Source: s3://data.kl3m.ai/documents/govinfo/USCOURTS/USCOURTS-ca7-14-01437/USCOURTS-ca7-14-01437-0/pdf.json

Nature of Suit Code: 190
Nature of Suit: Other Contract Actions
Cause of Action: 

---

In the 

United States Court of Appeals 

For the Seventh Circuit ____________________ 

No. 14-1437 

LIFE PLANS, INCORPORATED, 

Plaintiff-Appellant, 

v.

SECURITY LIFE OF DENVER INSURANCE COMPANY, 

Defendant-Appellee. 

____________________ 

Appeal from the United States District Court for the 

Northern District of Illinois, Eastern Division. 

No. 11 C 8449 — Ronald A. Guzmán, Judge. 

____________________ 

ARGUED DECEMBER 3, 2014 — DECIDED AUGUST 31, 2015 

____________________ 

Before MANION, ROVNER, and HAMILTON, Circuit Judges. 

HAMILTON, Circuit Judge. Plaintiff Life Plans, Inc. appeals 

from the grant of summary judgment in favor of defendant 

Security Life of Denver Insurance Company. In 2011, the two 

companies signed an agreement under which Life Plans 

would broker and Security Life would insure life insurance 

policies financed through arbitrage. Roughly four months 

later, Security Life said it was terminating the agreement. 

Life Plans then sued Security Life for breach of contract and 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
2 No. 14-1437 

breach of the implied covenant of good faith and fair dealing 

for refusing to offer the life insurance policies. The district 

court granted summary judgment, reading the contract to 

grant Security Life the right to terminate at any time. Life 

Plans has appealed the grant of summary judgment, as well 

as the district court’s denial of a motion to alter the judgment 

and its earlier denial of leave to amend the complaint to add 

new claims against Security Life and its parent company. 

We reverse. The evidence presents genuine disputes of 

material facts for both the contract and the implied covenant 

claims. The language of the agreement is ambiguous as to 

whether Security Life could terminate at will during the first 

three years of the agreed term. The extrinsic evidence of 

meaning is in conflict, so summary judgment is not appropriate on this claim. We also reject Security Life’s alternative 

grounds for affirmance—that a condition precedent requiring Security Life’s review and approval of the product, did 

not occur. The facts are disputed regarding what review was 

required by the agreement and whether the required approval was received. The district court also erred in denying 

Life Plans’ motion to alter the judgment, which argued that 

the district court had improperly granting summary judgment on a claim that had not been covered by the summary 

judgment briefing. 

The implied covenant claim under Delaware law also 

should not have been resolved on summary judgment. A 

reasonable jury could find that Security Life’s conduct was 

arbitrary and unreasonable and had the effect of denying 

Life Plans the fruits of its bargain. Finally, the district court 

abused its discretion in denying Life Plans’ motion for leave 

to amend its complaint. Leave to amend should be given 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 3 

freely unless there is a showing of futility, undue delay, undue prejudice, or bad faith. None of those exceptions applied 

here. Life Plans filed the motion promptly after discovering 

the factual basis of its claims and acted to mitigate any delay 

that might result. 

I. Factual and Procedural Background 

In reviewing a grant of summary judgment, we view the 

facts and draw reasonable inferences in the light most favorable to the non-moving party—here, Life Plans. Spitz v. Proven Winners North America, LLC, 759 F.3d 724, 730 (7th Cir. 

2014). The background that we recount here is not disputed. 

We identify the disputed facts as they come up in our later 

discussion of summary judgment. 

A. The Arbitrage Life Payment System 

Plaintiff Life Plans is a life insurance brokerage agency 

owned by Pamela Simon, who is also the company’s President. Pamela Simon and her husband David Simon developed a new and apparently exotic method of financing life 

insurance policies they call the Arbitrage Life Payment Systems, or ALPS. The details of ALPS are not important for the 

issues we must decide; suffice it to say that significant 

changes in market interest rates can make what once seemed 

like an attractive deal for one side or the other look much 

less promising. Between 1994, an affiliate of Life Plans brokered ALPS-financed policies with insurers other than defendant Security Life from 1994 to 2005. In 2009 and 2010, 

Life Plans and Security Life discussed developing an ALPSfinanced policy product together. The policy, later named 

“Peak,” would be brokered by Life Plans and insured by Security Life. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
4 No. 14-1437 

B. The Joint Cooperation Agreement 

On June 7, 2011, Life Plans and Security Life signed a 

joint cooperation agreement regarding the sale of Peak policies. The core deal was that Security Life promised to accept 

at least $100 million in premiums for Peak policies each year 

for three years. Life Plans claims it would have collected approximately $21 million in commissions and fees for those 

policies. 

That arrangement never came to fruition. On October 17, 

2011, an attorney for Security Life wrote to Life Plans to say 

that Security Life was terminating the agreement because the 

Peak policy had not been approved through Security Life’s 

internal review process. 

C. Procedural History 

In October 2011, Life Plans sued Security Life in state 

court for breach of contract, or in the alternative, breach of 

the implied covenant of good faith and fair dealing. Security 

Life removed the suit to federal court based on diversity jurisdiction and promptly moved to dismiss the suit. The district court denied the motion to dismiss in July 2012. 

