Anetsberger v. Metropolitan Life Ins. Co.

• Decision Date: 28 January 1994
• Docket Number: No. 93-1852,93-1852
• Citation: 14 F.3d 1226
• Parties: Deborah J. ANETSBERGER, Margaret H. Lepine and Joseph A. Ryan, Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: U.S. Court of Appeals — Seventh Circuit

Page 1226

14 F.3d 1226

Deborah J. ANETSBERGER, Margaret H. Lepine and Joseph A Ryan, Plaintiffs-Appellants, v. METROPOLITAN LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 93-1852.

United States Court of Appeals Seventh Circuit.

Argued Oct. 1, 1993.

Decided Jan. 28, 1994.

Robert A. Habib, Chicago, IL (argued), for plaintiffs-appellants.

Cornelia Dude (argued), Alvin Pasternak, Metropolitan Life Ins. Co., Law Dept., New York City, for defendant-appellee.

Before POSNER, Chief Judge, HARLINGTON WOOD, Jr., and MANION, Circuit Judges.

HARLINGTON WOOD, Jr., Circuit Judge.

Plaintiffs-appellants Deborah J. Anetsberger, Margaret H. Lepine, and Joseph A. Ryan appeal the district court's entry of summary judgment against them on all counts of their complaint against defendant-appellee Metropolitan Life Insurance Company ("Metropolitan").

I. BACKGROUND

Plaintiffs sue Metropolitan based on a Receipt and Temporary Insurance Agreement ("Receipt") allegedly issued to their father, Joseph Ryan, Sr. ("Ryan, Sr."), now deceased. On the policy Ryan, Sr. had listed the plaintiffs as the beneficiaries. The complaint alleges that plaintiffs are entitled to the life insurance proceeds under terms of the Receipt.

In September, 1991, Ryan, Sr. was sixty-three years old and suffering from emphysema. His wife had recently passed away and he received his medical coverage under her medical policy. Following her death, terms of the medical policy allowed Ryan, Sr. to extend the policy under a COBRA ¹ plan for a limited period of time. Because of Ryan, Sr.'s age and illness, Ryan, Sr.'s children expected their father's medical costs to be high. For these reasons, Ryan, Sr.'s children decided to seek some form of life insurance for their father.

On September 13, 1991, Ryan, Sr. and his adult children, Deborah Anetsberger, Margaret H. LePine, and Joseph A. Ryan, met with John Morreale, an insurance agent of Metropolitan, for the purpose of obtaining life insurance on the life of Ryan, Sr. Everyone present knew of Ryan, Sr.'s emphysema and poor health. During this meeting, Morreale completed an application form for a term insurance policy in the amount of $100,000 on behalf of Ryan, Sr. Deborah Anetsberger paid the first month premium of $107.00 on behalf of her father. Metropolitan subsequently cashed and deposited this check. As a matter of convenience, the parties agreed that Morreale would contact Deborah Anetsberger regarding any future questions on the policy.

On the subject of when policy coverage would begin, Morreale told the plaintiffs that coverage would go into effect after Morreale signed the application and collected the first month's premium. ² After making this statement, Morreale handed Ryan, Sr. the Receipt. Morreale did not inform plaintiffs or Ryan, Sr. that a medical examination would be required and did not say he was waiving any provisions of the Receipt.

At the top of the first page of the Receipt, in a paragraph set off by different margins and in heavier type, Metropolitan stated:

Please read both sides of this Receipt carefully. The Information It contains is Important to you. The maximum amount of coverage under this and all other receipts will not be more than $500,000 for any person to be insured. The maximum period of coverage under this Receipt is 90 days. If a medical examination is required, no coverage [except for accidental death] will be provided until the examination has been completed.

Immediately below this paragraph the Receipt described the terms under which temporary insurance would take effect. Terms of the policy stated in relevant part:

Eligibility for Temporary Insurance-Metropolitan will grant Temporary Insurance to each person to be insured if at least one month's premium is received on the date of the application and there is no material misrepresentation in the application.

When Temporary Insurance Starts--Coverage starts on the date of this Receipt. But, if a medical examination of a person to be insured is initially required by our underwriting rules, coverage on that person will not start until completion of the examination. If it is not completed within 90 days from the date of this Receipt, there will be no coverage. However, if a person to be insured dies from an accident within 30 days from the date of this Receipt and before the examination is completed, Temporary Insurance will be in effect if it has not already ended under the terms of this Receipt.

At the top of page two, the Receipt described when temporary insurance ends and limitations on the authority of the insurance agent:

When Temporary Insurance Ends--Temporary Insurance on any person will end on the earliest of the following:

1. When coverage starts under a Metropolitan policy.

2. When Metropolitan's first offer to issue a policy is not accepted.

3. When Metropolitan offers to refund the amount received.

4. Five days after Metropolitan mails, to the address on the application, a notice that the application has been declined.

