Lawhon-Davis v. Reassure Am. Life Ins. Co.

Decision Date08 December 2015
Docket NumberNo. 12 C 182,12 C 182
CourtU.S. District Court — Northern District of Illinois

Judge Sara L. Ellis


In her latest attempt to recover benefits from her husband's life insurance policy dating back to 2001, Plaintiff Valerie Lawhon-Davis filed this suit against Reassure America Life Insurance Company ("Reassure").1 In a previous suit filed in state court, the Illinois Appellate Court found that Reassure could not rescind the policy based on alleged misrepresentations that Lawhon-Davis' husband made in the insurance application. Her complaint includes claims for breach of contract, fraud, violation of the Illinois Consumer Fraud and Deceptive Business Practices Act ("ICFA"), bad faith, negligent misrepresentation, unjust enrichment, and declaratory judgment.2 The parties have filed cross-motions for summary judgment [75, 79]; although the motions are not dispositive of Lawhon-Davis' entire complaint.3 Because theIllinois Appellate Court rendered a final judgment and the remaining elements of collateral estoppel are met, Reassure's motion for summary judgment is denied and Lawhon-Davis prevails on her breach of contract claim. Additionally, because Reassure has no legal basis to continue to contest the policy in this litigation after the Illinois Appellate Court's decision, Lawhon-Davis is entitled to section 155 damages. But Lawhon-Davis' motion is denied with respect to her fraud and ICFA claims because she has not properly supported that request with evidence or legal argument.


Reassure, which was at the time known as the Midland Insurance Company,4 entered into an agreement with Bank One Bank in May 1996 to provide group life insurance to Bank One Bank customers. One of those customers was Marion Davis, who applied for life insurance under the Reassure group policy on May 10, 1999. In filling out the customer enrollment form, he indicated that he had not smoked cigarettes within the previous twelve months. By signing, Davis acknowledged "understand[ing] that the rates for the insurance applied for are based on [his] smoking habits." Doc. 77-2 at 9. He also acknowledged that "[i]f [he] misstate[d] these habits, the insurance may be voidable by [Reassure]." Id. On June 15, 1999, Reassure then issued Davis a certificate of group insurance (number T16-2100871) under Group Insurance Policy 96-0001 (the "Group Policy") for $50,000 (collectively, the "policy"). Davis designated Lawhon-Davis as the beneficiary of the coverage. Both the certificate and the Group Policy state the following regarding the incontestability of life insurance:

Except for fraud, no statement made by an Insured Person will be used to contest the validity of that Insured Person's insurance after his or her insurance has been in force prior to the contest for a period of two years during his or her lifetime; nor unless it iscontained in a written instrument signed by the Insured Person making the statement.

Doc. 77-1 at 6; Doc. 77-2 at 5.

Davis died on May 2, 2001, less than two years after the effective date of the policy. Lawhon-Davis made a timely claim for benefits. On December 4, 2001, Reassure denied Lawhon-Davis' claim, taking the position that Davis misrepresented his smoking habits, which denied Reassure the opportunity to properly evaluate his application and thus required the policy's rescission. The letter enclosed a check refunding all premiums that Davis had paid, including interest, and stated that cashing the check constituted acceptance of the rescission.

Instead of accepting rescission, Lawhon-Davis, acting through counsel, demanded payment under the policy on April 17, 2002. Lawhon-Davis argued that the policy's incontestability provision precluded Reassure from contesting the policy's validity. Reassure responded on August 8, 2002, again denying Lawhon-Davis' claim and reiterating the conclusions reached in Reassure's December 4, 2001 denial letter.

On April 18, 2003, Lawhon-Davis filed suit against Reassure in state court, seeking to enforce the policy. Reassure answered the complaint on May 28, 2003, asserting misrepresentation as an affirmative defense and pursuing a counterclaim for rescission. Lawhon-Davis ultimately dropped her affirmative claim, and the case proceeded to trial on Reassure's counter-claim for rescission. The trial court entered judgment in Reassure's favor, rescinding the policy. The Illinois Appellate Court reversed in an order issued June 3, 2008. Reassure's petition for leave to appeal to the Illinois Supreme Court was denied on September 24, 2008. The Illinois Appellate Court assessed the cost of the appeal ($975.05) against Reassure on July 25, 2008. To date, Reassure has not paid Lawhon-Davis any amount.