The parties engaged in substantial discovery. After Life 

Plans took the deposition of Security Life’s chief executive, 

Life Plans moved to amend its complaint to add a promissory estoppel claim against Security Life and a tortious interference claim against Security Life’s parent, ING US, Inc., a 

new party that had not been named in the original complaint. The district court denied leave to amend the complaint. 

After the close of discovery, Security Life moved for 

summary judgment, arguing that the failure of a condition 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 5 

precedent discharged its obligations under the agreement. 

Life Plans responded and cross-moved for summary judgment on its claim that Security Life was liable for its threeyear, $300 million commitment and could not prematurely 

terminate under the agreement. 

The district court granted summary judgment for Security Life, concluding that Security Life could terminate the 

agreement at any time, and entered final judgment in favor 

of Security Life on all claims. Life Plans then filed a motion 

to alter the judgment, arguing that it was improper to grant 

summary judgment on Security Life’s liability for pending 

insurance applications. Life Plans argued that, even if Security Life’s termination was proper, it remained liable for failing 

to accept applications that were submitted before the termination. The district court denied the motion to alter, finding 

that Security Life had no obligation to process pending applications under the agreement and that Life Plans had forfeited the claim by failing to present such an argument in its 

own motion for summary judgment. 

This appeal followed. Life Plans appeals three orders of 

the district court: the grant of summary judgment on both 

counts, the denial of the motion to alter the judgment regarding the pending applications claim, and the denial of the 

motion for leave to amend the complaint. 

II. Summary Judgment 

We begin with the core of the parties’ dispute: the district 

court’s grant of summary judgment to Security Life. We review a grant of summary judgment de novo, viewing the evidence and drawing all reasonable inferences in favor of Life 

Plans, the non-moving party. Spitz, 759 F.3d at 730. Summary 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
6 No. 14-1437 

judgment is appropriate only where there is no genuine dispute as to any material fact and the moving party is entitled 

to judgment as a matter of law. Fed. R. Civ. P. 56(a); Celotex 

Corp. v. Catrett, 477 U.S. 317, 322–23 (1986). A dispute over a 

material fact is genuine if a reasonable jury could return a 

verdict for the non-moving party on the evidence presented. 

Anderson v. Liberty Lobby, Inc., 477 U.S. 242, 248 (1986). To 

survive summary judgment, the non-moving party must 

show evidence sufficient to establish every element that is 

essential to its claim and for which it will bear the burden of 

proof at trial. Celotex Corp., 477 U.S. at 322–23. 

A. Breach of Contract 

Life Plans claims that Security Life is liable for breaching 

the joint cooperation agreement. It offers two legal theories 

of breach: first, that Security Life violated the agreement by 

refusing to accept premiums for Peak policies; and second, 

that even if Security Life’s termination was allowed under 

the agreement, it is still liable for refusing to process pending applications for Peak policies. We address both theories 

in turn. Pursuant to the choice-of-law provision in the contract, we apply Delaware law. 

The role of a court in interpreting a contract is to give effect to the intention of the parties as expressed in the agreed 

terms. Norton v. K-Sea Transportation Partners L.P., 67 A.3d 

354, 360 (Del. 2013); E.I. du Pont de Nemours & Co. v. Shell Oil 

Co., 498 A.2d 1108, 1113 (Del. 1985). We enforce the plain 

meaning of the words in the contract unless the parties intended a special meaning. AT&T Corp. v. Lillis, 953 A.2d 241, 

252 (Del. 2008). We also must “construe the agreement as a 

whole, giving effect to all provisions therein.” GMG Capital 

Investments, LLC v. Athenian Venture Partners I, L.P., 36 A.3d 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 7 

776, 779 (Del. 2012), quoting E.I. du Pont de Nemours & Co., 

498 A.2d at 1113. “The meaning inferred from a particular 

provision cannot control the meaning of the entire agreement if such an inference conflicts with the agreement’s 

overall scheme or plan.” Id., citing E.I. du Pont de Nemours & 

Co., 498 A.2d at 1113. 

We begin our analysis with the text of the agreement. 

“Contract terms themselves will be controlling when they 

establish the parties’ common meaning so that a reasonable 

person in the position of either party would have no expectations inconsistent with the contract language.” Eagle Industries, Inc. v. DeVilbiss Health Care, Inc., 702 A.2d 1228, 1232 

(Del. 1997) (footnote and citation omitted). However, when 

the text of the agreement is “fairly susceptible of different 

interpretations or may have two or more different meanings,” the contract is ambiguous. Id. 

Only if the contract is ambiguous may a court consider 

extrinsic evidence of the parties’ intent. O’Brien v. Progressive 

Northern Ins. Co., 785 A.2d 281, 288–89 (Del. 2001). “It is a 

familiar rule that when a contract is ambiguous, a construction given to it by the acts and conduct of the parties with 

knowledge of its terms, before any controversy has arisen as 

to its meaning, is entitled to great weight, and will, when 

reasonable, be adopted and enforced by the courts.” Radio 

Corp. of America v. Philadelphia Storage Battery Co., 6 A.2d 329, 

340 (Del. 1939); see also Viking Pump, Inc. v. Century Indemnity Co., 2 A.3d 76, 101 (Del. Ch. 2009) (extrinsic evidence of 

course of performance or conduct under contract shows the 

parties’ intent). 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
8 No. 14-1437 

1. The Right to Terminate 

Life Plans argues that Security Life breached the agreement by terminating it, which dashed Life Plans’ hopes for 

