Tsichlis v. Country Life Insurance Co. , 2022 IL App (1st) 201032-U ( 2022 )

2022 IL App (1st) 201032No. 1-20-1032
Order filed September 26, 2022
First Division
NOTICE: This order was filed under Supreme Court Rule 23 and is not precedent except in the
limited circumstances allowed under Rule 23(e)(1).
IN THE
APPELLATE COURT OF ILLINOIS
FIRST DISTRICT
____________________________________________________________________________
) Appeal from the Circuit Court
KATHRYN TSICHLIS, ) of Cook County.
)
Plaintiff-Appellant, )
) No. 19 CH 6077
v. )
)
COUNTRY LIFE INSURANCE COMPANY, ) The Honorable
) Franklin U. Valderrama,
Defendant-Appellee. ) Judge, presiding.
JUSTICE HYMAN delivered the judgment of the court.
Justices Pucinski and Walker concurred in the judgment.
ORDER
¶1 Held: Trial court properly dismissed first count of complaint seeking declaratory judgment
as to life insurance proceeds because doctrine of res judicata applied, but insurance
policy required refund of premiums paid. Second count of the complaint alleging
bad faith under the Illinois Insurance Code as to premium refund not barred because
ongoing breach of the contract terms. Cause remanded to the trial court.
¶2 Kathryn Tsichlis sought a declaratory judgment against Country Life Insurance Company
to determine her rights as a beneficiary under a life insurance policy issued by Country Life to her
husband, John, in light of her submission of due proof of death to Country Life in 2018. See
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Tsichlis v. Country Life Insurance Company, 2018 IL App (1st) 170826. The trial court granted
Country Life’s section 2-619(a)(4) motion to dismiss the complaint. 735 ILCS 5/2-619(a)(4) (West
2018).
¶3 We affirm in part and reverse in part. Because of this court’s decision in Tsichlis v. Country
Life Insurance Company, 2018 IL App (1st) 170826, the doctrine of res judicata applied to bar
recovery for the death benefits due to John’s suicide within two years of the issuance of the policy.
But that did not relieve Country Life from its agreement to remit in full the amount of premiums
paid before John’s death. Accordingly, we remand for proceedings under the Illinois Insurance
Code (215 ILCS 5/155 (West 2018)), regarding refund of the paid premiums with interest and
attorney’s fees.
¶4 Background
¶5 We relate the pertinent facts, including those relevant from an earlier appeal, Tsichlis v.
Country Life Insurance Company, 2018 IL App (1st) 170826 (Tsichlis I).
¶6 John Tsichlis purchased a $700,000 life insurance policy from Country Life, issued August
6, 2010. Bill Asimakopoulos, a close family friend, sold John the policy. Under the policy, suicide
within two years of the date of the policy barred payment of the $700,000 death benefit. In addition,
the policy provided that Country Life must either pay the entire benefits or refund the paid
premiums should an exclusion as suicide apply.
¶7 In December 2011, John disappeared. The police, the family, and a private investigator
searched for John without success. Two months later, in February 2012, John’s body was found in
the woods near the Tsichlis home. The medical examiner determined that he died from a self-
inflicted gunshot wound to the head.
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¶8 On February 14, Asimakopoulos’s supervisor called Country Life and spoke to a phone
representative, who filled out a “death claim notification worksheet.” Based on that call, the
paperwork stated that Tsichlis had committed suicide and passed along to senior claims examiner
Barbara Dirks. On February 21, Dirks wrote Asimakopoulos that Country Life had been informed
of John’s suicide. She asked Asimakopoulos to arrange for Tsichlis to provide a death certificate
and fill out some forms so that Country Life could refund the premiums.
¶9 In March 2012, Dirks sent a letter to Tsichlis asking for a copy of John’s death certificate
so Country Life could process the claim. Tsichlis never responded. Nor did she respond to similar
letters sent to her monthly for over a year. Although Tsichlis admitted that she had a copy of the
death certificate, she neither provided it nor responded to Country Life’s numerous requests.
