Cook v. AAA Life Insurance Co.

Illinois Official Reports
Appellate Court
Cook v. AAA Life Insurance Co., 2014 IL App (1st) 123700
Appellate Court BRIANNAH COOK, a Minor, By and Through BRUCE COOK, Her
Caption Father and Next Friend, Plaintiff-Appellant, v. AAA LIFE
INSURANCE COMPANY, Defendant-Appellee.
District & No. First District, First Division
Docket No. 1-12-3700
Filed June 9, 2014
Held In an action arising from defendant insurer’s failure to promptly pay a
(Note: This syllabus claim on a policy insuring the life of plaintiff’s mother when she
constitutes no part of the drowned in a boating accident a few days after paying the delinquent
opinion of the court but premiums on the policy, the trial court’s judgment finding that the
has been prepared by the insurer was only responsible for paying the face amount of the policy
Reporter of Decisions was affirmed and the denial of any statutory penalties or sanctions
for the convenience of under Supreme Court Rule 137 was not an abuse of discretion in the
the reader.) absence of evidence that the insurer was guilty of intentional
misrepresentation or bad faith.
Decision Under Appeal from the Circuit Court of Cook County, No. 05-CH-21326; the
Review Hon. James R. Epstein and the Hon. Michael B. Hyman, Judges,
presiding.
Judgment Affirmed.
Counsel on Barbara Revak, of Cook, Revak & Associates, Ltd., of Chicago, for
Appeal appellant.
Creed T. Tucker, of Tucker Robin & Merker, LLC, of Chicago, for
appellee.
Panel JUSTICE DELORT delivered the judgment of the court, with opinion.
Justice Hoffman concurred in the judgment and opinion.
Justice Cunningham specially concurred, with opinion.
OPINION
¶1 An insured mother died in a tragic accident just a few days after she had fortuitously paid
up the delinquent premiums on a life insurance policy payable to her three-year-old daughter.
An innocuous mix-up at the insurance company over that last-minute payment precipitated an
avalanche of litigation. Although the company offered to pay on the policy, the daughter’s
father and grandfather, both attorneys, refused the offer and demanded substantial penalties
from the company over the brief payment delay. Along the way, the grandfather’s law firm
took one-third of the girl’s insurance policy proceeds as a contingency fee. We agree with the
two chancellors who heard the case below that the insurance company was only responsible to
pay the face amount of the policy and therefore affirm.
¶2 BACKGROUND
¶3 Briannah Cook, a minor, sued defendant AAA Life Insurance Company (AAA Life)
through her father, Bruce Cook (Bruce). The suit concerned a life insurance policy issued for
Briannah’s benefit on the life of Bruce’s late wife and Briannah’s mother, Camille Cook
(Camille). The complaint alleged four claims, including violations of the Illinois Consumer
Fraud and Deceptive Business Practices Act (Consumer Fraud Act) (815 ILCS 505/1 et seq.
(West 2000)) (counts I and IV), breach of contract (count II), and damages for vexatious and
unreasonable delay in settling an insurance claim under section 155 of the Illinois Insurance
Code (215 ILCS 5/155 (West 2000)) (count III). The court below granted summary judgment
for AAA Life on counts I, II, and IV. AAA Life also prevailed after a bench trial on count III.
The court also denied Bruce’s motions to join additional parties and amend his complaint and
for sanctions. Bruce has appealed virtually every substantive order rendered against him.
¶4 The facts adduced through summary judgment and at trial are essentially uncontested. In
August 2002, Camille applied for a $200,000 life insurance policy from AAA Life, naming
Briannah as the beneficiary. AAA Life accepted the application and issued the policy to
Camille. In May 2005, AAA Life mailed Camille a reminder that she must pay $67.50 for three
months of premiums, due on May 14, 2005. The notice stated:
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“TO CONTINUE YOUR INSURANCE WITH ITS VALUABLE PROTECTION
YOU MUST PAY THE AMOUNT DUE BEFORE THE END OF THE GRACE
PERIOD WHICH EXPIRES JUNE 15, 2005.”
Camille did not pay this premium before June 15, 2005. In July 2005, Camille sent a check for
$135 to AAA Life, and the check was duly honored and paid by her credit union on July 19,
2005. Five days later, on July 24, Camille drowned in a boating accident.
¶5 On July 26, 2005, Bruce informed AAA Life of his wife’s death. The AAA Life agent told
Bruce that the policy had lapsed for nonpayment and no restorative payment had been made
after the lapse date. It was not until making further investigation that Bruce discovered an entry
for Camille’s July 2005 payment in her check register.
¶6 On July 28, 2005, Juna Putvin, an AAA Life customer service representative, who was
unaware of Camille’s death, wrote Camille that because her “premium payment ha[d] not been
received and the grace period ha[d] expired,” her coverage was “now in lapse status as of May
14, 2005.” Putvin’s letter stated that AAA Life “would consider” reinstating the policy if
Camille submitted a reinstatement application to AAA Life “for approval.” The letter
concluded with an admonition that “until reinstatement has been approved by our
Underwriting Department your coverage will remain lapsed.”
¶7 On August 30, 2005, Rufus Cook (Rufus), Bruce’s father and an attorney, wrote to AAA
Life making a claim on the policy and advising it that Bruce and Briannah were being
represented by Rufus’s law firm, Cook & Revak, Ltd. (the Cook firm). Rufus included a copy
of Camille’s final check to AAA Life showing the July 19, 2005, processing date.
¶8 On September 16, 2005, Brenda White, an AAA Life claims representative, responded to
Rufus’s letter, stating the policy had lapsed for nonpayment of premiums prior to Camille’s
death. She also stated that the reinstatement form was sent on July 28, 2005 and because
Camille was already deceased at that time and therefore unable to complete the application, the
policy “could not be reinstated and therefore remained lapsed,” and the premium would be
refunded. AAA Life mailed the refund to the Cook firm on September 21, 2005. On the same
day, Brenda told Rufus that he would need to send a formal demand letter to her manager,
Sherry Young, who would then forward the letter to AAA Life’s legal department.
¶9 On September 23, 2005, Bruce signed a contingent fee agreement with the Cook firm on
behalf of Briannah, agreeing to pay the firm (1) one-third of the policy proceeds from any
settlement with AAA Life that occurred before filing a lawsuit, or (2) 40% of any settlement or
judgment if it was necessary to file a lawsuit. On October 11, 2005, Rufus sent an unfiled class
action complaint to Brenda along with the $135 AAA Life check. The letter demanded full
payment of the policy and indicated that AAA Life might be liable for an additional 60%
statutory penalty and other damages.
¶ 10 On October 21, 2005, Diane Coudurier, an assistant general counsel for AAA Life, sent an
internal email to Brenda stating that there was no basis to deny coverage under the policy. She
noted that the policy was “in force at the time of death,” was “not contestable” and “would be
payable without investigation” because the premium check cashed by AAA Life brought the
coverage up to date and there was “no indication that the insured’s health had changed.” She
asked for an immediate response “to keep the lawsuit from being filed.”
