Schaffert by Schaffert v. Jackson Nat. Life Ins. Co.

Decision Date05 November 1997
Docket NumberNo. 45A03-9701-CV-30,45A03-9701-CV-30
Citation687 N.E.2d 230
PartiesEmily SCHAFFERT and Nathan Schaffert, by their next Friend, Deena SCHAFFERT, Appellants-Plaintiffs, v. JACKSON NATIONAL LIFE INSURANCE COMPANY, Appellee-Defendant.
CourtIndiana Appellate Court


Deena Schaffert on behalf of her children (collectively "Schafferts"), appeals the trial court's grant of summary judgment in favor of Jackson National Life Insurance Co. ("Jackson National"), claiming that the trial court erred by choosing to apply Illinois' substantive law.

We affirm.


The Schafferts' claim against Jackson National involves their attempt to collect, as beneficiaries, proceeds from a life insurance policy that their father, Dr. Paul Schaffert, ("Dr. Schaffert") had applied for with Jackson National. Dr. Schaffert, along with his family, resided in Flossmoor, Illinois, but maintained a medical office in Crown Point, Indiana. Dr. Schaffert first discussed the possibility of purchasing a life insurance policy from Karen Patterson ("Patterson"), an independent insurance agent, in 1991, when Patterson accompanied her husband during his visit to Dr. Schaffert's Crown Point office. Patterson was licensed to do business in both Illinois and Indiana with her place of business in Lansing, Illinois. Over the next two years, Dr. Schaffert and Patterson discussed possible life insurance policies. Several of these discussions occurred when Patterson returned to Dr. Schaffert's Indiana office with her husband. Patterson also mailed proposals from her Illinois office to Dr. Schaffert at his Indiana Office.

Finally, in June of 1993, Dr. Schaffert informed Patterson that he had decided on a $500,000 policy from Jackson National. When Patterson then sent Dr. Schaffert an application for the life insurance policy, Dr. Schaffert knew that he was required to submit to a physical before Jackson National would approve the application. On July 29, 1993, Dr. Schaffert completed the application and mailed it, along with the first premium check, to Patterson at her Illinois office. Patterson, upon receiving the application, countersigned it and mailed Dr. Schaffert an interim receipt. This interim receipt did not contain a choice of law provision.

On August 13, 1993, Timothy Hall, the paramedical examiner assigned to examine Dr. Schaffert, spoke with Dr. Schaffert to set up an examination and was informed by Dr. Schaffert that he would not be available until after August 30th. Sadly, Dr. Schaffert was killed in an automobile accident on August 29, 1993, before he was able to undergo the examination. On September 7, 1993, Jackson National, unaware that Dr. Schaffert had died, made a note in Dr. Schaffert's file that if the results of the examination were not received by September 21st, the file would be closed. Five days later, on September 12th, Jackson National, having learned of his death, denied Dr. Schaffert's application and refunded his premium.

The Schafferts filed suit against Jackson National on May 4, 1994, in Indiana, to recover the life insurance proceeds that Jackson National refused to pay. One year later, on May 5, 1995, the Schaffert's filed a motion for summary judgment, arguing that Indiana's law was the appropriate choice of law and that under Indiana law, a valid life insurance contract had been formed. Jackson National responded with a cross-motion for summary judgment on June 12, 1995, arguing that Illinois law was the appropriate choice of law and that under Illinois law no life insurance contract had been formed. On June 13, 1996, the trial court held a hearing on the parties' motions and on July 26, 1996, entered its order. In its order, the trial court granted Jackson National's cross-motion for summary judgment, concluding that under the "most intimate contacts" test and the "last act" test, Illinois law was the appropriate choice of law. The trial court then stated that under Illinois law the physical was a condition precedent which had not been met by Dr. Schaffert and, therefore, there was no insurance policy in effect. The Schafferts appeal this order.