¶ 10 Eventually, in May 2013, Tsichlis sued Country Life, alleging breach of contract,
negligence, and bad faith. Country Life filed a counterclaim for declaratory judgment, arguing that
Tsichlis had not provided the necessary information to pay benefits, and, in any event, John had
committed suicide within two years of issuance, thereby limiting Tsichlis to a refund of the paid
premiums. Country Life attached a copy of John’s death certificate, listing John’s cause of death
as “gunshot wound to the head” and manner of death as “suicide.” Country Life answered the
complaint, including the affirmative defense that John committed suicide.
¶ 11 After trial, the trial court rejected Country Life’s contention that Tsichlis did not provide
“due proof,” finding that the policy did not require her to give any particular documentation. And,
in any event, no evidence established her failure to provide the documentation prejudiced Country
Life. Tsichlis v. Country Life Insurance Company, 2018 IL App (1st) 170826, ¶ 27. Additionally,
the trial court found that Country Life had not proven suicide by clear and convincing evidence
and entered judgment in favor of Tsichlis for $700,000 plus prejudgment interest. Id.-3-
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¶ 12 On direct appeal, this Court reversed outright due to John’s suicide within the two-year
contestability term. Id. ¶¶ 36-38. Shortly after our decision, Tsichlis provided Country Life with a
redacted copy of Tsichlis’ death certificate, redacted autopsy results, and a completed W-9 tax
form. Country Life denied the claim. In May 2019, Tsichlis again sued, seeking a declaration of
her rights to the entire $700,000.
¶ 13 Tsichlis alleged that she provided Country Life with paperwork on September 27, 2018.
Still, Country Life’s attorneys declined to process the claim or make any payments while
acknowledging receipt of the W-9, death certificate, and autopsy report.
¶ 14 The policy provided:
“We agree to pay the Face Amount to the Beneficiary when we receive due proof that the
Insured’s death occurred while this policy was in full force. This payment and any other
policy benefit is subject to the terms of this policy which are contained on this and the
following pages.”
¶ 15 Tsichlis sought Declaratory Judgment. In the first count, Tsichlis sought $700,000 plus
interest, contending that the trial court’s January 4, 2017 order established Country Life did not
prove that the “suicide exclusion” was a proper basis to deny plaintiff’s claim for the full limits of
the policy. She also alleged that this Court’s 2018 opinion required her to first tender “due proof”
that Tsichlis had died as a condition precedent. Finally, she alleged that she complied with the
“procedural” requirement of “due proof” by providing Country Life with a copy of the redacted
death certificate and autopsy results.
¶ 16 The second count alleged bad faith. Tsichlis asserted Country Life’s conduct in responding
to her 2018 claim constituted unreasonable and vexatious conduct under section 155 of the Illinois
Insurance Code. 215 ILCS 5/155 (West 2018). She alleged that Country Life refused to pay her
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claim without a bona fide dispute as to coverage and that it failed to make a reasonable attempt to
resolve the claim once liability had become apparent. Finally, she alleged that she had obtained a
ruling that no basis existed to deny or limit the claim based on the policy’s suicide exclusion, and
had submitted “due proof” of death in 2018 “as directed by the Appellate Court,” but that Country
Life still denied her claim. She alleged the redacted autopsy and reacted death certificate
established “Mr. Tsichlis is dead.”
¶ 17 Country Life moved to dismiss under section 2-619(a)(4) of the Code of Civil Procedure
based on the doctrine of res judicata. 735 ILCS 5/2-619(a)(4) (West 2006. At the hearing, Country
Life’s counsel argued: “[Tsichlis] had no motivation to help Country Life process a claim that
would result in her receiving only the paid premium. That’s the problem. If she had given us an
unredacted death certificate, we tender the return of the premium.”
