The opinion of the court was delivered by: Magistrate Judge Nan R. Nolan
MEMORANDUM OPINION AND ORDER
Plaintiffs Colin Hann ("Hann"), Carol Gallagher ("Gallagher"), and Import Logistics, Inc. ("Import Logistics") initiated this lawsuit against Defendants The Paul Revere Life Insurance Company and Provident Life and Accident Insurance Company in order to recover benefits under three disability insurance policies naming Hann as the covered insured. The parties have filed cross-motions for summary judgment on the issue of liability. For the reasons stated below, Plaintiffs' summary judgment motion [#78] is denied and Defendants' summary judgment motion [#79] is granted in part and denied in part.
A. The Business of Import Logistics
Hann and Gallagher incorporated Import Logistics in 1991. Hann served as President, Gallagher served as Vice President, and they each owed 50% of the company's stock. The business of Import Logistics is to establish a domestic supply chain for its clientele of approximately thirty overseas manufacturers. Import Logistics processes the export and import of foreign made products for its clients, maintains an inventory of its clients' products at its Aurora, Illinois warehouse facility, processes purchase orders for the sale of it clients' products and coordinates the logistics for delivering those products to manufacturers located in the United States. Import Logistics has approximately twenty-five employees in various departments, including accounting, brokerage, warehouse and materials management, and general business administration.
B. Hann's Individual Disability Insurance Policy Issued By Paul Revere
Hann is the named insured under an individual disability insurance policy, Policy No. 0102611795 ("IDI Policy") issued to Hann by Paul Revere on April 1, 1993. The IDI Policy contains, in relevant part, the following definition of Total Disability:
"Total Disability" means that because of Injury or Sickness:
a. You are unable to perform the important duties of Your Occupation; and
b. You are receiving Physician's Care. We will waive this requirement if We receive written proof acceptable to Us that further Physician's Care would be of no benefit to You.
The IDI Policy defines "Your Occupation" as "[t]he occupation or occupations in which You are regularly engaged at the time Disability begins."
C. The Paul Revere Business Buy-Out Expense Policy
Hann is the named insured under Policy No. 0102611796 issued by Paul Revere to "Carol Gallagher c/o Import Logistics" as "Owner" with an issue date of April 1, 1993 ("Paul Revere Buy-Out Policy"). The Paul Revere Buy-Out Policy states: "Benefits will be paid to reimburse Buy-Out Expenses incurred to perform the Buy-Sell Agreement." The Paul Revere Buy-Out Policy also states: "The Paul Revere Life Insurance Company will pay the benefits provided in the Policy to reimburse You, the Owner of this Policy, for monies actually paid to buy the disabled Insured's entire ownership interest in the Business Entity." The Paul Revere Buy-Out Policy defines "Buy-Sell Agreement," "Buy-Out Expense" and "Business Entity," respectively, as follows:
"Buy-Sell Agreement" means a written agreement between the insured and You [i.e., the "Owner"]. It calls for the purchase of the Insured's entire ownership interest in the Business Entity in the event of the Insured's Total Disability. We [Paul Revere] are not a party to this agreement. "Buy-Out Expense" means the monies payable by You to the Insured to perform the terms of the Buy-Sell Agreement in effect when the Insured's Total Disability began. "Business Entity" means the partnership or corporation named in the Application in which the Insured has an ownership interest. It also means the same business with the same ownership under a new name.
The Business Entity named in the Application is Import Logistics.
The Paul Revere Buy-Out Policy defines Total Disability, in relevant part, as follows: "Total Disability" means that because of Injury or Sickness the insured:
a. Is unable to perform the important duties of his or her regular occupation; and
b. Does not perform any work for the Business entity.
c. Is Receiving Physician's Care.
The Paul Review Buy-Out Policy provides in section 2.1 titled Conditions of Payments, as follows:
The Buy-Out Expense benefit will become payable as of the later of: a) the Commencement Date; or b) the date a Buy-Out Expense is incurred. The Policy must be in force when the Insured becomes Totally Disabled. A Buy-Sell Agreement must be in effect when Total Disability begins.
The maximum Business Buy-Out Expense benefit under the Paul Revere Buy-Out Policy is $250,000.00.
D. The Provident Business Buy-Out Expense Policy
Hann is the named insured under Policy No. 06-1738-6146953 issued by Provident to Import Logistics as "Policy Owner" with an issue date of February 18, 2000 ("Provident Buy-Out Policy"). The Provident Buy-Out Policy states: "A Business Buy-Out Expense Disability Policy provides funds toward the purchase of a disabled Insured's ownership interest in a business." The Provident Buy-Out Policy provides, in the section titled Total Disability - Single Lump Sum Funding Method as follows:
We will pay a lump sum benefit to the Loss Payee for the Business Buy-Out Expense if: (a) the Insured is an owner of the Business and is engaged in Active Full-time Work when the Period of Disability starts; and (b) a lump sum becomes payable in accordance with the Buy-Sell Agreement because of the Insured's Total Disability.
The Provident Buy-Out Policy names the Loss Payee as Carol Gallagher.
The Provident Buy-Out Policy defines "Total Disability," in relevant part, as follows: Total Disability and totally disabled means that due ...