Benedict v. Federal Kemper Life Assur. Co.

• Decision Date: 09 October 2001
• Docket Number: No. 1-99-3758.,1-99-3758.
• Parties: Charles BENEDICT and Frederick J. Hanifan, Indiv. and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants, v. FEDERAL KEMPER LIFE ASSURANCE COMPANY, d/b/a Zurich Kemper Life, Defendant-Appellee.
• Court: United States Appellate Court of Illinois

759 N.E.2d 23

325 Ill. App.3d 820

259 Ill.Dec. 543

Charles BENEDICT and Frederick J. Hanifan, Indiv. and on Behalf of All Others Similarly Situated, Plaintiffs-Appellants, v. FEDERAL KEMPER LIFE ASSURANCE COMPANY, d/b/a Zurich Kemper Life, Defendant-Appellee.

No. 1-99-3758.

Appellate Court of Illinois, First District, First Division.

October 9, 2001.

Glen DeValerio, John Peter Zavez, John Pentz, Berman DeValerio & Pease LLP, Boston MA, Michael B. Hyman, William H. London, Much Shelist Freed Denenberg Ament & Rubenstein, P.C., Chicago, Richard J. Vita, Boston, MA, for Appellants.

J. Kevin McCall, Clark C. Johnson, Jenner & Block, Chicago, for Appellee.

Justice TULLY delivered the opinion of the court:

Plaintiffs, Charles Benedict and Frederick J. Hanifan, appeal the circuit court's dismissal with prejudice of their second amended complaint for failure to state a cause of action. Plaintiffs filed a one-count complaint for breach of contract based upon whole life insurance policies sold to them by defendant, Federal Kemper Life Assurance Company, d/b/a Zurich Kemper Life (Kemper). Plaintiffs allege that they purchased Kemper life insurance policies with the understanding that they would pay out-of-pocket annual premiums for five years and, thereafter, the policy would accumulate a "cash value" to cover future premium payments. This feature is known as a "vanishing premium." Plaintiffs allege that Kemper breached the life insurance policies when it continued to require the insured to pay premiums out-of-pocket after five years. The circuit court concluded that the Kemper policy was not ambiguous and Kemper did not breach its contract with plaintiffs. The issues on appeal are (1) whether the Kemper life insurance policy is ambiguous so that parol evidence may be considered in determining whether Kemper did in fact breach the contract and, if so, (2) whether the statute of limitations bars plaintiffs' claim. For the reasons stated below, we affirm the decision of the circuit court.

SUMMARY OF ALLEGATIONS

The named plaintiffs, and those they purportedly represent, purchased life insurance policies from Kemper from 1980 forward. The second amended complaint alleges that Kemper entered into life insurance contracts with its policyholders which contained "vanishing premiums." The plaintiffs allege that Kemper agents used sales illustrations to sell policies which showed that after a stated number of years, the obligation of the insured to make out-of-pocket premium payments would vanish.

Facts Pertaining to Charles Benedict

The complaint alleges that in 1984, Kemper contacted named plaintiff Charles Benedict and persuaded him to purchase a $50,000 whole life insurance policy based on illustrations showing premium payments "vanishing" after five years. The complaint further alleges that the sales agent provided an illustration generated by Kemper which promised that, after five years, Benedict would not have to make another out-of-pocket premium payment for the life of the policy. Benedict paid a premium on his policy for five years, and in the sixth year, he received another premium bill. Benedict has continued to pay premiums out-of-pocket.

Facts Pertaining to Frederick J. Hanifan

The complaint alleges that named plaintiff Frederick J. Hanifan was contacted by Kemper and persuaded to purchase a $100,000 whole life insurance policy based on a sales illustration similar to the one shown to Benedict. The complaint alleges that Hanifan was also shown a sales illustration which indicated that his out-of-pocket payments would "vanish" after five years. Hanifan paid premiums for five years. Kemper sent a sixth premium bill to Hanifan and Hanifan subsequently surrendered his policy.

