JAMES B. ZAGEL, District Judge.
Kerry Becker by and through her attorneys, Roberts & Caruso, and pursuant to Federal Rule of Civil Procedure No. 58, hereby moves for judgment on Count I of her Counter-Complaint and in support thereof states as follows:
At trial, there were two main issues in dispute to be addressed: (1) whether Mr. Yarbrough committed suicide and (2) assuming Mr. Yarbrough did not commit suicide, what interest rate applied to Mrs. Becker's $500,000 death benefit from a certain life insurance policy insuring Mr. Yarbrough's life. In an effort to simplify the jury instructions, the parties agreed to submit only the suicide issue to the jury and agreed to allow this Court to determine the appropriate amount of interest payable to Mrs. Becker in the event the jury ruled in favor of Mrs. Becker on the first issue of Mr. Yarbrough's suicide. Mrs. Becker understood that if the jury ruled in her favor, she would receive a money judgment for the face value of the insurance policy that day, and would later obtain a determination from the trial court judge regarding the proper amount of her prejudgment interest. Now that the jury has ruled in Mrs. Becker's favor, she requests: (1) a money judgment in the amount of the face value of the insurance policy,
Mrs. Becker and Nationwide agree that the insurance policy has a face value of $500,000, and they agree that prejudgment interest is due to Ms. Becker. They disagree, however, as to the applicable rate of prejudgment interest due and owing on the policy. Mrs. Becker claims that prejudgment interest accrues at the rate of 9% per year; Nationwide claims that prejudgment interest accrues at the rate of 5% per year. (See Nationwide's Trial Brief, Dkt. No. 84, Page ID# 936).
Under Illinois law prejudgment interest is not recoverable absent a statute or an agreement providing for it. City of Springfield v. Allphin, 82 Ill.2d 571, 576 (1980). According to the Affidavit of Nationwide's claim supervisor, Mark Trigg, "Nationwide follows the law of the jurisdiction whose law governs the life insurance policy, so, for example, if Illinois law governed the life insurance policy, then Nationwide would apply Illinois law regarding the amount/percentage of interest owed." (Dkt. No. 95, Page ID# 1096). Insurance policies are governed by the law in force at the time of issuance. Nabor v. Occidental Life Ins. Co. of Cal., 78 Ill.App.3d 288, 289 (1st Dist. 1979) citing 12 APPELMAN, INSURANCE LAW AND PRACTICE, §7041. That law, 215 ILCS 5/224(l) (West 2005) ("the Old Law"), clearly and unambiguously provided for 9% interest:
Consistent with Mark Trigg's affidavit, Nationwide followed the Old Law's 9% per year requirement when it paid Greg Yarbrough 9% interest on an identical life insurance policy that Greg Yarbrough purchased to insure the life of Mrs. Becker's late husband, Martin Becker. (Becker Trial Ex. 4). Thus, Nationwide should also pay Mrs. Becker prejudgment interest at the rate of 9% per year on Mrs. Becker's identical policy insuring Mr. Yarbrough's life. Mrs. Becker calculates this amount as follows: $500,000 x 0.09 x (5 + 150/365 yrs) =
Perhaps the source of Nationwide's claim that the insurance policy pays only 5% prejudgment interest per year arises out of the fact that on August 23, 2011, Governor Quinn signed into law Public Act No. 097-0527 ("the New Law"), which among other things, amended Section 224(l), increased the interest rate from 9% per year to 10% per year, but provided insurers with certain safe harbors to toll the running of the 10% interest rate. The specific changes to Section 224(l) are as follows:
Ill. Public Act. No. 097-0527. In its Trial Brief, Nationwide asserts that the safe-harbor provision created in Paragraph 2 of the New Law tolls the running of the 10% interest rate "unless and until there is a judgment against Nationwide". (Nationwide's Trial Brief, Docket No. #84, PageID #940). Instead, Nationwide asserted in its Trial Brief that under the New Law, prejudgment interest on Mrs. Becker's death benefits accrues at the Illinois Interest Act's statutory rate of 5% per year. Id. at PageID #939, citing 815 ILCS 205/2. Mrs. Becker concedes that if the New Law had been in effect at the time Nationwide issued its policy insuring the life of Greg Yarbrough (it was not), then prejudgment interest would have accrued at the Interest Act's rate of 5% per year. Under Nationwide's analysis, Mrs. Becker would be owed prejudgment interest in the amount of
Section 99 of the New Law, entitled "Effective Date", states "This Act takes effect upon becoming law." Ill. Public Act. No. 097-0527, §99. Thus, the New Law took effect on August 23, 2011. The New Law was not in effect at the time Nationwide issued its insurance policy (June, 2005) nor at the time Mr. Yarbrough died and Mrs. Becker's death benefits became due (February, 2007). Therefore, there should be no doubt that Mrs. Becker is entitled to the Old Law's 9% statutory interest rate at least until August 23, 2011, when the New Law took effect.
After August 23, 2011, the analysis becomes trickier. There are absolutely no indications in the New Law or its legislative history that the New Law's new safe-harbor provisions should be applied retroactively to claims filed and policies issued under the Old Law. After a thorough and diligent search, Mrs. Becker did not find any reported cases addressing whether the New Law's new safe-harbor provisions apply retroactively to claims filed and policies issued under the Old Law. Without adequate guidance from the Illinois courts or the Illinois General Assembly, this Court (which sits in diversity jurisdiction) should not deviate from the general rule that insurance policies are governed by the law in force at the time of issuance, and award Mrs. Becker 9% prejudgment interest from the date of death to the date of judgment. 12 APPELMAN, INSURANCE LAW AND PRACTICE, §7041.
The closest case Mrs. Becker could find is Nabor v. Occidental Life Ins. Co., 78 Ill.App.3d 288 (1st Dist. 1979). Like this case, the Nabor court confronted a scenario where an insurer denied coverage due to a suicide provision, but ultimately lost at trial. Like this case, during the pendency of the litigation, the Illinois General Assembly amended the Illinois Insurance Act. However, unlike this case, the amendment in Nabor merely changed the applicable rate of interest from 6% to 5%. Id. at 293. The Nabor amendment did not add new safe-harbor provisions like the New Law in this case did. In considering whether to award 6% interest or 5% interest, the Nabor Court took a compromise approach and applied the 6% interest rate from the death of death until the date the amendment went into effective, after which the Court applied the lower 5% rate. Id. at 294.
Mrs. Becker admits that the Nabor court applied a thoughtful analysis of how to apply changes in statutory interest rates to pending claims, however, Nabor is distinguishable from this case because the Nabor amendment merely changed the statutory interest rate; whereas the New Law applicable in this case
Substantial injustice would result should this Court allow Nationwide to reduce its liability by relying upon a safe-harbor provision that did not exist at the time Nationwide issued its life insurance policy insuring Mr. Yarbrough or at the time Mr. Yarbrough died. If Nationwide had paid Mrs. Becker's death benefit on August 22, 2011, the day before the New Law went into effect, then Nationwide would have owed Mrs. Becker
There are ample reasons why this Court should not deviate from the generally accepted principal that insurance policies are governed by the law in force at the time of issuance, and award Mrs. Becker prejudgment interest at the rate of 9% per year from the date of Mr. Yarbrough's death until the date of judgment. If, however, this Court decides to take the Nabor approach by awarding 9% interest from the date of death until the date the New Law went into effect, and 5% interest thereafter, then Mrs. Becker would be entitled to prejudgment interest in the amount of
WHEREFORE, Kerry Becker respectfully requests that this Honorable Court amend its judgment by entering judgment in the principal amount of