$21 million in brokerage fees over three years. Security Life 

responds that the district court correctly found that it committed no breach because its termination was authorized by 

the agreement. As an alternative basis for affirmance, Security Life argues that it had no obligation to accept premiums 

because of the failure of a condition precedent—the Peak 

policy was not approved under Security Life’s internal review process. 

a. Termination 

The district court ruled that the terms of the agreement 

were unambiguous and permitted Security Life to terminate 

at any time. The termination provision stated: 

Termination. This Joint Cooperation Agreement will continue indefinitely, until terminated by either party upon thirty (30) days written 

notice, delivered by certified mail. Company 

[Security Life] will complete processing of all 

applications received prior to notice of termination. Upon termination, all software, documents, customer information and other documents shared under this Joint Cooperation 

Agreement must be returned to the party 

providing same. 

Joint Cooperation Agreement, § 8.i. If that were the only relevant language, Security Life and the district court would 

certainly be correct. But we cannot read this provision in isolation from the rest of the agreement. The agreement also 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 9 

contained a provision that committed the parties to a threeyear term: 

Commitments. The terms of this Joint Cooperation Agreement will govern the commitments 

of LPI and the Company with regard to the use 

of the Policy with the A.L.P.S.TM Program. The 

Company agrees to accept at least $100,000,000 

of premium per twelve month period, excluding reallocations and client payments, from July 1, 2011 until June 30, 2014; provided however, that the Company may in its sole discretion 

accept premium in excess of $100,000,000 in 

any such period. 

Id., § 1.a. The problem is how to harmonize these two provisions. 

Life Plans argues that the “commitments” provision required Security Life to accept at least $100 million in premiums each year for the first three years, so that only after 

three years could it terminate the arrangement by merely 

giving written notice. This interpretation, Life Plans contends, is consistent with the clause in the termination provision that the agreement “will continue indefinitely, until 

terminated.” The agreement says “continue” because the 

termination provision should govern after, but only after, the 

initial three-year commitment. 

Security Life maintains that either party could terminate 

at any time without penalty because the termination provision contains no limit on the timing of a termination. According to Security Life, the termination provision effectively trumps the commitment provision, rendering the threeCase: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
10 No. 14-1437 

year term optional. This reading construes the “will continue 

indefinitely” clause as referring to continuing from the date 

the agreement was signed rather than being limited to after 

the first three years. 

The agreement is ambiguous. These two provisions conflict with one another and do not refer to one another. They 

are fairly susceptible to both interpretations. Life Plans’ reading gives effect to the three-year term of commitment and 

harmonizes the “will continue indefinitely” clause in the 

termination provision with the commitment term. Security 

Life offers a more aggressive reading of the termination provision emphasizing the absence of language limiting the parties’ rights to terminate, but that reading effectively nullifies 

the three-year provision. Both readings are at least plausible. 

In light of this ambiguity, we consider extrinsic evidence that 

might shed light on the parties’ intent.1

 1 For such issues of contract interpretation, directly applicable case 

law is scarce. Security Life cites Ferentinos v. Firstate Mortgage Corp., 1991 

WL 18102 (Del. Super. Ct. 1991), aff’d, 608 A.2d 726 (Del. 1992), which 

involved a conflict between two termination provisions in an individual 

employment contract. One clause provided a five-year term unless certain reasons to terminate arose; a second clause allowed the employer to 

terminate without cause “at any time” by paying the employee at least 

one year’s severance pay. The trial court found the contract unambiguously allowed termination at any time without cause (as long as the employer paid the severance pay), and the Delaware Supreme Court affirmed. Cases like these depend on close attention to the language used. 

Both clauses in Ferentinos were part of a termination provision, and the 

combination of termination “at any time” with severance pay seems to 

have been decisive in the court’s reconciliation of the provisions. The 

five-year term clause dealt with causes for termination. The severancepay clause allowed termination without cause, but only with severance 

pay. The two clauses could therefore be reconciled as intended to comCase: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 11 

Security Life offers evidence from the parties’ negotiations: a prior draft of the agreement offered by Life Plans 

stating that the contract “shall not be terminable prior to the 

fulfillment of COMPANY’S $300 million A.L.P.S.TM premium 

commitment.” Security Life argues that the absence of that 

limiting language in the final executed agreement shows that 

the parties understood the agreement to allow termination at 

any time. The district court was persuaded that the deletion 

of this limitation showed that Security Life’s interpretation of 

the termination provision was correct. 

But Life Plans argues that the language in the earlier 

draft has no bearing on the parties’ intent in the final agreement. Life Plans points to deposition testimony by Security 

Life’s attorney who drafted the final version of the agreement. That attorney said that a different document, drafted 

by Security Life, was used as the basis for contract negotiations. Life Plans argues that no inference can be drawn from 

differences between the early Life Plans draft and the final 

agreement because the Life Plans draft was never the subject 

of negotiations. The clause limiting termination in the earlier 

draft, which was tied to a total of $300 million in premiums 

rather than to the calendar, was not specifically deleted by 

the parties because it was never discussed. Life Plans also 

 

plement one another, dealing with termination with or without cause, 

and providing that the severance pay would be due only during the first 

five years of the contract. In this case, however, it is much more difficult 

to reconcile the two relevant provisions while giving both meaning. We 

have difficulty seeing how Security Life could have made this specific 

promise: “The Company agrees to accept at least $100,000,000 of premium per twelve month period, excluding reallocations and client payments, from July 1, 2011 until June 30, 2014;” while also claiming a right 

to terminate at any time without consequence. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
12 No. 14-1437 

notes that Security Life offers no evidence to support an inference about the parties’ intent other than the text of the 

draft itself. 