¶ 11 Brenda then advised Diane to contact Sherry and Diane responded: “If Sherry approves I
will send the claim form out with my letter to the attorney, since he is handling this matter for
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the beneficiary.” On the same day, Diane wrote a letter to Rufus advising him that AAA Life
acted reasonably when it initially found that evidence of insurability was not met. However,
upon full consideration of the relevant facts, including that the death was accidental, she had
recommended that coverage be granted upon completion of an enclosed application.
¶ 12 That did not satisfy the Cook family, however. On November 3, 2005, Rufus responded to
Diane’s letter, acknowledging AAA Life’s offer to pay the $200,000 policy proceeds, but
demanding AAA Life resolve Bruce’s claims for $485,000, including the face amount of the
policy with prejudgment interest, the $60,000 “provided by statute for such cases” and
$100,000 in “exemplary damages.” The letter stated that AAA Life’s representative had
“falsely” stated that the policy had lapsed even though it had already cashed the premium
check. It claimed that AAA Life’s failure to disclose its knowledge that the premium was paid
was “fraudulent as a matter of law.” The letter rejected payment of the policy, noting that
Briannah’s net proceeds were now diminished because of the contingency fee. The letter went
on to threaten AAA Life with an additional claim for violation of state consumer protection
laws.
¶ 13 Because life insurance proceeds in such a large amount cannot be paid directly to a minor,
AAA Life inquired about the existence of Briannah’s minor’s estate. Rufus sent a second letter
to Brenda on November 3, admitting that he could not provide any conservatorship or
guardianship papers for Briannah because no such documents existed. AAA Life explained
that it would not pay Cook the policy proceeds unless a trust was established for Briannah’s
benefit. Rufus provided AAA Life with a declaration of trust executed by Bruce, but a few
days later, he wrote to Diane expressing his dissatisfaction with her handling of the claim.
After receiving no response, the Cook firm filed this lawsuit on December 12, 2005.
¶ 14 Bruce moved for a temporary restraining order against AAA Life, but the court suggested
that a guardian should be appointed for Briannah through the probate court. A week later,
Bruce filed a petition in probate court seeking to be appointed as the guardian of Briannah’s
estate. On that same day, the Cook firm sent AAA Life’s counsel notice of an attorney’s lien on
40% of the policy proceeds. On January 10, 2006, the probate court issued letters of office
appointing Bruce as guardian of Briannah’s estate.
¶ 15 On January 31, 2006, AAA Life filed a petition to adjudicate lien in the probate case. AAA
Life sought to pay the $200,000 to Briannah’s estate and requested that the court direct the
estate to make any distributions. The probate court declined to adjudicate the attorney’s lien,
finding the matter was subject to jurisdiction of the chancery court. AAA Life then filed an
interpleader counterclaim in this case seeking to deposit the policy proceeds with the court. On
the same day, Bruce filed a citation to recover assets in the probate case. As part of the
agreement resolving the citation, AAA Life tendered a $200,000 draft to Bruce in his capacity
as the guardian of Briannah’s estate.
¶ 16 The Cook firm then sought court approval of its contingency fee. The probate court
appointed a guardian ad litem to determine the amount of attorney fees the Cook firm could
take from Briannah’s estate. On the recommendation of the guardian ad litem, the probate
court entered an order awarding the Cook firm $66,666.66 in attorney fees. The parties then
proceeded to litigate Bruce’s complaint and AAA Life’s affirmative defenses in the chancery
case.
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¶ 17 The summary judgment proceedings primarily examined whether the policy had lapsed at
the time of Camille’s death. Two different contracts were at issue: the group insurance
certificate issued to Camille and the group term, life insurance policy. The certificate states
that “[t]his certificate is a legal contract between the Certificateholder [Camille] and AAA Life
Insurance Company.” The certificate further provides, “This certificate, with a copy of the
application and any attached riders form the entire contract.” As to nonpayment of premiums,
the certificate states:
“Grace Period
We will allow a thirty-one (31) day grace period for all premiums due, except the
first one. During this period the coverage will remain in force. If the premium due is not
paid by the end of the grace period, the coverage provided by the Certificate will lapse.
All insurance ends when the Certificate lapses. If Your death occurs during the grace
period, We will deduct from the amount otherwise payable, that part of the unpaid
premium which is applicable to the grace period.
Reinstatement of Insurance
If We terminate insurance for non-payment of premium, You may reinstate
coverage within ninety (90) days following the last unpaid premium due date. You
must pay all overdue premiums and provide Us with satisfactory Evidence of
Insurability. The reinstated Certificate will not cover a loss which occurred during the
lapse period.”
The certificate defines “Evidence of Insurability” as “proof satisfactory to Us that an Insured is
an acceptable risk under the Group Policy.” The certificate defines “Group Policy” as the
“Group Life Insurance Policy bearing the number LTL-97” and “issued to the Policyholder by
Us.” The certificate further provides that “[i]f there is a difference between the provisions of
this Certificate and the Policy, the provisions of the Policy will govern.”
¶ 18 The group policy is a contract between AAA Life and the American Automobile
Association (the Association) which reads in part:
“Entire Contract
This Policy, its appendices, endorsements, riders, and the application made by the
Policyholders (a copy of which is attached), and the Certificate, applications made for
insurance, riders and any endorsements, form the entire contract between the Company
[AAA Life] and the Policyholder [the Association].”
The group policy also states:
“AAA Life Insurance Company *** has issued this Policy in consideration of the
Policyholder’s [the Association] application and the payment of premiums, and agrees
to pay the benefits as stated herein.
This Policy issues to the Policyholder and any papers made a part of it, including
the application for this Policy, and each application for Certificate of Insurance are part
of this agreement.”
The group policy allows AAA Life to issue certificates to eligible members of the Association:
“Certificate of Group Insurance
We will provide an individual Certificate of Group Insurance (Certificate) for issue
to each Insured whose application for insurance has been approved by Us. The
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Certificate is a summary of the insurance under this Policy. The Certificate along with
any attached riders, and a copy of the Insured’s application for insurance under this
policy for the entire contract.
***
If there is a difference between the provisions of this Policy and a Certificate, the
provisions of this Policy will govern.”
The grace period and reinstatement provisions in the group policy are virtually identical,
except that the group policy does not require the insured to “provide [AAA Life] with
satisfactory Evidence of Insurability” to reinstate the insurance after the grace period.
¶ 19 The evidence showed that premium payments mailed to AAA Life are sent to a post office
box, where all the checks are automatically processed by a bank. The money then goes to one
of two places. If the certificate or policy number, the due date, and the frequency of payment
are all satisfactory, the payment is deposited in AAA Life’s premium account. However, if
there is an issue with the check or certificate, the bank places the funds into a suspense account.
AAA Life then reviews its suspense reports to determine why funds were rejected into the
suspense account. Here, because AAA Life believed that Camille’s certificate had lapsed for
nonpayment of premiums and required a new application, Camille’s July 2005 payment was
rejected and placed into the suspense account.
