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Costello v. Liberty Mutual Ins. Co.





APPEAL from the Circuit Court of Cook County; the Hon. FRANCIS T. DELANEY, Judge, presiding.


George Costello (plaintiff) brought action against his former employer, Liberty Mutual Insurance Company (defendant) alleging that defendant had fraudulently induced him to retire prematurely, thereby causing him to forfeit group insurance coverage provided by defendant to all employees. The amended complaint prayed for an accounting and damages. After a bench trial, the trial court awarded plaintiff damages of $3000 and certain additional benefits. Defendant appeals and plaintiff cross-appeals.

Plaintiff testified that he had worked for defendant as an elevator inspector since July 5, 1953. The inspections involved a great deal of physical exertion including standing, stooping and riding on top of elevator cars. In January 1969, when plaintiff was about 56 years old, he was hospitalized for a month with a severe heart attack and did not return to work until May 14, 1969. On October 29, 1970, he had another heart attack and was unable to work until May of 1971. Commencing May 5, 1971, he worked four hours a day for two weeks and then resumed full-time status.

When he returned to work, he was informed that the company was discontinuing its elevator inspections. He was to be trained to handle small business risk inspections when there were not enough elevator inspections to fill his time. During some of his working hours he studied materials in preparation for his new work. He testified that he had difficulty in this because he was tired and his eyes bothered him. During this time, plaintiff was short of breath and had chest pains. He remained at home from June 21, 1971, to June 30, 1971. At that time he took five days of sick leave and three vacation days.

When plaintiff returned to work on July 1, 1971, he reported to the company physician for a physical examination. He then reported to his supervisor who informed him that his job was terminated due to the cutback in elevator inspection. His supervisor told him that the company doctor said he was healthy enough to resume work and that his health had nothing to do with the termination. Furthermore, he was informed that his work had been satisfactory. Plaintiff's supervisor offered him the choice of receiving one month's salary and withdrawing the money he had paid into defendant's pension fund, or of applying for early retirement benefits.

After consulting with his attorney, his doctor and his wife, plaintiff requested early retirement and signed a waiver of any right to benefits under defendant's income protection plan for disabled employees. His application for early retirement was accepted and he began to receive net weekly payments of $67.02 per month after deductions for medical and life insurance premiums. As we will later specify, he also received continued health and reduced life insurance benefits. At this time, plaintiff applied for and received unemployment compensation benefits from the State of Illinois and Social Security disability payments.

The written waiver, dated July 29, 1971, is in the nature of an agreement or stipulation signed by both parties. It provides that plaintiff's request for early retirement will be acted on expeditiously but that any claim he might have for income protection benefits was incompatible with the concept of retirement. Therefore, if plaintiff agreed to waive all right to further income protection benefits "as a condition precedent to early retirement," he was to sign the letter, which he did.

Dr. Clement J. Michet testified that he had been plaintiff's physician since 1951. He stated that plaintiff was quite obese, had a severe heart condition and was a borderline diabetic. He detailed plaintiff's various symptoms and medical treatment. In his opinion, plaintiff's condition indicated that plaintiff could not stand the stress of performing elevator inspections and therefore he could not work full time in that occupation. Furthermore, plaintiff's physical weakness was of a permanent nature. On cross-examination the doctor testified that plaintiff could perform work at home while sitting at a desk or perhaps on the telephone. The heart condition was so severe that the physician feared that plaintiff could not withstand the rigors of commuting to and from work each day.

Robert H. Wingate, a senior vice president of defendant, testified that the company has greatly reduced its elevator inspection work and no longer employs any elevator inspectors in Chicago. Plaintiff was terminated due to lack of work. Mr. Wingate also testified that defendant's employees do not automatically receive early retirement benefits upon termination but that a committee determines whether an employee shall receive such benefits. He had recommended that plaintiff receive early retirement benefits and the committee had acted accordingly.

On cross-examination he testified that prior to plaintiff's termination, several of defendant's executives had exchanged memoranda expressing concern about plaintiff's health and his ability to continue on the job. On May 12, 1971, Mr. Wingate received a memorandum from another vice president of the company stating that it did not appear that plaintiff would "work out" in the new job for which he was being trained and that his work would have to be limited to elevator inspections.

Mr. William E. Powell testified that he was plaintiff's supervisor at defendant company. The company had reduced the number of elevator inspections it handled and plaintiff was terminated due to lack of work. Efforts to retrain plaintiff were unsuccessful. He had suggested that plaintiff be examined by the company doctor because it was contrary to defendant's policy to terminate an employee who was too ill to secure employment elsewhere. When he was informed that plaintiff was physically capable of continuing to perform his work, Mr. Powell notified plaintiff of his termination and suggested that he apply for early retirement benefits. Mr. Powell subsequently received a letter from plaintiff requesting early retirement and reserving his rights under defendant's income protection plan for disabled employees. In response, the witness wrote informing plaintiff that he would have to waive any claim to income protection in order to receive early retirement.

The group policy provided by defendant for its employees extended coverage to regular full-time employees including plaintiff. The policy creates an income protection plan covering employees disabled by accident or sickness. The benefit provided is two thirds of the regular weekly earnings of the employee to a maximum of $275 per week. However, payment of these benefits is limited to a one-year period. The benefits will continue beyond one year only in the case of an employee so disabled by sickness or accident that he is "wholly and continuously prevented from engaging in any occupation for wage or profit." In such case, the employee would receive the full income protection benefit until he attained age 65, at which time he would begin to receive lifetime retirement benefits.

The policy also contained life insurance benefits. In plaintiff's case, as long as he received income protection benefits he would have retained a life insurance policy in the amount of $36,000. However, if plaintiff retired, the life coverage was reduced by 25% after one month and 10% of the original benefit per year for five more years. Thus, since plaintiff was on retirement, his life benefit would have been reduced to $9000 after five years. If he retained income protection benefits until age 65, the total life insurance would remain in effect until then, at which time these reductions would take effect.

As regards payment of income protection benefits, it is agreed that plaintiff has received these amounts for 43 weeks. Thus, the maximum that he could receive if he were not wholly and continuously disabled would have been nine additional weeks. If he were wholly and continuously disabled, he would then have been eligible for a longer period of benefits under the policy, as above pointed out. In either event, plaintiff would be, and presently is, entitled to participate in the medical coverage ...

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