¶ 18 The trial court granted Country Life’s dismissal motion, concluding: (i) a court of
competent jurisdiction had rendered a final judgment on the merits; (ii) an identity of causes of
action arose from the “same operative facts” (John’s death and the circumstances surrounding his
death); and (iii) an identity of parties existed, which was undisputed. The trial court did not address
Country Life’s section 2-615 motion or the sur-response and sur-reply.
¶ 19 Analysis
¶ 20 Standard of Review
¶ 21 The standard of review from dismissal under section 2-619(a)(4) is de novo. Morris B.
Chapman & Associates v. Kitzman, 193 Ill. 2d 560, 565 (2000).
¶ 22 Motion to Dismiss
¶ 23 Under section 2-619, we accept all well-pleaded facts in the complaint as true and draw all
reasonable inferences from those facts in favor of the nonmoving party. Snyder v. Heidelberger,
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2011 IL 111052, ¶ 8. Section 2-619(a)(4) permits involuntary dismissal where other affirmative
matters bar the claim by defeating or avoiding its legal effect, including the doctrine of res judicata.
735 ILCS 5/2-619(a)(4) (West 2018); Yorulmazoglu v. Lake Forest Hospital, 359 Ill. App. 3d 554,
558 (2005). The doctrine has three requirements: (i) a final judgment on the merits rendered by a
court of competent jurisdiction; (ii) an identity of causes of action; and (iii) an identity of parties
or their privies. River Park, Inc. v. City of Highland Park, 184 Ill. 2d 290, 302 (1998). The bar to
a later lawsuit “extends to what was actually decided in the first action, as well as those matters
that could have been decided in that suit.” Id. On appeal, we determine whether the existence of a
genuine issue of material fact should have precluded the dismissal or, absent an issue of fact,
whether dismissal is proper as a matter of law. Sandholm v. Kuecker, 2012 IL 111443, ¶ 55.
¶ 24 Tsichlis’s premise appears in the first sentence of her opening brief: “The only issue the
Illinois Appellate Court determined with respect to Plaintiff’s prior 2012 Claim *** was that it
was premature because a condition precedent had not been met specifically, that Mrs. Tsichlis had
not provided ‘due proof’ of death.” This theme repeats throughout her briefs. Yet, in light of
Tsichlis I, her interpretation is fiction. The 2013 and 2019 complaints present causes of action
arising from the same operative facts–-John’s death, his life insurance policy’s suicide exclusion,
his death certificate, and Country Life’s denial of benefits. Moreover, our decision in Tsichlis I
nowhere indicates that the lawsuit was “premature.” Tsichlis’s non-cooperation in the first lawsuit
ultimately resulted in an outright reversal.
¶ 25 Life Insurance Policy Proceeds
¶ 26 Tsichlis argues the 2019 lawsuit was a “separate and independent claim” and not barred by
a prior judgment or the doctrine of res judicata. Country Life maintains the trial court properly
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dismissed Tsichlis’s 2019 lawsuit arguing that Tsichlis I reversed the trial court’s finding that
plaintiff had provided “due proof” of death as required by the policy. Id., ¶ 38.
¶ 27 We agree with Country Life. Tsichlis I did not pertain to procedural or technical defects.
2018 IL App (1st) 170826, ¶¶ 3, 31-38. As we stated, “The policy contains explicit language
limiting the benefit if the insured committed suicide within two years of issue. We must consider
the suicide clause equally relevant when considering whether due proof has been given. Country
Mutual Insurance v. Livorsi Marine, Inc., 222 Ill. 2d 303, 311 (2006) (“insurance policy must be
construed as whole, giving effect to every provision”).” Id. ¶ 36.
