Insurance Law

Plaintiff, a utility company, filed a lawsuit against the defendant insurance company alleging breach of contract, breach of fiduciary duty, and breath of its duty to deal in good faith after the insurer refused to defend the plaintiff at a mediation by finding the plaintiff was not an “additional insured” under the terms of an excess liability insurance policy. The Seventh Circuit concluded that the plaintiff was an additional insured under the excess policy but affirmed the district court’s dismissal the contract and fiduciary duty claims because the defendant did not owe a duty to the insured until after the primary policy was exhausted. The appellate court also affirmed the dismissal of the bad faith claim by finding that an incorrect denial, without more, is not a basis for bad faith and the subsequent dismissal of the breach of fiduciary duty claim because it was premised on the insurer having acted in bad faith. (ST. EVE and JACKSON-AKIWUMI, concurring)

Plaintiff, as an investment strategy, purchased the existing life insurance policy of a person with whom he had no relationship but whose purchase of the policy provided the required insurable interest. The policyholder failed to make a required policy payment prior to the end of a grace period and the insurance company canceled the policy. Plaintiff then filed a lawsuit alleging that the defendant improperly canceled the policy without providing the notice or six-month grace period required under Illinois law. The Seventh Circuit affirmed, finding that the undisputed facts showed that the required premiums for the policy were payable in monthly intervals, exempting the policy from the notice and grace-period requirements of 215 ILCS 5/234. (ROVNER and SCUDDER, concurring)