Crichton v. Golden Rule Ins. Co.

• Decision Date: 13 June 2005
• Docket Number: No. 5-03-0637.,5-03-0637.
• Citation: 832 N.E.2d 843
• Parties: John H. CRICHTON, Jr., on Behalf of Himself and All Others Similarly Situated, Plaintiff-Appellant, v. GOLDEN RULE INSURANCE COMPANY, Defendant (Federation of American Consumers and Travelers, Defendant-Appellee).
• Court: Illinois Supreme Court

832 N.E.2d 843

John H. CRICHTON, Jr., on Behalf of Himself and All Others Similarly Situated, Plaintiff-Appellant, v. GOLDEN RULE INSURANCE COMPANY, Defendant (Federation of American Consumers and Travelers, Defendant-Appellee).

No. 5-03-0637.

Appellate Court of Illinois, Fifth District.

June 13, 2005.

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Daniel E. Bacine, Sheldon L. Albert, Leslie Bornstein Molder, Barrack, Rodos & Bacine, Philadelphia, PA; Myron M. Cherry, Daniel J. Becka, Chicago, IL; Bradley M. Lakin, Thomas M. Maag, The Lakin Law Firm, Wood River, IL; Jason Adkins, John Zavez, Adkins, Kelston & Zavez, P.C., Boston, MA, for Appellant.

William J. Knapp, Elizabeth A. Bradley, Knapp, Ohl & Green, Edwardsville, IL, for Appellee FACT.

Troy A. Bozarth, Regina L.L. Wells, Burroughs, Hepler, Broom, MacDonald, Hebrank & True, Edwardsville, IL, for Appellee Golden Rule Insurance Co.

Justice HOPKINS delivered the opinion of the court:

The plaintiff, John H. Crichton, Jr., on behalf of himself and all others similarly situated, appeals the circuit court's order entering a summary judgment in favor of defendant Federation of American Consumers and Travelers (FACT) on the plaintiff's Illinois Consumer Fraud and Deceptive Business Practices Act (Act) (815 ILCS 505/1 et seq. (West 2002)) and breach of fiduciary duty claims. On appeal, the plaintiff also argues that the circuit court erred in refusing to permit him to acquire from FACT additional discovery pursuant to Supreme Court Rule 191(b) (145 Ill.2d R. 191(b)). Defendant Golden Rule Insurance Company (Golden Rule) is not a party to this appeal. We affirm.

FACTS

On January 30, 2002, the plaintiff filed his complaint against Golden Rule, alleging that Golden Rule had violated the Act because, contrary to the principle underlying group insurance, Golden Rule periodically discontinued the marketing to and enrollment of eligible individuals, a practice called "closing a block" of insurance, which increased its insurance renewal premiums.

On November 13, 2002, the plaintiff filed a motion for leave to file a first amended complaint to add FACT as a defendant. On November 21, 2002, the court granted the plaintiff's motion. On December 9, 2002, the plaintiff filed an amended complaint against FACT for violating the Act and for breaching its fiduciary duty in connection with the marketing and sale of Golden Rule's health insurance. The plaintiff alleged that, as a member of FACT, he held an insurance certificate issued by Golden Rule. The plaintiff alleged that Golden Rule and FACT falsely marketed the health insurance as group insurance despite Golden Rule's practice of closing blocks of insurance and causing the insurance to become increasingly expensive. The plaintiff alleged that Golden Rule and FACT concealed from the plaintiff and members of the class the rate consequences of Golden Rule's routine practice of closing blocks of insurance and replacing low, new-issue premium rates with much higher, permanent premium rates. The plaintiff also alleged that FACT owed a fiduciary duty to its members who purchased Golden Rule health insurance pursuant to the master insurance policies issued to FACT by Golden Rule and that FACT breached its fiduciary duty by participating in the deceptive marketing practices.

On February 14, 2003, Golden Rule filed its answer to the plaintiff's amended complaint. Golden Rule admitted, among other things, that (1) purchasers of its association group health insurance were required to become members of FACT to purchase the insurance, (2) one of the benefits FACT provided to its members was access to health insurance underwritten by Golden Rule that was marketed as group insurance, (3) FACT's website contained a link to Golden Rule's website and informed viewers that they could learn more about the health insurance plans available to FACT members by connecting to Golden Rule's website, and (4) since the early 1990s, Golden Rule notified FACT when it implemented a standard premium rate increase on a FACT master group policy.

