Sonnichsen v. Principal Life Insurance Company

Filing 24

ORDER DISMISSING CASE signed by Judge Rudolph T. Randa on 3/7/2013 DENYING 4 MOTION for Partial Summary Judgment filed by Michael Sonnichsen; GRANTING 15 MOTION for Summary Judgment filed by Principal Life Insurance Co.; Clerk of Court to enter judgment accordingly. (cc: all counsel)(cb)

UNITED STATES DISTRICT COURT
EASTERN DISTRICT OF WISCONSIN

MICHAEL SONNICHSEN,
Plaintiff,
-vs-

Case No. 12-C-1232

PRINCIPAL LIFE INSURANCE COMPANY,
Defendant.

DECISION AND ORDER

Michael Sonnichsen, a self-employed stock broker and financial advisor, seeks the
recovery of benefits under a disability income policy issued by Principal Life Insurance
Company. Since Sonnichsen is self-employed, this is not an ERISA action. See, e.g., Patil
v. Prudential Ins. Co., 197 F. Supp. 2d 716, 719 (E.D. Tex. 2002) (“An employer cannot
form an [Employee Welfare Benefit Plan] for himself as the sole employee of the plan”);
Smith v. Equitable Life Assur. Co. of United States, 148 F. Supp. 2d 1247, 1253 (N.D. Ala.
2001) (no ERISA plan because the insurance policy “covered people who were employed
by themselves”). However, this matter was properly removed from state court on the basis
of diversity jurisdiction. 28 U.S.C. § 1332(a)(1). Now before the Court are cross-motions
for summary judgment.
I.
On June 13, 2011, Sonnichsen applied for disability income insurance coverage.
Principal Life’s underwriting department approved Sonnichsen for coverage. However, on

July 20, 2011, Principal Life was contacted by the insurance broker from Disability
Specialists, Scott Fletcher. Fletcher reported that Sonnichsen suffered a mild stroke on July
20 prior to signing the application. Fletcher also reported that, according to Sonnichsen, he
did not miss any work as a result of the stroke. Principal Life’s underwriting department
advised that Sonnichsen needed to call the tele-app department and provide updated health
information. Principal life further advised that the previous offer of insurance was void and
in light of the changed health, Sonnichsen would likely only qualify for insurance through
the modified guaranteed standard issue (“GSI”) program.
On July 21, 2011, Sonnichsen called the tele-app department and supplemented the
previously-provided information, including the fact that he suffered a stroke in July 2011 and
suffered from hypertension. Sonnichsen stated that he was actively at work on a full-time
basis without medical restriction.
On July 22, 2011, Principal Life’s underwriting department informed the broker that
Principal Life could only offer GSI coverage to Sonnichsen given his changed medical
history. The broker reported that Sonnichsen was aware of that fact and would be happy
with the GSI offer, knowing that he “screwed up by not binding the coverage” given that he
made no premium payment with the application.
On July 27, 2011, Principal Life re-issued the policy at smoker premium rates under
Woodbury Financial Services, Inc.’s GSI program with a monthly disability benefit of
$4,000.00 and a policy date of August 8, 2011. Principal Life forwarded the policy to

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Disability Specialists for delivery to Sonnichsen, collection of the premium in the amount
of $2,949.90 and his signature on part D, verifying receipt and no change in health status.
On June 25, 2012, Sonnichsen submitted a disability claim notice to Principal Life,
identifying that he had a stroke on July 10, 2011 and claiming partial disability and
catastrophic disability as of August 15, 2011.
On July 6, 2012, Principal Life received information from Massachusetts Mutual Life
Insurance Company relative to a claim made by Sonnichsen under a separate policy on
February 15, 2012. Mass Mutual reported that Sonnichsen claimed a disability date of July
11, 2011 due to the stroke and that his claim had been approved. On August 8, Principal Life
received Sonnichsen’s claim form from Mass Mutual, identifying that he was totally disabled
from July 11, 2011 to August 8, 2011 as a result of his July 10, 2011 stroke and partially
disabled from August 8, 2011 to the time of claim submission.
When asked about these discrepancies in date of disability, Sonnichsen admitted as
follows:
I considered myself totally disabled from 7-11-12 to 8-8-12 because I was not
working at all. From 8-9-12 to 8-15-12 I was in the process of determining
how much I could work. By 8-15-12 I determined that I could work part time
and therefore was partially disabled from that point on. I did indicate on the
claim form that my sickness began 8-9-12. I am not claiming total disability
benefits from Principal Financial, only partial disability benefits.1
In response, Principal Life denied Sonnichsen’s claim, explaining as follows: “According to
disability claim form that you completed for Mass Mutual you listed that you were totally

1

Sonnichsen mistakenly refers to 2012 dates, but they are all 2011 dates.

