International Administrators, Inc. v. Life Ins. Co. of North America

Citation753 F.2d 1373
Decision Date24 January 1985
Docket NumberNo. 83-2102,83-2102
PartiesINTERNATIONAL ADMINISTRATORS, INC. and Sheldon Harrison, Plaintiffs-Appellants, v. LIFE INSURANCE COMPANY OF NORTH AMERICA, Defendant-Appellee.
CourtUnited States Courts of Appeals. United States Court of Appeals (7th Circuit)

Katrina Veerhusen, Kevin M. Forde, Ltd., Chicago, Ill., for plaintiffs-appellants.

William J. Holloway, Hinshaw, Culbertson, Moelmann, Hoban & Fuller, Chicago, Ill., for defendant-appellee.

Before CUMMINGS, Chief Judge, CUDAHY, Circuit Judge, and GORDON, Senior District Judge. *

CUDAHY, Circuit Judge.

International Administrators, Inc. ("IAI"), appeals from an order of the district court granting summary judgment to the Life Insurance Company of North America ("LINA") in an action brought by IAI on several tort claims and a contract claim. 564 F.Supp. 1247. IAI argues that various privileges the district court allowed LINA to invoke are not applicable here, and that the district court incorrectly applied the parol evidence rule to the contract claim. We affirm.


Beginning in 1976, IAI, an insurance broker, asked LINA, a Pennsylvania corporation, to underwrite various policies for the Iowa American Legion. 1 Premiums on the Iowa Legion policies were sent to IAI; IAI was to forward them to LINA within 45 days after the first day of the billing quarter. Beginning in June, 1980, and until March, 1981, IAI was, on average, 139 days late in remitting premiums on the various policies.

By mid-March of 1981 LINA had decided to bring its dealings with IAI to an end. Since under the terms of the various contracts the Iowa Legion was an IAI account, which LINA would presumably lose when dealings with IAI were terminated, LINA gave notice to officials of the Legion. LINA claims that it was concerned to give notice according to the terms of the policies, and that the policies required notice to be given thirty days before the anniversary date, the only permissible cancellation date. The district court found that, although there was some dispute on the issue, LINA's belief that May 1 was the anniversary date was reasonable and justified; this point is not contested on appeal.

On March 18, 1981, Sheldon Harrison, president of IAI, received an undated letter from LINA, which read:

Your account with [LINA] is considerably overdue. Our records indicate non-payment of premium for the [Iowa Legion] accounts as far back as September of 1980. In addition, much of this business was moved to other carriers without proper notification to us.

We must insist that all past due premiums be remitted to us immediately. If we do not receive a full accounting with the appropriate premiums by March 23, 1981, we shall begin legal action to collect these accounts.

Shortly afterwards, on March 19, LINA sent the letter to the Iowa Legion in which it declared its intention to cancel the insurance policies because of the late payment:

We regret to inform you that we have not received certain premiums on policies issued to the Iowa American Legion that were due as far back as September 1980. These premiums were collected by your broker, Mr. Sheldon Harrison of G & H Insurance Administrators, Inc., but have not been remitted to [LINA].

We must inform you that under these circumstances it is no longer possible for us to do business with Mr. Harrison. Since he is your appointed broker, we are in a position that forces us to terminate our relationship with your organization as long as he is your representative. We regret that this action is necessary and trust you can appreciate our situation.

Please accept this letter as intent to cancel Policy # AGL-270 on May 1, 1981. We will, of course, cooperate with you in every way and see that individual claims are handled properly. 2

Because of the March 19 letter the Iowa Legion, rather than permit its LINA policies to be cancelled, switched its business from IAI to one of three brokers whose names it had solicited from LINA.

IAI then sued, charging LINA with tortious interference with contractual relations and prospective advantage, with breach of contract and with defamation. 3 The district court granted LINA's summary judgment motion with respect to these counts, and IAI brought this appeal.


Because Illinois, alone among the states having contacts with this litigation, has a provision in its insurance code arguably immunizing LINA from liability for information conveyed in the letters of nonrenewal, there is a question of applicable law. IAI argues on appeal that Iowa law should apply.

Since the result we reach in this opinion is supported as well by the common law doctrine of conditional privilege, and since IAI has conceded that the law of Iowa does not differ from the law of Illinois on conditional privilege, application of Iowa law would not change the outcome. In that sense it is immaterial whether Illinois law or Iowa law is applied.

