Joy V. Cunningham
Mathias W. Delort
A state appeals panel ruled Monday that a delay in payment of a life insurance policy did not violate fraud or insurance laws because it was the result of an “innocuous mix-up,” not a vexatious delay.
The dispute arose following the July 24, 2005, death of Camille Cook, who paid the delinquent premiums on her $200,000 life insurance policy with AAA Life Insurance Co. just five days before drowning in a Lake Michigan boating accident.
While the court affirmed judgments in favor of AAA Life in its 29-page opinion written by Justice Mathias W. Delort, one justice wrote a special concurrence to admonish the insurance company for its internal disarray.
Two days after Cook’s death, her husband, attorney Bruce L. Cook, informed AAA Life and was told the policy lapsed for non-payment. After investigation, he found an entry in his wife’s check register that showed her payment July 19.
On July 28, an AAA Life representative wrote to Camille, unaware of her death, that she would need to submit a reinstatement application, or the policy would remain lapsed.
Cook, who at the time served as president of the Cook County Bar Association, hired his father Rufus L. Cook to represent him and his 3-year-old daughter, Briannah.
In an August 2005 policy claim, Rufus Cook included a copy of the final check to AAA Life.
A claims representative mailed back a refund check and wrote that because Camille was deceased and unable to complete the application, the policy could not be reinstated.
Bruce Cook signed a contingent fee agreeing to pay a third of the policy proceeds or 40 percent of any settlement award to his father’s firm, Cook, Revak & Associates Ltd.
In October 2005, Rufus Cook sent an unfiled class-action complaint to the claims representative along with the check, demanding full payment of the policy and threatening a lawsuit.
That same month, an assistant general counsel at AAA Life advised the representative that there was no basis to deny coverage. The representative sent an application to the Cooks so that coverage could be granted.
The family didn’t accept the offer. Instead, Rufus Cook responded in November demanding AAA Life resolve his claims for $485,000 — the original policy amount plus prejudgment interest and damages.
In his letter, he said AAA Life falsely stated the policy had lapsed when it cashed the premium check and claimed that its failure to disclose knowledge of the payment was fraudulent.
The Cooks filed their complaint in Cook County Circuit Court in December 2005, claiming the company violated the Illinois Consumer Fraud and Deceptive Business Practices Act, breached its contract and created a vexatious, unreasonable delay in settling the insurance claim.
Then-Circuit Judge James R. Epstein entered summary judgment in favor of AAA Life on the deceptive practices and breach-of-contract counts but found there were issues of material fact on the remaining claim.
In a February 2012 bench trial, then-Circuit Judge Michael B. Hyman entered judgment in favor of AAA Life on the remaining count and denied Cook’s motion for sanctions.
On appeal, Cook asked the appellate court to reverse all of Epstein’s and Hyman’s rulings.
In the opinion, Delort wrote that Cook did not identify any deceptive act.
“There is no evidence in the record to suggest that AAA Life had a practice of lying to policyholders about the receipt of payments or that all of AAA Life’s agents knew that Camille’s payment had been received and processed at AAA Life’s lockbox,” Delort wrote. “We cannot deem AAA Life’s statements as rising to the level of deceit or fraud.”
The panel also found that the Consumer Fraud Act claim was pre-empted by the Insurance Code, which provides a remedy when an insurer’s misconduct is vexatious or unreasonable.
In order to state a claim under that remedy, Delort wrote, the insured must show factual support to show how conduct was unreasonable.
The panel agreed with the trial court that there was a good-faith dispute over the coverage and ruled that the delay in paying the policy proceeds were not unreasonable.
“Our review of the record shows that the Cook firm had no interest in resolving the trust issue but instead was determined to litigate some sort of potentially lucrative class-action suit,” Delort wrote.
“Therefore, the Cook firm’s decision to file the complaint was made after AAA Life had agreed to pay the claim, which it was well aware of since it was working on the legalities of properly paying Briannah, who was a minor.”
The opinion affirmed the judgments of the trial court. Justice Thomas E. Hoffman concurred, and Justice Joy V. Cunningham issued a five-page special concurrence.
Cunningham wrote that “while I agree with the holding of the majority on a strictly legal basis, there are many things wrong with this case which leaves me with the feeling that justice was not served.”
The tone of the majority’s opinion infers that the plaintiffs were to blame for the delay in payment and that AAA Life’s internal inefficiency left something to be desired, she wrote.
“When one reads the record in totality, it is easy to see why and how the plaintiffs were outraged by the behavior and seeming indifference of AAA Life’s staff,” she wrote. “It is not a dramatic leap to understand why plaintiffs were pushed to a point of wanting to make AAA Life experience some consequences for its actions.”
While there was not evidence to support the plaintiff’s claims, AAA Life’s conduct should be criticized, she wrote.
“The plaintiffs fought back in an appropriate way against a large insurance company which had turned a deaf ear to a legitimate claim,” Cunningham wrote. “In my view, but for the plaintiff’s ability to fight back, the outcome of the request for payment of this legitimate claim was uncertain.”
Court documents list Cook, Revak & Associates Ltd. as representing Cook.
Stemming from a separate case, the Illinois Supreme Court disbarred Rufus Cook last month.
Bruce Cook could not be reached for comment.
AAA Life was represented by Creed T. Tucker, a member of Tucker, Robin & Merker LLC. Tucker declined to comment.
The case is Briannah Cook v. AAA Life Insurance Company, 2014 IL App (1st) 123700.