549 F. App'x 534
7th Cir.2013Background
- Plaintiff Mai Nhia Thao bought a universal life policy from Midland National and sued in diversity for breach of contract, challenging how Midland calculates the monthly "cost of insurance" (COI) charge.
- Policy §7.7 states COI rates "are based on" five specified factors: Issue Age, completed Policy Years, Sex, Specified Amount, and Premium Class.
- Midland uses those five factors to index rate-table cells but derives the numeric rates in the cells from actuarial models that incorporate many other business and pricing inputs (investment returns, lapse/surrender rates, profit targets, sales commissions, etc.).
- Thao argued "based on" means exclusively based on the five named factors; Midland argued it means the named factors will play the foundational role but not the exclusive role.
- The district court granted summary judgment to Midland, denied Thao's motions for class certification, denied her motion to compel production of mortality data, and imposed Rule 37(a)(5)(B) sanctions for the motion to compel.
- The Seventh Circuit affirmed: it adopted a non-exclusive reading of "based on," found the withheld/historical mortality data claims either already produced or irrelevant, and upheld the sanctions award.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Proper construction of "based on" in COI-rate clause | "Based on" means COI rate must be determined solely from the five listed factors | "Based on" means the five factors determine which table cell applies, but other pricing inputs may set the numeric rate in that cell | Court: "Based on" is non-exclusive; named factors differentiate insureds and determine applicable cell, while other inputs affect numeric rates in cells; summary judgment for Midland |
| Whether leave to amend complaint should have been allowed to recast breach claim | Amendment to pursue exclusive-factor theory would cure defect | Amendment would be futile because policy language permits non-exclusive meaning | Denied as futile |
| Class certification — commonality and common grievance | Classwide interpretation because contract language is common | Individual policy interests (earlier vs. later years) defeat common grievance; Midland opposed class | Moot in light of adverse merits ruling; district court's denial not reversed |
| Motion to compel production of Midland's pricing-mortality and historical mortality data; Rule 37 sanctions | Pricing-mortality estimates and historical experience needed to prove rates would be lower if only named factors used; production was incomplete | Midland had produced its pricing-mortality tables; historical experience is irrelevant to Thao's claim | District court did not abuse discretion: production was sufficient and historical data irrelevant; sanctions upheld |
Key Cases Cited
- Rexam Beverage Can Co. v. Bolger, 620 F.3d 718 (7th Cir. 2010) (de novo review of contractual interpretation)
- Blum v. 1st Auto. & Cas. Ins. Co., 786 N.W.2d 78 (Wis. 2010) (insurance policies interpreted as contracts; primary objective is parties' intent)
- Fireman’s Fund Ins. Co. of Wis. v. Bradley Corp., 660 N.W.2d 666 (Wis. 2003) (contract interpretation principles)
- Tufail v. Midwest Hospitality, LLC, 833 N.W.2d 586 (Wis. 2013) (ordinary-meaning standard for contract terms)
- Schinner v. Gundrum, 833 N.W.2d 685 (Wis. 2013) (reasonable insured's interpretation controls ordinary meaning)
- Wellness Int’l Network, Ltd. v. Sharif, 727 F.3d 751 (7th Cir. 2013) (standards for Rule 37 sanctions review)
- Scott v. Chuhak & Tecson, P.C., 725 F.3d 772 (7th Cir. 2013) (abuse-of-discretion review of discovery rulings)
- United States v. Pecore, 664 F.3d 1125 (7th Cir. 2011) (standard for whether litigation position is "substantially justified")
- Brengettsy v. LTV Steel (Republic) Hourly Pension Plan, 241 F.3d 609 (7th Cir. 2001) (mootness and class-certification considerations)