The conflicting interpretations of the evidence present a 

genuine dispute of material fact precluding summary judgment. Where the parties offer competing reasonable inferences from extrinsic evidence, the disputed meaning of the 

contract is a question for the trier of fact not appropriately 

resolved through summary judgment. See Mathews v. Sears 

Pension Plan, 144 F.3d 461, 468 (7th Cir. 1998) (dispute over 

inferences from extrinsic evidence presented question of fact 

for jury on the ultimate issue of what contract meant); Restatement (Second) of Contracts § 212(2) (1981) (“A question 

of interpretation of an integrated agreement is to be determined by the trier of fact if it depends on the credibility of 

extrinsic evidence or on a choice among reasonable inferences to be drawn from extrinsic evidence.”). 

Other extrinsic evidence offered by the parties also fails 

to establish conclusively the parties’ intent. Life Plans offers 

evidence of statements from various Security Life representatives indicating that they understood termination was prohibited during the first three years. David Simon’s affidavit 

asserts that Security Life’s attorney said in a phone call in 

June 2011 that Security Life “could not terminate the JCA 

without funding the Peak Policies.” A Security Life internal 

email on September 7, 2011, from a Security Life executive to 

Britton and an ING U.S. executive, summarized the deal: 

“Our expectation is to write $300 million of single premium 

... over three years. ... After 3 years, we review the product 

and decide if we wish to continue to write more business.” 

(E-mail from Kafayi to Carney.) And Security Life proposed 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 13 

an amendment to the agreement in July 2011 (a month after 

it was signed) that would have committed Security Life to 

accepting $100 million in premium for the first year but 

freely allowed termination in the second and third years. 

The draft amendment provided: “In the event of a Termination during [the second and third years], the Company shall 

only be obligated to accept premium until the effective date 

of termination of the Agreement.” 

Security Life interprets those statements more narrowly, 

arguing that Life Plans is taking them out of context and 

misunderstanding the speakers’ intentions and the reason 

for the proposed amendment. Perhaps, but such arguments 

show this is not the stuff of summary judgment. The disputes over the inferences drawn from this evidence must also be resolved by the trier of fact. The agreement is ambiguous on this point, and the extrinsic evidence does not settle 

the dispute as a matter of law. 

b. Failure of Condition Precedent 

Security Life presents an alternative ground for affirming: that it had no obligation to offer Peak policies because a 

condition precedent failed. The agreement provides, in relevant part: 

The obligation of the Company to offer the Policy shall be subject to the following conditions 

... 

ii. Product Review and Approval Process. Submission and approval of the Policy under Company’s Product Review and Approval Process ... . 

Joint Cooperation Agreement, § 2.b. The parties dispute 

what the review process entailed and whether the Peak poliCase: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
14 No. 14-1437 

cy received approval before Security Life terminated the 

agreement.2

Both parties argue that the condition precedent term in 

the agreement is unambiguous. That’s plainly incorrect. The 

“Product Review and Approval Process” is not defined in 

the agreement, and the phrase does not otherwise convey an 

“unmistakable meaning,” City Investing Co. Liquidating Trust 

v. Continental Casualty Co., 624 A.2d 1191, 1198 (Del. 1993), 

but rather is fairly susceptible to different interpretations. 

The meaning of this term “can only be known through an 

appreciation of the context and circumstances in which [it 

was] used,” so we must consult extrinsic evidence. Id., quoting Klair v. Reese, 531 A.2d 219, 223 (Del. 1987). 

Security Life argues that the “Product Review and Approval Process” refers to a risk assessment by its management team that is informally called “PARP.” (Product Review and Approval Process would seem to be abbreviated as 

PRAP, but Security Life claims there is only one approval 

and review process at Security Life called PARP.) According 

to Security Life, there are two steps to that process: first, 

Richard Lau, chief insurance risk officer for Security Life’s 

parent company ING, issues a memorandum with a recom-

 2 We reject Life Plans’ argument that Security Life waived this defense by failing to plead it with particularity as required by Federal Rule 

of Civil Procedure 9(c). Read as a whole, the answer made clear that Security Life alleged the required approval had not been obtained. See Myers v. Central Florida Investments, Inc., 592 F.3d 1201, 1224 (11th Cir. 2010) 

(considering pleading as a whole). Even if the answer had not been sufficiently clear, the district court had discretion to allow Security Life to 

raise the issue, at least where there would be no unfair prejudice to Life 

Plans. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 15 

mendation regarding PARP approval of the policy, and second, Prakash Shimpi, an executive with titles at both Security Life and ING, makes a final decision. Security Life claims 

that Life Plans understood the two-step process, as evidenced by notes taken by Pamela Simon on April 27, 2011 

stating: “Richard ___ next week will review PARP ... then 

PARP goes to corporate for ok.” 

