The opinion of the court was delivered by: Magistrate Judge Morton Denlow
MEMORANDUM OPINION AND ORDER
Plaintiff, Janice Spinelli ("Plaintiff"), filed a declaratory judgment suit to recover life insurance benefits that were denied to her by Defendant, Monumental Life Insurance Company ("Monumental Life" or "Defendant"). The suit was filed in the DuPage County Circuit Court and removed to this Court by Defendant. Defendant denies any liability to Plaintiff, due to material omissions or misrepresentations in the application for reinstatement of coverage. Defendant filed its Counterclaim seeking to rescind the policy or, in the alternative, a declaration that the reinstated policy was null and void ab initio, and that it has no obligation or liability other than to refund the premiums paid from the effective date of the policy's reinstatement.
On June 21, 2006, the Court permitted plaintiff's previous counsel to withdraw and granted Plaintiff's current counsel leave to enter an appearance. At that time the parties had fully briefed a trial on the papers, and the case was awaiting oral arguments. Given the substitution of counsel, the Court granted Plaintiff the opportunity to submit a new brief, and Defendant was permitted to submit a new reply brief.
The Court conducted a bench trial on the papers and heard oral argument on February 7, 2006. The Court has carefully considered the declarations filed by the parties, the exhibits introduced into evidence, and the briefs and arguments of counsel. The following constitute the Court's findings of fact and conclusions of law pursuant to Rule 52(a) of the Federal Rules of Civil Procedure.
Plaintiff is, and was at the time of filing this present action, a citizen of the State of Illinois and the widow of Phillip Spinelli ("Mr. Spinelli"). R. ¶ 1; Spinelli Dep. Ex. 3 ¶¶ 6-7.*fn1 Monumental Life is a Maryland corporation, with its headquarters and principal place of business in Baltimore, Maryland, and is a citizen of the State of Maryland. R. ¶ 2. Monumental Life is authorized to transact insurance business in the State of Illinois. Id.
B. JURISDICTION, VENUE, AND CHOICE OF LAW
This is an action brought by Plaintiff, as the alleged designated primary beneficiary of the estate of Mr. Spinelli, to recover benefits purportedly provided under a universal life insurance policy issued by Defendant to Mr. Spinelli, now deceased. R. ¶ 3. Jurisdiction is proper in the Court pursuant to 28 U.S.C. § 1332(a)(1) since diversity of citizenship exists between Plaintiff and Defendant and the amount in controversy exceeds the sum of $75,000 exclusive of interests and costs. Id. Venue is also proper in this Court pursuant to 28 U.S.C. § 1391(a)(2) because this is a civil action brought in the judicial district in which a substantial part of the events giving rise to Plaintiff's claim occurred, and under 28 U.S.C. § 1391(a)(3) since Defendant was subject to personal jurisdiction in this judicial district at the time this civil action was commenced. R. ¶ 4.
The parties have consented to a Magistrate Judge's jurisdiction pursuant to 28 U.S.C. 636(c)(1). As both parties either reside in or transact business in Illinois and the Court has diversity jurisdiction over the state law claim, the Court will apply state law. Erie R.R. Co. v. Tompkins, 304 U.S. 64 (1938). As the insured party, Mr. Spinelli, was domiciled in Illinois at the time of his application for insurance, the Court applies Illinois law. Prudential Ins. Co. of Am. v. Athmer, 178 F.3d 473, 477 (7th Cir. 1999) (in life insurance cases, the federal court "picks the law of the state where the insured was domiciled when the policy was applied for . unless some other state has a more significant relationship").
On August 12, 1985, Defendant issued a universal life insurance policy, designated as Policy Number MM106030 ("the Policy"), to Mr. Spinelli with an initial face value of $50,000. R. ¶ 5. Mr. Spinelli was the designated owner and insured under the Policy. Id. On July 12, 1988, the value of the Policy was increased to $125,000. R. ¶ 6.
The Policy specifies that planned periodic payments of $113.12 are due on or before the twelfth of each month until the Policy's maturity date of August 12, 2035. R. ¶ 9.
In the event a planned periodic payment is outstanding after the twelfth of the month, a grace period provides that the Policy will stay in effect for sixty-one days, allowing the Policy holder additional time to pay the negative balance. R. ¶ 10.
If the Policy holder fails to provide Monumental Life with sufficient payment to cover the negative balance within the grace period, the Policy will lapse thirty-one days after Monumental has provided written notice to the Policy holder. R. ¶¶ 10-11.
In the event of a lapse, the Policy will be reinstated at any time within five years from the date of the lapse and prior to the maturity date only upon submission of satisfactory proof of insurability, a premium payment for two months of coverage, and the payment of any loan balance. R. ¶ 12.
3. Beneficiary Designation
In October 1991, Plaintiff was designated by Mr. Spinelli as the primary beneficiary of the Policy. R. ¶ 13.
D. SUMMARY OF MR. SPINELLI'S MEDICAL RECORDS DURING THE 1990'S
In October and November 1992 and August 1994, Mr. Spinelli was diagnosed with stenosis*fn2 in both the arterial and circumflex coronary arteries. R. ¶ 14. He received treatment from 1992 through 1998, which included at least three cardiac catherizations, seven angioplasties, and the insertion of four stents. R. ¶ 15.
2. Gastroesophageal Reflux Disease
In January 1994, Mr. Spinelli was diagnosed with severe gastroesophageal reflux disease (GERD). R. ¶ 14.
In August 1994, Mr. Spinelli was diagnosed with a bladder tumor. Id. He underwent a resection of the tumor in August 1994, the biopsy results of which were negative. R. ¶ 17. As a result of his heart and bladder conditions, in August and November 1994, and again in January 1995, Mr. Spinelli's primary care physician, James Boblick, M.D. ("Dr. Boblick"), placed him on work restriction, which instructed him not to lift anything in excess of fifty pounds. R. ¶ 18.
4. Angina and Coronary Artery Disease
In November and December 1998 and August 1999, Mr. Spinelli was diagnosed with angina and coronary artery disease. R. ¶ 14. He took prescribed medication to regulate his chronic angina but continued to experience exertional and occasional resting angina. R. ¶ 16. In addition to the regularly prescribed medication, Mr. Spinelli took nitroglycerin to combat particularly severe episodes of chest pain. Id. In November 1998, Mr. Spinelli's supervisor required him to undergo an evaluation at an occupational medical clinic before he could resume his duties. R. ¶ 19. Despite the detection of an arterial occlusion, Mr. Spinelli was ultimately cleared to return to work. Id.
E. THE POLICY'S ACCOUNTING HISTORY
1. Monumental Life's General Accounting Practices
Monumental Life maintains accounting records that document the amount of premium payments and date they are received. R. ¶ 21. Further accounting records reflect the corresponding monthly cash value of a policy after such payments are credited. Id.
Monumental Life also maintains a log that documents the date on which it mails letters to owners of universal life insurance policies. R. ¶ 22. Included in this log are the dates on which Monumental Life mails a written notice ...