Clarin Corp. v. Massachusetts General Life Ins. Co.

• Citation: 44 F.3d 471
• Decision Date: 30 December 1994
• Docket Number: No. 94-1413,94-1413
• Parties: CLARIN CORPORATION, Plaintiff-Appellant, v. MASSACHUSETTS GENERAL LIFE INSURANCE COMPANY, Defendant-Appellee.
• Court: United States Courts of Appeals. United States Court of Appeals (7th Circuit)

Page 471

44 F.3d 471

CLARIN CORPORATION, Plaintiff-Appellant, v. MASSACHUSETTS GENERAL LIFE INSURANCE COMPANY, Defendant-Appellee.

No. 94-1413.

United States Court of Appeals, Seventh Circuit.

Argued Oct. 25, 1994.

Decided Dec. 30, 1994.

Stuart Smith (argued), Gordon & Glickson, Chicago, IL, for plaintiff-appellant.

Joseph J. Hasman, Ernest W. Irons, Sherri L. Giffin (argued), Peterson & Ross, Chicago, IL, for defendant-appellee.

Before CUDAHY, ESCHBACH, and EASTERBROOK, Circuit Judges.

ESCHBACH, Circuit Judge.

In this diversity action under Illinois law, Clarin Corporation ("Clarin") appeals the district court's grant of summary judgment in favor of Massachusetts General Life Insurance Company ("Massachusetts General"). Clarin sued Massachusetts General for breach of a policy of insurance after Massachusetts General terminated a life insurance policy for nonpayment of premium without sending notice to the named insured as required by Sec. 234(1) of the Illinois Insurance Code. The district court rejected Clarin's claim, ruling that notice to the owner was sufficient in this case, 842 F.Supp. 328. For the reasons below, we reverse and remand.

I.

On December 22, 1986, Clarin entered into a written employment agreement with Carl Hammond ("Hammond"). The Employment Agreement established a five-year term of employment, beginning in 1987 and ending in 1992, in which Hammond would receive a guaranteed fixed sum of money payable in equal amounts annually, or in a lump sum in the event Hammond died during the term of the Agreement. As part of the contract, Clarin agreed to purchase and help maintain an insurance policy on Hammond's life to ensure payment of the lump sum due if Hammond died within five years. Clarin agreed to use the proceeds of this policy to pay Hammond's beneficiaries the amount still due under the Employment Agreement. ¹

Pursuant to the Agreement, Clarin procured a policy of insurance on Hammond's life, first with Transamerica, and then with Massachusetts General. The policy named Hammond as the insured and Clarin as the owner and beneficiary. On the Massachusetts General policy application, question "8(a)" asked "To whom shall premium notices be mailed?" Three boxes were provided for an applicant to check in response to this question: "Proposed Insured," "Proposed Owner," or "Other." Jack E. Hoffman ("Hoffman"), the President of Clarin, instructed Massachusetts General's agent to send premium notices to the "Proposed Owner," i.e., Clarin. The record does not indicate whether Hammond was present when this choice was made. ² In any event, the application was marked accordingly and no further discussion took place as to the meaning or impact of this choice.

Clarin thus received all premium notices and assumed its responsibility of making the premium payments due on the policy of life insurance. Throughout the period of coverage, Clarin often failed to pay the premiums by the due date specified on the policy. Generally, though, Clarin made the payment within the sixty-one day grace period and pursuant to the conditions specified on the reverse side of Massachusetts General's Notice of Life Policy Lapse. In the beginning of April, 1991, Clarin received a Notice of Life Premium Due on April 26, 1991. The reverse side of the notice provided that if the premium was "not paid on or before the due date or within the policy grace period, the policy and all payments thereon become forfeited and void, except as provided by the policy's nonforfeiture provisions, if any, or by law." No notice was ever sent to Hammond. Clarin failed to make the payment due on April 26, 1991 and did not tender payment of the premium until June 28, 1991, sixty-three days later. Hammond died on July 9, 1991 and Massachusetts General denied Clarin's claim for the proceeds, informing it that the policy had been terminated for nonpayment of premium. Massachusetts General returned Clarin's last premium payment.

On December 26, 1991, Clarin brought this action seeking payment of the proceeds due under the insurance policy. It alleged that the policy could not have lapsed within six months after the failure to pay the premium, because Massachusetts General failed to comply with Sec. 234(1) of the Illinois Insurance Code, which requires notice to be sent to the named insured. Both parties moved for summary judgment. The district court initially referred this case to a magistrate judge, who recommended that neither side's motion be granted, in light of the factual disputes necessary to determine whether Hammond had waived his right to notice under the statute or designated Clarin as his agent for purposes of receiving notice. The district court, however, chose not to adopt the recommendation of the magistrate judge. It concluded that, in this case, notice to the owner of the policy was both necessary and sufficient under the statute to cause the policy to be forfeited and it therefore granted summary judgment in favor of Massachusetts General. Clarin filed a timely notice of appeal under 28 U.S.C. Sec. 1291.

