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The Estate of Melin v. Washington National Insurance Co.

United States District Court, N.D. Illinois, Eastern Division

March 17, 2015

The Estate of LOIS MELIN, by its executor CATHY JAGER, individually and on behalf of all others similarly situated, Plaintiff,
v.
WASHINGTON NATIONAL INSURANCE COMPANY, Successors in Interest to Pioneer Life Insurance Company, Defendant.

MEMORANDUM OPINION AND ORDER

JOAN B. GOTTSCHALL, District Judge.

The predecessor to Washington National Insurance Company issued a home health care policy (the "Policy") to Lois Melin more than twenty years ago.[1] In her second amended complaint, which is styled as a class action, Melin contends that Washington National wrongfully limited a provision that escalates benefits 8% per year to her daily home health care benefit, which started at $90 per day. According to Melin, Washington National should also have increased other benefits in the Policy by 8% per year. Washington National seeks to dismiss Melin's complaint, arguing that her interpretation of the Policy is at odds with Illinois law. For the following reasons, Washington National's motion to dismiss is denied.

I. BACKGROUND[2]

A. The Policy

Melin purchased the Policy in January 1991 from Pioneer Life Insurance Company, which is Washington National's predecessor in interest. The Policy (which is attached to the second amended complaint) contains a "Benefits" section that applies to all policyholders, as well as a "Certificate Schedule" that is unique to each policyholder. The "Benefits" section includes four types of benefits that refer the policyholder to a corresponding section of the Certificate Schedule:

A. HOME HEALTH CARE: We will pay 100% of the usual and customary charges for Home Health Care expenses if the care was pre-authorized. If the care was not pre-authorized we will pay 75% of the usual and customary charges for Home Health Care expenses incurred, up to 75% of the Daily Benefit Amount shown in the schedule. All benefits will be limited to the Per Occurrence Maximum Benefit for each injury or sickness and the Lifetime Maximum Benefit Amount for ALL injuries and sicknesses which are shown in the certificate schedule....
B. AUTOMATIC DAILY BENEFIT INCREASE: On each policy anniversary, we will increase the Home Health Care Daily Benefit payable under this policy by the Automatic Benefit Increase Percentage shown on the schedule page....
E. PER OCCURENCE MAXIMUM BENEFIT: No further benefits will be payable for sickness or injury when the total sum of Home Health Care or Adult Day Care of benefits for that occurrence equals the amount shown in the schedule for the Per Occurrence Maximum Benefit. Successive confinement due to the same or related cause not separated by at least six months of normal daily living will be considered as the same occurrence.
F. LIFETIME MAXIMUM BENEFIT: This coverage shall terminate and no further benefits will be payable when the total sum of Home Health Care or Adult Day Care benefits paid equals the amount shown in the schedule for the Lifetime Maximum Benefit Amount. Any premium paid for a paid for a period after termination will be refunded.

(Dkt. 27-1 at PageID #311-12.)

The Certificate Schedule in the Policy is on its own page and provides that:

CERTIFICATE SCHEDULE

HOME HEALTH CARE BENEFIT $90/DAY LIFETIME MAXIMUM BENEFIT AMOUNT $250, 000.00 PER OCCURRENCE MAXIMUM BENEFIT $75, 000/ILLNESS AUTOMATIC BENEFIT INCREASE PERCENTAGE Benefits increase by 8% each year

( Id. at PageID #309.)

B. Denial of Coverage

In November 2012, Washington National began to deny claims made by Melin based on its finding that she had reached her Per Occurrence Maximum Benefit cap of $75, 000. Melin contends that Washington National wrongfully limited the 8% annual increase to the Home Health Care Daily Benefit. According to Melin, the 8% annual increase also applied to the Per Occurrence Maximum Benefit cap and the Lifetime Maximum Benefit.

The second amended complaint attaches a letter dated April 24, 2013, from Melin's attorney to Washington National. (Dkt. 27-1 at PageID #322.) In the letter, Melin's attorney stated that Melin suffered from dementia and asked Washington National to reconsider its decision that Melin had exceeded the plan maximum for in home care based on the Per Occurrence Maximum Benefit cap. Counsel noted that Washington National had stated that Melin could not receive further benefits until she had a "six month separation date" between times she received care and that this was impossible because "dementia is not something that someone recuperates from and has a separation period."[3] ( Id. )

After Washington National adhered to its position regarding coverage, Melin filed suit in the Circuit Court of Kane County, Illinois. Washington National removed the case to federal court based on diversity jurisdiction, 28 U.S.C. § 1332(a), and the Class Action Fairness Act of 2005, 28 U.S.C. § 1332(d)(2). Melin, on behalf of a putative class, contends that Washington National breached the Policy by refusing to apply the 8% annual increase to the ...


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