Cooke v. Jackson Nat'l Life Ins. Co.

Decision Date20 March 2017
Docket NumberNo. 15 C 817,15 C 817
Parties Norma L. COOKE, Plaintiff, v. JACKSON NATIONAL LIFE INSURANCE COMPANY (successor to Southwestern Life Insurance Company and Reassure America Life Insurance Company), Defendant.
CourtU.S. District Court — Northern District of Illinois

Jeffrey Scott Marks, Busse, Busse & Grasse, P.C., Chicago, IL, Steven Bradley Pollack, Law Office of Steven B. Pollack, Lake Bluff, IL, for Plaintiff.

Alexander David Marks, Frederic A. Mendelsohn, Burke, Warren, MacKay & Serritella PC, Chicago, IL, for Defendant.

MEMORANDUM OPINION AND ORDER
Rubén Castillo, Chief Judge, United States District Court

Norma Cooke ("Plaintiff") brings this diversity action against Jackson National Life Insurance Company ("Jackson"), alleging that it breached her late husband's life insurance policy by denying benefits after he died during the grace period for a missed premium payment. Presently before the Court are the parties' cross-motions for summary judgment.1 (R. 42; R. 47.) For the reasons stated below, judgment is entered in favor of Plaintiff.

RELEVANT FACTS

The following facts are undisputed unless otherwise stated. Plaintiff is an Illinois citizen whose late husband, Charles Cooke ("Cooke"), took out a life insurance policy from Southwestern Life Insurance Company on July 28, 1998. (R. 52, Pl.'s Resp. to Facts ¶¶ 1, 5.) Jackson is a Michigan life insurance and annuity corporation and is the successor in interest to the policy.2 (Id. ¶¶ 2, 6.)

Cooke's policy had a death benefit of $200,000, naming Plaintiff as the beneficiary. (Id. ¶ 5; see also R. 37–1, Policy.) The policy had level premiums for a 15-year period, after which it could be renewed at a significantly higher premium rate. (R. 52, Pl.'s Resp. to Facts ¶¶ 14–16.) The Policy Data Page, which set forth the basic facts and terms of the policy such as its premium and coverage amount, notes that the premium frequency was to be quarterly.3 (R. 37–1, Policy at 9.) The policy also provided that Cooke could pay his premiums by "any other mode or method" with Jackson's consent. (R. 52, Pl.'s Resp. to Facts ¶ 9; see also R. 37–1, Policy at 17.) Shortly after taking out the policy, Cooke submitted a form titled, "Request for Payment of Premiums by the Automatic Bank Deduction Program" ("EFT application"), which provided Cooke's bank account information to allow him to pay his premium by monthly bank draft on the 28th of every month. (R. 52, Pl.'s Resp. to Facts ¶¶ 9–10; see also R. 37–1, Policy at 33.) The EFT application was not signed by any employee of the insurer, (R. 37–1, Policy at 33), but the parties do not dispute that Cooke made monthly payments with Jackson's consent for the first 15 years of the policy until it expired on July 28, 2013, (R. 52, Pl.'s Resp. to Facts ¶ 13). Over the life of the policy, Cooke completed two more EFT applications. (Id. ¶ 10.)

The policy provided that, at the end of the initial coverage term of 15 years, the policy could be renewed for subsequent one-year periods. On each such date, Jackson could adjust the premiums up to a maximum annual premium for each year as set forth on the Policy Data Page. The policy also stated that the first premium for a new term would be due at the end of the previous term and that "[p]remiums for the new term will be due and payable at the premium frequency shown on a Policy Data Page." (R. 37–1, Policy at 18.)

The renewal provision also stated that the policy would be renewed if the premium were paid within the grace period. (Id. ) The grace-period provision guaranteed Cooke a 31-day period "beginning on the due date to pay the premium due." (Id. ) The policy would remain in force during a grace period, and if Cooke died during a grace period the unpaid premium would be deducted from the policy's proceeds. (Id. ) By the same token, if a premium that was not paid "on or before its due date" were also not paid before the end of the grace period, the policy would be terminated. (Id. )

On May 30, 2013, Jackson issued a letter to Cooke, titled "IMPORTANT NOTICE—PREMIUM CHANGE," informing Cooke that his premium would increase beginning July 28, 2013: "Your new premium of $2,835.85 will be billed at the same frequency or mode as your current premium. This is your new modal premium amount." (R. 37–2, May 30 Letter at 1.) On or about July 28, 2013, Jackson attempted to automatically withdraw the $2,835.85 payment from Cooke's bank account, but the withdrawal failed for a lack of sufficient funds. (R. 52, Pl.'s Resp. to Facts ¶ 26.) This failed withdrawal triggered a 31-day grace period, which would expire on August 28, 2013, during which Cooke was required to pay the overdue premium or the policy would lapse. (Id. ¶ 29.) Jackson notified Cooke of his account deficiency in a letter dated August 9, 2013. (R. 37–3, Aug. 9 Letter at 1.) The letter informed Cooke that the policy would "terminate if the renewal premium [was] not received by the last day of the grace period." (Id. ) The letter also notified Cooke that his billing had been changed to direct, rather than automatic withdrawal. (Id. )

