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Siudut v. Banner Life Insurance Co.

United States District Court, Seventh Circuit

August 30, 2013

MARGARET SIUDUT, Plaintiff/Counter-Defendant,
v.
BANNER LIFE INSURANCE COMPANY, Defendant/Counter-Plaintiff.

MEMORANDUM OPINION AND ORDER

GARY FEINERMAN, District Judge.

Margaret Siudut brought this suit in the Circuit Court of Cook County, Illinois, alleging that Banner Life Insurance Company's refusal to pay on the life insurance policy held by her deceased husband, Paul Siudut ("Paul"), breached the policy and constituted a vexatious and unreasonable delay under 215 ILCS 5/155. Doc. 1-2. Banner removed the case to this court. Doc. 1. Alleging that Paul's policy application had misrepresented his medical history, Banner counterclaimed for rescission of the policy under 215 ILCS 5/154 and a declaration that the policy is null and void. Doc. 10 at pp. 11-17. Siudut and Banner have cross-moved for summary judgment on the claims and counterclaims. Docs. 23, 32. Siudut's motion is denied, and Banner's motion is granted in part and denied in part.

Background

Before setting forth the relevant background, the court addresses three motions that bear on the composition of the summary judgment record. First, Banner moves to strike portions of Siudut's Local Rule 56.1(a)(3) statement, portions of Siudut's Local Rule 56.1(b)(3)(B) response to Banner's Local Rule 56.1(b)(3)(B) statement, and portions of Siudut's summary judgment briefs, and to deem admitted portions of Banner's Local Rule 56.1(a)(3) statement. Doc. 42. Banner argues that Siudut should not be permitted to deny the assertions in its Local Rule 56.1(a)(3) statement that rested on allegations of its counterclaims because Siudut admitted those allegations by failing to answer the counterclaims; Banner also contends that Siudut has failed to support some of her denials with citations to the record or other materials, in violation of Local Rule 56.1(b)(3)(B). Siudut has responded to Banner's motion with two motions of her own: a motion for leave to file an answer to Banner's counterclaims, and a motion for leave to file an amended Local Rule 56.1(b)(3)(B) response. Docs. 48, 49. Banner's motion is denied, and Siudut's motions are granted.

The purpose of Local Rule 56.1 "is to make the summary judgment process less burdensome on district courts, by requiring the parties to nail down the relevant facts and the way they propose to support them." Sojka v. Bovis Lend Lease, Inc., 686 F.3d 394, 398 (7th Cir. 2012). "These rules were not intended to provide a maze of technical traps to complicate and delay litigation without advancing the merits." Stevo v. Frasor, 662 F.3d 880, 887 (7th Cir. 2011). Although district courts "are entitled to insist on strict compliance with local rules designed to promote the clarity of summary judgment filings, " the Seventh Circuit has "not endorsed the very different proposition that litigants are entitled to expect strict enforcement by district judges." Ibid. "Rather, it is clear that the decision whether to apply the rule strictly or to overlook any transgression is one left to the district court's discretion." Ibid. (internal quotation marks omitted); see also Little v. Cox's Supermarkets, 71 F.3d 637, 641 (7th Cir. 1995).

It is appropriate under the particular circumstances of this case to overlook Siudut's transgressions. The central issue to Siudut's claims and Banner's counterclaims is whether Paul properly or improperly answered "No" when asked on the life insurance policy application whether he had received any treatment for, or had been advised to have treatment for or to refrain from, alcohol use. The answer to that question rests primarily on the records and recollection of Paul's physician, Dr. Zdenek Durek, regarding what he advised Paul about alcohol-related medical issues at medical appointments in September and October 2007. All this state of play was readily apparent when the summary judgment motions were filed. Accordingly, although Siudut's original Local Rule 56.1(b)(3)(B) response (Doc. 34) failed to comply with the requirement that she support her denials with citations to the record or other materials, it is obvious, and undoubtedly was obvious to Banner, that Siudut's denials were in fact based on certain favorable (to Siudut) portions of Dr. Durek's deposition transcript and records. Siudut's proposed amended Local Rule 56.1(b)(3)(B) response (Doc. 48-1) does not assert any new facts or denials; rather, it simply provides specific citations to the transcript and records. Given these circumstances, Banner would suffer no unfair prejudice if Siudut were permitted to file her amended Local Rule 56.1(b)(3)(B) response and if the court considered the record citations offered in support of Siudut's denials.

