Benham v. Manufacturers & Wholesalers Indem

In Benham v. Manufacturers & Wholesalers Indem. (Colo.Ct.App. 1984) 685 P.2d 249, a receiver appointed for an interinsurance exchange filed a collection lawsuit to recover assessments imposed by the receiver. One subscriber asserted it had been fraudulently induced to become a member by the exchange's false representations and by the Colorado Insurance Commissioner's concealment of the interinsurance exchange's insolvency. (Id. at pp. 253-254.) Benham concluded that any wrongdoing did not absolve the member of its assessment liability. (Ibid.) Benham reasoned, "a policyholder cannot deny the existence of the insurance corporation so as to avoid an obligation into which he had deliberately entered, and upon faith of which others became co-insurers and co-insured with him. To allow the policyholder to make the attack, and thereby avoid payment to the fund, would, in effect, permit him to practice fraud on the others." (Id. at p. 254.) The member could seek redress in a separate action against those responsible for the fraud. (Ibid.)