¶ 20 Judge Epstein denied Bruce’s motion for summary judgment on counts I, II, and III of his
complaint and granted AAA Life’s cross-motion for summary judgment on counts I, II, and
VI. He determined there were issues of genuine material fact as to count III, the sole remaining
claim. Judge Hyman later denied AAA Life’s own motion for summary judgment on count III
and denied Bruce’s motion to add parties and to amend the complaint. The matter proceeded to
a bench trial before Judge Hyman on February 29, 2012.
¶ 21 After trial, Judge Hyman entered judgment in favor of AAA Life and against Bruce on
count III, and denied Bruce’s motion for sanctions. Later, he denied Bruce’s additional
posttrial motion for sanctions against AAA Life and its attorney. This appeal, which requests
us to reverse virtually every decision made by the two trial judges, followed.
¶ 22 ANALYSIS
¶ 23 Summary Judgment on Counts I and IV
¶ 24 The construction of an insurance policy and the determination of the parties’ rights and
obligations thereunder are questions of law appropriate for resolution by summary judgment.
Continental Casualty Co. v. Donald T. Bertucci, Ltd., 399 Ill. App. 3d 775, 776 (2010) (citing
Zurich Insurance Co. v. Raymark Industries, Inc., 118 Ill. 2d 23, 58 (1987)). “ ‘Summary
judgment is proper if, when viewed in the light most favorable to the nonmoving party, the
pleadings, depositions, admissions, and affidavits on file demonstrate that there is no genuine
issue as to any material fact and that the moving party is entitled to judgment as a matter of
law.’ ” Farmers Automobile Insurance Ass’n v. Danner, 2012 IL App (4th) 110461, ¶ 30
(quoting Lazenby v. Mark’s Construction, Inc., 236 Ill. 2d 83, 93 (2010)). We review the trial
court’s decision to grant or deny a motion for summary judgment de novo. Id. (citing
Millennium Park Joint Venture, LLC v. Houlihan, 241 Ill. 2d 281, 308 (2010)); see also Joe
Cotton Ford, Inc. v. Illinois Emcasco Insurance Co., 389 Ill. App. 3d 718, 720 (2009) (finding
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review of a grant of summary judgment in an action for declaratory judgment is reviewed
de novo).
¶ 25 The purpose of summary judgment is to determine whether triable issues of fact exist and is
proper where the pleadings, depositions, and admissions on file, together with any affidavits
and exhibits, when viewed in the light most favorable to the nonmoving party, establish there is
no genuine issue of material fact and the moving party is entitled to judgment as a matter of
law. O’Connell v. Turner Construction Co., 409 Ill. App. 3d 819, 822 (2011) (citing Busch v.
Graphic Color Corp., 169 Ill. 2d 325, 333 (1996)).
¶ 26 When reviewing a trial court’s grant of summary judgment de novo, we are “limited to
deciding whether the [trial] court correctly concluded that no genuine issue of material fact had
been raised and, if none was raised, whether judgment as a matter of law was appropriate.”
Chicago Transit Authority v. Clear Channel Outdoor, Inc., 366 Ill. App. 3d 315, 323 (2006)
(citing William Blair & Co. v. FI Liquidation Corp., 358 Ill. App. 3d 324, 333 (2005)). An
issue is “genuine” only if there is evidence to support the position of the nonmoving party.
N.W. v. Amalgamated Trust & Savings Bank, 196 Ill. App. 3d 1066, 1075 (1990). To determine
whether a genuine issue of material fact exists, we “must construe the evidence strictly against
the movant and liberally in favor of the opponent.” Chicago Transit Authority, 366 Ill. App. 3d
at 323 (citing William Blair & Co., 358 Ill. App. 3d at 333).
¶ 27 Bruce argues that the trial court’s grant of summary judgment in favor of AAA Life on the
Consumer Fraud Act counts I and IV was in error. He asserts the trial court incorrectly
analyzed the procedure for reinstating Camille’s coverage by characterizing the conflict
between the policy and the certificate as a mere “disagreement,” when the policy’s more
generous provisions clearly governed. Bruce explains that AAA Life had a duty to follow the
policy’s reinstatement requirements but misrepresented the requirements for reinstating
coverage and denied coverage on that basis. He also argues that the two counts properly
alleged that AAA Life knowingly misrepresented the terms of the policy, failed to implement
procedures for prompt investigation and settlement of claims, and refused to pay the claim
without conducting a reasonable investigation. Furthermore, Bruce contends that the trial
court’s reasoning for finding that these claims are preempted by section 155 of the Insurance
Code was erroneous because recovery is permitted not only for deceptive conduct, but also for
unfair conduct.
¶ 28 “[I]t is settled that the Consumer Fraud Act was not intended to apply to every contract
dispute or to supplement every breach of contract claim with a redundant remedy.” Zankle v.
Queen Anne Landscaping, 311 Ill. App. 3d 308, 312 (2000). Thus, “[a] breach of contract,
without more, is insufficient to sustain a cause of action cognizable under the Consumer Fraud
Act.” Brody v. Finch University of Health Sciences/The Chicago Medical School, 298 Ill. App.
3d 146, 159 (1998) (citing Lake County Grading Co. of Libertyville, Inc. v. Advance
Mechanical Contractors, Inc., 275 Ill. App. 3d 452, 459 (1995)). The Consumer Fraud Act
prohibits, in the course of trade or commerce:
“Unfair methods of competition and unfair or deceptive acts or practices, including but
not limited to the use or employment of any deception, fraud, false pretense, false
promise, misrepresentation or the concealment, suppression or omission of any
material fact, with intent that others rely upon the concealment, suppression or
omission of such material fact.” 815 ILCS 505/2 (West 1992).
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The elements of a cause of action under the Consumer Fraud Act include: “(1) a deceptive act
or practice; (2) the intent that the plaintiff rely on the deception; and (3) that the deception
occurred in the course of trade or commerce.” Zankle, 311 Ill. App. 3d at 311-12.
¶ 29 Bruce did not establish a claim under the Consumer Fraud Act because he did not identify
any “deceptive act.” Camille’s policy states: “If a premium due is not paid by the end of the
grace period, the coverage provided by the Certificate will lapse.” Camille’s policy lapsed for
nonpayment when she failed to pay her overdue premiums before June 15, 2005, the end of her
grace period. The key issue is whether Camille’s July 2005 payment effectuated reinstatement
of her policy. The policy provides that the insured may reinstate coverage within 90 days
following the last unpaid premium due date, but that the reinstated policy will not cover a loss
which occurred during the lapse period. The certificate also allows reinstatement within 90
days but, in contrast to the policy, requires “Evidence of Insurability” before reinstatement
becomes effective. The policy and certificate indicate that when there is a difference between
the two, the policy controls.
¶ 30 Relying on the certificate, AAA Life initially determined that Camille’s payment did not
reinstate her policy because she did not provide evidence of her insurability. However, Bruce,
relying on the policy, claimed that no such evidence was required to reinstate the policy. Here,
the parties’ disagreement about the procedure for reinstating Camille’s coverage does not
imply that AAA Life engaged in fraudulent or deceptive behavior, implicating the Consumer
Fraud Act. Instead, we agree with the trial court that it constitutes a mere difference of opinion
regarding contract interpretation insufficient to invoke the Consumer Fraud Act. There is no
evidence in the record to suggest that AAA Life had a practice of lying to policyholders about
the receipt of payments or that all of AAA Life’s agents knew that Camille’s payment had been
received and processed at AAA Life’s lockbox. We cannot deem AAA Life’s statements as
rising to the level of deceit or fraud.