Security Life claims that the Peak policy failed to gain 

approval. Lau issued a memorandum on July 22, 2011 saying 

that the Peak policy “involves significant new risks” and 

“cannot be recommended for sale” by his office, and that 

“approval should not be given” unless three conditions were 

met. Security Life contends that this memo recommended 

the Peak policy not be offered. Shimpi, Lau’s superior, then 

issued a memo on August 15, 2011 stating that his office fully supported the Lau recommendation expressing “concerns 

of business risks associated with the single broker.” Security 

Life argues that Shimpi’s signature on a pricing memorandum was needed for PARP approval, and that Shimpi’s disapproval in that memo doomed the Peak policy and thus the 

agreement with Life Plans before it ever got off the ground. 

(Pricing Memorandum dated May 5, 2011 with no signatures.) 

Life Plans denies that the agreement referred to that twostep process. Life Plans counters with sworn testimony from 

David Simon that representatives from Security Life told 

him in December 2010 that PARP was “an individual or a 

group of individuals who were deciding what the premium 

needs of Security Life of Denver were.” Pam Simon testified 

that those same Security Life representatives told her and 

her husband David that PARP would be completed before 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
16 No. 14-1437 

the agreement was signed. (Such testimony about admissions by representatives of the opposing party is not hearsay 

but is admissible under Federal Rule of Evidence 801(d)(2).) 

According to both Simons’ testimony, PARP was not a part of 

the agreement or related to the Product Review and Approval Process mentioned as a condition precedent. Life 

Plans also argues that the Product Review and Approval 

Process referred to in the agreement was satisfied because a 

Security Life employee admitted the Peak policy was approved by Security Life’s “contract review team” by January 

12, 2011. 

In the alternative, Life Plans argues that even if the Product Review and Approval Process mentioned in the agreement was a reference to the two-step PARP, the condition 

was satisfied because there is evidence that the Peak policy 

actually received PARP approval, despite Security Life’s denials. Life Plans contends that an earlier memo from Lau 

dated June 7, 2011 approved the Peak policy. That memo 

said that Security Life “would not recommend approval” 

without three conditions being met, but all three were in fact 

later satisfied. One executive for ING testified that he understood that double negative to mean that Lau would approve 

the Peak policy if the conditions were met. Life Plans also 

disputes that Shimpi refused to sign the pricing memorandum and therefore rejected PARP approval for the Peak policy because Shimpi said in his deposition that a different review process—for minimum standards rather than the pricing memorandum—was the PARP. Finally, Life Plans claims 

that Security Life’s chief executive officer, Bruce Britton, gave 

PARP approval to the Peak policy. Britton testified that he 

signed the pricing memorandum. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 17 

The voluminous evidence on these matters, which we 

have sharply condensed here, presents genuine disputes of 

material fact that make summary judgment inappropriate. 

Life Plans and Security Life presented conflicting evidence 

over (a) what the Product Review and Approval Process required, (b) whether that was a reference to PARP, (c) what 

PARP is, and (d) whether the Peak policy received whatever 

approval was required by the agreement. It will be up to a 

jury to weigh this conflicting evidence and to decide whether the condition precedent was satisfied. On this evidence, a 

reasonable jury could return a verdict for either side. Neither 

is entitled to summary judgment. 

2. Processing of Pending Applications 

Life Plans also challenges the district court’s grant of 

summary judgment for Security Life on the second theory of 

a breach of contract: even if the agreement permitted the 

termination, Security Life violated the contract by failing to 

process Peak applications that were already pending when it 

gave notice of termination. The termination clause provided: 

“Company will complete processing of all applications received prior to notice of termination.” Security Life admits 

this clause required it to process applications pending before 

termination but argues that no applications for the Peak policy were pending when it gave notice of termination. 

This claim has an unusual procedural history. The parties’ cross-motions for summary judgment addressed the 

primary breach of contract claim regarding Security Life’s 

three-year term of commitment. In response to Security 

Life’s motion, Life Plans argued that the purported termination was ineffective because Security Life had not processed 

pending applications. The district court rejected this arguCase: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
18 No. 14-1437 

ment and commented in a footnote: “Whether or not LPI has 

an independent breach of contract claim against SLD solely 

for an alleged failure to complete processing of ‘all applications received prior to notice of termination’ is not discussed 

by the parties.” (Emphasis added.) The district court granted 

full summary judgment for Security Life and terminated the 

case. 

Life Plans then moved to alter that judgment, arguing 

that the parties simply had not addressed the pending application issue in their summary judgment briefing and that 

summary judgment was improper because there were disputed issues of material fact. Security Life replied that Life 

Plan had abandoned the pending application claim by failing 

to move for summary judgment! The district court denied the 

motion to alter, agreeing that Life Plans had indeed abandoned the claim. The district court reasoned: “It was up to 

LPI to set forth any and all bases for relief it was seeking, including the position that even if SLD properly terminated 

the contract, LPI was still entitled to damages for SLD’s failure to process applications it had received at the time of termination.” 

