidation or Rehabilitation, and unless the unearned portion of the premium on that cancelled policy was refunded or credited to the assured or his representative prior to the entry of the Order of Liquidation or Rehabilitation. 15 Under the statute, then, because the policies in question were cancelled after the court-ordered liquidation, Facer owes Fabe for the entire premiums due on PIC policies written by Facer prior to July 30, 1981, the date liquidation was ordered. The statute represents the legislative plan for marshalling the assets of insolvent insurance companies to assure fair distribution. 16 Facer argues that the liquidation statute does not apply because it is not seeking a set-off for unearned premiums, as it contends that it never was obligated to PIC for unearned premiums. As the district court noted, however, the Agency Agreement required that Facer as agent pay PIC the full premiums for policies it procured within forty-five days of the end of the month in which the policies became effective. Further, the course of dealing between the parties demonstrates that Facer consistently paid PIC the total premiums for policies it procured when PIC invoiced Facer, regardless of whether the premiums had been earned or collected. Facer maintains that holding it responsible to Fabe for uncollected premiums amounts to the impermissible creation of independent liability on the part of Facer to pay the premiums. Facer, however, chose to extend credit to the policyholders; an agent's extension of credit to policyholders does not affect its liability to pay the premiums. See Ratchford v. United States Central Underwriters Agency, Inc., 492 F.Supp. 137, 139 (E.D.Mo.1980). And as the district court pointed out, the final sentence of paragraph 2 of the Agency Agreement evinces the parties' intention that if Facer were to extend credit to policyholders, it would remain responsible to PIC whether or not it collected from the policyholders. 17 As for the unearned commissions in dispute here, because they were retained by Facer from premiums on policies cancelled subsequent to the date of liquidation, Ill.Rev.Stat. ch. 73, Sec. 818 operates to make Facer liable for these commissions as well. Contrary to Facer's contention, it had no right to refund the unearned commissions after the Order of Liquidation. The mailgram sent to Facer on July 30, 1981, by Robert L. Ratchford, the original court-appointed conservator of PIC, expressly revoked Facer's authority to refund or credit its policyholders any unearned premiums, and stated that any such refunds would be made at Facer's own expense. See Cork v. Associated International Insurance Managers, Inc., 58 Ill.App.2d 331, 338, 208 N.E.2d 4, 8 (1st Dist.1965) (notice of liquidation revoked authority, granted in agreement between the parties, to make withdrawals from bank account). In sum, because no issue of fact exists and under Illinois law Facer is liable to Fabe for the total premiums, including the unearned commissions, on the cancelled policies, the district court properly granted Fabe's motion for summary judgment.