Swanberg v. Mutual Ben. Life Ins. Co.

• Decision Date: 07 December 1979
• Docket Number: No. 79-40,79-40
• Citation: 34 Ill.Dec. 624,398 N.E.2d 299,79 Ill.App.3d 81
• Parties: , 34 Ill.Dec. 624 Ravenna C. SWANBERG, Administrator of the Estate of Alfred A. Swanberg, Deceased, Plaintiff-Appellee, v. The MUTUAL BENEFIT LIFE INSURANCE COMPANY, Defendant-Appellant.
• Court: United States Appellate Court of Illinois

Page 299

398 N.E.2d 299

79 Ill.App.3d 81, 34 Ill.Dec. 624

Ravenna C. SWANBERG, Administrator of the Estate of Alfred A. Swanberg, Deceased, Plaintiff-Appellee, v. The MUTUAL BENEFIT LIFE INSURANCE COMPANY, Defendant-Appellant.

No. 79-40.

Appellate Court of Illinois, First District, Fifth Division.

Dec. 7, 1979.

Peterson, Ross, Schloerb & Seidel, Chicago (Joseph J. Hasman and Ernest W. Irons, Chicago, of counsel), for defendant-appellant.

William P. Butcher, Homewood, for plaintiff-appellee.

MEJDA, Justice:

Plaintiff, the administrator of the estate of decedent, Alfred A. Swanberg, brought this action against the Mutual Benefit Life Insurance Company (Mutual), alleging that Mutual had violated Section 367.1 of The Illinois Insurance Code (Ill.Rev.Stat.1975, ch. 73, par. 979.1) by failing to provide a continuation of group insurance benefits to Swanberg and by failing to notify him of his right to keep the health and accident insurance policy in effect after the termination of his employment. Both parties filed motions for summary judgment and judgment was entered in favor of plaintiff. On appeal, Mutual contends that: (1) the trial court erred in retroactively applying section 367.1 to Mutual's group policy; and (2) the trial court should have granted Mutual's motion for summary judgment. We reverse. The parties stipulated to the following facts.

Swanberg became an employee of the H. Wilson Corporation on or about July 7, 1975. The Corporation was then a member of the Upper Midwest Employers' Association (Association) which was organized under Minnesota law. On May 29, 1969, the Association had entered into a trust agreement with the First National Bank of Minneapolis (Trustee), creating the Upper Midwest Employers' Association Group Insurance Trust (Trust). The stated purpose of the trust was "to establish a plan or plans of life, accidental death and dismemberment, health and such other forms of insurance which the individual and employer members may desire." The Trust also contained the following provision in Article VI, Par. F:

"This Trust is accepted by the Trustee in the State of North Dakota, and all questions pertaining to its validity, construction and administration shall be determined in accordance with the laws of that State."

On December 12, 1973, Mutual issued and delivered to the Trustee a group insurance policy insuring "against loss resulting from accidental bodily injury or from sickness for eligible persons and their eligible dependents if any." The policy became effective October 15, 1973, and also provided: "The Policy is delivered in North Dakota and is governed by its laws." The Corporation was a member of the Association and had been participating in the Association's insurance plan since February 15, 1972.

Swanberg was a full-time employee of the Wilson Corporation and, on September 16, 1975, began participating in the group health insurance program offered in the policy issued to the Trust by Mutual. Swanberg received a group information card which provided in bold face type:

"Benefits are subject to policy provisions and limitations including coordination of benefits. This is a partial description of benefits not a guarantee of payment."

Swanberg's employment with the Wilson Corporation was involuntarily terminated on November 21, 1975, and, according to the terms of the policy, his eligibility for and participation in the group insurance program was also terminated on that date. Mutual did not send Swanberg notice of any election available to him to maintain his group insurance after his termination from employment.

Plaintiff, as administrator of Swanberg's estate, filed a claim with Mutual for certain hospital and medical expenses incurred by Swanberg from December 29, 1975, through January 5, 1976. Mutual denied the claim but admitted that, if Swanberg were still covered by the group policy, Mutual would pay $8917.80 of the expenses claimed.

Plaintiff and Mutual both filed motions for summary judgment. The trial court denied Mutual's motion and granted summary judgment for plaintiff in the amount of $8917.80. Mutual has appealed.

OPINION

Mutual first contends that the trial court erred in granting summary judgment for plaintiff because Illinois law is not applicable to Mutual's group policy and section 367.1 of The Illinois Insurance Code cannot be applied retroactively.

