The opinion of the court was delivered by: Matthew F. Kennelly, District Judge
MEMORANDUM OPINION AND ORDER
Michael Pekin has sued The Paul Revere Life Insurance Company over its decision to stop paying him residual disability benefits under an insurance policy he had purchased. Pekin's eyes were badly damaged by LASIK surgery,*fn1 which caused him to leave his job as a trial lawyer. He seeks a declaratory judgment of insurance coverage and asserts claims for breach of contract and violation of Illinois insurance and consumer protection laws. Pekin has moved for summary judgment on the declaratory judgment and breach of contract claims. Paul Revere has cross-moved for summary judgment on all claims. For the reasons stated below, the Court denies both motions.
Pekin worked as a trial attorney and was a partner in the law firm of Pekin, Levin & Associates. In 1993, he purchased a disability insurance policy from Paul Revere's predecessor. The policy included "residual disability" coverage, which entitled Pekin to monthly payments if he was unable to perform key functions of his occupation due to illness or injury but was not totally disabled. Under the residual disability provision, if an injury or sickness caused a loss of earnings of at least twenty percent of prior earnings, Pekin was entitled to monthly payments of residual disability benefits.
In 1999, Pekin had LASIK surgery to correct his vision. The surgery was not successful, and Pekin began suffering complications including severe eye dryness, constant eye pain, headaches, and occlusion of his tear duct drainage system. These problems made it difficult for Pekin to read and concentrate for prolonged periods of time and interfered with his ability to perform his duties as a trial attorney.
In December 2002, Pekin took a six month leave of absence from his law firm, during which he hoped his eyes would heal. In January 2003, he took a job with a startup company, Oasis Legal Finance Group, LLC. His job at Oasis did not require the same prolonged periods of reading and concentration as his work as a trial lawyer, and he was able to perform his job duties at Oasis despite his eye problems. Pekin also accepted a minority ownership interest in Oasis. Some time before the six month leave was set to expire in June 2003, Pekin resigned from his law firm, which bought out his share of the partnership. He continued to work at Oasis.
Oasis, a start-up company, was not a financial success. In early 2004, Pekin began considering what he might do in the event Oasis went out of business. According to Pekin, he realized at that time that his eye condition was not improving despite what he had hoped based on his doctors' advice. He concluded that he would never be able to resume his occupation as a trial attorney. Based on this conclusion, in March 2004, he applied to Paul Revere for residual disability insurance benefits under the policy, claiming that the complications from his LASIK surgery had left him unable to perform his work as a trial attorney.
Pekin's claim for benefits was assigned to Kimberly Boivin, a Paul Revere employee. From April to September 2004, Boivin investigated Pekin's claim. During this investigation, Boivin reviewed Pekin's medical records, interviewed Pekin, his doctor, and his former law partner, and required Pekin to submit to a medical examination by a physician chosen by Paul Revere. According to Boivin's notes and reports, Pekin claimed his eye problems prevented him from returning to work as a trial lawyer and as a result he had been forced to work at Oasis, where he earned substantially less money than he had when he was in law practice.
As part of the investigation, Pekin was asked why he filed his notice of disability with Paul Revere so long after his LASIK surgery. Boivin reported that over the phone, Pekin told her he had a hard time accepting his disability and it had taken him until January 2004 to come to the conclusion that it was a permanent condition. In July 2004, Boivin asked Pekin explain in writing the circumstances that led to his claim for benefits, including an explanation for the late filing of notice. In a letter dated July 28, 2004, Pekin again explained that he did not arrive at the conclusion that he would never be able to return to the practice of law until March 2004, which explained his late filing for residual disability benefits.
In November 2004, Paul Revere began paying Pekin residual disability benefits. Paul Revere identified Pekin's "date of disability" as March 10, 2004. Pekin's policy included a ninety-day waiting period, so the payments included back payment dating to July 2004. The amount of the payments was calculated using a formula laid out in Pekin's policy. Under the policy, residual disability benefits are calculated based on "prior earnings," a term defined as "the greater of your average Monthly Earnings for the year just before your disability began; or your highest average Monthly Earnings for any 2 successive years during the 5 year period just before Your Disability began." Compl., Ex. A at 2.2. Pekin's benefit was calculated using the second method. His highest average monthly earning for a two-year period was during the time he was a practicing lawyer, so Paul Revere used his earnings from Pekin, Levin & Associates to calculate the amount of the benefit. Dep. of Marc Champoux, Pl.'s Mot. for Summ. J., Ex. 13 at 17.
Until January 2005, Paul Revere paid Pekin benefits under a reservation of rights, which stated that "the payment cannot be construed as an admission of past, present or future liability and we reserve our right to enforce any and all provisions of the policy." Pl.'s L.R. 56.1 Stat. ¶ 42. On January 27, 2005, however, Paul Revere informed Pekin in a letter that it "accepted liability" for Pekin's claim and "removed the Reservation of Rights that was applicable to prior payments." Id. ¶ 45.
To continue to receive residual disability benefits, Pekin was required to submit monthly earnings statements to Paul Revere to verify that he was still experiencing a loss of earnings of twenty percent or more. Because Pekin had a partial ownership in interest in Oasis, he was also required to submit profit and loss statements for the company to allow Paul Revere to determine whether he received any income from his ownership interest.
In 2006, a new claims adjuster, Scott Allen, was assigned to administer Pekin's claims after an internal reorganization at Paul Revere. In early 2007, Oasis changed its accounting method from cash basis to accrual basis. Under the new accounting method, Oasis' monthly profit and loss statements began showing a positive net income for 2007, though apparently the financial health of the company had not changed substantially.
The change in accounting method for Oasis caused Paul Revere to reevaluate Pekin's claims for residual disability payments, because the profit and loss statements under the new method seemed to indicate that he was earning substantial money from his partial ownership of Oasis. According to Pekin, this was "ghost" income brought about by the change in accounting methods; he contends that he was not actually earning substantially more. In March 2007, however, Paul Revere stopped making payments to Pekin. In October 2007, it notified him that it was seeking repayment of the benefits paid to him from January 2007 to March 2007 on the ground that under the new method of accounting, he had not experienced a qualifying loss in earnings.
This was the beginning of problems between Pekin and Paul Revere. In the months following, Pekin retained counsel. Oasis returned to its old way of accounting and Pekin, through his counsel, submitted revised profit and loss statements to Paul Revere, which he felt demonstrated his continued eligibility for benefits. A financial analyst at Paul Revere reviewed the revised statements and concluded that Pekin appeared to have qualified for benefits for much of 2007.
In a letter dated January 31, 2008, however, Paul Revere notified Pekin that it had determined he was no longer eligible for residual disability benefits, regardless of the accounting method employed ...