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September 8, 1982


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


On November 9, 1978 Andrew Smith and plaintiff Aline Smith, husband and wife, applied for and received a joint life insurance policy issued by defendant Metropolitan Life Insurance Company ("Metropolitan"). Less than one year later Andrew Smith died in an automobile accident and plaintiff made claim to Metropolitan for the proceeds allegedly due under the policy. Before making payment Metropolitan conducted a routine investigation which, they contend, disclosed that Andrew had been hospitalized for cirrhosis of the liver and chronic alcohol abuse. None of these conditions, nor the hospitalization, was disclosed by the plaintiff or her husband in the insurance application. On the basis of what defendant depicts as a misrepresentation material to the risk assumed by it in issuing the insurance policy, Metropolitan denied the claim.

In response, Aline Smith brought suit against Metropolitan in Circuit Court and defendant subsequently removed the suit to this court. Plaintiff's complaint is in two counts. In Count I plaintiff seeks recovery of the insurance proceeds plus attorneys' fees and other costs under Section 155 of Illinois Insurance Code, ch. 73, ¶ 767, Ill. Rev.Stat., § 1 et seq., (1979), alleging that Metropolitan vexatiously and unreasonably refused to pay the proceeds. In Count II, plaintiff seems to allege that defendants breached a duty of good faith and, in addition, intentionally inflicted emotional distress on plaintiff.

Currently before the court is defendant's motion for partial summary judgment on Count I and summary judgment on Count II. Specifically, Metropolitan contends that as to Count I plaintiff is not entitled to damages under § 155 of the Illinois Insurance Code because there exists a bona fide dispute between the parties and, thus, Metropolitan as a matter of law did not act vexatiously and unreasonably. As for Count II, plaintiff argues that no claim for breach of duty of good faith has been made out, and moreover, if it was, that § 155 preempts the field of extra contractual damages. Finally, Metropolitan contends that plaintiff has not stated a claim for intentional infliction of emotional distress, nor is punitive damages recoverable for such a tort.

I. Count I: Recovery of Damages under Section 155

Section 155 provides, inter alia, that

  In any action by or against a company wherein
  there is an issue of the liability of a company
  on a policy or policies of insurance or the
  amount of the loss payable thereunder, or for an

  delay on 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, other costs, plus an amount not to exceed
  any of the following amounts:
    (a) 25% of the amount which the court or jury
    finds such party is entitled to recover against
    the company, exclusive of all costs [or]

(b) $5,000 . . . .

Whether an insurance company has acted vexatiously or unreasonably in processing a claim is to be determined by the court in its discretion. Howard Foundry Co. v. Hartford Fire Insurance Co., 222 F.2d 767 (7th Cir.), cert. denied, 350 U.S. 885, 76 S.Ct. 137, 100 L.Ed. 780 (1955). Automotive Wholesalers of Illinois v. National Union Fire Insurance Co., 501 F. Supp. 1205, 1210 (N.D. Ill. 1980). No single factor is determinative, "rather, the totality of the circumstances, taken in broad focus, will determine the matter." Deverman v. Country Mutual Insurance Co., 56 Ill. App.3d 122, 14 Ill.Dec. 94, 96, 371 N.E.2d 1147, 1149 (4th Dist. 1977). See Fassola v. Montgomery Ward Insurance Co., 104 Ill. App.3d 825, 60 Ill.Dec. 581, 586, 433 N.E.2d 378, 383 (3d Dist. 1982); Crest v. State Farm Mutual Automobile Insurance Co., 20 Ill. App.3d 382, 313 N.E.2d 679, 684 (2d Dist. 1974). In support of their motion for summary judgment, Metropolitan contends that because a bona fide dispute exists between the parties defendant cannot be said to have acted vexatiously and is therefore entitled to summary judgment as a matter of law. In other words, defendant's position is that even if a jury ultimately were to find that the facts misrepresented in the Smith application were not material, Metropolitan nonetheless acted in accord with underwriting regulations, common sense and case law precedent in denying the claim.

In opposition, plaintiff maintains that a decision at this juncture would be premature. If further evidence reveals that Metropolitan knew or should have known that the misrepresentation was not material, then the misrepresentation was not grounds for rescission and Metropolitan could be found to have taken a vexatious and unreasonable position. Further, plaintiff asserts that under Illinois law Metropolitan should be estopped from relying on the misrepresentation to avoid liability on the contract. According to plaintiff, Laura Muller, the agent of Metropolitan who sold the policy, was told by Andrew Smith at the time of application that he had been hospitalized in 1975 for leg cramps. (Dep. of A. Smith, pp. 57-59.) Nevertheless, "despite having been so put on notice and informed, albeit in layman's terms, of the deceased's medical history, Muller checked `No' in answer to several questions regarding the deceased's medical history, and further failed to note the fact of the disclosed hospitalization in the prominent blank space provided for such notation on the application form." Under Illinois law an insurer who issues a policy with notice of an insured's medical history is estopped from using that medical condition to defeat plaintiff's claim. Moone v. Commercial Casualty Insurance Co., 350 Ill. App. 328, 112 N.E.2d 626 (1st Dist. 1953). See National Discount Shoes, Inc. v. Royal Globe Insurance Co., 99 Ill. App.3d 54, 54 Ill.Dec. 263, 424 N.E.2d 1166 (1st Dist. 1981).

Defendant, relying upon Muller's deposition, responds that in fact the agent was never advised prior to the issuance of the policy that Andrew Smith had been hospitalized in 1975. Moreover, at best, plaintiff's evidence only supports an inference that Muller was informed that Andrew was hospitalized for leg cramps, not that he received medical treatment for alcoholism and cirrhosis of the liver.

Viewing the facts in a light most favorable to the plaintiff, this court finds that Metropolitan's refusal to pay the insurance proceeds was in no way vexatious or unreasonable. See Crest v. State Farm Mutual Insurance Co., supra, 313 N.E.2d at 684. Even if plaintiff were ultimately to prevail on the merits of her claim it still could not be said that the insurance company took a vexatious and unreasonable position in rejecting the claim. Automotive Wholesalers of Illinois v. National Fire Insurance Co., supra. Instead, all the evidence adduced thus far supports the conclusion that Metropolitan acted in good faith when it interpreted the omission of medical information as a material representation and in accordance with established practice rejected plaintiff's claim.

Nor does Aline Smith's estoppel theory advance her cause. There is no indication that the agent knew of the specific medical condition which Metropolitan claims to constitute the misrepresentation. Accordingly, defendant's motion for partial summary judgment with respect to ...

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