The insurance policy expressly states that it is to be governed by the laws of North Dakota, and defendants maintain that the contractual choice of law provision should be given effect. Defendants' position is supported by Hofeld v. Nationwide Life Insurance Co. (1975), 59 Ill.2d 522, 322 N.E.2d 454, the leading case in this State regarding contractual choice of law provisions. Hofeld involved a choice of law provision in a group health and accident insurance policy, which had been issued and delivered in Georgia by an Ohio insurance corporation to a Georgia organization. The plaintiff in Hofeld was an Illinois resident who sought a declaratory judgment that certain insurance coverage remained in effect although the insurance company had stopped making payments of benefits on the ground that the plaintiff had made material fraudulent misrepresentations in his application for an optional disability income privilege. The plaintiff had continued to pay his premiums until his death at which time the administrator of his estate was substituted as plaintiff. In holding that Georgia law was applicable, the court stated:

"The prevailing view is that a choice of law made in the basic group policy will be honored by the courts, particularly where that selection is the State of the group policyholder. We believe that to be the better view, and the one to be followed in this State so long as the particular statutory provision to be applied does not conflict with the public policy of this State, and so long as the certificate received by the insured does not contain conflicting provisions." 59 Ill.2d at 532, 322 N.E.2d at 460.

The court cited Comment (h) to section 192 of the Restatement (Second) of Conflict of Laws (1971) in explaining the reasoning underlying its decision. Comment (h) states that choice of law provisions in group life insurance policies are more likely to be given effect than those in individual life insurance policies because the party who procures the master policy is usually in a better bargaining position, thus minimizing the likelihood that the choice of law provision in a group policy would be of "a 'take-it-or- leave-it' character." The Hofeld court found Comment (h) to be equally applicable to group health insurance policies. 59 Ill.2d at 529, 322 N.E.2d at 458.

The court in Hofeld also adopted the reasoning of the United States Supreme Court expressed in Boseman v. Connecticut General Life Insurance Co. (1937), 301 U.S. 196, 57 S.Ct. 686, 81 L.Ed. 1036, which involved a group policyholder from Pennsylvania, a Connecticut insurer and an insured employee from Texas. The court concluded that its application of Pennsylvania law was supported "not only by the making and delivery of the contract of insurance in that state, the declaration in the policy that Pennsylvania law shall govern and petitioner's acceptance of the insurance according to the terms of the policy, but also by the purpose of the parties to the contract that everywhere it shall have the same meaning and give the same protection, and that inequalities and confusion liable to result from applications of diverse state laws shall be avoided." 301 U.S. at 206, 57 S.Ct. at 691, 81 L.Ed. at 1042.

Plaintiff maintains that Boseman should not apply because it is an older case and because two recent cases, John Hancock Mutual Life Insurance Co. v. Schroder (5th Cir. 1965), 349 F.2d 406, and Nelson v. Aetna Life Insurance Co. (W.D.Mo.1973), 359 F.Supp. 271, have held to the contrary. However, it is clear that the Hofeld court intended to adopt the Boseman rationale, for it rejected out-of-hand the two cases cited by plaintiff, noting that: "Boseman was criticized in John Hancock Mutual Life Insurance Co. v. Schroder (citation) and in Nelson v. Aetna Life Insurance Co. (citation), but it has never been overruled." 59 Ill.2d at 530, 322 N.E.2d at 458.

Applying the choice of law principles expressed in Hofeld and Boseman, we conclude that the law of North Dakota, not Illinois, governs the policy here in question. The parties expressly chose the law of North Dakota, the policy was delivered in North Dakota, and the trust established for purposes of providing the insurance was accepted in North Dakota and similarly calls for the application of North Dakota law. That the Trustee is from Minnesota does not compel the automatic application of Minnesota law, as plaintiff suggests. As was pointed out in Hofeld, the choice of law found in the policy is most likely the real, negotiated and mutual choice of the parties and, in the interest of uniformity and predictability, should be given effect, if possible.

Relying on Hofeld and Thieme v. Union Labor Life Insurance Co. (1956), 12 Ill.App.2d 110, 138 N.E.2d 857, plaintiff further urges that the information certificate is part of the total insurance contract and that, because it was delivered to Swanberg in Illinois, the contract itself was delivered here. In Thieme, the master policy contained no choice of law provision and differed from the individual's certificate in several respects. The court there held that Illinois law was applicable in the absence of a provision to the contrary in the master policy and that under Illinois law the certificate was considered a part of the contract. The court nevertheless acknowledged the preference given to a contractual choice of law and noted that the United States Supreme Court had held in Boseman that the place of delivery of the certificate was not part of the insurance contract for the purpose of determining the applicable law where...