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Busse v. Paul Revere Life Insurance Co.

June 30, 2003


Appeal from the Circuit Court of Cook County No. 98 L 11983 Honorable Allen S. Goldberg, Judge Presiding.

The opinion of the court was delivered by: Justice Smith


This is a breach of contract case, arising out of the non-payment of benefits to plaintiff, Dr. Busse, under two disability income insurance policies. Trial has not yet taken place below, and the case is before this court pursuant to an appeal under Supreme Court Rule 308(a) (155 Ill. 2d R. 308(a)). The question certified for this court's review is:

Does I.P.I. 700.00 authorize recovery of future damages based upon a repudiation theory where a plaintiff alleges a breach of contract and a section 155 claim in the context of a disability insurance policy calling for periodic payment of benefits based upon certain conditions precedent, including continued disability?


Dr. Busse is an anesthesiologist who, in 1989, purchased from Provident Mutual Life Insurance Company (Provident) an "own occupation" disability income insurance policy, and in 1994 purchased similar insurance from Paul Revere Life Insurance Company (Paul Revere). Under the terms of both policies, Dr. Busse was to receive benefits on a monthly (periodic) basis, in the event that he became unable to practice anesthesiology due to mental or physical illness. The Provident policy was to pay Dr. Busse until he reached the age of 65; the Paul Revere policy was to pay Dr. Busse for life. Benefits under both policies were made subject to the submission by Dr. Busse of written proofs of loss within 90 days after the end of each monthly period of the time for which he was claiming benefits. Neither policy provides for benefits related to "permanent" disability, nor does either include provisions for or circumstances under which disability benefits could become accelerated or payable on a lump sum basis.

In May of 1995, Dr. Busse paralyzed a patient while administering a spinal anesthetic. *fn2 After injuring his patient, Dr. Busse began to suffer from major depression and other mental illness, including uncontrollable anxiety. He also experienced involuntary tremors. He was obliged to give up his staff privileges at Illinois Masonic Medical Center. Dr. Busse began treatment with Dr. Cahnmann, Ph.D., a licensed professional clinical counselor and Dr. Kurland, M.D., a psychiatrist, both of whom have repeatedly and continuously certified that he is completely disabled and unable to practice anesthesiology. They are both of the opinion that this condition is permanent. Dr. Busse has been and continues to be on a daily regimen of prescribed medications, some of which are psychotropic, including Wellbutrin, Serazone, Propanolol, Neurotin and Risperdol.

In the fall of 1995, Dr. Busse made a claim on both of his policies, pursuant to which both Provident and Paul Revere began to pay him monthly income benefits. Payment of these benefits continued for approximately three years. In 1998, evidently pursuant to an investigation into Dr. Busse's disability status, the companies received a copy of a document filed in the course of Dr. Busse's divorce proceedings in the Circuit Court of Cook County. The document, entitled "Answer to Motion For Psychiatric Evaluation," contains the following statement:

"The Respondent (Busse) did claim that he was out of work due to disability and due to his immigration status which bars him from working legally in this country. The Respondent is now waiving his claim to be out of work due to disability, and therefore denies the allegation contained in paragraph 2 of said Motion."

Following their receipt of the document, the companies asked Dr. Busse to undergo independent medical examinations. Dr. Busse was first examined by a psychologist, who was unable to obtain a valid diagnosis due to the psychotropic drugs Dr. Busse was taking. Dr. Busse was then referred to a psychiatrist qualified to evaluate a medicated subject. This psychiatrist found Dr. Busse to be completely disabled and unable to practice anesthesiology.

An internal memorandum from Provident's claim department dated May 5, 1998 indicates that Dr. Busse's "IME's appear to support [total disability] at this time." Nevertheless, during the month of June, correspondence was being exchanged between Dr. Busse and the companies in which the companies stated that Dr. Busse's "waiver" of his disability claim in the context of his divorce proceeding was "inconsistent" with the policy's definition of disability due to mental or physical illness, and that benefits would accordingly be discontinued. *fn3 There was additionally some evidence that Dr. Busse was working, though not in the field of anesthesiology or even medicine.

Prior to filing suit, Dr. Busse filed a complaint with the Illinois Department of Insurance. The Department opened an inquiry, pursuant to which the companies were directed to and did file with the Department a statement of the basis for denial of benefits in this case, along with any supporting records from their claims files. In a letter to the companies dated October 28, 1998, the Department set forth its conclusion that there was no basis for the companies' continued denial of Dr. Busse's claims, and further stated that the correspondence it had received from the companies did not adequately explain their denial.

According to Dr. Busse, the companies subsequently wrote to him and cancelled his policies. The record shows that on January 6, 1999, Provident cancelled Dr. Busse's policy, for non-payment of premiums (benefits were never reinstated after the initial denial in mid 1998). Both companies deny that their policies were ever cancelled or otherwise rescinded.

Dr. Busse filed his initial two-count complaint on October 16, 1998. Count I alleged breach of contract against both companies. *fn4 Count II alleged that the companies' failure and refusal to pay under the contracts of insurance was vexatious, unreasonable, and done in bad faith, warranting damages pursuant to §155 of the Illinois Insurance Code (215 ILCS 5/155 (West 2001)).

Dr. Busse planned to claim entitlement to the present cash value of the entire policies. Towards this end, hired an economist (disclosed as a 213(g) witness) to assist the trier of fact in making this calculation. The calculation was based on Dr. Busse's work and life expectancies, and made the assumption that Dr. Busse was, as reported by all who had examined him, permanently disabled from working as an anesthesiologist. The economist calculated the present cash value of the two policies, over the course of Dr. Busse's expected life, to be just over $6,000,000.00.

Trial was scheduled to begin on April 22, 2002. The companies filed a motion in limine (entitled Motion in Limine No. 3) to bar the economist's testimony, and to preclude the introduction of any evidence as to Dr. Busse's future damages, on the ground Illinois recognizes no cause of action which would allow them for the breach of a policy calling for periodic payments that are subject to conditions precedent. At most, the companies contended before the trial court, Dr. Busse would be entitled to the benefits which had accrued up to the date of trial. In his response to the motion, Dr. Busse argued that, under a theory ...

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