Zena Phillips v. The Prudential Insurance Compa
2013 U.S. App. LEXIS 9130
| 7th Cir. | 2013Background
- Phillips, the beneficiary of Strang’s Prudential life insurance policy, challenges the Alliance Account as the default payment method.
- Prudential offered multiple payment options; the Alliance Account was promoted as flexible and immediate access, with interest earned for the beneficiary.
- Strang never elected a payment method; Phillips filled out the claim form leaving two lines blank, resulting in enrollment in Alliance Account.
- The district court dismissed Phillips’s claims under Rule 12(b)(6); Phillips appeals to the Seventh Circuit.
- The court analyzes contract interpretation under Illinois law and whether the Alliance Account breached the policy, caused delay, or created a fiduciary duty.
- The court finds Phillips could have chosen lump-sum or other options, but the policy allowed Alliance Account and there is no breach.
Issues
| Issue | Plaintiff's Argument | Defendant's Argument | Held |
|---|---|---|---|
| Breach of contract by Alliance Account default | Phillips alleges defaulted to Alliance Account breached policy. | Prudential complied with policy by allowing choice and enrolling due to blank election. | No breach; option valid and chosen by Phillips. |
| Unreasonable delay under 215 ILCS 5/155 | Phillips claims vexatious delay in payment under 155. | Alliance Account payment is not a delay; Phillips chose the option. | No violation; no vexatious delay shown. |
| Breach of fiduciary duty | Phillips argues insurer as investment manager created fiduciary duties. | No fiduciary relationship; it is a debtor-creditor arrangement. | No fiduciary duty; no breach. |
Key Cases Cited
- Clarendon Nat'l Ins. Co. v. Medina, 645 F.3d 928 (7th Cir. 2011) (interpretation of insurance policies under Illinois law)
- Valley Forge Ins. Co. v. Swiderski Elecs., Inc., 860 N.E.2d 307 (Ill. 2006) (ambiguity controls in insurance contract interpretation)
- Native Am. Arts, Inc. v. Hartford Cas. Ins. Co., 435 F.3d 729 (7th Cir. 2006) (ambiguities favored for insureds; established legal meaning)
- Ace Am. Ins. Co. v. RC2 Corp., 600 F.3d 763 (7th Cir. 2010) (unambiguous policy terms and liberal construction of ambiguous terms)
- Mogel v. UNUM Life Ins. Co., 547 F.3d 23 (1st Cir. 2008) (retained asset accounts and ERISA fiduciary status considerations)
- Rabin v. MONY Life Ins. Co., 387 F. App'x 36 (2d Cir. 2010) (retained asset accounts not sufficiently different from lump-sum payment)