¶ 28 Illinois applies the “transactional test” to determine whether two suits assert the same cause
of action. River Park, Inc., 184 Ill. 2d at 311. Under this test, different theories of relief constitute
a single cause of action if a single group of operative facts gives rise to the assertion of relief. Don
Scaffolds Enterprises v. Concept I, Inc., 316 Ill. App. 3d 993, 996 (2000). To determine whether
the separate claims arise from a single set of operative facts, we weigh “whether the facts are
related in time, space, origin, or motivation, whether they form a convenient trial unit, and whether
their treatment as a unit conforms to the parties’ expectations or business understanding or usage.”
First Midwest Bank v. Cobo, 2018 IL 123038, ¶ 19 (quoting Restatement (Second) of Judgments
§ 24, at 196 (1982)). When the doctrine applies, it bars all matters to sustain or defeat a claim in
the first action and all that could have been offered. Ross Advertising, Inc. v. Heartland Bank &
Trust Co., 2012 IL App (3d) 110200, ¶ 30.
¶ 29 Thus, even if Tsichlis had a different theory or sought other relief, res judicata applies. See
Singer v. Brookman, 217 Ill. App.3d 870, 877 (1991) (“Plaintiffs’ actions are really just a different
means to the same end and are identical for purposes of res judicata.”).
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¶ 30 The two complaints propound causes of action arising from the same operative facts.
Despite the attempt to differentiate them, the complaints allege the same underlying injury
resulting from the same occurrence. The finality of this court’s holding could not have been more
explicit—outright reversal without remand. Our inquiry does not end, however.
¶ 31 Exceptions
¶ 32 We must consider potential exceptions to the doctrine of res judicata. In Altair Corp. v.
Grand Premier Trust and Investment, Inc., 318 Ill. App. 3d 57 (2000), cited by Tsichlis, outlined
three exceptions to the doctrine: (i) the judgment in the first action is inconsistent with the equitable
implementation of a statutory scheme; (ii) the wrong suffered by the plaintiff is recurrent or
ongoing; or (iii) the plaintiff clearly and convincingly shows that the policies favoring preclusion
are overcome for some extraordinary reason. Id. at 63.
¶ 33 Tsichlis’s attempt to revive the identical claim fails unless one of the exceptions applies.
Tsichlis insists that res judicata yields a “harsh result,” and advances all three exceptions.
¶ 34 “Condition Precedent”
¶ 35 According to Tsichlis, she fulfilled a “condition precedent” to her claim by submitting the
autopsy report, relying on cases holding that res judicata does not bar a claim after a condition
precedent has been satisfied. Tsichlis cites Pratt v. Baker, 79 Ill. App.2d 479 (1967), where the
time for performance had not yet arrived. Id. at 482. Pratt established exceptions to the application
of res judicata where the time for performance by the defendant has not yet arrived or where
plaintiff has not performed a condition precedent to recovery. Id. Pratt is inapposite. The time for
performance arrived with the submission of the first insurance claim in 2012 and reversal without
remand in Tsichlis I precluded this exception from Tsichlis’s attempt to revive her earlier claims
in the 2018 lawsuit.
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¶ 36 “Ongoing Breach”
¶ 37 Next, Tsichlis submits that the basis of this lawsuit involves an “ongoing and reoccurring
breach” because “[t]he wrong suffered by the plaintiff (non-payment of her death benefit claim) is
ongoing as there has been no resolution of her claim.” Relying on D’Last Corp. v. Ugent, 288 Ill.
App. 3d 216, 224 (1997), Tsichlis argues that “claims for continuing conduct complained of in the
second lawsuit that occur after judgment has been entered in the first lawsuit” are not barred.
¶ 38 We first address Country Life’s argument that Tsichlis forfeited the issue of an ongoing
breach of the contract by neglecting to raise it before the trial court until the motion for
reconsideration. The record refutes Country Life’s contention. The issues raised on appeal figure
in the complaint, where Tsichlis alleges Country Life “continue[d] to deny [Tsichlis’s] claim for
benefits under the policy” and “the denial is ongoing.” Tsichslis urged these points in opposing
Country Life’s motion to dismiss and included them in the motion for reconsideration. While the
trial court did not consider the argument, the trial court’s inaction does not amount to forfeiture.