Nevertheless, on the record before us we are obliged to approve the district judge's choice of Illinois law. Neither party objected to that choice in the district court, and thus it is not open to us to reconsider that issue, absent some compelling reason of policy. 4

It is true that, when the Illinois immunity provision was first raised as a defense, IAI, although conceding the applicability of Illinois law, tried to avoid the effect of the provision by pointing out that under Illinois law the intent of the parties to an insurance contract decides what law will govern the interpretation of the contract, and that the parties to these contracts--LINA and the Iowa Legion--intended Iowa law to govern. If this litigation concerned the construction or validity of the insurance policies, and if the parties to this litigation were the same as the parties to the insurance policies, then Illinois courts would, other things being equal, apply the law provided for by the parties. Hofeld v. Nationwide Life Insurance Co., 59 Ill.2d 522, 322 N.E.2d 454, 458 (1975); RESTATEMENT (SECOND) OF CONFLICTS OF LAW Secs. 187, 192, 193; 6A CORBIN ON CONTRACTS Sec. 1446 (1962). As Corbin points out, this may not even rise to the status of applying foreign law:

In applying this tentatively suggested rule, the court would not even appear to be enforcing the 'laws' of another jurisdiction than its own; it is merely enforcing the contract as made by the parties in accordance with its own system of law.... In applying this rule the court of the forum would merely enforce its own law as to the making of contracts, recognizing and giving effect to bargains that parties are empowered by that law to make.

It was thus perfectly consistent for IAI to accept Illinois law as governing and yet appeal to Iowa law as the law of the contract.

The law of the contract is, however, irrelevant to the issues before us. The dispute is not over provisions of the contract, and is not between parties to the contract. Although parties may provide for their own future litigation, it is too much to suppose that they may bind others who are not parties or beneficiaries to that decision, and no court that we are aware of has ever so held. For all purposes relevant to the issues before us, IAI acquiesced in the decision of the trial court to apply Illinois law.

Where, with the acquiescence of both parties, the district court has applied Illinois law, it would be manifestly unfair and inappropriate, absent compelling reasons of policy, for this court to disapprove the decision to apply Illinois law. Bilancia v. General Motors Corp., 538 F.2d 621, 623 (4th Cir.1976); Wachs v. Winter, 569 F.Supp. 1438, 1443 (E.D.N.Y.1983). 5 We hold, therefore, that under Illinois choice of law rules Illinois substantive law governs in this case.


IAI's tort claims are based upon the March 19 letter to Iowa Legion officials. IAI claims to have been injured by this letter, and alleges tortious interference with IAI's contractual relationship with the Iowa Legion, and interference with prospective advantage. IAI also claims that this communication defamed Harrison and his corporation, G & H Insurance Administrators, Inc.

The issue whether or not a federal court should grant summary judgment in a diversity action is, of course, a question of federal law. General Accident, Fire & Life Assurance Corp. v. Akzona, Inc., 622 F.2d 90, 93-94 n. 5 (4th Cir.1980); Cohen v. Ayers, 596 F.2d 733, 743 n. 20 (7th Cir.1979). Under FED.R.CIV.P. 56, summary judgment is to be granted if the record, including pleadings, depositions and answers to interrogatories, admissions and affidavits, shows "that there is no genuine issue as to any material fact and that the moving party is entitled to a judgment as a matter of law." All factual inferences are to be taken against the moving party and in favor of the opposing party. Adickes v. S.H. Kress & Co., 398 U.S. 144, 157, 90 S.Ct. 1598, 1608, 26 L.Ed.2d 142 (1970).

In granting LINA's summary judgment motion, the district court found that LINA was insulated from liability on the tort claims by Illinois Insurance Code Sec. 143.18, 73 S.H.A. Sec. 755.18, and by the Illinois conditional privilege doctrine. 6

A. Statutory Immunity Under Section 143.18.

Section 143.18 of the Illinois Insurance Code provides:

Liability of company or agents regarding statements made in notices or information. There shall be no liability on the part of and no cause of action of any nature shall arise against any company, its authorized representative, its agents, its employees, or any firm, person or corporation furnishing to the company information as to reasons for cancellation, or nonrenewal, for any statement made by any of them in any written notice of cancellation or nonrenewal, or any other communications, oral or written, specifying the reasons for cancellation or nonrenewal, or for the providing of information pertaining thereto.

IAI does not argue that the district court left genuine issues of fact unresolved in holding that the...

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