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unable to work from July 11, 2011 through August 8, 2011 and that you were partially unable
to work from August 8, 2011 to current. Even though you are not claiming Disability with
Principal until August 15, 2011 your Disability began based on your statements to Mass
Mutual July 11, 2011, which is prior [to] the August 8, 2011 Policy Date on your policy.”
II.
Summary judgment should be granted if “the movant shows that there is no genuine
dispute as to any material fact and the movant is entitled to judgment as a matter of law.”
Fed. R. Civ. P. 56(a). The plain language of the rule “mandates the entry of summary
judgment, after adequate time for discovery and upon motion, against a party who fails to
make a showing sufficient to establish the existence of an element essential to that party's
case, and on which that party will bear the burden of proof at trial.” Celotex Corp. v. Catrett,
477 U.S. 317, 322 (1986). The Court must accept as true the evidence of the nonmovant and
draw all justifiable inferences in his favor. Anderson v. Liberty Lobby, Inc., 477 U.S. 242,
255 (1986). Summary judgment is appropriate only if, on the record as a whole, a rational
trier of fact could not find for the non-moving party. Rogers v. City of Chi., 320 F.3d 748,
752 (7th Cir. 2003). When confronted by cross-motions for summary judgment, “inferences
are drawn in favor of the party against whom the motion under consideration was made.”
McKinney v. Cadleway Prop., Inc., 548 F.3d 496, 500 (7th Cir. 2008). The Court considers
each party’s motion individually to determine if that party has satisfied the summary
judgment standard. In re FedEx Ground Package Sys., Inc., 734 F. Supp. 2d 557, 583-84
(N.D. Ind. 2010).

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The policy issued by Principal Life, like most (if not all) disability insurance policies,
only applies to disabilities that begin on or after the Policy Date. Policy at 8 (“DISABILITY
BENEFIT: We will pay for Your Continuous Disability that begins on or after the Policy
Date and while this policy is in force and subject to the policy provisions. . . .”) (emphasis
added). Here, the Policy Date is August 8, 2011, but Sonnichsen claimed that his disability
began on July 11, 2011. See, e.g., McKay v. Reliance Standard Life Ins. Co., 428 Fed. App’x
537, 545 (6th Cir. 2011) (denial of benefits because disability predated the policy).
Sonnichsen argues that Principal Life must provide coverage pursuant to the policy’s
“incontestability clause,” part of which provides that a sickness or injury that is “fully
disclosed on the application(s) will be covered, unless excluded by name or description.”
Policy at 18. Sonnichsen conflates the distinction between a sickness, an injury, and a
disability. The policy does not provide coverage for sickness or injury; it provides coverage
for disability caused by sickness or injury. Policy at 7 (Total Disability means the inability
to work “solely due to Injury or Sickness”). The sentence preceding the selective quotation
offered by Sonnichsen in the incontestability clause illustrates the distinction: “No claim for
Disability or loss covered by this policy or any attached riders starting after two years from
the date of coverage has been in effect will be reduced or denied because a Sickness or Injury
existed before the effective date of coverage(s) unless the condition is excluded by name or
description.” Policy at 18 (emphasis added). Accordingly, the clause does not apply to
disabilities that begin prior to the issue date of the policy. See, e.g., Equitable Life Assur.
Soc. of United States v. Bell, 27 F.3d 1274, 1277 (7th Cir. 1994) (“This appeal turns on the

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appropriate construction of the insurance policy’s incontestability provisions and their effect
on the scope of the policy, which otherwise does not cover disabilities resulting from premanifesting illnesses”) (emphasis added).
Ultimately, Sonnichsen’s position is akin to the assertion that a life insurance policy
would be issued for someone who is already dead. Sonnichsen is not entitled to coverage for
a disability that began prior to the date his policy was issued. For purposes of Sonnichsen’s
bad faith claim, it necessarily follows that Principal Life had a reasonable basis for denying
benefits. Anderson v. Cont’l Ins. Co., 271 N.W. 2d 368, 376 (Wis. 1978).
III.
IT IS ORDERED THAT Principal Life’s motion for summary judgment [ECF No.
15] is GRANTED; Sonnichsen’s motion for partial summary judgment [ECF No. 4] is
DENIED; and this matter DISMISSED. The Clerk of Court is directed to enter judgment
accordingly.
Dated at Milwaukee, Wisconsin, this 7th day of March, 2013.
BY THE COURT:

__________________________
HON. RUDOLPH T. RANDA
U.S. District Judge

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