Fidelity Investments Life Insurance Company v. Squire et al

Filing 183

MEMORANDUM Opinion Signed by the Honorable Samuel Der-Yeghiayan on 4/13/2011: Mailed notice (mw, )

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION
FIDELITY INVESTMENTS LIFE
INSURANCE COMPANY,

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Plaintiff
v.
DENISE SQUIRE, et al.,
Defendants

No. 09 C 2704

MEMORANDUM OPINION
SAMUEL DER-YEGHIAYAN, District Judge
This matter is before the court on the parties’ cross motions for summary
judgment. This matter is also before the court on Defendant Denise Squire’s,
Defendant Joe Vaccaro’s (Vaccaro), and Defendant Estate of Justin Newman’s
(Newman Estate)(collectively referred to as “Beneficiaries”) motion to strike. For
the reasons stated below, the court denies the Beneficiaries’ motion to strike, the
court grants in part and denies in part the Beneficiaries’ motion for summary
judgment, and the court grants in part and denies in part Plaintiff Fidelity
Investments Life Insurance Company’s (FILI) motion for summary judgment.

BACKGROUND
In August 1999, FILI issued a $5,000,000.00 life insurance policy (Policy)
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covering Ari Squire. On December 20, 2006, Ari Squire executed a Beneficiary
Change Form, which purportedly designated Denise Squire as a primary beneficiary
of 80% of the death benefit ($4,000,000.00), Vaccaro as a primary beneficiary of
20% of the death benefit ($1,000,000.00), and Shana Majmudar (Majmudar), as the
secondary beneficiary of 100% of the death benefit.
In an attempt to fake his death and thereby obtain proceeds under the Policy
(Proceeds), Ari Squire allegedly murdered Justin Newman (Newman), assumed
Newman’s identity, and fled to Missouri. On March 2, 2008, Ari Squire shot and
killed himself when several police officers came to his hotel room to investigate the
presence of Newman’s car in the hotel parking lot. In August 2008, Denise Squire
submitted a claim for benefits under the Policy. Upon FILI’s investigation of the
claim, FILI learned that Denise Squire had been implicated in Newman’s alleged
murder. On May 4, 2009, FILI filed the instant declaratory judgment action, naming
Denise Squire, Vaccaro, and Majmudar as Defendants.
After the Newman Estate prevailed against Denise Squire in a civil jury trial,
Denise Squire assigned a significant portion of her rights under the Policy to the
Newman Estate. In settlement of a separate civil lawsuit, Vaccaro also assigned a
significant portion of his rights under the Policy to the Newman Estate. Thus, the
Newman Estate became a significant party in interest in the instant action.
Ultimately, all of the parties reached a partial settlement agreement, whereby FILI
paid the Proceeds to the Beneficiaries. However, the parties were unable to reach a
resolution regarding how much interest on the Proceeds, if any, FILI was required to
pay, given the unique circumstances of this case. FILI and the Beneficiaries have
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each moved for summary judgment on the issue of the payment of interest. The
Beneficiaries have also moved to strike FILI’s reply brief in support of FILI’s motion
for summary judgment.

LEGAL STANDARD
Summary judgment is appropriate when the record, viewed in the light most
favorable to the non-moving party, reveals that there is no genuine issue as to any
material fact and that the moving party is entitled to judgment as a matter of law.
Fed. R. Civ. P. 56(c). In seeking a grant of summary judgment, the moving party
must identify “those portions of ‘the pleadings, depositions, answers to
interrogatories, and admissions on file, together with the affidavits, if any,’ which it
believes demonstrate the absence of a genuine issue of material fact.” Celotex Corp.
v. Catrett, 477 U.S. 317, 323 (1986)(quoting Fed. R. Civ. P. 56(c)). This initial
burden may be satisfied by presenting specific evidence on a particular issue or by
pointing out “an absence of evidence to support the non-moving party’s case.” Id. at
325. Once the movant has met this burden, the non-moving party cannot simply rest
on the allegations in the pleadings, but, “by affidavits or as otherwise provided for in
[Rule 56], must set forth specific facts showing that there is a genuine issue for trial.”
Fed. R. Civ. P. 56(e). A “genuine issue” in the context of a motion for summary
judgment is not simply a “metaphysical doubt as to the material facts.” Matsushita
Elec. Indus. Co., Ltd. v. Zenith Radio Corp., 475 U.S. 574, 586 (1986). Rather, a
genuine issue of material fact exists when “the evidence is such that a reasonable
jury could return a verdict for the nonmoving party.” Anderson v. Liberty Lobby,
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Inc., 477 U.S. 242, 248 (1986); Insolia v. Philip Morris, Inc., 216 F.3d 596, 599 (7th
Cir. 2000). The court must consider the record as a whole, in a light most favorable
to the non-moving party, and draw all reasonable inferences that favor the nonmoving party. Anderson, 477 U.S. at 255; Bay v. Cassens Transport Co., 212 F.3d
969, 972 (7th Cir. 2000). When there are cross motions for summary judgment, the
court should “construe all inferences in favor of the party against whom the motion
under consideration is made.” Mote v. Aetna Life Ins. Co., 502 F.3d 601, 606 (7th
Cir. 2007)(internal quotations omitted); see also Krieg v. Seybold, 481 F.3d 512, 516
(7th Cir. 2007).

