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Bajwa v. Metropolitan Life Insurance Co.

January 23, 2004

[5] KHALID J. BAJWA, ADM'R OF THE ESTATE OF MUHAMMAD CHEEMA, A/K/A MANWAR AHMAD BAJWA, DECEASED, APPELLEE AND CROSS-APPELLANT,
v.
METROPOLITAN LIFE INSURANCE COMPANY, APPELLANT AND CROSS-APPELLEE.



[6] The opinion of the court was delivered by: Justice Thomas

[7]  Docket No. 95051-Agenda 6-November 2003.

[8]  Plaintiff, Khalid J. Bajwa, as administrator of the estate of Muhammad Cheema, filed an action under the Wrongful Death Act (740 ILCS 180/1 et seq. (West 1998)), alleging that the negligent issuance of a life insurance policy by defendant, Metropolitan Life Insurance Company (Met Life), proximately caused the murder of Muhammad Cheema (decedent or A. Cheema) by the beneficiary of the policy. Met Life filed a motion to dismiss pursuant to section 2-615 of the Code of Civil Procedure (the Code) (735 ILCS 5/2-615 (West 2000)). The circuit court of Cook County granted the motion. The appellate court reversed and remanded the cause for further proceedings. 333 Ill. App. 3d 558. We granted Met Life's petition for leave to appeal pursuant to Supreme Court Rule 315 (177 Ill. 2d R. 315), to consider an issue of first impression in Illinois:

[9]  whether a cause of action for negligent issuance of a life insurance policy should be recognized, where there are a number of anomalies in the application process and plaintiff alleges that the insurer should have known that the supposed insured did not know of the policy and did not give his consent to it, thereby proximately causing the death of the insured.

[10]   BACKGROUND

[11]   The plaintiff's fourth amended complaint and the attached exhibits reveal that in December 1992, Muhammad U. Cheema (U. Cheema) met with Met Life account representative Imtiaz Sheik to fill out an insurance policy on the life of A. Cheema. U. Cheema falsely represented himself as the son of A. Cheema and provided some personal information necessary to fill out part A of the application. U. Cheema designated himself as the beneficiary and arranged for the policy premiums to be deducted from his own bank account. U. Cheema then told the agent that he would take the application to his "father" to obtain his signature. This was a violation of Met Life's standard procedural rules, requiring that the agent meet personally with the proposed insured to witness the signature on the application and to propound certain questions to the proposed insured. Nevertheless, Sheik agreed to this deviation from procedure, and U. Cheema returned the application with it signed "A. Cheema." Agent Sheikh then signed part A of the application, under the heading "Witness," indicating that he had personally witnessed the proposed insured sign the application. When the policy was contested following the decedent's death, Sheikh admitted that he had not witnessed the proposed insured's signature.

[12]   For part B of Met Life's application process, the proposed insured was required to submit to a medical examination conducted by a paramedical examiner hired by Met Life. The medical exam resulted in a number of discrepancies between part A and part B of the application: the proposed insured's mailing address was listed as 6400 N. Ridge, #305, Chicago, IL in part A, but the address of his residence was listed as 5101 N. Slunden, Chicago, IL in part B; the social security numbers listed for the proposed insured in part A and part B were not the same; and the spaces provided for disclosing previous treatment for high blood pressure and previous surgery were checked "no" in part A, but were checked "yes" in part B.

[13]   The paramedical examiner certified in part C of the application that he had personally examined A. Cheema. However, the person examined by the paramedical examiner was 5 feet 11 inches tall and 195 pounds, while decedent was actually 5 feet 8 inches tall and 213 pounds.

[14]   Prior to the issuance of the policy, a Met Life underwriter noticed a number of additional irregularities in the application that required further investigation. In that regard, he questioned why U. Cheema, rather than A. Cheema's wife, was the policy beneficiary, and why the beneficiary was paying the premiums rather than the insured, and finally, he questioned why the policy was for $200,000 when A. Cheema's income, according to Met Life's guidelines, did not qualify him for that large of a policy amount. Despite these discrepancies, the underwriter decided the application was acceptable and issued the policy on January 18, 1993.

[15]   After the policy was issued, someone identifying himself as "Muhammad Cheema" called Met Life on five different occasions, purporting to be the insured and asking questions about possible coverage in the event of the insured's death. Met Life found these calls "strange enough" to send the case to the Consulting Services area, where the file was "noted." Nine days after the last of those calls was made to Met Life, the real A. Cheema was stabbed and beaten to death in his apartment. According to plaintiff, U. Cheema murdered the decedent in order to collect the life insurance benefits from the policy provided by Met Life.

