Standard Ins. Co. v. Vanlanduit

• Decision Date: 29 July 2021
• Docket Number: 20 C 2084
• Citation: 551 F.Supp.3d 854
• Parties: STANDARD INSURANCE COMPANY, Plaintiff/Counter-Defendant, v. Justin VANLANDUIT, Defendant/Counter-Plaintiff.
• Court: U.S. District Court — Northern District of Illinois

551 F.Supp.3d 854

STANDARD INSURANCE COMPANY, Plaintiff/Counter-Defendant,

v.Justin VANLANDUIT, Defendant/Counter-Plaintiff.

20 C 2084

United States District Court, N.D. Illinois, Eastern Division.

Signed July 29, 2021

Jacqueline J. Herring, Smith von Schleicher & Associates, Chicago, IL, for Plaintiff/Counter-Defendant.

William T. Reynolds, IV, Mark D. DeBofsky, DeBofsky Sherman Casciari Reynolds, P.C., Chicago, IL, for Defendant/Counter-Plaintiff.

MEMORANDUM OPINION AND ORDER

Gary Feinerman, United States District Judge In this diversity suit against Justin VanLanduit, Standard Insurance Company seeks, alternatively, (1) a declaration that his disability income insurance policy is void ab initio due to his failure to satisfy conditions precedent to coverage, (2) rescission of the policy due to the misstatements he made in his policy application materials, or (3) a declaration that the policy does not cover his disability claim. Doc. 1. VanLanduit's counterclaims allege that Standard wrongfully denied him disability benefits and breached its duty of good faith and fair dealing. Doc. 13. On the parties’ joint motion, the court bifurcated Standard's claims from VanLanduit's counterclaims, ordering Standard's claims to proceed first. Doc. 26.

With discovery closed, the parties cross-move for summary judgment on Standard's claims. Docs. 31, 34. Standard's motion is denied, while VanLanduit's motion is granted as to Standard's void ab initio claim and denied as to its rescission and coverage claims.

Background

Because the parties cross-move for summary judgment, the court must consider the facts in the light most favorable to VanLanduit when considering Standard's motion and in the light most favorable to Standard when considering VanLanduit's motion. See First State Bank of Monticello v. Ohio Cas. Ins. Co. , 555 F.3d 564, 567 (7th Cir. 2009) ("[B]ecause the district court had cross-motions for summary judgment before it, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.") (internal quotation marks omitted). When a disputed fact relates to both motions, the court will set forth the parties’ respective positions on that fact. At this juncture, the court does not vouch for either side's version of the facts. See Gates v. Bd. of Educ. of Chi. , 916 F.3d 631, 633 (7th Cir. 2019).

A. VanLanduit's Application for a Disability Income Insurance Policy

On October 24, 2012, VanLanduit—then employed as a golf course superintendent—signed and submitted an application to obtain a disability income insurance policy from Standard. Doc. 38 at ¶ 3; Doc. 35-1 at 36-41. The application required VanLanduit to answer the following questions about his medical history:

1. In the last 10 years have you had, been told you had, been treated or seen by a medical practitioner for, or been diagnosed as having: ... Back or neck pain or disc problems; spinal sprain or strain; sciatica, arthritis, or carpal tunnel syndrome ; or any other disease, disorder or injury of the bones, joints, nerves or muscles?

2. Other than as stated in other answers, have you within the last 5 years: ... Been hospitalized or been seen by a physician, chiropractor, counselor, psychiatrist, therapist or other medical practitioner?

3. Other than as stated in other answers, have you within the last 5 years: ... Had an EKG or blood test; sleep study or other medical procedure, study or test?

4. Other than as stated in other answers, have you within the last 5 years: ... Been advised to have any medical test, surgery or hospitalization that was not completed?

5. In the last 3 years have you had any physical or mental condition or symptom that has not been treated or diagnosed?

Doc. 35-1 at 39-40; Doc. 38 at ¶¶ 4, 6-9. VanLanduit answered "no" to all but the first question. Doc. 35-1 at 39-40; Doc. 38 at ¶¶ 4-9. He answered the first question "yes," noting that he had a "strained muscle in [his] lower back" in June 2012 for which a physician, Dr. Brian Waxman, prescribed a pain killer for one week. Doc. 35-1 at 39; Doc. 38 at ¶¶ 4-5; Doc. 40 at p. 4, ¶ 14. In another part of the application, VanLanduit disclosed Dr. George Elvove as his primary care physician. Doc. 40 at p. 12, ¶ 30.

VanLanduit made several representations in signing the application, three of which are pertinent here. First, he agreed that if Standard issued him a disability income insurance policy, the application, along with any amendments and supplements, would "become part of the policy issued by Standard." Doc. 35-1 at 41; Doc. 38 at ¶ 10. Second, he acknowledged that "[n]o [i]nsurance will be in force until: (a) the date a policy has been issued, delivered to and accepted by the owner; and (b) the first full premium is paid while all answers in this application remain true and complete." Ibid. Third, he represented that "[a]ll answers in this application are true and complete and correctly recorded," and "that if any answers are false, [i]ncorrect or untrue, Standard may have the right to deny benefits or rescind [his] insurance policy." Ibid.