II.

Generally, we review a grant of a motion for summary judgment de novo. Colip v. Clare, 26 F.3d 712, 714 (7th Cir.1994); Sivard v. Pulaski County, 17 F.3d 185, 188 (7th Cir.1994). Massachusetts General argues that in this case it is more appropriate to review the district court's order for clear error. In the context of motions for summary judgment, this court has limited its application of a clear error standard of review to cases in which "(1) the facts are undisputed, (2) the trial court is merely applying the law to the facts, and (3) the nonmoving party has made no request for a jury trial." Jurcev v. Central Community Hosp., 7 F.3d 618, 623 (7th Cir.1993). Given this formulation, clear error review is not appropriate here. Clarin made a demand for a jury trial when its complaint was first filed and that demand was not withdrawn. Massachusetts General asserts that this demand has been implicitly waived by Clarin's filing of its motion for summary judgment. However, Clarin's filing of a motion for summary judgment does not waive its right to a jury trial if the motion is denied. American Nat'l Bank and Trust Co. v. United States, 832 F.2d 1032, 1036 (7th Cir.1987); May v. Evansville-Vanderburgh School Corp., 787 F.2d 1105, 1115 (7th Cir.1986) (citing 10A Wright, Miller & Kane, Federal Practice & Procedure Sec. 2720 (2d ed. 1983)). Furthermore, this case does not involve the mere application of the law to a set of facts; rather, the district court primarily reached a legal conclusion without any significant examination of the facts at all. Thus, we will review this case de novo.

Clarin's principal argument on appeal is that notice was not provided to the named insured as required by Illinois law. ³ Under Sec. 234(1) of the Illinois insurance code, an insurance company must send written notice to the named insured informing him of the possibility of forfeiture or be barred from terminating the policy within six months after default: ⁴

No life company doing business in this State shall declare any policy forfeited or lapsed within six months after default in payment of any premium installment or interest or any portion thereof, nor shall any such policy be forfeited or lapsed by reason of nonpayment when due any premium, installment or interest, or any portion thereof, required by the terms of the policy to be paid, within six months from the default in payment of such premium, payment or interest, unless a written or printed notice stating the amount of such premium, installment, interest or portion thereof due on such policy, the place where it should be paid and the person to whom the same is payable, shall have been duly addressed and mailed with the required postage affixed, to the person whose life is insured, or the assignee of the policy, (if notice of assignment has been given to the company) at his last known post office address, at least fifteen days and not more than forty-five days prior to the day when the same is due and payable, before the beginning of the period of grace.... Such notice shall also state that unless such premium or other sums due shall be paid to the company or its agents the policy and all payments thereon will become forfeited and void....

215 ILCS 5/234(1) (West 1992). Thus, under the plain language of the statute, there is no provision for substituting notice to the owner of the policy for notice to the named insured where the owner and the named insured are different. Notice may be sent to the assignee of the policy, but it is not clear what constitutes an assignment under the statute.

As a federal court sitting in diversity, we look to the courts of Illinois for guidance in determining the meaning of a statute. United States v. Thirty-Seven Photographs, 402 U.S. 363, 369, 91 S.Ct. 1400, 1404-05, 28 L.Ed.2d 822 (1971); DeGrand v. Motors Ins. Corp., 903 F.2d 1100, 1103 (7th Cir.1990). Where the state supreme court has not ruled on an issue, decisions of intermediate state courts control unless there are persuasive indications that the highest state court would decide the issue differently. L.S. Heath & Son v. AT & T Information Sys., 9 F.3d 561, 574 (7th Cir.1993) (citing Hicks v. Feiock, 485 U.S. 624, 630 n. 3, 108 S.Ct. 1423, 1428 n. 3, 99 L.Ed.2d 721 (1988)). Illinois has established that "forfeiture of an insurance contract for nonpayment of premium is not favored in the law, and courts are prompt to seize upon circumstances which indicate a waiver of forfeiture." Cullotta v. Kemper Corp., 78 Ill.2d 25, 34 Ill.Dec. 306, 310, 397 N.E.2d 1372, 1376 (1979). "[E]ven in doubtful cases, courts should be quick to find facts supporting coverage." Bellmer v. Charter Sec. Life Ins. Co., 140 Ill.App.3d 752, 94 Ill.Dec. 945, 947, 488 N.E.2d 1338, 1340 (1986).

The district court concluded that the policy vested Clarin with the right to receive Sec. 234(1) notice based on the...