243 F. Supp. 3d 987
N.D. Ill.2017Background
- Insured Charles Cooke held a life policy (initial 15-year level premium term) naming Norma Cooke beneficiary; Jackson succeeded as insurer.
- Policy Data Page listed premium frequency as quarterly but policy allowed other payment modes with insurer consent; Cooke submitted EFT authorizations and paid by monthly bank draft for ~15 years.
- On May 30, 2013 Jackson notified a premium increase; on July 28, 2013 Jackson’s attempted automatic withdrawal for $2,835.85 (monthly) failed, triggering a 31‑day grace period expiring August 28.
- On August 15 Jackson sent a notice demanding a quarterly premium of $8,637.94 (18 days into the grace period); Cooke died on September 10, 2013; a payment mailed September 12 arrived after his death.
- Jackson denied the beneficiary’s claim, asserting the quarterly premium was due on July 28 (so no post‑demand grace period), and later reinstated the policy then denied benefits as not paid during insured’s life.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Whether the monthly payments Cooke made were "premiums" triggering the 31‑day grace period | Monthly bank drafts were premiums; default on July 28 entitled insured to 31 days to pay $2,835.85 | Quarterly premium listed on Policy Data Page was the premium "due" on July 28; monthly drafts were installments toward that quarterly premium | Monthly payments qualified as premiums; July 28 due date was for the monthly premium; Jackson’s Aug 15 demand for quarterly premium created a new 31‑day grace period |
| Whether Jackson’s August 15 demand required a new grace period | Demand for a new, higher premium on Aug 15 triggered a new 31‑day grace period under the policy | No new grace period needed because quarterly premium was already due on July 28 | Court held Aug 15 demand constituted a new premium demand and required a new 31‑day grace period; insured died during that period |
| Whether Illinois statute (215 Ill. Comp. Stat. 5/234) barred lapse within six months absent proper pre‑default notice | Once Jackson revoked monthly payment option, §234 applied; Jackson failed to send required notice, so it could not terminate within six months after default | §234 inapplicable because premiums were payable monthly (or §234 applies only to pre‑default notices) | §234 applied after Jackson revoked monthly payments and Jackson did not show compliant notice; termination within six months was barred |
| Whether Jackson’s denial was "vexatious and unreasonable" under 215 Ill. Comp. Stat. 5/155 | Jackson acted unreasonably in numerous ways and caused litigation delay | Denial was based on a bona fide dispute over contract interpretation | Denial itself was a good‑faith dispute (no §155 award on claim denial), but Jackson unreasonably delayed litigation; court awarded attorney fees for needless procedural delay (motion practice) |
Key Cases Cited
- Celotex Corp. v. Catrett, 477 U.S. 317 (summary judgment standard)
- Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (trial court may not weigh credibility on summary judgment)
- Pekin Ins. Co. v. Wilson, 237 Ill.2d 446 (ambiguities in insurance policies construed against insurer)
- Cramer v. Ins. Exchange Agency, 174 Ill.2d 513 (purpose of §155 to deter frivolous insurer delay and pretextual denials)
- Reliance Standard Life Ins. Co. v. Magli‑Grant, 503 F. Supp. 2d 1050 (beneficiary’s right vests at insured’s death under policy terms)
- Clarin Corp. v. Mass. Gen. Life Ins. Co., 44 F.3d 471 (insurer must comply with §234 notice requirements to terminate within six months)