DISCUSSION
I. Beneficiaries’ Motion to Strike
The Beneficiaries have moved to strike FILI’s reply brief in support of FILI’s
motion for summary judgment, arguing that FILI improperly introduced new
arguments in its reply. Motions to strike are generally disfavored because they
“potentially serve only to delay.” Heller Financial, Inc. v. Midwhey Powder Co.,
Inc. 883 F.2d 1286, 1294 (7th Cir. 1989); see also Redwood v. Dobson, 476 F.3d
462, 471 (7th Cir. 2007)(stating that motions to strike “disserve the interest of
judicial economy”). In this case, the public policy arguments raised by FILI in its
reply brief address certain arguments made by the Beneficiaries in their response
brief. In addition, FILI has advanced those same public policy arguments throughout
the litigation. The court has considered FILI’s arguments, and therefore the

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Beneficiaries’ motion to strike is denied.

II. Cross-Motions for Summary Judgment
In their cross-motions for summary judgment, the parties dispute the amount
of interest, if any, that FILI owes on the proceeds of the Policy.

A. Date Upon Which Interest Began to Accrue
FILI argues that if it is required to pay interest on the Proceeds, such interest
did not begin to accrue until thirty days after November 8, 2010, which was the date
upon which the Beneficiaries’ and Majmudar’s competing claims under the Policy
were resolved. However, it is undisputed that the Policy in effect at the time of Ari
Squire’s death provides that “[i]nterest will be paid on [any amount to be paid at the
death of the Insured] from the date of death or maturity. . . .” (PR SAF Par
3)(emphasis added); (B SAF Ex. C, 13). It is also undisputed that Ari Squire died on
March 2, 2008. (PR SF Par. 6). Under Illinois law, “[i]f the terms of [a] contract are
unambiguous, the court must enforce the contract as written.” Janiga v. Questar
Capital Corp., 615 F.3d 735, 742-43 (7th Cir. 2010). In the instant action, the terms
of the contract are unambiguous, and FILI’s arguments that the express terms of the
contract should be ignored based on the timing of the Beneficiaries’ claims, the
procedural history of the instant action, and public policy concerns are unpersuasive.
Further, payment of interest from the date of death is consistent with the provisions
of the Illinois Interest Act, 815 ILCS 205/2, which relates to interest owed on any
money that becomes due under an “instrument of writing,” such as an insurance
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policy. Id.; See Aulich v. Aetna Life Ins. Co., 428 N.E.2d 703, 705 (Ill. App. Ct.
1981)(stating that “[p]rejudgment interest is due upon insurance benefits where . . .
the sum due is subject to exact computation even though the insurer has a good faith
legal defense”). Therefore, the court finds that interest began to accrue on March 2,
2008, the date upon which Ari Squire died.

B. Date Upon Which Interest Stopped Accruing
The Beneficiaries contend that since FILI has not yet paid the interest required
to be paid under the Policy, interest continues to accrue at a rate of 9%. In making
their argument, the Beneficiaries rely on 215 ILCS 5/224 (Section 224 of the Illinois
Insurance Code), which requires that Illinois life insurance policies include payment
of “[i]nterest [that accrues] on the proceeds payable because of the death of the
insured, from date of death, at the rate of 9% on the total amount payable. . . .” 215
ILCS 5/224(1)(l). It is undisputed that the Policy indicates that “[i]nterest will be
paid on [any amount to be paid at the death of the Insured] . . . [until the] date of
payment.” (PR SAF Par 3); (B SAF Ex. C, 13). The “amount to be paid at the death
of the Insured” was $5,000,000.00, and the insured died on March 2, 2008. FILI
paid the amount of $5,000,000.00 on January 12, 2011. (PR SAF Par. 1, 22).
Therefore, the court finds that the Beneficiaries were entitled to 9% interest on the
$5,000,000.00 from March 2, 2008 until January 12, 2011. Applying the statutory
9% rate to the $5,000,000.00 in Proceeds due under the Policy for the period from
March 2, 2008 until January 12, 2011 yields $1,298,219.00 in interest.

