COURT DECISIONS

Rough Notes, Jan 2005

Digested from case reports published in the North Eastern Reporter 2d, West Publishing Co., St. Paul, MN

Agent appeals order to return commissions

On September 20, 2000, the Massachusetts Commissioner of Insurance was appointed receiver for New England Fidelity Insurance Company. The Supreme Judicial Court directed the commissioner to take immediate control of the property and assets of New England Fidelity and to administer them under general supervision of the court. All existing New England Fidelity policies were to be canceled, effective on 90 days' notice to policyholders.

Jankowski Insurance Agency had an agency agreement with New England Fidelity. The commissioner sought the repayment of commissions previously paid by New England Fidelity to Jankowski. Jankowski refused. The commissioner filed an action in Superior Court seeking repayment of the commissions that were unearned. The Superior Court judge ordered Jankowski to pay the $38,688.08, plus interest, to the commissioner. Jankowski appealed.

The Appeals Court of Massachusetts, Suffolk, agreed with the Superior Court. The agency contract expressly provided that Jankowski was required to return a portion of the commission in the event the insurer was to refund part of its premium, which would then be unearned. The court found that unearned commissions are assets that the receiver must take into custody. Additionally it found that, under its agency contract with New England Fidelity, Jankowski had no right to retain unearned commissions. Accordingly, the judgment of the Superior Court was affirmed, with double costs on appeal.

Commissioner of Insurance v. Jankowski Insurance Agency, LLC-No. 03-P-614-Appeals Court of Massachusetts, Suffolk-June 9, 2004-809 North Eastern Reporter 2d 1084.

Landlord seeks to escape liability for negligence

In this landlord and tenant case, the Appellate Court of Illinois addressed the question of whether the Illinois Landlord and Tenant Act prohibited certain language in a tenant's residential lease. The suit was filed by residents of the Chatham Hills apartment complex, managed by Nolan Real Estate Services. The complaint alleged that an employee of Nolan, William Klein, was negligent with regard to maintenance of fireplaces in the apartments. A fire damaged the residents' personal property covered by the residents' individual rental insurance agreements when John Whitledge started a fire in his fireplace that spread beyond the firebox and into other units.

Nolan attempted to dismiss the complaint, arguing that the terms of its lease agreements with Chatham Hills residents provided that Nolan was not responsible for damage to the tenants' personal property. Each lease contained the following provision: "Resident understands and agrees it shall be Resident's own obligation to insure Resident's property and persons for whom Resident is or may be responsible. The owner is not responsible for Resident's property in the case of accident." In addition, some of the leases contained endorsements requiring tenants to carry renters insurance. These endorsements also contained the following language: "Chatham Hills Apartments is not responsible for your property in case of an accident."

The residents argued that the language in the lease agreements conflicted with Section 1 of the Illinois Landlord and Tenant Act, which provided that agreements "exempting the lessor from liability for damages for injuries to person or property caused by or resulting from the negligence of the lessor, his or her agents, servants[,] or employees, in the operation or maintenance of the demised premises or the real property containing the demised premises shall be deemed to be void as against public policy and wholly unenforceable."

The parties eventually agreed to certify several questions to the Appellate Court of Illinois, including the question of whether the language of the Illinois Landlord and Tenant Act protected the tenants and the tenants' insurers under the circumstances. The court found that the language in the lease agreements had the effect of requiring a tenant to indemnify a landlord for a fire allegedly caused by the landlord's negligence. This enabled a landlord to escape liability for its own negligence, and was precisely the evil the Act was written to prevent. For this reason, the court found the lease provisions to be void and unenforceable.

Nolan attempted to argue that the act was intended to protect tenants, not their insurers. The court was not convinced. The insurance carriers were afforded the same protections as the tenants.

The certified questions were answered.

Whiteledge v. Klein-No. 4-03-0820-Appellate Court of Illinois, Fourth District-May 19, 2004-810 North Eastern Reporter 2d 303.

Coverage for new vehicle within 30 days of purchase

On October 12, 1999, Corey Smith bought a 1986 Chevrolet Caprice. He also owned a 1995 Chevrolet Monte Carlo, which he had purchased early in 1999. Smith had insurance coverage for the Monte Carlo with American Freedom Insurance Company.