[16]   Plaintiff filed a fourth amended complaint on February 19, 1999, alleging that Met Life negligently issued an insurance policy on the life of the decedent. Count IV of that complaint alleged that Met Life was negligent in the following ways: (1) issued a life insurance policy on the life of the decedent without investigating the veracity of the information on the insurance application and personally meeting with the insured; (2) issued a policy in favor of a beneficiary who did not possess an insurable interest on the life of the insured; (3) relied upon misrepresentations of its agent in underwriting the policy; (4) failed to warn decedent of the suspicious phone calls; and (5) provided motivation for the murder. Count V alleged gross negligence for the same acts. Count VI alleged negligent supervision of agent Sheik. The trial court granted Met Life's 2-615 motion to dismiss these counts of the complaint. *fn1

[17]   The appellate court reversed, finding that plaintiff could maintain a cause of action for negligent issuance of an insurance policy. In so doing, it looked to cases from other jurisdictions that have considered the matter and found that courts in those states have recognized the validity of such claims on three different grounds: (1) where the insurer should have known that the person who procured and owned the policy, and who was named as beneficiary, had no insurable interest in the life of the insured; (2) where the insurer had knowledge that the insured was unaware of and did not consent to the policy; and (3) where the insurer had actual knowledge of the beneficiary's intent to murder the insured and failed to take action. 333 Ill. App. 3d at 565.

[18]   As to the insurable interest ground, the appellate court noted that "while it has long been the established law of Illinois that the purchaser of an insurance policy must have an insurable interest in the insured's life [citation], it has also long been held that `one may insure his own life for the benefit of another having no insurable interest therein [citation].' " 333 Ill. App. 3d at 568. The court then found that plaintiff's pleadings were insufficient because they failed to make this distinction-plaintiff did not allege that Met Life issued an insurance policy on the life of the decedent to an individual who did not possess an insurable interest, but, rather, that Met Life allowed the policy owner to designate a beneficiary who did not possess an insurable interest. Accordingly, the court concluded that plaintiff's allegations as they relate to an insurable interest were insufficient to state a cause of action. 333 Ill. App. 3d at 569.

[19]   With respect to the second ground of possible recovery, however, the appellate court found that Met Life had a duty to ascertain, prior to the issuance of a policy on the life of another, whether the individual named as the insured is aware of and has consented to the procurement of the policy. The court found that the various irregularities in the application process, combined with the suspicious phone calls, were sufficient to put the insurer on notice that an investigation was warranted. 333 Ill. App. 3d at 580. The court then rejected the notion that actual knowledge was necessary to establish liability on the part of the insured. 333 Ill. App. 3d at 578-79.

[20]   ANALYSIS

[21]   As noted above, the circuit court dismissed plaintiff's complaint after Met Life brought a section 2-615 motion to dismiss. A section 2-615 motion to dismiss challenges the legal sufficiency of the complaint. Chandler v. Illinois Central R.R. Co., 207 Ill. 2d 331, 348 (2003). In reviewing a section 2-615 dismissal, a reviewing court must decide whether the allegations, when construed in the light most favorable to the plaintiff, are sufficient to establish a cause of action upon which relief may be granted. People ex rel. Ryan v. Telemarketing Associates, Inc., 198 Ill. 2d 345, 351 (2001). A cause of action should be dismissed only if it is clearly apparent from the pleadings that no set of facts can be proven which will entitle the plaintiff to recovery. Chandler, 207 Ill. 2d at 349. Review of a section 2-615 dismissal is conducted de novo. Telemarketing Associates, Inc., 198 Ill. 2d at 351; Chandler, 207 Ill. 2d at 349.

[22]   To recover in a negligence action, a plaintiff must allege facts from which a court will find a duty of care owed by the defendant to the plaintiff, a breach of that duty, and an injury proximately caused by the breach. Chandler, 207 Ill. 2d at 340, 349. The existence of a duty depends on whether the plaintiff and the defendant stood in such a relationship to each other that the law will impose upon the defendant an obligation of reasonable conduct for the benefit of the plaintiff. Happel v. Wal-Mart Stores, Inc., 199 Ill. 2d 179, 186 (2002). Whether a duty of care exists is a question of law to be determined by the court. Marshall v. City of Centralia, 143 Ill. 2d 1, 6 (1991). However, the question of whether defendant breached its duty and whether the breach was the proximate cause of the plaintiff's injuries are factual matters for the jury to decide. Chandler, 207 Ill. 2d at 340; Thompson v. County of Cook, 154 Ill. 2d 374, 382 (1993).

