Casey v. American International Group, Inc.

Filing 18

Enter MEMORANDUM Opinion and Order Signed by the Honorable Elaine E. Bucklo on 10/9/2014. Mailed notice (jdh)

IN THE UNITED STATES DISTRICT COURT
FOR THE NORTHERN DISTRICT OF ILLINOIS
EASTERN DIVISION

LINDA CASEY,
Plaintiff,
v.
AMERICAN INTERNATIONAL
GROUP, INC., a Delaware
corporation a/k/a AMERICAN
GENERAL LIFE INSURSANCE CO.
f/k/a WESTERN NATIONAL LIFE
INSURSANCE CO. f/k/a AIG
ANNUITY INSURANCE CO.,

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No. 14 C 3541

Defendant.

MEMORANDUM OPINION AND ORDER
Linda Casey (“Casey”) has sued American International
Group, Inc. (“AIG”) for allegedly breaching an annuity contract.
AIG has moved to dismiss Casey’s complaint under Rule 12(b)(6)
for failure to state a claim upon which relief may be granted.
I deny AIG’s motion for the reasons stated below.
I.
At the motion to dismiss stage, I must accept Casey’s
factual allegations as true and draw all reasonable inferences
in her favor.

See Geinosky v. City of Chicago, 675 F.3d 743,

746 (7th Cir. 2012).

I may also consider the documents attached

to AIG’s motion to dismiss--i.e., the two underlying annuity
applications, the annuity contract, and a March 1, 2013 letter-1

because Casey referred to these documents in her complaint and
they are central to her claim.

Id. at 745 n.1.

I also take

note of the exhibits Casey has submitted in opposition to AIG’s
motion to dismiss because they illustrate facts that she intends
to prove.

Id.

On March 12, 2008, Natalie Bailey (“Bailey”) applied for a
$96,000 annuity policy as the “owner” and “annuitant.”
executed the application as “joint owner.”

Casey

Bailey’s application

contains the signature of an AIG agent named Henry Meyer, but
the complaint is silent about what role, if any, he played in
preparing or reviewing Bailey’s application.
The annuity application states that in the event of
Bailey’s death, the joint owner (Casey) would become the primary
beneficiary of the policy unless Bailey designated otherwise.
Bailey checked a box on her March 12, 2008 application to change
this default designation and attached a schedule of eighteen
beneficiaries.

Casey is listed on this schedule as a “friend”

entitled to eight percent of the policy proceeds in the event of
Bailey’s death.

Bailey and Casey both signed the hand-written

schedule of beneficiaries.
On March 17, 2008, AIG issued an annuity policy to Bailey
that listed her initial premium payment as $97,000.
Ex. B (Policy No. 1ET01836).

See Def.’s

As the policy owner, Bailey had

the right to change her beneficiary designations.
2

Id. at 4.

The annuity contract contained the following language about
changing beneficiary designations:
If you make a beneficiary change, the change will take
effect on the date you sign the change request form.
However, we are not responsible for any payment or
other action taken before we have received and
acknowledged in writing your change request.
Id. at 5.
On April 1, 2008, Bailey and Casey executed a second
annuity application that left in place the default designation
of Casey, the joint owner, as the policy’s primary beneficiary.
Bailey’s second application listed the number of her existing
annuity policy (1ET01836), but did not bear the signature of a
licensed AIG agent.
Bailey died on May 28, 2011 at the age of eighty-two.
Casey subsequently demanded that AIG pay her the benefits owed
to the primary beneficiary of Bailey’s annuity policy.
In a letter to Casey’s attorney dated March 1, 2013, AIG
acknowledged it had received Casey’s second annuity application
dated April 1, 2008.

See Def.’s Ex. C.

However, AIG stated

that Bailey’s second application did not change her beneficiary
designations: “As the annuity was, by [then], in force, the
second application was not necessary to set up the annuity, and
it was not viewed as an attempt to change the beneficiary.”

Id.

AIG’s letter also described an inquiry made by Henry Meyer,
“the writing agent of [Bailey’s] annuity,” on June 12, 2008.
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AIG asserted that the “specific purpose” of Meyer’s inquiry was
to confirm that “the [eighteen] beneficiary designation attached
to [Bailey’s] original application were in place.”

Id.

Not satisfied with AIG’s response, Casey filed a Consumer
Complaint Form with the Illinois Department of Insurance
(“IDOI”) on September 24, 2013.