Since the Supreme Court’s 1986 summary judgment trilogy,3 the role of summary judgment in federal civil practice 

has expanded significantly. Lawyers even joke that in some 

types of cases, it’s malpractice for a defense attorney not to 

move for summary judgment. Things have not, however, 

reached the point that a party can fairly be deemed to have 

 3 Matsushita Electric Industrial Co. v. Zenith Radio Corp., 475 U.S. 574 

(1986); Celotex Corp. v. Catrett, 477 U.S. 317 (1986); Anderson v. Liberty Lobby, Inc., 477 U.S. 242 (1986). 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 19 

waived or forfeited a claim or defense by failing to move for 

summary judgment on it. Security Life moved for judgment 

on Life Plans’ breach of contract claim, arguing failure of a 

condition precedent and lawful termination, but scarcely 

addressed possible liability for pending applications. Life 

Plans might have avoided the district court’s premature resolution of this claim by stating more clearly in its briefing that 

it intended to proceed with this claim even if the court 

granted summary judgment for Security Life on the threeyear commitment theory. But its failure to do so did not 

abandon this claim. 

Turning to the merits of the issue, there is a genuine dispute of material fact as to whether any applications were 

pending when Security Life gave notice. Security Life says 

no because the Peak policy was never offered. Life Plans 

counters that it submitted dozens of applications, at least 

nine of which were approved by Security Life and for which 

underwriting was completed. And Life Plans offers evidence 

that Britton, Security Life’s CEO, admitted that there were 

insureds who were “medically underwritten and approved, 

so we should be issuing them a PEAK policy.” A reasonable 

jury could find for Life Plans based on this evidence. 

B. Implied Covenant of Good Faith 

Life Plans also brought a distinct claim under Delaware 

law alleging that Security Life breached the implied covenant of good faith and fair dealing in abusing its discretion 

to approve the Peak policy under its Product Review and 

Approval Process. The district court granted summary 

judgment on this claim because it found that Security Life’s 

termination was an exercise of a right expressly provided in 

the agreement. Having found a genuine dispute as to a maCase: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
20 No. 14-1437 

terial fact regarding the termination, we re-evaluate the implied covenant claim. 

Delaware recognizes a claim for the breach of the implied 

covenant of good faith and fair dealing in limited circumstances. The implied covenant requires “‘a party in a contractual relationship to refrain from arbitrary or unreasonable conduct which has the effect of preventing the other 

party to the contract from receiving the fruits’ of the bargain.” Dunlap v. State Farm Fire & Casualty Ins. Co., 878 A.2d 

434, 442 (Del. 2005), quoting Wilgus v. Salt Pond Investment 

Co., 498 A.2d 151, 159 (Del. Ch. 1985). The covenant implies 

terms in an agreement to fill gaps or to account for unanticipated developments. Id. 

The implied covenant cannot modify the express language of the parties’ agreement, so a party generally may not 

base a claim of a breach of the implied covenant on conduct 

authorized by the terms of an agreement. Id. “Under Delaware law, a court confronting an implied covenant claim 

asks whether it is clear from what was expressly agreed upon that the parties who negotiated the express terms of the 

contract would have agreed to proscribe the act later complained of as a breach of the implied covenant of good 

faith—had they thought to negotiate with respect to that 

matter.” Gerber v. Enterprise Products Holdings, LLC, 67 A.3d 

400, 418 (Del. 2013), overruled on other grounds by Winshall 

v. Viacom Int'l Inc., 76 A.3d 808 (Del. 2013). Finding a breach 

of the implied covenant “should be a rare and fact-intensive 

exercise, governed solely by issues of compelling fairness.” 

Dunlap, 878 A.2d at 442 (brackets, footnote, citation, and internal quotation marks omitted). 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 21 

Life Plans has offered evidence to show that questions of 

fact preclude summary judgment on this claim. A reasonable 

jury could find that Security Life’s alleged termination was 

arbitrary or unreasonable and would have been proscribed if 

the parties had thought to negotiate with respect to this matter. Life Plans argues that Security Life acted in bad faith and 

treated Life Plans unfairly. Even the CEO of Security Life 

wrote in an internal email on September 25, 2011 to Lau and 

another executive that “We are not operating with integrity 

in this deal,” trying to convince them to reverse their disapproval of PARP. CEO Britton also discussed the possibility of 

telling other insurance companies not to work with Life 

Plans in the context of addressing executives’ concerns that 

Life Plans would just transfer the ALPS-funded policies to 

another insurance carrier. These comments could support a 

reasonable finding that Security Life’s conduct breached the 

implied covenant. 

Security Life argues that the evidence shows that it had a 

perfectly reasonable explanation for not offering the Peak 

policy: it found the exotic policy was just too risky. That may 

well be true, but on this record the evidence does not support summary judgment. Security Life may address its arguments about the better inferences to draw from the evidence to the jury at trial. The inferences argued by Life Plans 

are reasonable. That is enough to survive summary judgment. 

Security Life also contends that it is entitled to summary 

judgment on this claim because Life Plans has not presented 

evidence that would show fraud, deceit, or misrepresentation, which Security Life contends is required under Delaware Law. It cites a Court of Chancery opinion stating: “The 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
22 No. 14-1437 

Delaware Supreme Court has explicitly held that a claimant 

must demonstrate that the conduct at issue involved fraud, 

deceit, or misrepresentation in order to prove a breach of the 

implied covenant.” Continental Ins. Co. v. Rutledge & Co., 750 

A.2d 1219, 1234 (Del. Ch. 2000). But the Delaware Supreme 

Court opinion that Continental Insurance cited held that an 

employer breaches the implied covenant in an employment 

contract only when the employer’s conduct constitutes “an 

aspect of fraud, deceit or misrepresentation.” Merrill v. Crothall-American, Inc., 606 A.2d 96, 101 (Del. 1992) (citation and 

internal quotation marks omitted). That decision should not 

be read to apply broadly to all implied covenant claims. 