¶ 39 Turning to the issue, we find D’Last inapplicable. The statute then permitted a single
refiling of a voluntarily dismissed action, notwithstanding that a federal complaint contained
federal claims not pled in the state action. In D’Last, the plaintiff voluntarily dismissed the original
state lawsuit, and the court held a later federal complaint constituted a “refiling” of the state action.
¶ 40 The incompatibility of the procedural postures aside, the case on which D’Last rests,
Lawlor v. National Screen Service Corp., 349 U.S. 322 (1955). There, the new action named five
new defendants. The Lawlor court stated: “While the [prior] judgment precludes recovery on
claims arising prior to its entry, it cannot be given the effect of extinguishing claims which did not
even then exist and which could not possibly have been sued upon in the previous case.”
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¶ 41 Unlike in D’Last and Lawlor, when filing the earlier case, Tsichlis had available to her all
necessary facts. And she cites nothing to support that the denial of life insurance proceeds in the
event of suicide initiates an “ongoing” wrong.
¶ 42 “Balance Of Equities”
¶ 43 Finally, Tsichlis seeks an exception because “there is no question that the widow is owed
some benefit, and it would be unjust and against public policy to deny her that.” Though we
sympathize with this family’s loss, the legal reality of the policy’s terms demands otherwise. We
reversed without remand after unequivocally holding Tsichlis had not fulfilled her responsibility.
Tsichlis I, ¶ 37 (“The policy states that Country Life will pay the benefit when it ‘receive[s]’ the
due proof. Its responsibility to investigate the claim further only starts after receiving that due
proof. That Country Life obtained the death certificate after Tsichlis sued it does not obviate her
responsibility under the policy before suit.”) In addition, Tsichlis had been made aware that the
suicide clause would prevent her from receiving the full death benefits. Id. ¶¶ 23, 37.
¶ 44 Tsichlis cites Adams v. Pearson, 411 Ill. 431 (1952), a case with “peculiar facts” in which
the appellate court reversed and remanded but cautioned that “[t]his case, in which both parties
would be barred by ordinary application of the rules of res judicata with an unsatisfactory and
perhaps inequitable result, presents a unique and nonrecurrent situation.” Id. at 442. (Adams is a
1952 case about a 1942 real estate transaction.)
¶ 45 Under no circumstances would Country Life be obliged to pay the full death benefit after
a suicide during the two-year exclusion. Indeed, rather than submit the required paperwork,
Tsichlis sued. It matters not whether this maneuver sought to sidestep the exclusion or simply a
gamble to receive the full benefit.
¶ 46 The operative facts, parties, and final adjudication satisfy the requirements of res judicata.
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¶ 47 Premiums Refund
¶ 48 The question remains regarding the refund of the paid premiums paid.
¶ 49 Country Life requested a copy of Tsichlis’ death certificate to process the claim and refund
the paid premiums—the limited benefit available under a suicide clause. Country Life asserts, “As
the pleadings did not frame any issue regarding the premium, the alleged “windfall” was not
properly before the trial court and not properly raised on appeal.” Conversely, at oral argument,
Country Life argued that Tsichlis did not properly submit her claim due to reactions, but if she
had, she would be entitled to receive the premiums. Whether or not the documents submitted had
redactions is irrelevant under these facts.
¶ 50 Tischlis asserts it would be fundamentally unfair to deny the life insurance proceeds as
well as the premiums. We agree. The insurance contract requires a refund of premiums on denial
of the death benefit. By retaining the premiums, Country Life secured a windfall.