The Schafferts raise two issues on appeal which we restate as:

I. Whether the trial court erred by determining that Illinois law was the appropriate choice of law.

II. Whether the trial court should have declined to apply Illinois law because it violated Indiana's public policy.


When reviewing a trial court's grant or denial of summary judgment, we stand in the shoes of the trial court. Fifth Third Bank v. Bentonville Farm Supply, 629 N.E.2d 1246, 1248 (Ind.Ct.App.1994), reh'g denied, trans. denied. Summary judgment is only appropriate when "the designated evidentiary matter 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." IND.TRIAL RULE 56(C). "Cross motions for summary judgment on the same issues do not alter the standard for granting summary judgment." Fifth Third Bank, 629 N.E.2d at 1248. Here the issue is whether the correct law was applied.

The Schafferts argue that the appropriate choice of law is Indiana's law because the purchase of the policy was negotiated in Indiana and because Dr. Schaffert completed and sent the application from his Indiana office. In contrast, Jackson National, focusing on the domicil of Dr. Schaffert, his family, and Patterson's place of business, argues that the trial court correctly ruled that Illinois law was the appropriate choice of law. In the present case, the choice of law is dispositive to the parties' claims. Under Illinois law, the medical examination Dr. Schaffert was required to undergo is considered a condition precedent which must be met before the life insurance policy takes effect. Garde v. American Family Life Ins. Co., 147 Ill.App.3d 1034, 101 Ill.Dec. 110, 113, 498 N.E.2d 292, 295 (1986). Because Dr. Schaffert failed to undergo the examination, under Illinois law, the life insurance policy did not take effect and the Schafferts are not entitled to any death benefits. Id. Unlike Illinois law, under Indiana law the Schafferts would be entitled to recover benefits based on the life insurance policy. Kaiser v. National Farmers Union Life Ins. Co., 167 Ind.App. 619, 339 N.E.2d 599, 601 (1976). Indiana law interprets conditional receipts, like the one Dr. Schaffert received, "as creating a temporary or interim contract for insurance subject to a condition subsequent--rejection of the application by the company. Where rejection does not occur, in the case of life insurance, prior to the death of the applicant, the company is liable for the stated amount of proceeds." Id. Dr. Schaffert died before he had been notified that his application had been rejected and, therefore, under Indiana law the Schafferts may recover death benefits under the life insurance policy.

When faced with a choice of law question, the decision is made by the courts of the state in which the suit is pending. Hubbard Mfg. Co., Inc. v. Greeson, 515 N.E.2d 1071, 1073 (Ind.1987). Indiana's choice of law rule for contract actions is the "most intimate contacts" test. 1 Eby v. York- Division, Borg-Warner, 455 N.E.2d 623, 626 (Ind.Ct.App.1983); Suyemasa v. Myers, 420 N.E.2d 1334, 1344 (Ind.Ct.App.1981); Dohm & Nelke v. Wilson Foods Corp., 531 N.E.2d 512, 513 (Ind.Ct.App.1988). "As formulated by our supreme court, the rule has been succinctly stated as follows: 'The court will consider all acts of the parties touching the transaction in relation to the several states involved and will apply as the law governing the transaction the law of that state with which the facts are in most intimate contact.' " Eby, 455 N.E.2d at 626 (quoting W.H. Barber Co. v. Hughes, 223 Ind. 570, 63 N.E.2d 417, 423 (1945)). Quoting the Restatement (Second) of Conflict of Laws § 188, the Eby court listed the factors to be considered in this test as: (1) the place of contracting, (2) the place of negotiation, (3) the place of performance, (4) the location of the subject matter of the contract, and (5) the domicil, residence, nationality, place of incorporation and place of business of the parties. Id. This test and these factors apply to actions based upon insurance contracts. See Travelers Ins. Companies v. Rogers, 579 N.E.2d 1328 (Ind.Ct.App.1991).

Applying the factors set forth in Eby, we first look to the place of contracting. In this case, this factor does not aid our inquiry because it is precisely the issue which we must first determine the applicable law in order to decide. To determine whether a contract was legally formed, we must apply either the law of Indiana or Illinois. Because we must apply the substantive law of one of the two states to decide where the place of contracting is, and we need to know the place of contracting to decide which state's substantive law to apply, we are caught in a "catch-22." This first factor is therefore inapplicable. The facts do reveal that the place of negotiation, the second factor, was Indiana. All of the...

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