SARA L. ELLIS, District Judge.
In her latest attempt to recover benefits from her husband's life insurance policy dating back to 2001, Plaintiff Valerie Lawhon-Davis filed this suit against Reassure America Life Insurance Company ("Reassure").
Reassure, which was at the time known as the Midland Insurance Company,
Doc. 77-1 at 6; Doc. 77-2 at 5.
Davis died on May 2, 2001, less than two years after the effective date of the policy. Lawhon-Davis made a timely claim for benefits. On December 4, 2001, Reassure denied Lawhon-Davis' claim, taking the position that Davis misrepresented his smoking habits, which denied Reassure the opportunity to properly evaluate his application and thus required the policy's rescission. The letter enclosed a check refunding all premiums that Davis had paid, including interest, and stated that cashing the check constituted acceptance of the rescission.
Instead of accepting rescission, Lawhon-Davis, acting through counsel, demanded payment under the policy on April 17, 2002. Lawhon-Davis argued that the policy's incontestability provision precluded Reassure from contesting the policy's validity. Reassure responded on August 8, 2002, again denying Lawhon-Davis' claim and reiterating the conclusions reached in Reassure's December 4, 2001 denial letter.
On April 18, 2003, Lawhon-Davis filed suit against Reassure in state court, seeking to enforce the policy. Reassure answered the complaint on May 28, 2003, asserting misrepresentation as an affirmative defense and pursuing a counterclaim for rescission. Lawhon-Davis ultimately dropped her affirmative claim, and the case proceeded to trial on Reassure's counter-claim for rescission. The trial court entered judgment in Reassure's favor, rescinding the policy. The Illinois Appellate Court reversed in an order issued June 3, 2008. Reassure's petition for leave to appeal to the Illinois Supreme Court was denied on September 24, 2008. The Illinois Appellate Court assessed the cost of the appeal ($975.05) against Reassure on July 25, 2008. To date, Reassure has not paid Lawhon-Davis any amount.
Lawhon-Davis filed this action on December 5, 2011 in state court. Reassure removed the case to this Court on the basis of diversity jurisdiction.
Summary judgment obviates the need for a trial where there is no genuine issue as to any material fact and the moving party is entitled to judgment as a matter of law. Fed. R. Civ. P. 56. To determine whether a genuine issue of fact exists, the Court must pierce the pleadings and assess the proof as presented in depositions, answers to interrogatories, admissions, and affidavits that are part of the record. Fed. R. Civ. P. 56 & advisory committee's notes. The party seeking summary judgment bears the initial burden of proving that no genuine issue of material fact exists. Celotex Corp. v. Catrett, 477 U.S. 317, 323, 106 S.Ct. 2548, 91 L. Ed. 2d 265 (1986). In response, the non-moving party cannot rest on mere pleadings alone but must use the evidentiary tools listed above to identify specific material facts that demonstrate a genuine issue for trial. Id. at 324; Insolia v. Philip Morris Inc., 216 F.3d 596, 598 (7th Cir. 2000). Although a bare contention that an issue of fact exists is insufficient to create a factual dispute, Bellaver v. Quanex Corp., 200 F.3d 485, 492 (7th Cir. 2000), the Court must construe all facts in a light most favorable to the non-moving party and draw all reasonable inferences in that party's favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 255, 106 S.Ct. 2505, 91 L. Ed. 2d 202 (1986). The same standard applies when considering cross-motions for summary judgment. Int'l Bhd. of Elec. Workers, Local 176 v. Balmoral Racing Club, Inc., 293 F.3d 402, 404 (7th Cir. 2002). Therefore, when considering Lawhon-Davis' motion for partial summary judgment, the Court views all evidence in the light most favorable to Reassure, and when considering Reassure's motion, the Court views all evidence in the light most favorable to Lawhon-Davis. Id.
The parties contest whether the Illinois Appellate Court's opinion, which reversed the trial court's decision on Reassure's counterclaim for rescission and found that the policy was not contestable at the time Reassure sought rescission, has any preclusive effect in this litigation. Reassure's entire motion for summary judgment is premised on the argument that the Illinois Appellate Court opinion has no preclusive effect.