¶ 51 At oral argument, County Life argued that Tsichlis chose how to litigate her claim and did
not request the return of the premiums, but her brief belies this notion. Tsichlis argued, “The
question before the Court in this lawsuit is: in light of Plaintiff’s satisfaction of the condition
precedent and ongoing breach, whether Country Life has an obligation to pay either a full death
benefit or a limited death benefit–but there is no question that the widow is owed some benefit and
it would be unjust and against public policy to deny her that.” At oral argument, Tischlis responded
that she sought a declaration that Country Life should refund the premiums.
¶ 52 Country Life’s persistent refusal to process the claim constitutes an ongoing breach. Citing
a medical malpractice case, Country Life argues that involuntary dismissal operates as an
adjudication on the merits. See DeLuna v. Treister, 185 Ill. 2d 565, 574-79 (1999) (res judicata barred
second lawsuit against physician after first lawsuit dismissed for failure to file affidavit of health
professional to medical malpractice complaint and failure to seek leave of court to refile complaint).
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But unlike medical malpractice cases, Tsichlis had an enforceable insurance contract with Country
Life on refund of the premiums.
¶ 53 Section 155
¶ 54 Country Life’s counsel stated in the trial court that it would “process the claim” only if it
had a copy of the “unredacted” death certificate. But the insurance policy obligates Country Life
to refund paid premiums if it invokes the suicide clause.
¶ 55 Country Life’s continuing refusal to return the premiums implicates section 155 of the
Insurance Code (215 ILCS 5/155 (West 2018)). That section confers a contractual remedy against
an insurer’s refusal to pay a claim under a valid insurance policy “in a vexatious and unreasonable
manner.” Cramer v. Insurance Exchange Agency, 174 Ill. 2d 513, 520 (1996).
¶ 56 Under Section 155, an insured or an assignee may recover damages if (i) the insurer
disputes the amount of the loss payable on a claim, delays settling a claim, or refuses to provide
coverage and (ii) the insurer’s action or delay was unreasonable and vexatious. See 215 ILCS
5/155 (West 2018). Count II alleges unreasonable and vexatious conduct under section 155 in
regard to Country Life’s response to her 2018 claim constituted. Id.¶ 57 The question of bad faith is decided by the factfinder. Haddick ex rel. Griffith v. Valor Ins.,
198 Ill. 2d 409, 419 (2001)). The Supreme Court addressed the issue of when an insurance
provider’s duty to settle arises in Haddick, holding: “The duty does not arise at the time the parties
enter into the insurance contract, nor does it depend on whether or not a lawsuit has been filed.
Id. at 417. Rather, the duty arises “when a claim has been made against the insured and there is a
reasonable probability of recovery in excess of policy limits and a reasonable probability of a
finding of liability against the insured.” Id. To survive a motion to dismiss a bad-faith claim, the
plaintiff must allege facts sufficient to establish the existence of the duty to settle in good faith. Id.-12-
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¶ 58 Given Country Life’s recognition of the right to a refund of the premiums paid on the policy
and its persistent refusal to issue a refund, the delay is potentially “vexatious and unreasonable”
within the statute’s meaning. There was no bona fide dispute as to the provision on refund of paid
premiums. The claims examiner for Country Life requested the insurance agent “to arrange for
[Tsichlis] to provide a death certificate and to fill out some Country Life forms so that Country
Life could refund the premiums paid on John’s policy.” Tsichlis, 2018 IL App (1st) 170826 ¶ 13.
Country Life filed a counterclaim for declaratory judgment, arguing Tsichlis should receive only
the limited benefit of the return of the premiums. Id. ¶ 16.
¶ 59 We hold that dismissal of Count II was error and remand for further proceedings in accord
with this opinion. As stated above, whether an insurer exercised bad faith presents a question for
the finder of fact. See Haddick, 198 Ill. 2d at 419. Accordingly, we do not decide whether Country
Life breached its duty of good faith when it refused to refund the premiums. Instead, we reverse
the trial court’s decision and remand to the trial court, holding that Tsichlis can maintain a cause
of action for bad faith.
¶ 60 Affirmed in part, reversed in part, and remanded.
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