More recent opinions from the Delaware Supreme Court and 

the Court of Chancery have addressed implied covenant 

claims outside the employment context and have not required fraud as an element of the claim. See Gerber, 67 A.3d 

at 418–19; Allen v. El Paso Pipeline GP Co., 113 A.3d 167, 183 

(Del. Ch. 2014). 

Finally, Security Life tries to avoid its choice of Delaware 

law and argues that Illinois law does not recognize an independent claim for breach of the implied covenant of good 

faith and fair dealing. See, e.g., LaScola v. US Sprint Communications, 946 F.2d 559, 565 (7th Cir. 1991) (in Illinois, obligation of good faith “is in aid of and furtherance of other terms 

of the agreement of the parties” and “does not create an independent cause of action”). Though Security Life agrees 

that Delaware law governs the rest of this dispute because of 

the agreement’s choice-of-law provision, it challenges the 

application of Delaware law to this claim. It argues that the 

failure of the condition precedent means the agreement is 

unenforceable so that the provision choosing Delaware law 

has no effect. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 23 

That is an incorrect statement of the law. Even if one party to the contract alleges the failure of a condition precedent, 

we apply the law chosen by the parties to all contractual issues. Smurfit Newsprint Corp. v. Southeast Paper Mfg. Co., 368 

F.3d 944, 949 (7th Cir. 2004). A contract’s choice-of-law provision may not apply if the contract’s legality is fairly in doubt, 

for example, if the contract is unconscionable, or if there is 

some other issue as to the validity of the very formation of 

the contract. See Sarnoff v. American Home Products Corp., 798 

F.2d 1075, 1081–82 (7th Cir. 1986), abrogated on other 

grounds by Hart v. Schering-Plough Corp., 253 F.3d 272 (7th 

Cir. 2001). But that concern is not present here. If Security 

Life is correct that a condition precedent was not satisfied, 

the agreement provides that it is relieved of the obligation to 

offer the Peak policy. That does not void the agreement’s 

Delaware choice-of-law provision. Under Illinois choice-oflaw rules, which we apply as a federal court sitting in diversity, a court must honor a contractual choice of law unless 

the parties’ choice of law would both violate fundamental 

Illinois public policy and Illinois has a materially greater interest in the litigation than the chosen state. Smurfit, 368 F.3d 

at 949, citing English Co. v. Northwest Envirocon, Inc., 663 

N.E.2d 448, 452 (Ill. App. 1996). Security Life has never argued that exception applies here and could not show it on 

these facts, especially because the agreement is a commercial 

contract negotiated by sophisticated business parties. 

III. Denial of Leave to Amend the Complaint 

The final issue on appeal is the district court’s denial of 

leave to amend the complaint. Life Plans sought to add two 

new claims: a promissory estoppel claim against Security 

Life and a tortious interference with contract claim against 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
24 No. 14-1437 

ING U.S., Inc., Security Life’s parent company. ING U.S. was 

not sued in the original complaint, so Life Plans’ amended 

complaint proposed adding ING U.S. as a new defendant. 

The district court denied Life Plans’ motion for leave to 

amend because it was filed near the end of the discovery period. We review a denial of leave to amend for abuse of discretion, but we think this is one of those unusual cases 

where the denial was an abuse of discretion. See Runnion v. 

Girl Scouts of Greater Chicago, 786 F.3d 510, 528 (7th Cir. 2015). 

The Federal Rules of Civil Procedure adopt a liberal 

standard for amending: “The court should freely give leave 

when justice so requires.” Fed. R. Civ. P. 15(a)(2). The Supreme Court has interpreted this rule to require a district 

court to allow amendment unless there is a good reason—

futility, undue delay, undue prejudice, or bad faith—for 

denying leave to amend. Foman v. Davis, 371 U.S. 178, 182 

(1962). 

None of those exceptions that might justify denying 

amendment was present in this case. Life Plans’ request for 

amendment was timely. Life Plans sought amendment 

promptly after discovering a factual basis for its new claims 

and tried to mitigate any delay that could result from 

amending the complaint late in discovery. Though the district court expressed frustration because the request was 

made when there was only a month remaining before the 

deadline for completing discovery, the motion was filed 

promptly and would not have caused undue delay. Life 

Plans sought leave to amend just ten days after completing 

the deposition of Security Life’s CEO, whose testimony 

showed for the first time, according to Life Plans, that termination of the agreement was forced on Security Life by ING. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 25 

Mindful of the impending discovery deadline, Life Plans 

told the court that it would not ask to re-depose any witnesses. And Security Life had completed only one deposition 

when amendment was sought, and that witness had already 

been asked about the amended complaint. 

Granting the amendment in these circumstances would 

not necessarily have caused any delay, and even a modest 

delay would not have been undue. See Dubicz v. Commonwealth Edison Co., 377 F.3d 787, 793 (7th Cir. 2004) (“[D]elay 

by itself is normally an insufficient reason to deny a motion 

for leave to amend. Delay must be coupled with some other 

reason ... [t]ypically ... prejudice to the non-moving party.”) 

(citation omitted). The purpose of discovery is to refine the 

case and to prepare it for trial based on a full understanding 

of the relevant facts. If discovery shows that a party should 

be added, and if the moving party has been diligent, there 

may well be sound grounds for amending the pleadings and 

even adding a new party. Moreover, Security Life has never 

explained how it would be prejudiced by the amendment. 