Lawhon-Davis filed this action on December 5, 2011 in state court. Reassure removed the case to this Court on the basis of diversity jurisdiction.


Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. To determine whether a genuine issue of fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P. 56 & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S. Ct. 2548, 91 L. Ed. 2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to identify specific material facts that demonstrate a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S. Ct. 2505, 91 L. Ed. 2d 202 (1986). The same standard applies when considering cross-motions for summary judgment. Int'l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). Therefore, when considering Lawhon-Davis' motion for partial summary judgment, the Court views all evidence in the light most favorable to Reassure, and when considering Reassure's motion, the Court views all evidence in the light most favorable to Lawhon-Davis. Id.

I. Effect of the Illinois Appellate Court's Ruling

The parties contest whether the Illinois Appellate Court's opinion, which reversed the trial court's decision on Reassure's counterclaim for rescission and found that the policy was not contestable at the time Reassure sought rescission, has any preclusive effect in this litigation. Reassure's entire motion for summary judgment is premised on the argument that the Illinois Appellate Court opinion has no preclusive effect.

The Court applies Illinois preclusion principles because the Illinois state court rendered the order to which Lawhon-Davis seeks to give preclusive effect. See 28 U.S.C. § 1738; Chicago Title Land Trust Co. v. Potash Corp. of Saskatchewan Sales Ltd., 664 F.3d 1075, 1079 (7th Cir. 2011). Although the parties discuss both res judicata and collateral estoppel interchangeably, only collateral estoppel is relevant here because the same cause of action decided in the state court case (rescission) is not asserted here. Collateral estoppel applies if (1) the issue decided in the prior action is identical to that presented in this action, (2) there was a final judgment on the merits in the prior action, and (3) the party against whom estoppel is asserted was a party or privy to the prior action. In re A.W., 896 N.E.2d 316, 321, 231 Ill. 2d 92, 324 Ill. Dec. 530 (2008). Reassure argues that Lawhon-Davis cannot take advantage of collateral estoppel because there was no final judgment in the state court action.

"A judgment is final if it determines the litigation on the merits so that if affirmed the only thing remaining is to proceed with the execution on the judgment." Relph v. Bd. of Educ. of DePue Unit Sch. Dist. No. 103 of Bureau County, 420 N.E.2d 147, 149, 84 Ill. 2d 436, 50 Ill. Dec. 830 (1981). Here, the Illinois Appellate Court reversed the circuit court's decision, without an accompanying order remanding the case to the circuit court. This means that the IllinoisAppellate Court judgment was final and no further proceedings were required or possible in circuit court.5 Glens of Hanover Condo. Ass'n v. Carbide, 6 N.E.3d 856, 857-58, 2014 IL App (2d) 130432, 379 Ill. Dec. 528 (2014) (Illinois Supreme Court Rule 369(b) provides that the trial court does not have jurisdiction over a case that is reversed without a remand); Dalan/Jupiter, Inc. ex rel. JRC Midway Marketplace, L.P. v. Draper & Kramer, Inc., 865 N.E.2d 442, 448, 372 Ill. App. 3d 362, 310 Ill. Dec. 118 (2007) ("[W]here a judgment is reversed with no order remanding the case, 'it cannot be reinstated in the court which entered the judgment from which the appeal was taken * * *.' In other words, following a reversal without remand, the trial court is not revested with jurisdiction over the case." (omission in original) (quoting Watkins v. Dunbar, 149 N.E. 14, 15, 318 Ill. 174 (1925)). The present state court case is thus distinguishable from Relph, where the appellate court reversed and remanded the case to the circuit court with directions, leaving the circuit court to enter judgment that conformed to the appellate court's opinion. 420 N.E.2d at 149; see also PSL Realty Co. v. Granite Inv. Co., 427 N.E.2d 563, 570, ...

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