5. The date the person to be insured or the applicant learns that the application has been declined.

6. Ninety days from the date of this Receipt.

If no Metropolitan policy takes effect, the amount received will be refunded when Temporary Insurance ends.

Limitations on Authority--No one but the President, the Secretary or Vice-President of Metropolitan may change or waive the terms of this Receipt.

Although some of the above quoted language was set off by different margins or bold print as identified above, all of the language appeared in standard type size.

Morreale handed the Receipt containing this language to Ryan, Sr. on September 13, 1991 who then placed it on a table in his home. The record contains no evidence indicating that Ryan, Sr. read the receipt or knew of its contents. Deborah Anetsberger did not read the Receipt until after her father died.

Morreale met with Deborah Anetsberger on or about September 21, 1991, to discuss a policy that Anetsberger was interested in taking out on her own life. At this time Morreale informed her that Metropolitan underwriting rules required a medical examination on her father before Metropolitan would issue the policy. He did not make any statement regarding whether temporary insurance was in effect.

On or about September 23, 1991, Anetsberger made an appointment for her father to undergo a physical. On the day the physical was scheduled, September 30, 1991, Ryan, Sr. died of a heart attack before the physical was completed.

Four days later, on October 4, 1991, Metropolitan denied Ryan, Sr.'s application on the grounds that the medical examination was not completed. In response, by an October 15, 1991 letter, plaintiffs claimed the benefits under the alleged policy. Metropolitan rejected this claim on November 22, 1991, and returned the initial deposit of $107.00 to the plaintiffs on December 4, 1991.

Plaintiffs filed the three count complaint in this matter on March 23, 1992 in the Circuit Court of Cook County. The defendant then removed the case to the United States District Court for the Northern District of Illinois. Count I alleges that Metropolitan is in breach of the Receipt and Temporary Agreement by refusing to pay the policy proceeds. Count II alleges that Metropolitan is estopped from denying coverage based on the lack of a medical examination because plaintiffs relied on Morreale's representation that policy coverage began when the application was completed and the first month's premium paid. Count III seeks statutory penalties under Illinois law for Metropolitan's vexatious and unreasonable delay in paying the proceeds due under the policy. The district court granted summary judgment on all counts in favor of the defendant holding "that the plain, ordinary, and popular meaning of the words used in the Receipt unambiguously assert that Ryan, Sr.'s temporary coverage would begin only after he had completed his scheduled medical examination." The district court also rejected plaintiffs' estoppel argument and claim for statutory penalties under 215 ILCS 5/155 (1993). This appeal followed.

II. ANALYSIS

We review the grant of summary judgment de novo, Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248, 106 S.Ct. 2505, 2510, 91 L.Ed.2d 202 (1986), and view the facts and all reasonable inferences drawn from it in the light most favorable to the nonmoving party. Brookins v. Kolb, 990 F.2d 308, 312 (7th Cir.1993); Talbot v. Robert Matthews Distrib. Co., 961 F.2d 654, 663 (7th Cir.1992). ³ We will affirm summary judgment if the record presents "no genuine issue of material fact [such] that the moving party is entitled to judgment as a matter of law." Fed.R.Civ.P. 56.

Plaintiffs first argue that the district court disregarded the intent of the parties and the ambiguities inherent in the Receipt when it held that temporary insurance never took effect. The second line of argument focuses on the scope of Morreale's authority when working as an agent of Metropolitan and his ability to waive provisions contained in the Receipt.

A. INTERPRETATION OF THE RECEIPT AND TEMPORARY INSURANCE AGREEMENT

Plaintiffs maintain that the district court should have liberally construed the Receipt's language to find that temporary insurance began on September 13, 1991. Such an interpretation, plaintiffs contend, is consistent with the intentions of the parties.

For the substantive legal rules applicable to this diversity action, we look to Illinois law. Erie v. Tompkins, 304 U.S. 64, 78, 58 S.Ct. 817, 822, 82 L.Ed. 1188 (1938). Illinois law provides that an insurance policy should be applied as written if the words used in the policy can reasonably be given their plain, ordinary, and popular meaning. United States Fidelity & Guaranty Co. v. Wilkin Insulation Co., 144 Ill.2d 64, 74, 161 Ill.Dec. 280, 284, 578 N.E.2d 926, 930 (1991); Garde v. American Family Life Ins. Co., 147 Ill.App.3d 1034, 1037, 101 Ill.Dec. 110, 112, 498 N.E.2d 292, 294...