In its answer, Golden Rule also admitted that it did not actively market a given association group health insurance policy to additional, eligible FACT members and that it periodically discontinued the marketing to and enrollment of otherwise eligible individuals in an existing pool of association group health insurance, a practice sometimes referred to as "closing a block" of insurance. Golden Rule admitted that when an insurer of medically underwritten coverage closes a block of insurance, the anticipated health status of the existing pool of insureds erodes due to, inter alia, the effects of natural aging and the attrition of members of the pool and that, therefore, as the insureds in a closed block aged, the premiums increased. Golden Rule admitted that the renewal rates for its association group health insurance were typically higher than the initial rates.

In its answer, Golden Rule asserted, as an affirmative defense, that the plaintiff's claim was barred by the statute of limitations and/or the doctrine of laches (see 815 ILCS 505/10a(e) (West 2002)) because the plaintiff's premiums with Golden Rule first increased in October 1996 but the plaintiff failed to file his complaint until February 14, 2002.¹

On June 24, 2003, FACT filed its motion for a summary judgment, together with attachments and exhibits. FACT attached to its motion for a summary judgment literature indicating as follows: "[FACT] is a not-for-profit association, formed in 1984 to help the value-conscious consumer receive information and benefits which he or she might find difficult (if not impossible!) to obtain alone." FACT attached documents from its website, which stated that FACT is "supported solely by member dues" (emphasis in original) of $3 per month, that FACT "does NOT accept commissions or compensation of any kind for recommending any product, service[,] or other benefit," and that FACT "provides an ever-improving menu of benefits, discounts, information[,] and resources for its members," including the opportunity to utilize various services and plans, such as continuing education scholarships, travel services and discounts, consumer information, disaster relief, and health insurance.

FACT's website also stated as follows:

"Skyrocketing health care costs have made it essential for almost all of us to own a solid medical plan, underwritten by a reputable carrier. * * *

If you want to know more about the Health Insurance Plans available to FACT members, you may link directly to Golden Rule Insurance Company."

FACT also attached to its motion for a summary judgment the affidavit of Vicki Rolens, FACT's managing director since 1999, which stated, in pertinent part, as follows:

"3. FACT is a small, not-for-profit association * * *. It was formed in 1984, primarily for the purpose of providing travel services and various buying advantages, approximately six years before it began offering its members the opportunity to obtain association group health insurance from Golden Rule * * *. * * *

4. FACT is not an insurer, and none of its directors or administrators have any actuarial training or experience. In addition, none of its directors or administrators have ever worked for an insurance company or been educated in any matters relating to the business of providing health insurance[.]

5. To facilitate Golden Rule's provision of association group health insurance to FACT members, FACT entered into a number of `group master policies' with Golden Rule, pursuant to which eligible individuals—i.e., certain FACT members—may purchase a certificate of insurance from Golden Rule. Golden Rule periodically sends correspondence to FACT apprising the association that it intends to implement a rate increase on one or more of the master policies between Golden Rule and FACT. Golden Rule * * * notifies FACT of certain premium increases that will apply across-the-board to insureds who hold certificates issued pursuant to a particular FACT master policy.

6. Golden Rule does not provide FACT with any information concerning the manner in which, or methodology by which, Golden Rule determines its premium increases. Thus, FACT has no knowledge regarding Golden Rule's practices or methods for calculating renewal premiums. Moreover, FACT has no knowledge of, or control over, Golden Rule's decision-making process regarding when to `close' a block of insurance. * * *

7. Before being joined in this action, FACT complied with a subpoena from plaintiff by producing to counsel for plaintiff * * * and Golden Rule * * * all of the documents in its possession, custody[,] and control that are relevant to its arrangement with Golden Rule. I am not aware of any other relevant documents in the possession of FACT."

FACT also attached to its motion for a summary judgment the May 29, 1990, agreement between Golden Rule and FACT, which provided, in pertinent part, as follows:

"WHEREAS, [Golden Rule] would like to market health and life insurance products to present and future members of [FACT]; and

WHEREAS, [FACT] would like its members to be eligible for life and health insurance on a group basis through the association;

* * * [Golden Rule and FACT] agree to the following terms and conditions.

* * *

2. Life and health insurance products marketed to members of [FACT] * * * must have the prior written approval of the Insurance Advisory Board of [FACT]. * * *

* * *

8. For those persons who are insured under a [FACT] Plan, [Golden Rule] will act as a conduit for [FACT] applications and will allow payment of [FACT] dues along with the insurance premium.

* * *

11. [FACT] will receive no compensation from [Golden Rule].

* * *

24. Nothing contained herein shall be construed to create the relation of employer and employee between [Golden Rule] and [FACT]. It is agreed and acknowledged between the parties that neither [FACT] nor [Golden Rule] is a...