The Court applies Illinois preclusion principles because the Illinois state court rendered the order to which Lawhon-Davis seeks to give preclusive effect. See 28 U.S.C. § 1738; Chicago Title Land Trust Co. v. Potash Corp. of Saskatchewan Sales Ltd., 664 F.3d 1075, 1079 (7th Cir. 2011). Although the parties discuss both res judicata and collateral estoppel interchangeably, only collateral estoppel is relevant here because the same cause of action decided in the state court case (rescission) is not asserted here. Collateral estoppel applies if (1) the issue decided in the prior action is identical to that presented in this action, (2) there was a final judgment on the merits in the prior action, and (3) the party against whom estoppel is asserted was a party or privy to the prior action. In re A.W., 896 N.E.2d 316, 321, 231 Ill.2d 92, 324 Ill.Dec. 530 (2008). Reassure argues that Lawhon-Davis cannot take advantage of collateral estoppel because there was no final judgment in the state court action.
"A judgment is final if it determines the litigation on the merits so that if affirmed the only thing remaining is to proceed with the execution on the judgment." Relph v. Bd. of Educ. of DePue Unit Sch. Dist. No. 103 of Bureau County, 420 N.E.2d 147, 149, 84 Ill.2d 436, 50 Ill.Dec. 830 (1981). Here, the Illinois Appellate Court reversed the circuit court's decision, without an accompanying order remanding the case to the circuit court. This means that the Illinois Appellate Court judgment was final and no further proceedings were required or possible in circuit court.
Thus, the Illinois Appellate Court order was a final judgment for purposes of collateral estoppel. Reassure does not challenge the other two elements of collateral estoppel, which the Court finds to be met here. Reassure was a party to the state court action. The Illinois Appellate Court found that the policy was not contestable at the time Reassure contested it based on Davis' alleged misrepresentations. See Doc. 77-4 at 8, 19. This issue has also been raised by Reassure through several affirmative defenses in an attempt to preclude Lawhon-Davis from recovering on the policy. But because the issue was already decided by the Illinois Appellate Court against Reassure, collateral estoppel prevents Reassure from relitigating the issue here.
Thus, the Court will not address Reassure's arguments that Davis' policy was voidable because he allegedly misrepresented his smoking history on his life insurance application. The Illinois Appellate Court already determined that Reassure is barred from making such arguments.
Lawhon-Davis seeks summary judgment on her breach of contract claim, arguing that all obligations under the insurance policy were performed but that Reassure breached the policy by failing to pay the benefits due upon Davis' death. Lawhon-Davis relies on the Illinois Appellate Court's finding that Reassure cannot contest the validity of the policy in arguing that Reassure has no defense to this claim. Reassure relies solely on its claim that Davis' policy was voidable because he allegedly misrepresented his smoking history on the application, but the Court has already found that Reassure is precluded from making this argument. Reassure's litigation tactic ultimately leads to the conclusion that summary judgment on the breach of contract claim is granted for Lawhon-Davis.
To establish breach of an insurance contract under Illinois law, Lawhon-Davis must establish (1) the existence of a valid, enforceable contract; (2) performance by Davis; (3) breach by Reassure; and (4) resulting injury. Page v. Am. Gen. Life Ins. Co., 13 C 6979, 2014 WL 7185290, at *3 (N.D. Ill. Dec. 11, 2014). As already discussed above, the insurance policy is valid and enforceable. Davis paid the premiums for his policy through the time of his death. Lawhon-Davis made a timely claim for benefits under the policy. But Reassure has to this day refused to pay the benefits due under the policy to Lawhon-Davis, who is designated as the beneficiary of the policy, causing her injury. Having established a breach of the policy and facing no viable defenses, Lawhon-Davis is entitled to judgment on her breach of contract claim.
Lawhon-Davis contends that Reassure violated ICFA and committed common law fraud because the incontestability clause included in the policy and in the denial letter did not comply with 215 Ill. Comp. Stat. 5/231.1(B). Specifically, relying on the Illinois Appellate Court's opinion, Lawhon-Davis argues that Reassure failed to include "the statutorily mandated language `validity of the policy shall not be contested, except for non-payment of premiums, after it has been in force for two years from its date of issue.'" Doc. 80 at 11 (quoting Doc. 77-4 at 9).
