NORMA L. COOKE, Plaintiff-Appellee, Cross-Appellant, v. JACKSON NATIONAL LIFE INSURANCE COMPANY, Defendant-Appellant, Cross-Appellee.
Nos. 18-3527 & 18-3583
United States Court of Appeals For the Seventh Circuit
MARCH 26, 2019
Appeals from the United States District Court for the Northern District of Illinois, Eastern Division. No. 15 C 817 — Ruben Castillo, Chief Judge. SUBMITTED MARCH 12, 2019
Before EASTERBROOK and BARRETT, Circuit Judges, and STADTMUELLER, District Judge.*
The district court then awarded $42,835 plus interest. 2018 U.S. Dist. LEXIS 197908 (N.D. Ill. Nov. 20, 2018). The insurer filed another appeal (No. 18-3527), which we resolve using the briefs filed in its initial appeal (No. 17-2080). Cooke filed a cross-appeal (No. 18-3583). Her lead contention is that the district court should have awarded a higher death benefit, but that argument comes too late. As our first decision explains, a judgment on the merits and an award of attorneys’ fees are separately appealable. Budinich v. Becton Dickinson & Co., 486 U.S. 196 (1988). Cooke did not appeal within
Instead of seeking additional fees, Cooke‘s brief in No. 18-3583 is principally devoted to contending that the judge did the right thing for the wrong reason. She made a similar argument in response to the insurer‘s initial appeal. We turn to the award under
Section 5/155(1) provides:
In any action by or against a company wherein there is in issue the liability of a company on a policy or policies of insurance or the amount of the loss payable thereunder, or for an unreasona-ble delay in settling a claim, and it appears to the court that such action or delay is vexatious and unreasonable, the court may allow as part of the taxable costs in the action reasonable attorney fees, other costs, plus an amount not to exceed any one of the following amounts:
(a) 60% of the amount which the court or jury finds such party is entitled to recover against the company, exclusive of all costs;
(b) $60,000;
(c) the excess of the amount which the court or jury finds such party is entitled to recover, exclusive of costs, over the amount, if any, which the company offered to pay in settlement of the claim prior to the action.
The district judge understood this statute to allow an award either for pre-litigation conduct or for behavior during the litigation. 243 F. Supp. 3d at 1006. He wrote that “Jackson‘s denial of coverage was based on a good-faith dispute regarding
The judge faulted the insurer because it opposed Cooke‘s motion for judgment on the pleadings without attaching the full policy to its papers. Jackson observed that Cooke had not supplied the court with all of the pertinent writings (which included an electronic funds transfer agreement as well as the policy) but failed to do so itself, until the summary-judgment stage, and the judge thought this unreasonable. Ibid. The judge summed up (ibid.):
This Court believes that this case could have been resolved on Plaintiff‘s motion for judgment on the pleadings one year ago. This is a straightforward insurance policy dispute with essentially undisputed facts, and the primary issue is the interpretation of the policy. Had Jackson provided with its response the full document to be construed, or clearly identified those documents it had already turned over that it contended were necessary to interpret the policy, this case may have been resolved one year ago. By frustrating Plaintiff‘s motion solely by pointing to the incomplete policy and then coyly refusing to identify the deficiency for months thereafter, Defendant unnecessarily and unreasonably extended this litigation for no reason related to its good-faith position on the merits.
The district court assumed that
Cooke tells us that TKK USA, Inc. v. Safety National Casualty Corp., 727 F.3d 782, 795 (7th Cir. 2013), has established that
It has long been understood that federal judges have a common-law power (sometimes called an inherent power) to impose sanctions on parties that needlessly run up the costs of litigation. See Chambers v. NASCO, Inc., 501 U.S. 32 (1991). The parties and the panel in TKK understandably did not focus on the source of law, when
RESULT OF PRESENTING MATTERS OUTSIDE THE PLEADINGS. If, on a motion under
Rule 12(b)(6) or12(c) , matters outside the pleadings are presented to and not excluded by the court, the motion must be treated as one for summary judgment underRule 56 . All parties must be given a reasonable opportunity to present all the material that is pertinent to the motion.
Courts occasionally hold that, despite the word “must” in
Perhaps the district judge did not mean to penalize the insurer just for its failure to attach documents to papers opposing Cooke‘s motion. Several passages in the judge‘s opinion imply that the problem was Jackson‘s failure to identify all of the pertinent documents, which had already been turned over under
If a certification violates this rule without substantial justification, the court, on motion or on its own, must impose an appropriate sanction on the signer, the party on whose behalf the signer was acting, or both. The sanction may include an order to pay the reasonable expenses, including attorney‘s fees, caused by the violation.
So is
Cooke contends that the award of fees should be affirmed for a reason that the district court rejected: that Jackson acted unreasonably and vexatiously before litigation began. Illinois asks whether an insurer‘s conduct was objectively unreasonable or vexatious. See West Bend Mutual Insurance v. Norton, 406 Ill. App. 3d 741, 745 (2010); Norman v. American National Fire Insurance Co., 198 Ill. App. 3d 269, 303-05 (1990). (Other decisions articulate a subjective standard. See, e.g., Deverman v. Country Mutual Insurance Co., 56 Ill. App. 3d 122, 124 (1977). For current purposes we assume that an objective approach governs.) In writing that Jackson‘s pre-suit denial of coverage “was based on a good-faith dispute regarding the nature of Cooke‘s payments” (243 F. Supp. 3d at 1006), Cooke contends, the judge asked and answered a question about Jackson‘s state of mind.
It is possible to read the district court‘s bottom line as Cooke does, but we do not think it the best reading. The bulk of the analysis is objective.
Charles Cooke had a policy of life insurance. For 15 years he paid premiums by monthly electronic transfers from his bank account, though the policy itself called for either annual or quarterly premiums. In May 2013 Jackson informed Charles that his premium for the next year (beginning in July) would be $2,835.85 a month. Toward the end of July the insurer sent the usual transfer request to Charles‘s bank, which rejected it because the account lacked sufficient funds. This started a 31-day grace period under the policy: Charles had until August 28 to make good the July payment or the policy would be cancelled. On August 15 Jackson sent Charles a letter telling him that he now owed a quarterly payment of $8,637.94. This letter specified a (retroactive) due date of July 28, which again implied that the grace period would end on August 28. But Charles did not pay anything that month — not the $2,835.85 for July, not the payment for August, and not the $8,637.94 for the quarter. Charles died on September 10, 2013, and Jackson declined to pay the death benefit, telling his widow that the policy had lapsed because of non-payment plus the expiration of the grace period.
When the suit began in 2015 Cooke contended that Jackson had waived its right to enforce the policy‘s payment terms or was estopped to do so. She filed an amended complaint in 2016 changing her theory. The amended complaint asserted that the letter of mid-August created a new grace period, running through September 15, even though the grace period (and thus the policy) otherwise would have expired on August 28, and even though the letter gave a due date implying that the end of the grace period remained August 28. The district judge eventually agreed with Cooke‘s
This means that an award under
REVERSED