¶ 31 Additionally, we agree that the Consumer Fraud Act claim is preempted by section 155 of
the Insurance Code. “[A]n insurer’s conduct may give rise to both a breach of contract action
and a separate and independent tort action.” Cramer v. Insurance Exchange Agency, 174 Ill. 2d
513, 528 (1996) (citing Kelsay v. Motorola, Inc., 74 Ill. 2d 172, 187 (1978)). Section 155
provides an extracontractual remedy when an insurer’s misconduct is vexatious and
unreasonable. Id. at 523. “A plaintiff may bring an independent tort action for insurer
misconduct if the plaintiff alleges and proves the elements of the separate tort.” Young v.
Allstate Insurance Co., 351 Ill. App. 3d 151, 169 (2004) (citing Cramer, 174 Ill. 2d at 528).
“Mere allegations of bad faith or unreasonable and vexatious conduct, without more, however,
do not constitute such a tort. Courts therefore should look beyond the legal theory asserted to
the conduct forming the basis for the claim.” Cramer, 174 Ill. 2d at 528. When the conduct is
merely a breach of contract or conduct proscribed by section 155, a Consumer Fraud Act claim
on that basis is preempted by section 155. Young, 351 Ill. App. 3d at 169 (holding that the
plaintiffs’ Consumer Fraud Act claim was preempted by section 155 because it was a claim for
failure to pay insurance policy proceeds and “[b]ased on Cramer, a separate tort claim is not
necessary and is inapplicable *** because a contractual remedy is available to plaintiffs”).
¶ 32 While AAA Life initially denied coverage, it changed course shortly thereafter and
appropriately paid the proceeds. AAA Life’s conduct was neither inherently deceptive nor
unfair. Accordingly, counts I and IV were preempted by section 155 of the Illinois Insurance
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Code. See also Evans v. International Village Apartments, 165 Ill. App. 3d 1048, 1051 (1988)
(“In Illinois, if the named plaintiff’s personal cause fails, the entire class action must fail.”).
Because there was no genuine issue of material fact with regard to counts I and IV, the court
correctly granted summary judgment to AAA Life on these counts.
¶ 33 Motion to Join Additional Parties
¶ 34 Bruce argues that the trial court erred when it denied his motion to join two defendants,
“American Automobile Association, Heathrow, FL” (the Association), and “Signet Trust
Company, Trustee for AAA Group Insurance Trust, Washington D.C.” (Signet). He moved to
join these defendants about 14 months before trial, arguing they were necessary parties. Bruce
asserts that he should be permitted to join these parties because they owed Camille a fiduciary
duty as her agents. He claims they had a fiduciary duty not to allow “AAA [Life] to impose
different and more stringent reinstatement terms than those set by the [p]olicy and then on that
basis to deny her coverage.” In other words, according to Bruce, they acted in concert with
AAA Life to impose the certificate’s reinstatement policy while ignoring the controlling policy
provisions.
¶ 35 The Code of Civil Procedure provides that any person may be made a defendant who is
alleged to have a claim or interest in the controversy or transaction out of which the
controversy arose, or whom it is necessary to join for the complete determination of any
question involved in the case, or against whom liability is asserted arising out of the same
transaction. 735 ILCS 5/2-405(a) (West 2010). In assessing whether joinder is proper, a court
considers whether the claims arise out of closely related transactions and whether there is in the
case a significant question of law or fact that is common to the parties. Boyd v. Travelers
Insurance Co., 166 Ill. 2d 188, 199 (1995). “A reviewing court will not disturb a trial court’s
ruling on discovery matters unless there is a manifest abuse of discretion.” Atlantic Mutual
Insurance Co. v. American Academy of Orthopaedic Surgeons, 315 Ill. App. 3d 552, 567
(2000) (citing Schneiderman v. Kahalnik, 200 Ill. App. 3d 629, 637 (1990)).
¶ 36 We agree with the trial court’s decision to deny Bruce’s motion to join the Association and
Signet because Bruce presented no significant questions of law or fact that are common to the
parties in this case. While Bruce contends there is an agency connection between these entities,
he failed to produce any hard facts necessary to establish the existence of an agency
relationship between the Association and/or Signet and Camille, nor any purpose such a
relationship would have, but merely assumed that one existed. The policy designates the
Association as the policyholder and does not designate it as AAA Life’s agent. Instead, he
merely claims that these additional defendants had some sort of duty to make sure that the
policy’s terms, and not those of the certificate, were controlling. We know of no such duty and
cannot discern one from the policy documents. Accordingly, the trial court did not abuse its
discretion in denying his motion. Boyd, 166 Ill. 2d at 199.
¶ 37 Motion to Amend Complaint
¶ 38 Bruce asserts that the trial court erred by denying his motion to file a postsummary
judgment amended complaint. Bruce sought to amend counts I though IV of the complaint, and
also moved to add count V, alleging that AAA Life fraudulently misrepresented that the policy
had lapsed and a new application was required for reinstatement. In another proposed claim,
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count VI, he alleged a conspiracy to defraud against AAA Life and also sought to add the
Association as a defendant. He based these proposed amendments on alleged
newly-discovered evidence, including that he did not learn until 2010 after Sandra was
deposed that AAA Life was continuing to apply the certificate’s inapplicable reinstatement
provision. By doing so, Bruce alleged that AAA Life continued to deny coverage to insureds
who paid overdue premiums within the 90-day lapse period (the only requirement specific in
the policy) but who passed away without having submitted a reinstatement application.
¶ 39 The Code of Civil Procedure states in relevant part: “Before or after the entry of a summary
judgment, the court shall permit pleadings to be amended upon just and reasonable terms.” 735
ILCS 5/2-1005(g) (West 2010). In deciding whether a postsummary judgment amendment is
proper, the following four factors are considered: (1) “whether the proposed amendment would
cure the defective pleading,” (2) “whether other parties would sustain prejudice or surprise by
virtue of the proposed amendment,” (3) “the timeliness of the proposed amendment,” and (4)
“whether plaintiff has had previous opportunities to amend the pleadings.” Lewis v. American
Airlines, Inc., 287 Ill. App. 3d 957, 963 (1997) (citing Loyola Academy v. S&S Roof
Maintenance, Inc., 146 Ill. 2d 263, 273 (1992)).
¶ 40 Section 2-1005(g) does not allow a plaintiff to amend a cause of action on which the
defendant was granted summary judgment unless depositions and affidavits indicate that the
plaintiff can replead the claim under another theory. Steinberg v. Dunseth, 276 Ill. App. 3d
1038, 1047 (1995). “As a rule, the circuit court’s ruling to allow or deny an amendment is a
matter of discretion and will not be reversed absent an abuse of discretion.” Board of Directors
of Bloomfield Club Recreation Ass’n v. The Hoffman Group, Inc., 186 Ill. 2d 419, 432 (1999).