Concerns about delay did not justify refusing amendment. 

And in light of our other rulings, we cannot say the proposed amendment would have been futile.4

The judgment of the district court is REVERSED and the 

case is REMANDED for proceedings consistent with this 

opinion. 

 4 At oral argument, counsel for Life Plans moved for the reassignment of this case on remand pursuant to Circuit Rule 36. We see no reason to reassign the case and so deny the request. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
26 No. 14-1437

ROVNER, Circuit Judge, concurring in part and dissenting in

part. 

In my view, the Termination provision is not ambiguous:

it granted an unfettered right to either party to terminate the

agreement on thirty days’ notice. Because of this conclusion, I

would find that it is not necessary to address the question of

whether Security Life breached the implied covenant of good

faith and fair dealing when it terminated the contract. I concur

in the majority’s opinion on the issues of the processing of

pending applications and the denial of leave to amend the

complaint. In addressing the pending applications on remand,

the district court likely will have to consider the issues of the

condition precedent and the implied covenant of good faith

and fair dealing as it relates to the failure to approve the Peak

policy. On those issues, I agree with the majority’s conclusion

that summary judgment is inappropriate and that a trial is

needed to resolve the fact questions identified in the majority

opinion. But as to the termination, I respectfully dissent.

The “Commitments” clause of the contract provides, in

relevant part, that Security Life “agrees to accept at least

$100,000,000 of premium per twelve month period, excluding

reallocations and client payments, from July 1, 2011 until

June 30, 2014[.]” The “Termination” provision specifies that

“[t]his Joint Cooperation Agreement will continue indefinitely,

until terminated by either party upon thirty (30) days written

notice, delivered by certified mail.” The majority agrees that

the Termination provision, standing alone, granted Security

Life the right to terminate the contract at any time. Supra at 10.

But the majority reads the “Commitments” clause as a

“provision that committed the parties to a three-year term,”

and concludes that the seemingly conflicting provisions must

be harmonized. I simply do not see any language in the

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 27

Commitments clause that binds either party to a particular

term of years. Instead, the Commitments clause locks in

financial terms that will govern the parties during the first

three years of an indefinite relationship.

An example illustrates the distinction that I am drawing.

Suppose a renter signs a month-to-month lease with a termination provision identical to the one utilized by the parties here.

If the lease also contains a provision that states, “The rent shall

be fixed at $1200 per month for the first twelve months,” no

one would argue that the month-to-month contract has been

transformed into a one-year lease. The rent clause would be

understood to be setting the financial terms for the first twelve

months of an indefinite relationship. Likewise, using the

language of the contract at issue, if the lease provides, “The

renter agrees to pay $1200 per month for the first thirty-six

months,” it would remain a month-to-month lease, not a lease

with a three-year minimum term. The rent clause, like the

Commitments clause here, removes uncertainty about financial

expectations but says nothing about the length of the agreement.

Purely financial terms cannot set the length of an indefinite

contract. Nothing in the financial “Commitments” clause of the

contract at issue here binds either party to a relationship of a

definite term. The language simply commits Security Life to

accepting a certain amount of premium per twelve month

period for the first three years of an indefinite relationship. It

would have been very easy for the parties to draft language

committing them to an initial three year term. For example,

they could have said that “the initial term of this agreement

shall be three years, after which the agreement will continue

indefinitely until either party terminates with thirty days’

notice in writing.” But they did not draft the contract that way;

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
28 No. 14-1437

they drafted an agreement with an indefinite term. Indeed, the

contract was subject to six express conditions precedent before

the deal would even commence. See Joint Cooperation Agreement, § 2.b (listing the conditions precedent). Because there is

no conflict between the Commitments clause and the Termination provision, there is no ambiguity and no need to consider

extrinsic evidence.

Neither party cited a case directly on point interpreting

similar language. The majority cites no controlling case and I

was also unable to find one. Security Life seems to have found

the closest analogue with the decision in Ferentinos v. Firstate

Mortgage Corp., 1991 WL 18102 (Del. Super. Ct. 1991), aff’d,

608 A.2d 726 (Del. 1992). In that case, a contract provision

established a five-year term of employment unless the employee died, became disabled, or was terminated for cause.

Another clause stated that the employer “may elect to terminate this agreement without cause at any time” by paying the

smaller of one years’ salary or the balance due on the unexpired term of employment. The court found no ambiguity in

those provisions, even though one stated a fixed term for the

contract and the other purported to allow termination at any

time. 

The case is even stronger here, where there is no provision

setting a particular length of time for the contract, and where

the only duration-related provision states that the agreement

is indefinite. As is apparent from the briefs, the agreement

never really got off the ground and at best there may be some

partial performance issues to be resolved. Because the contract

granted either party an unlimited right to terminate the

agreement on thirty days’ notice, I would affirm the district

court’s grant of summary judgment in favor of Security Life on

the issue of termination. I agree that the case must be reCase: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29
No. 14-1437 29

manded, however, because there are open questions of fact

regarding pending applications and because the district court

should have allowed Life Plans to amend its complaint. In my

view, the only issues for trial relate to partial performance

during the four months that the agreement was in effect. 

Case: 14-1437 Document: 59 Filed: 08/31/2015 Pages: 29