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05/16/88 Wayne Kohlmeier Et Al., v. Shelter Insurance Company

May 16, 1988





525 N.E.2d 94, 170 Ill. App. 3d 643, 121 Ill. Dec. 288 1988.IL.748

Appeal from the Circuit Court of St. Clair County; the Hon. John J. Hoban, Judge, presiding.


JUSTICE LEWIS delivered the opinion of the court. KARNS and WELCH, JJ., concur.


This was an action for breach of contract brought by plaintiff, Wayne Kohlmeier, on his own behalf and on behalf of his daughter, Amy Kohlmeier, for refusal of the defendant, Shelter Insurance Company, to pay for medical bills under a health insurance policy. The case was tried before a jury and resulted in judgments for the plaintiff in the amounts of $25,000 in compensatory damages for Wayne Kohlmeier, of $25,000 in compensatory damages for Amy Kohlmeier, and of $100,000 in punitive damages for Wayne Kohlmeier. Separate counts for attorney fees were considered by the circuit court and resulted in an award of $5,000 in attorney fees for plaintiff. From these judgments defendant appeals.

Plaintiffs' complaint set forth 12 counts, seven of which were dismissed after the presentation of evidence and before consideration by the jury. The three counts submitted to the jury were as follows: count I sought compensatory damages for breach of contract on behalf of plaintiff, count II sought compensatory damages for breach of contract on behalf of plaintiff's daughter, Amy Kohlmeier, and count VII sought punitive damages for defendant's breach of duty to deal fairly and in good faith with plaintiff and for the intentional infliction of emotional distress upon plaintiff caused by defendant's willful and wanton conduct. The remaining two counts, counts III and IV, related to attorney fees and were reserved for determination by the circuit court until after the Conclusion of the jury trial.

In defendant's answer to plaintiffs' complaint, it asserted the affirmative defense that plaintiff had made a material misrepresentation on his insurance application form regarding his daughter's preexisting medical condition. Because of plaintiff's material misrepresentation, defendant rescinded plaintiff's insurance policy and refunded his premium. Defendant claimed that the rescission rendered the policy void ab initio and refused to pay plaintiff's claims.

On appeal, defendant contends that because defendant's rescission of plaintiff's insurance policy was proper, there was no breach of contract, that the award of compensatory damages and punitive damages was excessive and improper, and that the circuit court abused its discretion when it imposed attorney fees under section 155 of the Illinois Insurance Code (Ill. Rev. Stat. 1983, ch. 73, par. 767). Defendant alternatively argues that a new trial should be granted as the verdicts were against the manifest weight of the evidence.

In order to address defendant's issues, a review of the facts is necessary. On May 14, 1982, plaintiff applied to an agent of defendant, Kenneth Schanz, for a health insurance policy. The agent, by asking questions of plaintiff and plaintiff's wife, prepared an application form which plaintiff then signed. The application form contained the following question: "Does any person to be insured now have any abnormality or deformity?" To this question plaintiff responded "no" for himself, for his wife and for his three children. It was because of plaintiff's answer to this question that defendant determined that plaintiff materially misrepresented his daughter Amy's medical condition.

As a result of plaintiff's application, defendant issued a health insurance policy to plaintiff effective July 14, 1982. The application was made a part of plaintiff's policy. The policy covered plaintiff, plaintiff's wife, and plaintiff's three children, Amy (age 10), Sarah (age eight), and Andrew (age five months) and included no waivers or exclusions with regard to any member of plaintiff's family. A two-year contestable period applied to the policy.

On January 15, 1983, plaintiff's daughter Amy was examined by a pediatric neurologist, Dr. Garrett Burris, at the recommendation of Thomas Palmer, a school psychologist. Palmer had discussed with plaintiff Amy's teachers' concerns that Amy may be having petit mal seizures. Reportedly, Amy had staring spells at school and she appeared to have an absence of consciousness during these spells.

At his examination, Dr. Burris conducted a quick screening of Amy's receptive language even though she had been evaluated by Thomas Palmer in December 1982. He found her receptive language skills (her understanding) and her handwriting quite primitive for a child of her age (10 years). During his examination Amy offered little in spontaneous communications and only answered questions in one-or two-word phrases. Dr. Burris was aware, through Discussions with plaintiff and plaintiff's wife, that Amy was socially immature and that she had had some slowness in her language development as a child. Plaintiff had also advised Dr. Burris that Amy had been having difficulty with her academic skills even with the help of a tutor.

In Dr. Burris' report, he described Amy's physical appearance as follows: that she had bushy, arching eyebrows, long eyelashes, ptosis (drooping eyelids), and epicanthal folds and hypertelorism (wide nasal bridge and a beak-like nose); that there was a downward slanting of the fissure of her eyes; that she had broad thumbs and toes; and that her head was small in circumference for her age. Dr. Burris determined that Amy was short in stature and below the third percentile in her weight, i.e., that out of 100 children of her age, 97 of the children weighed more than Amy. According to Dr. Burris, Amy's physical features were abnormal but a person untrained in medicine would be unable to put these physical findings together as a collection of symptoms representative of a given disease process. In his office notes Dr. Burris remarked, "It was also remarkable to note her achievement scores relative to what was felt to be a low intellectual capacity."

On the basis of his examination, Dr. Burris diagnosed Amy as having Rubenstein-Taybi syndrome, an uncommon condition. His report revealed that this syndrome was congenital and was characterized by a specific group of abnormal physical features consisting of specific facial features, specific eye appearance, broad toes and thumbs, small stature, and small head size. It also affects mental condition in a variable degree from person to person. He found Amy to have the classical physical appearance of a person having this syndrome. With regard to Amy's mental condition, he concluded her capabilities were in the middle range of what her intellectual functioning would be expected to be. He also found Amy to be suffering from strabismus (crossed eyes) and that she had a long-standing history of this condition. He noted that Amy had a high palatal arch, also a feature of this syndrome. Dr. Burris recommended that Amy be admitted to a hospital for a complete evaluation.

Amy was admitted to Cardinal Glennon Memorial Hospital for Children on February 14, 1983, for further testing and evaluation. The evaluations and tests administered at the hospital corresponded with Dr. Garrett Burris' initial findings.

Plaintiff submitted the bills for Amy's evaluations and tests to defendant for payment. The total amount of Amy's bills was $3,116.50. Plaintiff also submitted claims for chiropractic treatments which he had received after the effective date of the insurance policy.

After plaintiff's claims were submitted to defendant for payment, Sheryl (Sherry) Miller, a claims specialist for the defendant, received plaintiff's file to investigate his claims. The investigation was conducted to determine if plaintiff had duplicate coverage on the claims submitted with Old Republic, another insurance company which also insured plaintiff. A report from Equifax, an investigatory company for insurance companies, had revealed that plaintiff also had an insurance policy with this insurer. Her investigation revealed that the other coverage provided by Old Republic was not the same coverage as provided by defendant.

Prompted by her conversation with Old Republic, Sherry called plaintiff's health service suppliers to verify plaintiff's claims for chiropractic treatment. One claim was a bill and receipt from Dr. Meinders, a chiropractor. The bill, signed by Dr. Meinders, indicated that a fee of $19 was charged and paid in cash. From Dr. Meinders Sherry learned that he did not charge plaintiff but that he had administered the chiropractic treatment to plaintiff, also a chiropractor, as a professional courtesy. According to ...

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