A trial court abuses its discretion when it refuses to allow a plaintiff to amend his complaint
when a cause of action can be stated if the amendment is permitted. Moiseyev v. Rot’s Building
& Development, Inc., 369 Ill. App. 3d 338, 343 (2006).
¶ 41 The trial court did not abuse its discretion by denying Bruce’s motion to amend his
complaint. The proposed revisions of counts I through IV still rendered them almost identical
to their predecessors. The court had already disposed of counts I, II, and IV through summary
judgment in favor of AAA Life, and count III was set for trial. There is no indication
whatsoever that repleading of these three counts would have removed the defects that resulted
in their unfavorable disposition through summary judgment. As to Bruce’s fraudulent
misrepresentation claim, count V, he failed to establish detrimental reliance on any alleged
misrepresentation. Cramer, 174 Ill. 2d at 529. The evidence indicates that Bruce did not rely on
AAA Life’s representations that the policy lapsed. Instead, Bruce immediately retained
counsel and began aggressively litigating the reinstatement dispute surrounding Camille’s
policy.
¶ 42 The proposed conspiracy to defraud claim, count VI, alleges a number of unsupported legal
conclusions, including that the Association was a trustee and fiduciary for the group
policyholder’s beneficiaries, the Association is an alter ego of AAA Life, and the Association
has somehow supported AAA Life in violating the terms of the policy. The proposed count
simply did not allege the elements of a conspiracy. Karas v. Strevell, 227 Ill. 2d 440, 466
(2008) (a “[c]ivil conspiracy consists of a combination of two or more persons for the purpose
of accomplishing by some concerted action either an unlawful purpose or a lawful purpose by
unlawful means”).
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¶ 43 Bruce’s motion to amend his complaint was also untimely, as he filed it on September 19,
2011, almost six years after he filed his original complaint on December 12, 2005. The
addition of claims and parties at that late juncture would have required additional discovery
and would have prejudiced AAA Life because the proposed claims depended on evidence
different from that already gathered.
¶ 44 The case of Grove v. Carle Foundation Hospital, 364 Ill. App. 3d 412 (2006), is instructive
on this point. There, the trial court denied a motion for leave to amend the complaint two years
after the original complaint had been filed. In affirming the trial court, the appellate court held
that the evidence supporting the amendment was not “inextricably intertwined” with the
evidence supporting the alleged negligent acts already pled in the original complaint. 364 Ill.
App. 3d at 418. The court noted that the focus is on whether the proposed amendment alters the
nature and qualify of proof required for the defendant to defend the claim. Accordingly, we
find that the trial court did not abuse its discretion in denying Bruce’s motion to amend his
complaint. Cf. Pietka v. Chelco Corp., 107 Ill. App. 3d 544, 557 (1982) (an amendment was
proper because it relied on “essentially the same” evidence as the other claims and could have
been presented without delay).
¶ 45 Bench Trial on the Vexatious Delay Claim
¶ 46 Bruce argues that the trial court erred in granting judgment in favor of AAA Life after trial
on count III, because the evidence showed that AAA Life’s delay in paying the insurance
proceeds was vexatious and unreasonable as contemplated by section 155. Accordingly, Bruce
not only asks us to reverse the order below, but also for $126,666 in statutory attorney fees and
costs under section 155.
¶ 47 The sole issue at trial was whether AAA Life’s settling of Bruce’s claim violated section
155 of the Illinois Insurance Code. That section states, in relevant part:
“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 unreasonable 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, [and] other costs ***.”
(Emphasis added.) 215 ILCS 5/155(1) (West 2012).
By enacting this law, our legislature sought to effectuate a balance between the “individual
insured party’s need for compensation and the broad societal interest in avoiding excessive
damage awards that result in price increases to all policyholders.” Kush v. American States
Insurance Co., 853 F.2d 1380, 1386 (7th Cir. 1988). In other words, its purpose is to punish
insurance companies for vexatiously delaying or rejecting legitimate claims by holding
insurers responsible for the “expense resulting from the insured’s efforts to prosecute the
claim,” and discouraging them from using their “superior financial position by delaying
payment of legitimate contractual obligations” to profit at the insured’s expense. (Emphases in
original and internal quotation marks omitted.) Neiman v. Economy Preferred Insurance Co.,
357 Ill. App. 3d 786, 797 (2005). Thus, “[t]he allowance of fees and penalties under [s]ection
155 is within the judgment and discretion of the trial court, and its determination thereon will
not be disturbed on review absent an abuse of discretion.” Keller v. State Farm Insurance Co.,
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180 Ill. App. 3d 539, 554-55 (1989) (citing National Tea Co. v. Commerce & Industry
Insurance Co., 119 Ill. App. 3d 195, 209 (1983)).
¶ 48 Whether a delay is vexatious and unreasonable is a question of fact that must be assessed
based on the totality of the circumstances, taken in broad focus. Keller, 180 Ill. App. 3d at 555
(citing Fassola v. Montgomery Ward Insurance Co., 104 Ill. App. 3d 825, 832 (1982)).
“Neither the length of time, the amount of money involved, nor any other single factor taken by
itself is controlling in determining if a delay is vexatious or unreasonable.” Id. (citing
Deverman v. Country Mutual Insurance Co., 56 Ill. App. 3d 122, 124 (1977)). In examining
the circumstances, courts have considered factors such as “the insurer’s attitude, whether the
insured was forced to file suit to recover, and whether the insured was deprived of the use of its
property.” Mobil Oil Corp. v. Maryland Casualty Co., 288 Ill. App. 3d 743, 752 (1997).
Additional considerations include whether there is a bona fide dispute concerning coverage,
the extent of the insurance company’s evaluation and investigation of the claim, and the
adequacy of communications between the insurance company and the insured. Buais v.
Safeway Insurance Co., 275 Ill. App. 3d 587, 590-93 (1995).
¶ 49 In those circumstances “where a bona fide dispute concerning coverage exists, costs and
sanctions are inappropriate.” State Farm Mutual Automobile Insurance Co. v. Smith, 197 Ill.
2d 369, 380 (2001). “Bona fide” is defined as “ ‘[r]eal, actual, genuine, and not feigned.’ ”
McGee v. State Farm Fire & Casualty Co., 315 Ill. App. 3d 673, 683 (2000) (quoting Black’s
Law Dictionary 177 (6th ed. 1990)). If an insurance company’s delay is grounded in a
bona fide dispute over coverage, delay will not violate section 155, but that dispute must be
rationally based in fact. Id. at 681. In other words, in order to state a claim under section 155,
an “insured cannot merely allege that the insurer’s conduct was vexatious and unreasonable,
but she or he must include a modicum of factual support.” Id. (citing Bedoya v. Illinois
Founders Insurance Co., 293 Ill. App. 3d 668, 679 (1997)).
¶ 50 As is relevant here, “[g]roup insurance policies are those issued by insurance companies to
a group policyholder, such as an employer, association or union.” Hofeld v. Nationwide Life
Insurance Co., 59 Ill. 2d 522, 527 (1975). A certificate is then issued to participating insureds.