In its response to Casey’s

complaint, AIG reiterated its position that “[t]he receipt of
[Bailey’s] additional application was not considered to be a
request for a change in the beneficiaries listed in the document
executed by Ms. Bailey and Ms. Casey on March 12, 2008 and was
not treated as such.”

Dkt. No. 14-5.

Casey filed suit against AIG in the Circuit Court of Cook
County on March 31, 2014.

After removing the case to federal

court based on diversity of citizenship, AIG filed a motion a
dismiss.

In opposition to AIG’s motion, Casey has submitted a

letter from AIG to a claimant named Geraldine Simmons dated
November 10, 2011.

In that letter, AIG appears to take the

position that Bailey’s second application did, in fact, change
her beneficiary designations:
As you can see, this [second] policy application is
different than the first application submitted as the
box is no longer checked indicating that they would
like for the surviving joint owner to receive the
death benefits should one joint owner pass away.
Dkt. No. 14-3.

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II.
In order to survive AIG’s motion to dismiss, Casey’s
complaint must state a plausible breach of contract claim.

See

Bell Atlantic Corp. v. Twombly, 550 U.S. 544, 570 (2007)
(holding that complaint must contain “only enough facts to state
a claim to relief that is plausible on its face”). 1
The parties agree that Illinois law governs this dispute.
The Seventh Circuit recently summarized the legal requirements
in Illinois for changing the beneficiary designations in an
annuity policy:
Under Illinois law, “[w]here the insurer has specified
in the policy the method for changing the beneficiary,
some type of compliance with the policy terms is
required.”
Hoopingarner v. Stenzel, 768 N.E.2d 772,
776 (Ill App. Ct. 2002). Of course, exact compliance
with policy terms will effectuate a change in an
insurance
policy's
beneficiaries;
however,
in
Illinois, “exact compliance with the terms of the
policy is not necessary” to effectuate a change.
Aetna Life Ins. Co. v. Wise, 184 F.3d 660, 664 (7th
Cir.1999).
Recognizing that “technical compliance with the policy
provisions is solely for the benefit of the insurer,
to protect it from paying the wrong person and being
forced to pay twice,” Illinois courts recognize the
doctrine of substantial compliance.
Travelers Ins.
Co. v. Smith, 435 N.E.2d 1188, 1190 (Ill. App. Ct.
1982). As long as a policyholder has shown sufficient
“intent to make the change [in beneficiaries] and
positive action towards effecting that end,” this
doctrine allows courts to overlook a policyholder's
1

AIG’s motion to dismiss cites the “no set of facts” standard
from Conley v. Gibson, 355 U.S. 41 (1957), despite the widely
publicized “retirement” of this standard in Twombly. See 550
U.S. at 563.
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failure to comply with every detail of a policy's
terms.
Dooley v. James A. Dooley Assocs. Emps. Ret.
Plan, 442 N.E.2d 222, 227 (Ill. 1982).
Minn. Life Ins. Co. v. Kagan, 724 F.3d 843, 849 (7th Cir. 2013)
(paragraph break added).
The doctrine of substantial compliance is limited to
interpleader actions by an insurance company to determine who,
among all rival claimants, is entitled to the proceeds of a
decedent’s policy.

Indeed, every Seventh Circuit case applying

the Illinois doctrine of substantial compliance has been an
interpleader action where the insurance company faced no risk of
paying the wrong person or paying out twice on a policy. 2
The only Illinois Supreme Court case applying the doctrine
of substantial compliance also mirrors the posture of an
interpleader action.

