Scheff v. Fort Dearborn Life Insurance

Citations: 148 Ill. App. 3d 77; 499 N.E.2d 78; 101 Ill. Dec. 711; 1986 Ill. App. LEXIS 2889Docket: No. 4—85—0838

Court: Appellate Court of Illinois; October 6, 1986; Illinois; State Appellate Court

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William W. Scheff filed a lawsuit against Fort Dearborn Life Insurance Company seeking a $15,000 death benefit under a group life insurance policy for employees of "Bill’s Auction Service," where he was designated the beneficiary by his deceased wife, Marcella M. Scheff. The circuit court dismissed one count of his complaint and later granted summary judgment in favor of the defendant on the remaining count, concluding that Marcella was not eligible for coverage under the policy due to not meeting employment requirements. The policy required employees to be under 70, have the job as their principal occupation, work at least 30 hours per week, and be listed on Social Security and tax withholding records. Evidence showed that Marcella only worked limited hours, was not listed in any records, and the business was unable to pay her for her work. Plaintiff argued that the insurance agent did not mention the requirement for listing employees on tax records and that the policy was issued despite only three family members being involved in the business. The court affirmed the summary judgment, emphasizing that there was no factual question for trial as Marcella did not meet the policy's eligibility criteria.

The "Participation Agreement" established that employee listing in social security and withholding records was necessary for eligibility under the life policy, which was not met in this case. The court found that the informal employment relationship, where no wages were paid, heightened the risk of loss for the insurer, justifying the conclusion that Marcella M. Scheff did not qualify as an employee under the agreement. Consequently, the circuit court correctly granted summary judgment for count I of the second amended complaint.

Count II, which sought to invoke "equitable estoppel," reiterated many allegations from count I. To establish equitable estoppel, six elements must be present: a misrepresentation or concealment of material facts; knowledge of the untruth of representations by the party against whom estoppel is claimed; ignorance of the falsehood by the party seeking estoppel; expectation that the representations would be relied upon; actual reliance or action on the representations; and potential prejudice if the party is allowed to deny the representations. The court emphasized that the sufficiency of count II is evaluated based on its allegations rather than deposition testimonies. The allegations include that the defendant is affiliated with Blue Cross-Blue Shield and follows the same eligibility standards for group life insurance as for health and accident benefits, with Lane acting as an agent for both insurers and asserting that the eligibility requirements were equivalent. Lane informed the plaintiff that neither he nor his wife would qualify for life benefits without qualifying for health benefits, leading to the assertion that the defendant is estopped from denying the plaintiff's claim for a $15,000 benefit.

Count II asserts several reasons for estopping the defendant from denying recovery. First, Lane allegedly breached an equitable duty by informing the plaintiff that Bill’s Auction Service could not acquire accident and health insurance from Blue Cross-Blue Shield without also purchasing group life insurance, and subsequently stating that the business qualified for group life insurance. Second, Lane should have anticipated that his statements could mislead the plaintiff and his wife into believing they qualified for life benefits. Third, the plaintiff relied on Lane's representations, unaware they were false or misleading. Fourth, when benefits were provided for Marcella M. Scheff's illness, both she and the plaintiff were misled into thinking death benefits would also be available. Fifth, the plaintiff suffered prejudice by not knowing that Marcella M. Scheff was ineligible for death benefits, leading him to forgo purchasing a group policy elsewhere and to require group life insurance to obtain the Blue Cross-Blue Shield accident and health benefits.

The representations attributed to Lane include that the business entity qualified for group life insurance, that the eligibility requirements for both group life and Blue Cross-Blue Shield were the same, and that one group coverage was necessary to obtain the other. These representations were not alleged to be false. The plaintiff's argument rests on the expectation that if the business qualified for group coverage, Marcella M. Scheff as an individual would also qualify. However, the complaint did not sufficiently impose a duty on Lane to foresee such beliefs, especially given the attached document outlining the eligibility requirements. Furthermore, the allegations did not adequately claim a misrepresentation or concealment of material facts. Additionally, payments made by Blue Cross-Blue Shield after the life policy was issued could not have influenced the decision to acquire that policy. Consequently, Count II did not establish a valid cause of action, leading to the affirmation of the circuit court's judgment.