Id. The master policy is the primary contract under Illinois law and “must first be looked to in
construing group insurance policies.” Id. The Hofeld court explained:
“Commonly, the certificates summarize the more important provisions of the policy
terms as they apply to the insured. Often it is stated that the certificates do not
constitute a part of the insurance contract. [Citation.] It may even be suggested by
statute that only the master policy, the application of the employer and the individual
applications shall constitute the entire contract. [Citation.] The individual insured
normally sees only the certificate issued to him. If it contains provisions conflicting
with those in the master policy, the certificate normally will be held to control. Courts
have so held either under the theory that the certificates are a part of the total contract
under the particular language of the certificate or on the theory of estoppel.” Id.
¶ 51 “The trial judge, when sitting as the trier of fact in a bench trial, makes findings of fact and
weighs all of the evidence in reaching a conclusion.” Staes & Scallan, P.C. v. Orlich, 2012 IL
App (1st) 112974, ¶ 35 (citing Nokomis Quarry Co. v. Dietl, 333 Ill. App. 3d 480, 483-84
(2002)). Thus, when a party challenges a trial court’s bench-trial ruling, the appellate court will
“ ‘defer to the trial court’s factual findings unless they are contrary to the manifest weight of
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the evidence.’ ” Id. (quoting Nokomis Quarry Co., 333 Ill. App. 3d at 484). Under this standard
of review, we give great deference to the circuit court’s credibility findings and we will not
substitute our judgment for that of the circuit court “ ‘because the fact finder is in the best
position to evaluate the conduct and demeanor of the witnesses.’ ” Id. (quoting Samour, Inc. v.
Board of Election Commissioners, 224 Ill. 2d 530, 548 (2007)). Additionally, “ ‘[a] factual
finding is against the manifest weight of the evidence when the opposite conclusion is clearly
evident or the finding is arbitrary, unreasonable, or not based in evidence.’ ” Id. (quoting
Samour, 224 Ill. 2d at 544). Therefore, we will not disturb the findings and judgment of the
trier of fact “ ‘if there is any evidence in the record to support such findings.’ ” Id. (quoting
Brown v. Zimmerman, 18 Ill. 2d 94, 102 (1959)).
¶ 52 As a threshold matter, our review of the record establishes that on October 21, 2005, Bruce
knew that AAA Life offered to pay the policy proceeds in full. Here, Rufus specifically stated
in his November 3, 2005 letter to AAA Life that “you [Diane] left [a message] on the afternoon
of Friday October 21[st] advising that AAA [Life] would honor the policy.” However, at trial,
Rufus downplayed this critical evidence by characterizing it as “a little bit of hopeful whistling
in the dark.” The record supports the trial judge’s finding that he was less than credible on this
point. As the trial court explained in its detailed written decision:
“It is not believable that an attorney of Rufus’s caliber and experience would
correspond with an insurance company in anything but the most direct, straightforward
manner. When cross-examined on this point, Rufus dissembled, evaded answering
defense counsel’s questions, and failed to explain his November 3, 2005 admission.
The only believable explanation is that Cook & Revak received AAA Life’s offer of
the $200,000 policy proceeds on October 21, 2005, and then counteroffered on
November 3, 2005 for $485,000, which included in addition to the policy proceeds,
$285,000 for attorney’s fees and exemplary damages. [Bruce’s] characterization of
AAA Life’s correspondence as only ‘recommending’ coverage, or reserving liability of
payment are not believable in light of Rufus’s admission in his November 3 letter and
[Diane’s] testimony.”
¶ 53 Bruce’s first contention that the automated lockbox deposit of Camille’s premium check
constituted an “unconditional acceptance” is without merit. Under the Cullotta test, AAA
Life’s acceptance of the check was conditional. Here, we must consider three factors to
determine if AAA Life’s acceptance of Camille’s July 2005 check was conditional: (1)
whether the insurance company issued a policy document; (2) whether the policy contained
conditional language; and (3) whether the insurer processed “the check as though a cash
premium had been paid.” Cullotta v. Kemper Corp., 78 Ill. 2d 25, 31 (1979). Under this test,
we first note that there is no evidence that AAA Life issued a policy document in response to
Camille’s payment. Next, AAA Life’s certificate contains conditional language in the form of
two conditions precedent to reinstatement: payment and evidence of insurability. Finally,
AAA Life did not process Camille’s check as though it were a cash premium. Instead, it held
the funds in its suspense account and later tried to return the funds to Bruce. Therefore, on the
basis of the Cullotta factors, AAA Life only conditionally accepted Camille’s July 2005 check.
¶ 54 Additionally, the policy states that it is a contract between AAA Life and the Association.
If there is a “difference” between the group policy and certificate, the policy states that the
policy controls. The certificate conditions reinstatement on “Evidence of Insurability” and the
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policy is silent on the issue. However, AAA Life does not view the policy’s silence as a
“difference” and therefore maintains its position that a new application was a condition
precedent to reinstatement of coverage. The trial court found, and we agree, that AAA Life’s
interpretation of the policy and certificate was reasonable. In essence, AAA Life interprets a
“difference” to be an express contradiction and, under this interpretation, the policy’s silence
on “Evidence of Insurability” does not contradict the certificate’s terms. Thus, Diane’s
decision on October 21, 2005 to recommend coverage was a recommendation that AAA Life
simply waive any condition precedent to reinstatement except payment. LaSalle National
Bank v. Metropolitan Life Insurance Co., 18 F.3d 1371, 1375 (7th Cir. 1994) (“ ‘[c]onditions
precedent may be waived when a party to a contract intentionally relinquishes a known right
either expressly or by conduct indicating that strict compliance with the conditions is not
required’ ”). Furthermore, Bruce’s strained interpretation of the term “difference,” which
includes even the slightest departure between the policy and certificate is also unreasonable.
Accordingly, we agree with the trial court that the difference between AAA Life’s and Bruce’s
interpretations for the period July 26 to October 21, 2005 constituted a bona fide dispute over
coverage. Therefore, because AAA Life did not unconditionally accept Camille’s July 2005
check and because there was a bona fide dispute as to coverage before October 21, 2005, AAA
Life’s actions and delay in paying the policy proceeds were not vexatious and unreasonable.
¶ 55 Next, we agree with the trial court’s analysis that AAA Life’s actions were not improper
for the period of October 21, 2005 to the end of March 2006. A review of the applicable
timeline is instructive here. On November 3, 2005, the Cook firm wrote to AAA Life
demanding $485,000, extra-contractual damages, and also threatened to institute a class action
lawsuit. On the same day, the Cook firm incorrectly informed AAA Life that a guardianship
for Briannah could not be established because her father, Bruce, was still alive. AAA Life
wrote to the Cook law firm the next day explaining that “a legal account such as a trust” should
be set up before the policy proceeds could be paid. A week later, the Cook firm sent AAA Life
a declaration of trust, which set up a trust for Briannah with Bruce as the trustee. Diane
reviewed the document, and decided that she needed to retain outside counsel to evaluate the
trust. She was concerned that if the trust did not protect Briannah’s interests then AAA Life
could possibly be liable to her in the future.