The following notice, which the court will call the "fraud notice," appears immediately above the signature line on VanLanduit's application: "NOTE: A person commits a fraudulent act when that person knowingly files an application for [i]nsurance which either contains materially false information or conceals material information with intent to mislead." Doc. 35-1 at 41; Doc. 38 at ¶ 11.

B. VanLanduit's Medical Evaluation and Testing for a Muscular Disorder

On December 12, 2012, while VanLanduit's application was pending with Standard, Dr. Anthony Romeo, an orthopedic surgeon, examined him for a shoulder abnormality first noticed by his physical therapist. Doc. 38 at ¶¶ 13-15; Doc. 40 at p. 5, ¶ 18. Dr. Romeo took x-rays of the shoulder region, and determined that VanLanduit's "limited facial muscle use" and "bilateral severe scapular winging"—a condition where the patient's shoulder blades protrude outward like a pair of angel wings—"raise[d] the concern" that he had facioscapulohumeral muscular dystrophy ("FSHD"), a genetic muscular disease. Doc. 38 at ¶ 14. Dr. Romeo "discussed [with VanLanduit] the possibility of him having a type of muscular dystrophy" and "instructed him that he need[ed] to have genetic testing in order to confirm the diagnosis." Ibid. Dr. Romeo referred him to a neurologist, Dr. Alexandru C. Barboi, for further evaluation. Id. at ¶ 16.

Dr. Barboi evaluated VanLanduit on December 20 and performed electromyography ("EMG") and nerve conduction study ("NCS") testing. Id. at ¶ 17; Doc. 40 at p. 6, ¶ 19. Based on results "show[ing] evidence for a chronic [muscular disorder ]" and the fact that VanLanduit presented with a "FSHD phenotype," Dr. Barboi "discussed [with him] disease, prognosis[,] and possible worsening over time." Id. at ¶ 23. As a next step, Dr. Barboi ordered a genetic diagnostic test for FSHD. Id. at ¶ 24. VanLanduit had blood drawn for that test on January 10, 2013. Id. at ¶ 25. On February 15, Dr. Barboi advised VanLanduit that the test showed a "borderline FSHD1 result, but given his phenotype this is likely significant." Id. at ¶ 27.

C. Standard's Investigation and Approval of VanLanduit's Application

In the meantime, as part of the underwriting process for VanLanduit's application, Standard requested and obtained medical records from Drs. Elvove and Waxman, the two physicians identified on the application. Doc. 40 at p. 13, ¶ 33. Dr. Waxman's records described the treatment VanLanduit sought for the lower back pain referenced in the application. Id. at pp. 4, 14, ¶¶ 14, 34. Dr. Elvove's records described treatment for pain in VanLanduit's right shoulder, which was not referenced in the application. Id. at pp. 14, 17, ¶¶ 35, 40. Standard did not obtain any records regarding the treatment VanLanduit received from Drs. Romeo and Barboi or their concern that he had FSHD. Doc. 38 at ¶ 47; Doc. 40 at p. 14, ¶ 34.

On December 27, 2012, after Dr. Barboi's evaluation but before VanLanduit had his blood drawn, Standard wrote to VanLanduit informing him that his application was "approved" with two modifications "based on information received during [the] underwriting process." Doc. 35-10 at 2; Doc. 40 at p. 15, ¶ 37. The modifications effected two coverage exclusions—one for disability caused by injury to, disease, or disorder of the lower back, and the other for disability caused by injury to, disease, or disorder of the right shoulder. Doc. 40 at pp. 16-17, ¶¶ 38-39. Standard explained the basis for the exclusions as follows: "The reason for our decision and source of information is: Medical records information received from Drs. Waxman and El[v]ove with treatment to the lower back and the right shoulder." Doc. 35-10 at 2; Doc. 38 at ¶ 49; Doc. 40 at p. 15, ¶ 37.

D. VanLanduit's Supplement and Amendment to His Application

On January 14, 2013, VanLanduit signed a "supplement" and an "amendment" to his policy application, each of which contained the fraud notice. Doc. 38 at pp. 11-14, ¶¶ 28-36; Doc. 35-1 at 46 (amendment); Doc. 35-1 at 48 (supplement). In signing the supplement, VanLanduit certified that he "underst[ood] and agree[d]" that:

1. I have read the questions and answers in the application for insurance (including any application supplement) which is attached to the policy and all answers recorded in the application are true and complete as of the date of the application. ...

2. Since the date of the application, I have not: (1) consulted with or been treated by a physician or other medical practitioner, other than to comply with Standard's underwriting requirements ; (2) experienced any sickness, injury or change in health; or (3) changed occupation or employer. I understand that if any of this information has changed since the date of the application, I should notify the sales producer of the change(s) and should not sign this form and not accept delivery of the policy.

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