[23]   As the appellate court correctly noted, courts in other jurisdictions have recognized a cause of action for negligent issuance or continuation of a life insurance policy in three situations: (1) where the beneficiary who procured the insurance lacks an insurable interest (Liberty National Life Insurance Co. v. Weldon, 267 Ala. 171, 100 So. 2d 696 (1957)); (2) where there is a lack of knowledge and consent to the policy by the insured (Ramey v. Carolina Life Insurance Co., 244 S.C. 16, 135 S.E.2d 362 (1964); Williams v. John Hancock Mutual Life Insurance Co., 718 S.W.2d 611 (Mo. Ct. App. 1986); Wren v. New York Life Insurance Co., 59 F.R.D. 484 (N.D. Ga. 1973), aff'd, 493 F.2d 839 (5th Cir. 1974)); and (3) where the insurer has actual notice of a plot by the beneficiary to murder the insured (Bodine v. Federal Kemper Life Assurance Co., 912 F.2d 1373 (11th Cir. 1990); Bacon v. Federal Kemper Life Insurance Co., 400 Mass. 850, 512 N.E.2d 941 (1987); Life Insurance Co. of Georgia v. Lopez, 443 So. 2d 947 (Fla. 1983)). Because plaintiff does not challenge the appellate court's ruling that the allegations of plaintiff's fourth amended complaint failed to state a cause of action under the first and third grounds noted above, we will limit our analysis to the second ground-whether plaintiff stated a cause of action based on the decedent's lack of knowledge and consent to the policy.

[24]   The leading case on point is Ramey v. Carolina Life Insurance Co., 244 S.C. 16, 135 S.E.2d 362 (1964). There, the South Carolina Supreme Court recognized a cause of action for negligent issuance of a life insurance policy based on the lack of knowledge and consent of the insured. In Ramey, the wife procured the policy on the life of her husband without his consent, forged his signature on the application, and named herself beneficiary. After surviving his wife's attempt to murder him by poisoning, the husband brought an action against the insurer for the personal injuries he sustained, contending that issuance of the policy proximately caused his wife to poison him with the hope of collecting the proceeds of the policy. The insurer knew that the husband was unaware of the policy and that the signature was a forgery. The court noted that generally a wife has an insurable interest, but nevertheless concluded that even with an insurable interest, insurance taken out on the life of another, without consent, is against public policy. Ramey, 244 S.C. at 22, 135 S.E.2d at 365, citing Hack v. Metz, 173 S.C. 413, 418, 176 S.E. 314, 316 (1934); Holloman v. Life Insurance Co. of Virginia, 192 S.C. 454, 7 S.E.2d 169 (1940) (the authorities are generally to the effect that, except in the case of an infant, a policy of life insurance taken out without the knowledge and consent of the insured is not enforceable); 29 Am. Jur. Insurance §231, at 617 (1960) ("[a] wife, for example, cannot be permitted to obtain insurance on the life of her husband without his knowledge and consent; such a practice it has been deemed, might be a fruitful source of crime"). The Ramey court concluded by holding that "an insurance company has a duty to use reasonable care not to issue a policy of life insurance in favor of a beneficiary *** without the knowledge or consent of the insured, and this would especially be true, where as here, the company knew or had reason to know that such was the situation." Ramey, 244 S.C. at 25, 135 S.E.2d at 366.

[25]   In reaching its holding, Ramey relied upon Liberty National Life Insurance Co. v. Weldon, 267 Ala. 171, 100 So. 2d 696 (1957). There, an aunt obtained life insurance on her two-year-old niece and then poisoned the child to death. The father of the child filed suit against the insurer, alleging that the company "knew or should have known" that the aunt had no insurable interest, and the company failed to exercise reasonable diligence to ascertain whether an insurable interest existed. Weldon, 267 Ala. at 178-82, 100 So. 2d at 700-04. In finding that a duty existed, the Alabama Supreme Court noted that the rule against issuing policies on the life of a person without his knowledge and consent is designed to protect human life. It stated that an insured is placed in a position of extreme danger where a policy of insurance is issued in favor of a beneficiary with no insurable interest. Given that such policies are unreasonably dangerous because of ...


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