¶ 56 On November 18, 2005, Diane informed the Cook firm of her decision to retain outside
counsel. Our review of the record shows that the Cook firm had no interest in resolving the
trust issue but instead was determined to litigate some sort of potentially lucrative class action
suit. Therefore, the Cook firm’s decision to file the complaint was made after AAA Life had
agreed to pay the claim, which it was well aware of since it was working on the legalities of
properly paying Briannah, who was a minor.
¶ 57 We agree with the trial court that AAA Life’s delay to retain outside counsel was
reasonable. Here, AAA Life sought to insulate itself from liability and attempted to get the
probate court to adjudicate the amount of the Cook firm’s fees. Illinois law establishes that any
settlement on behalf of a minor child requires the court’s approval. The trial court relied on an
appellate court ruling in Wreglesworth v. Arctco, Inc., 316 Ill. App. 3d 1023 (2000), stating:
“Under Illinois law, a minor is a ward of the court when [s]he is involved in
litigation, and the court has a duty and broad discretion to protect the minor’s interests.
[Citations.] That duty to protect is reflected in section 19-8 of the Probate Act of 1975
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*** which requires that the court approve or reject any settlement agreement proposed
on behalf of a minor. Thus neither a guardian nor a next friend can effectuate settlement
of a minor’s suit without court approval. [Citation.] Similarly, a parent has no legal
right, by virtue of the parental relationship, to settle a minor’s cause of action, and court
review and approval of a settlement reached by a parent also is mandatory.” (Internal
quotation marks omitted.) Id. at 1026-27.
Rule 12.15 of the circuit court of Cook County also protects minors’ interests in these
situations. Compliance with both rules is required when there is a presuit settlement. Cook Co.
Cir. Ct. R. 12.15(b)(i) (eff. Sept. 29, 2011); Smith v. Smith, 358 Ill. App. 3d 790, 793 (2005).
¶ 58 In other words, if AAA Life had made payment to Bruce after receiving the declaration of
trust, it may have subjected itself to future liability. Similarly, if AAA Life had paid Briannah’s
estate $120,000 and paid the Cook firm $80,000 in attorney fees, it could have also subjected
itself to liability. Accordingly, with regard to the October 21, 2005 to the end of March 2006
time period, Bruce failed to meet his burden that the delay in settling his claim was due to
vexatious and unreasonable conduct on the part of AAA Life.
¶ 59 AAA Life erred when it sent out its July 28, 2005 letter to Camille representing that it had
not received her July 2005 check. AAA Life impliedly acknowledged that error in its
September 2005 letter when it sought to return Camille’s premium payment. Thus, there is no
evidence that the July 28, 2005 letter constituted anything other than a mistake. Illinois courts
have held that that a mistake without more is not considered vexatious conduct. Fassola v.
Montgomery Ward Insurance Co., 104 Ill. App. 3d 825, 832-33 (1982).
¶ 60 The trial court found that the “uncontradicted evidence showed that until 2008, [Diane]
was not aware of [the] difference between the certificate’s and the policy’s reinstatement
provisions.” Here, the span of time was relatively short, AAA Life agreed to pay the policy
proceeds before the lawsuit was filed. Thus, this allegedly wrongful conduct on the part of
AAA Life did not warrant section 155 sanctions.
¶ 61 Posttrial Motion for Sanctions
¶ 62 On appeal, Bruce argues that he is entitled to an award of sanctions under Supreme Court
Rule 137. Here, he contends that based on the number of motions to compel discovery he filed,
the late disclosure of the policy by AAA Life in 2008, and the numerous litigation delays
caused by AAA Life, the trial court erred when it refused to award sanctions for AAA Life’s
vexatious conduct. Therefore, according to Bruce, AAA Life should be held accountable for
knowing the terms of the policy and not disclosing them to him.
¶ 63 Rule 137 provides that every pleading or motion signed by the attorney of record
constitutes a certificate by the attorney that he or she (1) read the pleading or motion, and (2) to
the best of his or her knowledge, the pleading or motion is grounded in fact and warranted by
existing law or a good faith argument for the extension of existing law. Ill. S. Ct. R. 137 (eff.
July 1, 2013). The primary purpose of the rule is to discourage attorneys and parties from filing
frivolous or false matters and asserting claims without any basis in law or fact, by penalizing
those who engage in such wrongful conduct. Baker v. Daniel S. Berger, Ltd., 323 Ill. App. 3d
956, 963 (2001). “ ‘Courts should use an objective standard in determining what was
reasonable under the circumstances as they existed at the time of filing.’ [Citation.] However,
to award sanctions for a needless increase in the cost of litigation, there must be subjective bad
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faith.” Morgan Place of Chicago v. City of Chicago, 2012 IL App (1st) 091240, ¶ 59 (citing
People v. Stefanski, 377 Ill. App. 3d 548, 552 (2007)).
¶ 64 “The standard for evaluating a party’s conduct under Rule 137 is one of reasonableness
under the circumstances existing at the time of the filing.” Patton v. Lee, 406 Ill. App. 3d 195,
202 (2010). Thus, “[i]f a reasonable inquiry into the facts to support the filing has not been
made to ensure that the facts stated are well grounded, the party, the party’s attorney, or both
are subject to an appropriate sanction that may include an order to pay the other party’s
attorney fees and costs.” Id. (citing Chicago Title & Trust Co. v. Anderson, 177 Ill. App. 3d
615, 621 (1988)). In other words, a court will only award those fees or costs that are caused by
the improper filing. Ill. S. Ct. R. 137(a) (eff. July 1, 2013) (a sanction “may include an order to
pay to the other party or parties the amount of reasonable expenses incurred because of the
filing”). We review a trial court’s denial of Rule 137 sanctions for an abuse of discretion.
CitiMortgage, Inc. v. Johnson, 2013 IL App (2d) 120719, ¶ 19.
¶ 65 The trial court did not abuse its discretion by denying sanctions against AAA Life. The
issue tried was whether AAA Life made any inaccurate representations in bad faith regarding
the terms of the policy. Both the trial testimony and exhibits showed that Bruce as well as AAA
Life assumed from the outset of the litigation that the terms of the certificate controlled.
Hofeld, 59 Ill. 2d at 527 (“The individual insured normally sees only the certificate issued to
him. If it contains provisions conflicting with those in the master policy, the certificate
normally will be held to control.”). Here, both parties assumed that the certificate language was
identical to that of the policy. Bruce did not ask to see the policy until October 4, 2007, and he
received a copy of the policy on March 3, 2008. AAA Life did not know that the policy
differed from the certificate until October 21, 2008, when Bruce’s attorney deposed Diane,
AAA Life’s general counsel. The trial testimony showed that AAA Life did not consult the
policy on a regular basis, and instead referred to the certificate terms to determine coverage.
The fact that both Bruce and AAA Life did not know about the policy and its terms establishes
that there was no bad faith in AAA Life’s pleadings and filings. Thus, the parties did not
realize there was a difference between the language contained in the policy and the language
contained in the certificate.
