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INTERNATIONAL ADMINISTRATORS v. LIFE INS. CO.

May 11, 1982

INTERNATIONAL ADMINISTRATORS, INC., PLAINTIFF,
v.
LIFE INSURANCE COMPANY OF NORTH AMERICA, DEFENDANT.



The opinion of the court was delivered by: Shadur, District Judge.

MEMORANDUM OPINION AND ORDER

International Administrators, Inc. ("IAI") and its president, Sheldon Harrison ("Harrison") sue Life Insurance Company of North America ("LINA") in 12 counts claiming interference with IAI's contractual relationships, interference with prospective advantage, breach of contract and defamation. LINA has moved to dismiss the Complaint for failure to state a cause of action. For the reasons contained in this memorandum opinion and order, LINA's motion is granted as to Count VIII and Counts X-XII and is denied as to all other Counts.*fn1

Counts I to V

Complaint Counts I-V assert claims of interference with IAI's contractual relations with the Iowa Department of the American Legion (the "Iowa Legion"). Beginning in 1971 IAI was broker and administrator for various group insurance programs of the Iowa Legion and its Ladies' Auxiliary. In that capacity it placed a substantial part of that coverage with LINA beginning in 1976.

Then the Complaint alleges that in March 1981 (Ct. I, ¶ 12; Ct. II, ¶ 6; Ct. III, ¶ 4; Ct. IV, ¶ 4; Ct. V, ¶ 3 state slightly different variants):

  LINA communicated with [the Iowa Legion] and
  intentionally acted in a way calculated to cause
  damage to [IAI] by use of intimidation, force,
  coercion and misrepresentation and threats to [the
  Iowa Legion] with the malicious intent of preventing
  [IAI] from fulfilling its contract with [the Iowa
  Legion] and with the intent to induce [the Iowa
  Legion] not to continue a valuable business
  relationship with [IAI].

Two letters (Ex. D and E) from LINA to the Iowa Legion are attached to the Complaint as evidence of LINA's illegal interference. Those identical letters, written to two Iowa Legion officials, state that:

    (1) LINA "ha(s) not received certain premiums on
  policies . . . that were due as far back as
  September, 1980," although the premiums had been
  "collected by your broker, Mr. Sheldon Harrison . . .
  but have not been remitted to" LINA.
    (2) Because Harrison was the Iowa Legion's
  "appointed broker, we are in a position that forces us
  to terminate our relationship with your organization
  as long as he is your representative."
    (3) LINA meant the letters as "an intent to cancel"
  the hospital indemnity coverage as of May 1, 1981.

As a direct result of such actions by LINA, the Complaint concludes, the Iowa Legion cancelled its broker contract with IAI. This action followed.*fn2

In this diversity action, Illinois law provides the substantive rule of decision. LINA invokes Connaughton v. Gertz, 94 Ill. App.3d 265, 269, 49 Ill.Dec. 838, 841, 418 N.E.2d 858, 861 (1st Dist. 1981) to claim its interference with IAI's contract was "privileged." Because a defendant's intentional and unjustified inducement must be part of plaintiff's prima facie case (id. at 269, 49 Ill.Dec. at 841, 418 N.E.2d at 861) LINA seeks dismissal of Counts I to V.

Connaughton teaches the existence of a "privilege to interfere" rests on two factors (id. at 270, 49 Ill.Dec. at 841, 418 N.E.2d at 861):

    (1) Defendant must have brought about the breach of
  plaintiff's contract by acting to protect a
  conflicting interest considered under the law to be of
  a value ...

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