To prevail on her fraud claim, Lawhon-Davis must establish that (1) Reassure made a false statement or omission of material fact, (2) Reassure knew of or believed in its falsity, (3) Reassure intended to induce Davis (or Lawhon-Davis) to act, (4) Davis (or Lawhon-Davis) acted in reliance on the truth of Reassure's statements, and (5) damages resulted from that reliance. Weidner v. Karlin, 932 N.E.2d 602, 605, 402 Ill.App.3d 1084, 342 Ill.Dec. 475 (2010). Lawhon-Davis must prove her fraud claim by clear and convincing evidence, and the Court is to evaluate the evidence presented on summary judgment "through the prism of the substantive evidentiary burden." Liberty Lobby, 477 U.S. at 254; JPMorgan Chase Bank, N.A. v. Asia Pulp & Paper Co., 707 F.3d 853, 864 (7th Cir. 2013) (applying clear and convincing standard in affirming summary judgment dismissal of fraud claim); Ass'n Benefit Servs., Inc. v. Caremark RX, Inc., 493 F.3d 841, 853-54 (7th Cir. 2007).
To prevail on her ICFA deceptive practices claim, Lawhon-Davis must establish that (1) Reassure committed a deceptive act or practice, (2) Reassure intended for Davis (or Lawhon-Davis) to rely on the deceptive practice, (3) the deceptive practice occurred in the course of trade or commerce, and (4) the deceptive practice proximately caused Lawhon-Davis' injury. Cocroft v. HSBC Bank USA, N.A., 796 F.3d 680, 687 (7th Cir. 2015). A showing of reliance is not required. Id. "[A] statement is deceptive if it creates a likelihood of deception or has the capacity to deceive." Bober v. Glaxo Wellcome PLC, 246 F.3d 934, 938 (7th Cir. 2001).
In seeking summary judgment on her common law fraud and ICFA claims, Lawhon-Davis has the burden to establish that there is no material dispute as to all elements of both claims. See Hotel 71 Mezz Lender LLC v. Nat'l Ret. Fund, 778 F.3d 593, 601 (7th Cir. 2015) ("Where . . . the movant is seeking summary judgment on a claim as to which it bears the burden of proof, it must lay out the elements of the claim, cite the facts which it believes satisfies these elements, and demonstrate why the record is so one-sided as to rule out the prospect of finding in favor of the non-movant on the claim."). But Lawhon-Davis only argues that she has met these elements in a cursory fashion, failing to even set out the required elements of a common law fraud claim and explain how all the elements for both claims are met. Consequently, Lawhon-Davis' failure to meet her evidentiary burden warrants denial of her request for summary judgment on the ICFA and common law fraud claims without needing to address Reassure's arguments. See id. at 601-02 (district court properly denied movant's motion for summary judgment, where movant did not even cite relevant standard or apply it to facts in the record); Johnson v. Hix Wrecker Serv., Inc., 651 F.3d 658, 662 (7th Cir. 2011) ("A party opposing summary judgment does not have to rebut factual propositions on which the movant bears the burden of proof and that the movant has not properly supported in the first instance."); Sierra Club v. Franklin County Power of Ill., LLC, 546 F.3d 918, 925 (7th Cir. 2008) (for a plaintiff to prevail on a motion for summary judgment, "a plaintiff cannot rely on mere allegations but must support each element by specific facts via affidavits or other evidence"). Reassure's response is also lacking, as it argues, for example, that its policy language was approved by the Illinois Department of Insurance but does not provide any evidentiary support for that assertion. Further, although it may be true that Lawhon-Davis' ICFA claim is barred by the statute of limitations or that the fraud and ICFA claims fail for other reasons, Reassure has not moved for summary judgment on these claims on those bases, precluding the Court from entering summary judgment for Reassure on a potentially meritorious argument. See Hotel 71, 778 F.3d at 602-03 (denial of summary judgment does not automatically mean that summary judgment is warranted for the opposing party).