Similarly, although Siudut's failure to answer Banner's counterclaims is hardly a model of good litigation practice, Banner would not be unfairly prejudiced if Siudut were allowed to file her proposed answer (Doc. 49-1) at this time. Banner's counterclaims mirror Siudut's complaint, both factually and legally. Banner's contention that it "will be prejudiced because it cannot address the content of the Answer in its briefs in support of its Motion for Summary Judgment, " Doc. 58 at 3, cannot be taken seriously. Banner knew full well Siudut's position on all substantive issues in this case from her complaint and from discovery. Banner does not identify any additional discovery it would have sought had Siudut's proposed answer been filed before Banner moved for summary judgment. As a result, Siudut's motion for leave to file an answer to Banner's counterclaims is granted.

When considering whether Banner is entitled to summary judgment, the facts will be considered in the light moved favorable to Siudut, and when considering whether Siudut is entitled to summary judgment, the facts will be considered in the light most favorable to Banner. See In re United Air Lines, Inc., 453 F.3d 463, 468 (7th Cir. 2006) ("With cross summary judgment motions, we construe all facts and inferences therefrom in favor of the party against whom the motion under consideration is made.") (internal quotation marks omitted). That said, the following facts are undisputed, either by the parties' agreement or because they simply quote from a document in the record or recite what a deponent said during a deposition.

A. Paul's Application and the Insurance Policy

Banner issued a $450, 000 life insurance policy on Paul's life, effective February 10, 2009. Doc. 48-1 at ¶ 5; Doc. 10-1 at 2-10. Banner issued the Policy pursuant to Paul's application for insurance. Doc. 48-1 at ¶ 6; Doc. 10-1 at 14-21. Paul signed and dated Parts I and II of the Application on October 24, 2008. Doc. 48-1 at ¶¶ 7-8; Doc. 10-1 at 16-17, 19. Siudut's answers to the questions on the Application were recorded by a nurse. Doc. 41 at ¶ 40.

Part I of the Application states in part:

IN CONNECTION WITH THIS APPLICATION FOR INSURANCE, IT IS UNDERSTOOD AND AGREED THAT:
The statements contained here and in Part II of this application and any supplement thereto, copies of which shall be attached to and made a part of any policy to be issued, are true to the best of my (our) knowledge and belief and are made to induce the Company to issue an insurance policy. I agree to notify the Company of any changes to the statements and answers given in any part of the application before accepting delivery of any policy....
Except as may be provided in a duly issued Conditional Receipt, no insurance shall take effect unless and until the policy has been physically delivered and the first full premium paid during the lifetime of the insured(s) and then only if the person(s) to be insured is (are) actually in the state of health and insurability represented in Parts I and II of this application and any supplements thereto, copies of which shall be attached and made part of the policy to be issued.

Doc. 48-1 at ¶ 9 (italics added); Doc. 10-1 at 16. Paul answered "No" to Question 4(a) in Part II, which asked: "Within the past 10 years, have you: a. Had any treatment for, or been advised to have treatment for or to refrain from, the use of alcohol or any drug?" Doc. 48-1 at ¶ 10; Doc. 10-1 at 18. For Questions 3-7 in Part II, the Application asked Paul to provide "full details for each question answered YES, including date[, ] nature of illness or injury... treatment, ... name, address and telephone number of doctors, hospitals or clinics involved." Doc. 48-1 at ¶ 11; Doc. 10-1 at 19. The Application did not ask anything about the frequency of the applicant's alcohol consumption. Doc. 41 at ¶ 41.

