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ELLIOTT v. ITT CORP.

March 15, 1991

ZENOVIA ELLIOTT, on behalf of herself and all others similarly situated, Plaintiffs,
v.
ITT CORPORATION, formerly known as INTERNATIONAL TELEPHONE & TELEGRAPH CORPORATION; ITT CONSUMER FINANCIAL CORPORATION; AETNA FINANCE COMPANY, doing business as ITT FINANCIAL SERVICES, and formerly known as ITT THORP CORPORATION; ITT LYNDON LIFE INSURANCE COMPANY; and AMERICAN BANKERS LIFE ASSURANCE COMPANY OF FLORIDA, Defendants


Marvin E. Aspen, United States District Judge.


The opinion of the court was delivered by: ASPEN

MARVIN E. ASPEN, UNITED STATES DISTRICT JUDGE

 Defendants ITT Corp. ("ITT"), ITT Consumer Financial Corp. ("ITT Financial"), Aetna Finance Co. ("Aetna"), and ITT Lyndon Life Insurance Co. ("ITT Insurance"), a group that we will refer to collectively as the "ITT defendants," have moved to dismiss the three-count class action complaint filed by Zenovia Elliott. The complaint alleges violation of the Racketeer Influenced and Corrupt Organizations Act ("RICO"), 18 U.S.C. §§ 1961-1968 (1988), the Truth in Lending Act ("TILA"), 15 U.S.C. §§ 1601-1693 (1988), and the Illinois Consumer Fraud and Deceptive Business Practices Act, Ill. Rev. Stat. ch. 121 1/2, paras. 262-272 (1989). More specifically, Elliott complains of the ITT defendants' alleged practice of "insurance packing" -- that is, the practice of "using unfair and deceptive means to induce the purchase of insurance in connection with consumer credit transactions." Complaint at 2. For the reasons set forth herein, we deny the motion.

 I.

 A motion to dismiss should not be granted unless it "appears beyond doubt that the plaintiff can prove no set of facts in support of [her] claim which would entitle [her] to relief." Conley v. Gibson, 355 U.S. 41, 45-46, 78 S. Ct. 99, 102, 2 L. Ed. 2d 80 (1957); see also Ellsworth v. City of Racine, 774 F.2d 182, 184 (7th Cir. 1985), cert. denied, 475 U.S. 1047, 106 S. Ct. 1265, 89 L. Ed. 2d 574 (1986). We take the "well-pleaded allegations of the complaint as true and view them, as well as all reasonable inferences therefrom, in the light most favorable to the plaintiff." Balabanos v. North Am. Inv. Group, Ltd., 708 F. Supp. 1488, 1491 n. 1 (N.D. Ill. 1988) (citing Ellsworth).

 II.

 On January 7, 1988, Elliott and her husband obtained a loan from ITT Financial in the amount of $ 3,096.00. The Elliotts declined to purchase the credit insurance offered by ITT Financial. On January 13, 1988, the Elliotts and ITT Financial agreed on a method to refinance certain existing debts, including the January 7 loan. The new loan totaled $ 57,120.00, and the Elliotts secured it by taking a second mortgage on their Chicago home. Of the $ 26,417.29 "amount financed," *fn1" nearly twenty percent paid for various insurance policies, including "credit life" insurance, "credit disability" insurance, and "income assistance" insurance. The Elliotts paid $ 5,163.00 for these assorted insurance policies.

 The crux of Elliott's complaint is that neither she nor her husband requested, desired, or had any use for the insurance "packed" into their loan agreement with ITT Financial. As defined in the complaint, "insurance packing" is the practice "whereby amounts for the payment of premiums on 'optional' insurance products are added to the amount of a loan without the request of the customer and presented to the customer with pre-prepared loan documents at the closing of the loan." Complaint at 8. Elliott contends that ITT Financial included the various insurance policies in the loan documents prepared for the closing, and its representatives told her and her husband that "they had to take the insurance in order to obtain the loan." Id.

 The ITT defendants argue in the main that Elliott's complaint must be dismissed because the McCarran-Ferguson Act, 15 U.S.C. §§ 1011-1015 (1988), specifically prohibits application of federal laws like RICO and TILA to the "business of insurance." We do not agree with defendants that Elliott's complaint fundamentally implicates or impinges on the business of insurance, and we therefore decline to dismiss the action.

 III.

 In relevant part, the McCarran-Ferguson Act provides that:

 
(a) State regulation [:] The business of insurance, and every person engaged therein, shall be subject to the laws of the several States which relate to the regulation or taxation of such business.
 
(b) Federal regulation [:] No Act of Congress shall be construed to invalidate, impair, or supersede any law enacted by any State for the purpose of regulating the business of insurance, . . . unless such Act specifically relates to the business of insurance. . . .

 15 U.S.C. § 1012(a), (b). Congress designed the McCarran-Ferguson Act to give broad "support to the existing and future state systems for regulating and taxing the business of insurance." Prudential Ins. Co. v. Benjamin, 328 U.S. ...


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