See Dooley, 442 N.E.2d at 227 (noting that

trustee occupied “position akin to that of an insurer” taking a

2

See e.g., Kagan, 724 F.3d at 846; Sternitzke v. Pruco Life Ins.
Co., 64 Fed.Appx. 582, 583 (7th Cir. 2003); Aetna Life Ins. Co.
v. Wise, 184 F.3d 660, 661 (7th Cir. 1999); Rendleman v. Metro.
Life Ins. Co., 937 F.2d 1292, 1294 (7th Cir. 1991); Conn. Gen.
Life Ins. Co. v. Gulley, 668 F.2d 325, 326 (7th Cir. 1982);
Continental Assurance Co. v. Platke, 295 F.2d 571, 571 (7th Cir.
1961); Criscuolo v. U.S., 239 F.2d 280, 281 (7th Cir. 1956);
John Hancock Mutual Life Ins. Co. v. Douglass, 156 F.2d 367 (7th
Cir. 1946); Prudential Ins. Co. of Am. v. Moore, 145 F.2d 580,
580 (7th Cir. 1944); see also Metro. Life Ins. Co. v. Johnson,
297 F.3d 558, 566 (7th Cir. 2002) (interpleader action in which
court held that ERISA preempts Illinois doctrine of substantial
compliance); Davis v. Combes, 294 F.3d 931, 940-42 (7th Cir.
2002) (applying federal common law doctrine of substantial
compliance).
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neutral position “since all of the claimants [to the underlying
policy] are before the court”).
In contrast to an interpleader action involving all rival
claimants, Casey has sued AIG on the ground that she alone is
entitled to the proceeds of Bailey’s annuity policy.

In this

scenario, AIG is entitled to require “strict compliance” with
the policy terms governing beneficiary changes.

See John Alden

Life Ins. Co. v. Propp, 627 N.E.2d 703, 706 (Ill. App. Ct. 1994)
(“As a general rule, when an insurance policy or annuity
contract specifies a method for changing beneficiaries, that
method is exclusive and a change by any other means is
ineffectual.”); see also Kitchen v. North Am. Accident Ins. Co.,
118 N.E.2d 48, 50 (Ill. App. Ct. 1954); Kurgan v. Prudential
Ins. Co., 91 N.E.2d 620, 624 (Ill. App. Ct. 1950).
Although Casey’s entitlement to relief turns on whether
Bailey’s second annuity application amounted to “strict” or
“exact” compliance with the terms of the existing policy, she
need not prove her case in the complaint.

See Bryant v. Jackson

Nat’l Life Distributors, LLC, No. 12 C 9391, 2013 WL 1819927, at
*3 (N.D. Ill. Apr. 30, 2013) (“Plaintiffs are not required at
the pleading stage to allege every detail demonstrating that
[decedent strictly] complied with the terms of the policy.”).
At this stage, Casey’s claim is plausible because the
annuity contract does not, on its face, foreclose her asserted
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entitlement to relief.

Bailey’s policy does not define the term

“change request form” or specify that a successive annuity
application listing an existing policy number is insufficient to
change a policyholder’s beneficiary designations.

Similarly,

Bailey’s policy does not state whether or when AIG may refuse to
“receive[] and acknowledge” a beneficiary change request.
Dkt. No. 10-2 at 5.

See

Casey has presented evidence suggesting

that AIG received Bailey’s second annuity application and
understood that Bailey was attempting to make Casey the primary
beneficiary of her existing annuity policy.

Indeed, AIG appears

to have advanced this interpretation of Bailey’s second
application in its November 10, 2011 letter to claimant
Geraldine Simmons only to reverse course when Casey sought to
recover the full proceeds of Bailey’s policy.

Compare Dkt. No.

14-3 with Dkt. Nos. 14-4 and 14-5.
In sum, AIG is not entitled to judgment as a matter of law
because of ambiguities in the underlying policy and evidence
suggesting that AIG viewed Casey as the primary beneficiary of
Bailey’s annuity policy until it no longer served AIG’s purposes
to do so.

See Quake Construc., Inc. v. Am. Airlines, Inc., 565

N.E.2d 990, 994 (Ill. 1990) (“If the language of an alleged
contract is ambiguous regarding the parties' intent, the
interpretation of the language is a question of fact which
a...court cannot properly determine on a motion to dismiss.”).
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To the extent AIG seeks to defeat Casey’s claim on the
ground that she allegedly cashed a check for eight percent of
the policy proceeds in July 2013, Casey need not overcome
affirmative defenses at the pleading stage.

See Fed. R. Civ. P.

8(c)(1) (listing “accord and satisfaction,” “payment,”
“release,” and “waiver” as affirmative defense)
III.
AIG’s motion to dismiss is DENIED for the reasons stated
above.

I also note that AIG’s exhibits do not comply with the

privacy protections set forth in Federal Rule of Civil Procedure
5.2(a).

The Clerk of Court is therefore directed to seal Dkt.

No. 10-1.

AIG must re-file these exhibits with appropriate

redactions no later than seven (7) calendar days after entry of
this order.

ENTER ORDER:

_____________________________
Elaine E. Bucklo
United States District Judge

Dated: October 9, 2014

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