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Benedict v. Federal Kemper Life Assurance Co.

October 09, 2001


Appeal from the Circuit Court of Cook County. No. 98 CH 16503 Honorable Lester Foreman Judge Presiding

The opinion of the court was delivered by: Justice Tully.


Plaintiffs, Charles Benedict and Frederick J. Hanifan, appeal the circuit court's dismissal with prejudice of their second amended complaint for failure to state a cause of action. Plaintiffs filed a one-count complaint for breach of contract based upon whole life insurance policies sold to them by defendant, Federal Kemper Life Assurance Company, d/b/a Zurich Kemper Life (Kemper). Plaintiffs allege that they purchased Kemper life insurance policies with the understanding that they would pay out-of-pocket annual premiums for five years and, thereafter, the policy would accumulate a "cash value" to cover future premium payments. This feature is known as a "vanishing premium." Plaintiffs allege that Kemper breached the life insurance policies when it continued to require the insured to pay premiums out-of-pocket after five years. The circuit court concluded that the Kemper policy was not ambiguous and Kemper did not breach its contract with plaintiffs. The issues on appeal are (1) whether the Kemper life insurance policy is ambiguous so that parol evidence may be considered in determining whether Kemper did in fact breach the contract and, if so, (2) whether the statute of limitations bars plaintiffs' claim. For the reasons stated below, we affirm the decision of the circuit court.


The named plaintiffs, and those they purportedly represent, purchased life insurance policies from Kemper from 1980 forward. The second amended complaint alleges that Kemper entered into life insurance contracts with its policyholders which contained "vanishing premiums." The plaintiffs allege that Kemper agents used sales illustrations to sell policies which showed that after a stated number of years, the obligation of the insured to make out-of-pocket premium payments would vanish.

Facts Pertaining to Charles Benedict

The complaint alleges that in 1984, Kemper contacted named plaintiff Charles Benedict and persuaded him to purchase a $50,000 whole life insurance policy based on illustrations showing premium payments "vanishing" after five years. The complaint further alleges that the sales agent provided an illustration generated by Kemper which promised that, after five years, Benedict would not have to make another out-of-pocket premium payment for the life of the policy. Benedict paid a premium on his policy for five years, and in the sixth year, he received another premium bill. Benedict has continued to pay premiums out-of-pocket.

Facts Pertaining to Frederick J. Hanifan

The complaint alleges that named plaintiff Frederick J. Hanifan was contacted by Kemper and persuaded to purchase a $100,000 whole life insurance policy based on a sales illustration similar to the one shown to Benedict. The complaint alleges that Hanifan was also shown a sales illustration which indicated that his out-of-pocket payments would "vanish" after five years. Hanifan paid premiums for five years. Kemper sent a sixth premium bill to Hanifan and Hanifan subsequently surrendered his policy.

The second amended complaint contains one count for breach of contract. The plaintiffs allege that the Kemper policies promised that out-of-pocket premium costs to plaintiffs would vanish at a certain point. According to the complaint, Kemper breached these contracts by demanding that plaintiffs pay additional out-of-pocket premiums beyond the dates originally agreed to or risk having their policies canceled.

Kemper filed a motion to dismiss the complaint, arguing that the insurance policies unambiguously preclude a vanishing premium promise. Kemper asserts that the integration clause in the policy along with the parol evidence rule preclude consideration of the sales illustration. Moreover, Kemper contends that the sales illustration does not even support the plaintiffs' claim. Finally, Kemper maintains that even if parol evidence was considered here, the five-year limitation on actions based on oral contracts would bar plaintiffs' claim.

The circuit court found that the contract, consisting of the policy and the application, was not ambiguous so that the sales illustration could not be considered. The court further stated that even if it could properly consider the sales illustration, it did not support the claim that Kemper promised a vanishing premium. Finally, the circuit court stated that if the plaintiffs relied on parol evidence, their claim would be barred by the five year statute of limitations.


We review de novo the dismissal of a complaint pursuant to section 2-619 of the Code of Civil Procedure. (735 ILCS 5/2-619 (West 1998)). Bloom v. Braun, 317 Ill. App. 3d 720, 725, 739 N.E.2d 925 928 (2000). A reviewing court must construe the allegations in the light most favorable to the plaintiffs and determine whether plaintiffs have alleged sufficient facts to establish a cause of action on which relief may be granted. Weatherman v. Gary-Wheaton Bank of Fox Valley, 186 Ill. 2d 472, 491, 713 N.E.2d 543 (1999). Furthermore, the reviewing court must ascertain whether a genuine issue of ...

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