The second amended complaint contains one count for breach of contract. The plaintiffs allege that the Kemper policies promised that out-of-pocket premium costs to plaintiffs would vanish at a certain point. According to the complaint, Kemper breached these contracts by demanding that plaintiffs pay additional out-of-pocket premiums beyond the dates originally agreed to or risk having their policies canceled.

Kemper filed a motion to dismiss the complaint, arguing that the insurance policies unambiguously preclude a vanishing premium promise. Kemper asserts that the integration clause in the policy along with the parol evidence rule preclude consideration of the sales illustration. Moreover, Kemper contends that the sales illustration does not even support the plaintiffs' claim. Finally, Kemper maintains that even if parol evidence was considered here, the five-year limitation on actions based on oral contracts would bar plaintiffs' claim.

The circuit court found that the contract, consisting of the policy and the application, was not ambiguous so that the sales illustration could not be considered. The court further stated that even if it could properly consider the sales illustration, it did not support the claim that Kemper promised a vanishing premium. Finally, the circuit court stated that if the plaintiffs relied on parol evidence, their claim would be barred by the five year statute of limitations.

DISCUSSION

We review de novo the dismissal of a complaint pursuant to section 2-619 of the Code of Civil Procedure. (735 ILCS 5/2-619 (West 1998)). Bloom v. Braun, 317 Ill.App.3d 720, 725, 250 Ill.Dec. 928, 739 N.E.2d 925-928 (2000). A reviewing court must construe the allegations in the light most favorable to the plaintiffs and determine whether plaintiffs have alleged sufficient facts to establish a cause of action on which relief may be granted. Weatherman v. Gary-Wheaton Bank of Fox Valley, 186 Ill.2d 472, 491, 239 Ill.Dec. 12, 713 N.E.2d 543 (1999). Furthermore, the reviewing court must ascertain whether a genuine issue of material fact existed precluding dismissal or, absent an issue of fact, whether the dismissal was proper as a matter of law. Bloom, 317 Ill.App.3d at 725, 250 Ill.Dec. 928, 739 N.E.2d 925.

In Illinois, contract interpretation follows the four corners doctrine so that we look only to the language of the contract to determine if it is susceptible to more than one meaning. Air Safety, Inc. v. Teachers Realty Corp., 185 Ill.2d 457, 462, 706 N.E.2d 882, 885, 236 Ill.Dec. 8, (1999).¹ If the language of the contract is facially unambiguous, then the contract is interpreted without the use of parol evidence. Air Safety, Inc.,185 Ill.2d at 462, 236 Ill.Dec. 8, 706 N.E.2d 882, citing Farm Credit Bank v. Whitlock, 144 Ill.2d 440, 447, 163 Ill.Dec. 510, 581 N.E.2d 664 (1991). If, however, the court finds that the language of the contract is susceptible to more than one meaning, then an ambiguity is present and parol evidence may be admitted to aid the trier of fact in resolving the ambiguity. Air Safety, 185 Ill.2d at 462-63, 236 Ill.Dec. 8, 706 N.E.2d 882; Whitlock, 144 Ill.2d at 447,163 Ill.Dec. 510,581 N.E.2d 664.

Insurance contracts are subject to the same rules of construction applicable to other types of contracts. Hall v. Country Casualty Insurance Co., 204 Ill. App.3d 765, 773, 150 Ill.Dec. 110, 562 N.E.2d 640 (1990). When construing an insurance contract, it is our duty to ascertain and give effect to the intent of the parties and the best indicator of the parties' intent is the language used in the agreement. Wallis v. Country Mutual Insurance Co., 309 Ill.App.3d 566, 571, 243 Ill.Dec. 344, 723 N.E.2d 376 (2000). If the terms of the policy are clear and unambiguous, they must be given their plain and ordinary meaning. Hartford Insurance Co. of Illinois v. Kelly, 309 Ill.App.3d 800, 806, 243 Ill.Dec. 256, 723 N.E.2d 288 (1999). An insurance policy is said to be ambiguous if it is subject to more than one reasonable interpretation. Continental Casualty Co. v. Roper Corp., 173 Ill.App.3d 760, 767, 123 Ill.Dec....