Section 155 damages are appropriate if an insurer's actions with respect to a claim made under a policy are "vexatious and unreasonable." Cramer v. Ins. Exch. Agency, 675 N.E.2d 897, 902, 174 Ill.2d 513, 221 Ill.Dec. 473 (1996). But they may not be awarded if "(1) there is a bona fide dispute concerning the scope and application of insurance coverage; (2) the insurer asserts a legitimate policy defense; (3) the claim presents a genuine legal or factual issue regarding coverage; or (4) the insurer takes a reasonable legal position on an unsettled issue of law." Citizens First Nat'l Bank of Princeton v. Cincinnati Ins. Co., 200 F.3d 1102, 1110 (7th Cir. 2000) (citations omitted). A "bona fide" dispute is one that is "[r]eal, actual, genuine, and not feigned." Am. States Ins. Co. v. CFM Constr. Co., 923 N.E.2d 299, 308, 398 Ill.App.3d 994, 337 Ill.Dec. 740 (2010) (alteration in original) (quoting Black's Law Dictionary 177 (6th ed. 1990)). Determining whether conduct is vexatious or unreasonable is a factual question determined by looking at the totality of the circumstances. See Med. Protective Co. v. Kim, 507 F.3d 1076, 1086 (7th Cir. 2007). But it is a question for the Court, not a jury. Am. Safety Cas. Ins. Co. v. City of Waukegan, 776 F.Supp.2d 670, 704 (N.D. Ill. 2011) (finding insurer's conduct was vexatious and unreasonable on motion for summary judgment); see also Horning Wire Corp. v. Home Indem. Co., 8 F.3d 587, 590 (7th Cir. 1993).
Lawhon-Davis claims that Reassure acted unreasonably in three respects: (1) in continuing to contest the validity of the policy despite the Illinois Appellate Court's decision, (2) in requiring Lawhon-Davis to file multiple lawsuits to recover on the policy, and (3) in asserting allegedly unfounded arguments to the Illinois Appellate Court. Although certain arguments that Reassure asserted to the Illinois Appellate Court did not prevail, the Court does not find that they were presented in bad faith, or that the fact that it lost on the issue of incontestability makes it liable for section 155 damages. See Am. States Ins. Co., 923 N.E.2d at 308 (insurer not liable for section 155 damages "merely because it litigated and lost the issue of insurance coverage"). Additionally, the fact that Lawhon-Davis has filed two lawsuits to recover on the policy cannot be blamed on Reassure, where Lawhon-Davis withdrew her claim for policy benefits in the first suit. Although Reassure could have agreed to pay her the benefits outside of court after the Illinois Appellate Court decision instead of requiring another suit, without more facts, the Court cannot find as a matter of law that Reassure's actions constitute bad faith.
But the Court agrees that Lawhon-Davis is entitled to section 155 damages based on Reassure's assertion of the right to contest the policy in this litigation, despite the fact that the Illinois Appellate Court had already found otherwise in a case involving the same parties. Reassure responds that the fact that the circuit court disagreed with the Illinois Appellate Court, rescinding the policy in favor of Reassure demonstrates that Reassure's position is legally tenable. But the fact that the circuit court found for Reassure prior to the Illinois Appellate Court's binding decision does nothing for Reassure, for once the Illinois Appellate Court's decision became final, Reassure had no viable ground to withhold payment on the policy. Reassure's conduct after that decision became final, arguing to this day that the Illinois Appellate Court decision was not a final judgment and that as a result it can contest the policy despite clear law to the contrary, was vexatious and unreasonable and warrants an award of section 155 damages.
For the foregoing reasons, Reassure's motion for summary judgment [75] is denied. Lawhon-Davis' motion for summary judgment is granted in part and denied in part. Judgment is granted for Lawhon-Davis on her claims for breach of contract (Count I) and bad faith (Count X). The amount of damages on the bad faith claim is to be determined in further proceedings. Lawhon-Davis' claims for misrepresentation (Counts II, III, and IV), violation of ICFA (Counts V and VI), negligent misrepresentation (Count VII), declaratory judgment (Count VIII), and unjust enrichment (Count XI) remain pending.