On March 2, 2009, Paul signed a "Supplement to the Application" on which an "X" was marked in the box in Part A next to "No Change in Health for Paul Siudut." Doc. 48-1 at ¶ 12; Doc. 10-1 at 23. The Supplement provided in pertinent part: "Part A is to be completed if there has been no change in health of any of the proposed insured(s)" and "I represent that, to the best of my knowledge and belief, these statements are complete and true and agree that this statement and the answers given herewith will be made part of the new contract, if issued...." Doc. 48-1 at ¶ 13; Doc. 10-1 at 23. On March 2, 2009, Paul signed a Policy Delivery Receipt and Health Statement stating that he had no change in health since "the date of the last medical examination or non-medical application for insurance with Banner Life Insurance Company." Doc. 48-1 at ¶ 14; Doc. 10-2 at 2. The Delivery Receipt provided in pertinent part: "By signing below, I certify that... the proposed insured's health and medical history remain in every aspect as described in the application." Doc. 48-1 at ¶ 15; Doc. 10-2 at 2.

Paul's completed Application and Delivery Receipt were submitted to Banner. Doc. 48-1 at ¶ 16. Based in part on the representations that Paul made in the Application and Delivery Receipt, Banner issued the Policy. Id. at ¶ 17. As part of its underwriting process, Banner employs written underwriting guidelines that, along with the judgment of the underwriter, determine whether Banner can provide coverage to the applicant. Id. at ¶ 29. Banner relies on the information provided in a proposed insured's application to determine whether that applicant is insurable under Banner's underwriting guidelines. Id. at ¶ 30. According to Sharon Jenkins, Banner's Chief Underwriter, "Banner Life would not have issued coverage to Siudut if it had known his true health history. Specifically, upon review of the medical records, Banner Life determined that Siudut's diagnosis of alcohol abuse, Dr. Durek's medical advice to stop drinking alcohol and referral of Siudut to another physician for consultation regarding and treatment of his alcohol abuse, all in September 2007, by themselves would have resulted in the rejection of the Application." Doc. 30-3 at ¶¶ 22-23. Siudut denies Jenkins's statement that Banner would have not issued coverage had it known about Dr. Durek's treatment of Paul. Doc. 48-1 at ¶ 31.

Banner received notice on or about February 7, 2011, that Paul had died on February 5, 2011, and Siudut submitted a claim for life insurance benefits under the Policy on or about February 18, 2011. Id. at ¶ 18. On or about June 30, 2011, Banner denied Siudut's claim and sent her a check for a full refund of all premium payments made on the Policy. Id. at ¶ 25. Siudut did not cash the check. Id. at ¶ 26.

B. Paul's Medical History

In connection with its routine investigation of Siudut's claim, Banner obtained Paul's medical records, including records from Dr. Durek. Id. at ¶ 19. Dr. Durek testified at his deposition that the only independent recollection he had of Paul was that he "was an unusually heavy-set man" and "sort of pleasant." Doc. 26-6 at 17. According to Dr. Durek, at an appointment on September 6, 2007, Paul reported drinking three to four beers or two to three glasses of wine per day. Id. at 23, 27; Doc. 48-1 at ¶ 20. Among the coded diagnoses/symptoms set forth in the medical records, Dr. Durek included "alcohol abuse." Doc. 26-6 at 24, 27. Dr. Durek also wrote "hold alcohol wine" in his records. Doc. 48-1 at ¶ 21. At his deposition, Dr. Durek testified regarding that notation as follows:

Q: So under management plan/orders, it reads here, hold alcohol plus wine, correct?
A: Yes.
Q: And what does that mean? Why did you write that?
A: Well, because he admitted to drinking, so I initially advised him to ...

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