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COMMERCIAL LIFE INS. CO. v. LONE STAR LIFE INS. CO

December 27, 1989

COMMERCIAL LIFE INSURANCE CO., a corporation, Plaintiff,
v.
LONE STAR LIFE INSURANCE COMPANY, a Texas corporation, and LEININGER MID-STATES PAVING COMPANY, an Illinois corporation, Defendants. LEININGER MID-STATES PAVING COMPANY, an Illinois corporation, Counter-Plaintiff, v. LONE STAR LIFE INSURANCE COMPANY, a Texas corporation, Counter-Defendant. LEININGER MID-STATES PAVING COMPANY, an Illinois corporation, Third-Party Plaintiff, v. ROBIN D. EARL & ASSOC., LTD., an Illinois corporation, and ROBIN D. EARL, Third-Party Defendants


Marvin E. Aspen, United States District Judge.


The opinion of the court was delivered by: ASPEN

MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 Commercial Life Insurance Company ("Commercial") filed this action against Leininger Mid-States Paving Company ("Leininger") and Lone Star Life Insurance Company ("Lone Star"). Commercial seeks reimbursement of medical expenses that it paid on behalf of a Leininger employee. Leininger subsequently filed a counterclaim against Lone Star. Lone Star has moved for summary judgment on the Commercial's claim and Leininger's counterclaim. Commercial has filed a cross motion for summary judgment. For the reasons given below, we grant Lone Star's motion for summary judgment.

 Background

 John Telutki was employed as a supervisor at Leininger Mid-States Paving Company. Telutki had a long history of heart problems. He had a quadruple bypass operation in 1979, and received extensive treatment following this procedure. In May 1987, he underwent a heart transplant operation. Unfortunately, this operation was not successful; Telutki died on December 12, 1987.

 As might be expected, Telutki's health care was expensive. Commercial Life Insurance, which had issued a group insurance policy to Leininger, paid over $ 200,000 in medical benefits on behalf of Telutki. However, Commercial now contends that it should be reimbursed for these payments, and has instituted this action against Leininger and Lone Star Life Insurance Company.

 Leininger has filed a counterclaim against Lone Star. Leininger contends that it is entitled to a judgment against Lone Star "for any amount which the Court might find due from Leininger to Commercial."

 Lone Star, however, claims that it is entitled to summary judgment against both Leininger and Commercial. According to Lone Star, the "Preliminary Application for Group Insurance" completed by Leininger contains misrepresentations that render the policy coverage void as to Telutki. Lone Star identifies two statements which Leininger made when it completed this form. First, Leininger stated that no person who was eligible for this coverage had incurred medical expenses in excess of $ 5,000 in the two years prior to the date of the application. Second, Leininger stated that no person eligible for coverage had been disabled for a period of 14 days or more. Although the parties dispute whether Telutki had been disabled for a period of 14 days, they are in agreement that Telutki had incurred more than $ 5,000 in medical expenses during the two years prior to the date of application.

 Standard of Review

 "A motion for summary judgment should be granted only when there is no genuine issue of material fact and the moving party is entitled to judgment as a matter of law." Checkers, Simon & Rosner v. Lurie Corp., 864 F.2d 1338 (7th Cir. 1989)(citation omitted). The moving party bears the burden of establishing the absence of any disputed facts. Celotex Corp. v. Catrett, 477 U.S. 317, 106 S. Ct. 2548, 2553, 91 L. Ed. 2d 265 (1986). If, however, the nonmoving party bears the burden of proving an issue at trial, it also bears the burden of presenting sufficient facts on summary judgment from which a trier of fact could find in its favor, and the moving party need only "[point] out to the District Court . . . that there is an absence of evidence to support the nonmoving party's case." Id. at 2554; Beard v. Whitley County REMC, 840 F.2d 405, 410 (7th Cir. 1988). In deciding a motion for summary judgment, the court must read all facts in the light most favorable to the nonmoving party. Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 106 S. Ct. 2505, 2513, 91 L. Ed. 2d 202 (1986); Richardson v. Penfold, 839 F.2d 392, 394 (7th Cir. 1988).

 Discussion

 Lone Star contends that the preliminary application completed by Leininger contains misrepresentations that render the policy void as to Telutki. The legal basis for this argument is ยง 979(2)(a) of the Illinois Insurance Code. This statute provides:

 
[No policy of group insurance may be issued in the State of Illinois unless it contains a] provision that the policy, the application of the employer, or executive officer or trustee of any association, and the individual applications, if any, of the employees, members or employees of members insured shall constitute the entire contract between the parties, and that all statements made by the employer, or the executive officer or trustee, or by the individual employees, members or employees of members shall (in the absence of fraud) be deemed representations and ...

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