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If FILI had paid the $1,298,219.00 in interest on January 12, 2011, when FILI
paid the $5,000,000.00 in Proceeds due under the Policy, there would not be any
further issue to resolve relating to the interest. However, since FILI did not pay the
$1,298.219.00 in interest on the Proceeds on January 12, 2011, as of January 12,
2001, FILI owes interest on the $1,298.219.00. Pursuant to the Illinois Interest Act,
“[c]reditors shall be allowed to receive at the rate of five (5) per centum per annum
for all moneys after they become due on any bond, bill, promissory note, or other
instrument of writing.” 815 ILCS 205/2; see also Twenhafel v. State Auto Prop. and
Cas. Ins. Co., 581 F.3d 625, 631 (7th Cir. 2009)(stating that insurance policies are
“written instrument[s] covered by the Illinois Interest Act,” that “[p]rejudgment
interest is appropriate where the sum due or damages are liquidated or subject to an
easy determination by calculation or computation,” and that “[a]bsent some type of
bad, vexatious, or unreasonable conduct prejudgment interest should be awarded at
the statutory rate of 5% on written instruments”)(citations omitted)(internal
quotations omitted); see also Platinum Technology, Inc. v. Federal Ins. Co., 282 F.3d
927, 933 (7th Cir. 2002)(stating that prejudgment interest, whether grounded in a
statute or equity, is based on the concept of fairness and is awarded to make the
plaintiff whole for the loss of use of money wrongfully withheld). Applying the
statutory 5% rate to the $1,298,219.00 in interest due from January 12, 2011 to the
present (91 days) yields $16,183.21 in interest. Based on the above, the court finds
that the total amount due to the Beneficiaries is $1,314,402.21.
In addition, the court notes that 28 U.S.C. § 1961 provides for post-judgment
interest, which is “calculated from the date of the entry of judgment, at a rate equal to
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the weekly average 1-year constant maturity Treasury yield, as published by the
Board of Governors of the Federal Reserve System, for the calendar week preceding
the date of the judgment.” 28 U.S.C.A. § 1961.

C. Beneficiaries’ Request for Attorneys’ Fees and Statutory Penalties
The Beneficiaries contend that, pursuant to 215 ILCS 5/155(1), FILI should
pay the attorneys’ fees incurred by the Beneficiaries for their efforts to obtain the
interest on the Proceeds and an additional $60,000.00 in statutory penalties, arguing
that FILI’s refusal to pay interest on the Proceeds was vexatious and unreasonable.
Under 215 ILCS 5/155, “[i]n any action by or against a company wherein there is in
issue the liability of a company on a policy or policies of insurance or the amount of
the loss payable thereunder, or for an unreasonable delay in settling a claim, and it
appears to the court that such action or delay is vexatious and unreasonable, the court
may allow as part of the taxable costs in the action reasonable attorney fees, other
costs, plus an amount not to exceed . . . (b) $60,000.” 215 ILCS 5/155(1). In light of
the unique facts and procedural history of this case, and the various arguments raised
throughout the proceedings, there is not sufficient evidence that FILI’s conduct was
vexatious or unreasonable. Therefore, the court declines to award the attorneys’ fees
or statutory penalties to the Beneficiaries.

D. FILI’s Request for Reduction in Award
FILI contends that any amount of interest owed to the Beneficiaries should be

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reduced by $52,704.20, which was the amount FILI spent defending litigation
brought by Vaccaro and Denise Squire. However, FILI incurred such costs as “part
of its normal course of business.” Aaron v. Mahl, 550 F 3d. 659, 667 (7th Cir. 2008).
Therefore, the court declines to reduce the interest awarded to the Beneficiaries by
the amount FILI spent defending against litigation brought by Vaccaro and Denise
Squire.

CONCLUSION
Based on the foregoing analysis, the court denies the Beneficiaries’ motion to
strike, the court grants in part and denies in part the Beneficiaries’ motion for
summary judgment, and the court grants in part and denies in part FILI’s motion for
summary judgment. Accordingly, the Beneficiaries are awarded $1,314,402.21.

___________________________________
Samuel Der-Yeghiayan
United States District Court Judge

Dated: April 13, 2011

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