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Sullivan v. Transamerica Life Insurance Co.

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

December 12, 2019



          SHARON JOHNSON COLEMAN United States District Court Judge

         Plaintiff David K. Sullivan, as Trustee of the Thomas P. Sullivan Irrevocable Trust, brought this two-count complaint against Transamerica Life Insurance Company alleging breach of contract and Illinois Consumer Fraud and Deceptive Business Practices Act (“ICFA”) claims. Transamerica has moved to dismiss the entire complaint under Federal Rule of Civil Procedure 12(b)(6). For the reasons below, the Court grants Transamerica's motion to dismiss with prejudice.


         The following facts are summarized from the complaint and attachments to the complaint, including the insurance policy and the assured coverage endorsement at issue. On August 10, 2002, David Sullivan on behalf of the Trust purchased a universal life insurance policy for his brother Thomas P. Sullivan as the insured. The policy had both life insurance and savings features with a face value and death benefit of $1, 000, 000. As to the savings feature, after the cost of insurance (monthly deductions) are subtracted from the premium payments, the remainder is applied to the accumulation value of the policy that has a guaranteed minimum interest rate of 4%. As the policy data indicates, the accumulation value may decrease over the life of the insurance policy.

         The required annual premium for the first five years of the policy was $27, 520. After the five-year required premium period, the policy allows for flexible payments, as long as the net cash value of the policy is above a certain threshold. If the net cash threshold is insufficient, the policy will lapse after a 60-day grace period. Under the assured coverage endorsement, however, if the Trust continued to pay the annual premium of $27, 520 after the five-year required premium period, the policy would not lapse-even if the net cash value is insufficient to pay the costs of insurance.

         The Trust alleges that it timely paid an annual premium of $27, 520 from 2002 through 2008. According to the Trust, in August 2009, Tom Sullivan had a conversation with a Transamerica agent who told him that the 2019 premium would be taken from the cash value of the policy. The Trust also alleges that on August 17, 2010, a Transamerica agent told Tom Sullivan that the 2010 premium would be taken out of the policy's cash value on a monthly basis and that there was enough cash value for the coming year.

         Thereafter, the Trust alleges that it paid the $27, 520 premium every year from 2011 until 2018. On August 15, 2018, Transamerica sent a letter to the Trust stating:

Your policy has entered its grace period and is in danger of lapsing. Additionally, your Policy Threshold, minus any existing policy loan(s), is less than zero and therefore does not meet the requirements to keep your ACE [assured coverage endorsement] provision in effect on your policy…. We are therefore providing you information on how to maintain the ACE provision and, alternatively, the amount needed to maintain coverage without reliance on ACE.

         The letter explained that a payment of $15, 996 by September 14, 2018 would maintain the assured coverage endorsement. It also stated that because “your policy's value is not sufficient to cover the current Monthly Deductions, ” to continue coverage without the benefit of the assured coverage endorsement, a minimum payment of $99, 245 was due by October 14, 2018. In September 2018, Tom Sullivan paid the $15, 996 under the first option. On March 15, 2019, Transamerica sent another letter detailing that the policy was in its grace period and in danger of lapsing. Instead of making a payment to continue coverage, the Trust filed this lawsuit seeking the $15, 996 that Transamerica “improperly” demanded in August 2018, plus $60, 000, attorney's fees, and costs.

         Legal Standard

         A motion to dismiss pursuant to Rule 12(b)(6) for failure to state a claim tests the sufficiency of the complaint, not its merits. See Camasta v. Jos. A. Bank Clothiers, Inc., 761 F.3d 732, 736 (7th Cir. 2014). When considering dismissal of a complaint, the Court accepts all well pleaded factual allegations as true and draws all reasonable inferences in favor of the plaintiff. Erickson v. Pardus, 551 U.S. 89, 94, 127 S.Ct. 2197, 167 L.Ed.2d 1081 (2007) (per curiam). To survive a motion to dismiss, plaintiff must “state a claim for relief that is plausible on its face.” Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 555, 570, 127 S.Ct. 1955, 167 L.Ed.2d 929 (2007). A complaint is facially plausible when plaintiff alleges “factual content that allows the court to draw the reasonable inference that the defendant is liable for the misconduct alleged.” Ashcroft v. Iqbal, 556 U.S. 662, 678, 129 S.Ct. 1937, 173 L.Ed.2d 868 (2009). When ruling on a motion to dismiss, courts “may consider documents attached to the pleadings so long as the documents are referred to in the complaint and central to the plaintiff's claims.” Doe v. Columbia College Chicago, 933 F.3d 849, 854 (7th Cir. 2019). “When an exhibit incontrovertibly contradicts the allegations in the complaint, the exhibit ordinarily controls, even when considering a motion to dismiss.” Bogie v. Rosenberg, 705 F.3d 603, 609 (7th Cir. 2013).


         The Trust alleges a breach of contract claim in Count I of its complaint. Under Illinois law, when ascertaining the meaning of an insurance policy's language and the parties' intent, courts must construe the policy as a whole taking into account the type of insurance at issue. Windridge of Naperville Condo. Assoc. v. Philadelphia Indem. Ins. Co., 932 F.3d 1035, 1039 (7th Cir. 2019). As with all contracts, if the policy language is unambiguous, courts will enforce the policy as written. Id.; Thounsavath v. State Farm Mutual Auto. Ins. Co., 104 N.E.3d 1239, 1244, 423 Ill.Dec. 150, 155, 2018 IL 122558, ¶ 17 (Ill. 2018). If the policy is ambiguous, courts can consider extrinsic evident to determine the parties' intent. Soarus LLC v. Bolson Materials Int'l Corp., 905 F.3d 1009, 1011 (7th Cir. 2018).

         The Trust argues that Transamerica breached the insurance contract by charging more than the annual fixed premium of $27, 520 in 2018 and 2019. Instead of pointing to an express provision of the policy to support its assertion that the annual premium was fixed at $27, 520 throughout the life of the policy, the Trust relies on a sales illustration from July 2002, a portion of which is attached to the complaint. This illustration-which unequivocally states “this is an illustration not a contract”-shows a table of the insured's age and year of the policy over an 18-year period, the projected accumulated ...

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