¶ 66 The trial court also noted that, at times, AAA Life represented in its pleadings that it was
quoting the policy, when it was actually quoting the certificate. But here the trial court found
AAA Life’s affirmative statements were not intentional misrepresentations because it was not
aware of any difference between the master policy and certificate until October 21, 2008. It
noted:
“AAA Life’s position that there was no coverage under the certificate and group
policy is grounded in fact and law. The group policy states that it is a contract between
AAA Life and AAA. Where there is a ‘difference’ between the group policy and
certificate, the group policy controls. The certificate conditions reinstatement on
‘Evidence of Insurability’ and the group policy does not. But AAA Life does not view
the group policy’s silence as a ‘difference,’ and therefore maintains its position that a
new application was a condition precedent to reinstatement of coverage. This is a
reasonable interpretation of the group policy and certificate.”
¶ 67 Furthermore, in considering the balance of AAA Life’s pleadings and responses, the trial
court found no evidence of intentional misrepresentation or bad faith conduct on the part of
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AAA Life regarding the contents of the policy or any other related issue. Accordingly, the trial
court did not abuse its discretion in denying Bruce’s motion for sanctions under Rule 137.
¶ 68 CONCLUSION
¶ 69 Accordingly, we affirm the judgments of the trial court.
¶ 70 Affirmed.
¶ 71 JUSTICE CUNNINGHAM, specially concurring.
¶ 72 I write separately because while I agree with the holding of the majority on a strictly legal
basis, there are many things wrong with this case which leaves me with the feeling that justice
was not served. For example, the trial court found that the plaintiffs were to blame for AAA
Life’s delay in payment. This finding is not supported by the record. The majority in this court
does not make such a statement, but it seems to infer that AAA Life’s action in denying
payment for several months because of its own internal inefficiency was okay and the plaintiffs
should just accept it. When one reads the record in totality, it is easy to see why and how the
plaintiffs were outraged by the behavior and seeming indifference of AAA Life’s staff. It is not
a dramatic leap to understand why plaintiffs were pushed to a point of wanting to make AAA
Life experience some consequences for its actions. So while I believe that the record does not
provide the evidence to reverse the trial court, I take issue with the tone of the trial court’s
opinion and similarly with the tone of the opinion issued by the majority here. This case
exemplifies the maxim: in the world of litigation, victory and justice are not synonymous.
¶ 73 There are two reasons for AAA Life’s victory in the trial court and ultimately before this
court. Neither of those reasons can reasonably be said to establish a moral or legal high ground
for AAA Life. First, and most important, is that the plaintiffs could not prove the lack of a
bona fide belief and dispute by AAA Life that it was not obligated to pay because the insurance
policy had lapsed. In order to meet their proof on this point, the plaintiffs would have had to get
the very employees of AAA Life who caused the problem to admit their actions, attitude and
indifference. This was unlikely. Second, given the lack of proof on the first point, it necessarily
follows that it would be impossible to prove that AAA Life’s bad behavior rose to a level
which justifies the imposition of sanctions by the trial court. I agree that the proper standard of
review of the trial court’s denial of sanctions in this case is abuse of discretion. The abuse of
discretion standard is a steep hill to climb and while I may have reached a different conclusion
than the trial judge, the record does not provide a basis for reversal. So, while the record does
not support the plaintiffs’ theory by a preponderance of the evidence, AAA Life’s conduct in
its handling this claim was inappropriate and deserves to be criticized.
¶ 74 The delay by AAA Life in recognizing that Camille had paid the premium and was
therefore covered was occasioned by its own internal procedures. The procedures were
confusing, less than transparent, and unfamiliar to its own staff. The plaintiffs had no control
over that. Even after proof of premium payment by Camille was provided, AAA Life’s staff
continued to stonewall and refuse to meet its obligation to pay the claim. Weeks, then months
passed before there was any hint that the claim would be paid. AAA Life’s actions all took
place in the context of a grieving family dealing with a profound loss. AAA Life’s action must
surely have added another level of anxiety to the family’s grief.
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¶ 75 I do not agree with the majority’s statement that, while AAA Life initially denied coverage,
it changed course “shortly thereafter and appropriately paid the proceeds.” Supra ¶ 32. The
majority goes on to say that the insurance company’s conduct was neither inherently deceptive
nor unfair. I agree that the plaintiffs did not prove inherent deception. However, I do not agree
that the process was fair. On the contrary, the plaintiffs were subjected to seeming indifference
and what subsequently turned out to be an admittedly erroneous denial of a legitimate claim. It
is clear that the AAA Life employee who made the initial denial was unfamiliar with the
company’s procedures and did not bother to investigate. Further, it eventually required a
memorandum from AAA Life’s in-house counsel responding to the threat of a lawsuit by
plaintiffs for the claim to be paid. Unlike the majority, I do not consider that “appropriate”
behavior by AAA Life and cannot laud AAA Life for its handling of this claim.
¶ 76 The record is replete with instances of bureaucratic bungling and inexplicable delays by
AAA Life’s employees. One can only guess that they were inept; unfamiliar with company
policies and procedures; insensitive to the plight of their insured’s beneficiary; or intentionally
protracting the process. Whatever the cause, it is clear that the plaintiffs had ample reason to be
frustrated and angry and to believe that they had been wronged. Unfortunately, believing it and
proving it in a courtroom are two different things. There is no indication that AAA Life would
have paid the claim but for the memorandum from their in-house counsel, who acted under the
threat of a lawsuit. Yet, that alone is not enough to establish the proof necessary to give the
plaintiffs the relief they seek.
¶ 77 I find it interesting that the trial court and majority here seem to ascribe improper motives
to the plaintiffs, in seeking to launch a class action lawsuit against AAA Life while seemingly
giving the insurance company a pass on its role in precipitating the conflict in the first place.
The majority’s reasoning infers that all is well with AAA Life’s behavior since the plaintiffs
could not or did not prove that AAA Life’s conduct was anything other than a mistake. It bears
repeating that the mistake, if it was such, was occasioned by intractable indifference and
unfamiliarity with their own company’s policies and procedures by AAA Life’s employees.
The plaintiffs fought back in an appropriate way against a large insurance company which had
turned a deaf ear to a legitimate claim. In my view, but for the plaintiffs’ ability to fight back,
the outcome of the request for payment of this legitimate claim was uncertain.
¶ 78 While the record does not support reversing the trial court’s ruling as to count III of the
plaintiffs’ complaint or on the question of Rule 137 sanctions, I think AAA Life’s conduct was
high handed and inappropriate. Rather than the laudatory tone of the majority’s opinion
regarding AAA Life’s conduct, which in my view gives incentive to such behavior, I would
admonish AAA Life. It should be made aware that its behavior when viewed in totality, while
not actionable, was unacceptable. It should be encouraged to train its staff regarding familiarity
with company policies and procedures and sensitivity to its clients. In this case, the plaintiffs
had the wherewithal to fight back so they eventually got the benefit to which they were
entitled. I believe that their proposed class action lawsuit was aimed at shining light on AAA
Life’s practice of denying legitimate claims in similar cases. Under these facts, I cannot take
issue with that proposition. Accordingly, as a matter of public policy, AAA Life should be sent
a strong message that although it prevailed on the legal claim based on these specific facts, its
behavior does not deserve accolades.
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