On August 15, 2013, Jackson sent Cooke a payment notice demanding a quarterly premium of $8,637.94. (R. 37–4, Aug. 15 Letter at 1.) The notice listed the due date for this quarterly premium as July 28, 2013. (Id. ) The August 15 notice also stated that "[p]ayment must be received by the due date shown above or your policy will enter its grace period and will terminate if the renewal premium is not received by the last day of the grace period." (Id. )

Cooke failed to make any payments before August 28, 2013. (R. 52, Pl.'s Resp. to Facts ¶ 36.) On September 10, 2013, Cooke passed away. (Id. ¶ 39.) On September 12, 2013, Plaintiff, without informing Jackson that her husband had passed away, mailed the demanded quarterly premium to Jackson, which Jackson received the next day. (Id. ¶ 41.) Because Jackson had not yet processed Plaintiff's check, it issued a notice of policy termination on September 16, 2013, which stated that Jackson would reinstate the policy if all past premiums were paid within 61 days of the defaulted premium, provided that Cooke was still alive when the premiums were received. (R. 54, Def.'s Resp. to Facts ¶ 36; see also R. 37–6, Sept. 16 Letter at 1.) When Jackson processed the quarterly payment, it reinstated the policy. (R. 52, Pl.'s Resp to Facts ¶ 42.) After Plaintiff notified Jackson of Cooke's death and submitted a claim on September 20, 2013, Jackson issued a letter on October 23, 2013, denying her claim because the premium was not paid during Cooke's lifetime and the policy was thus not eligible for reinstatement. (Id. ¶¶ 43–44.)

PROCEDURAL HISTORY

Plaintiff filed her breach-of-contract complaint on January 27, 2015. (R. 1, Compl.) Plaintiff alleged that Jackson breached the insurance contract in various ways, that its mid-grace-period request for a higher premium payment modified the contract, that Jackson waived its right to demand quarterly payments, and that Jackson was estopped from requiring a quarterly payment because Plaintiff reasonably relied on its earlier representations that she would have 31 days to pay the monthly amount required to reinstate the policy. (Id. ¶¶ 28–61.) Jackson answered on March 24, 2015. (R. 10, Answer.)

Plaintiff filed a motion for judgment on the pleadings on July 2, 2015. (R. 18, Motion.) On March 15, 2016, this Court entered a memorandum opinion and order denying Plaintiff's motion, in large part because Jackson denied that the entire policy was before this Court and claimed that additional contracts that were part of the policy allowed Cooke to pay monthly subject to specific terms and conditions.4

(See id. at 10–11, 13.) Jackson argued that "additional contractual terms and documents, including, but not limited to, the Additional Contract, were not attached to the Complaint ... and contain additional applicable terms, including as to the premium ‘due’ upon default of a monthly installment payment." (R. 24, Resp. at 6.)

On April 25, 2016, Plaintiff filed her first amended complaint, abandoning her waiver and estoppel counts and proceeding on one count of breach of contract and one count of vexatious and unreasonable conduct. (R. 37, First Am. Compl.) Plaintiff alleges that, by demanding a quarterly premium 18 days into the 31-day grace period, Jackson was required to provide a new 31-day grace period and that its failure to pay benefits when Cooke died during this second grace period constitutes a breach of the policy. (Id. ¶¶ 28–42.) Plaintiff also alleges that Jackson's conduct was vexatious and unreasonable in a variety of ways under the Illinois Insurance Code, 215 ILL. COMP. STAT. 5/155. (Id. ¶¶ 43–53.) Jackson answered on May 16, 2016. (R. 38, Answer.) Discovery has now closed, and the parties each move for summary judgment in their favor. (R. 42, Def.'s Mot.; R. 47, Pl.'s Mot.)

In support of its motion, Jackson argues that it never breached the policy by terminating it for failure to pay the premium. Jackson argues generally that a quarterly premium was due from the beginning, by the terms of the policy, and so it was not required to provide a second grace period when it demanded that quarterly premium after Cooke's default. (R. 43, Def.'s Mem. at 9–14.) Jackson refers to the Policy Data Page, which lists the premium frequency as quarterly, and argues that Cooke was only able to pay monthly installments toward that quarterly premium by virtue of the EFT contracts. (Id. at 9–10.) Because the policy states that "[p]remiums for the new term will be due and payable at the premium frequency shown on a Policy Data Page" and "at the end of the previous term," (R. 37–1, Policy at 18), Jackson concludes that the quarterly premium was due on July 28, 2013, notwithstanding its voluntary agreement to allow Cooke to pay monthly installments toward that quarterly premium. (R. 43, Def.'s Mem. at 9–10.) Jackson also argues that neither its letters...

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