Opinion ID: 3002114
Heading Depth: 2
Heading Rank: 1

Heading: Insurance Contract Ambiguity

Text: When sitting in diversity, we must apply the substantive law of the state as we believe the highest court of that state would apply it when faced with the same issue. Allstate Ins. Co. v. Keca, 368 F.3d 793, 796 (7th Cir. 2004). Both parties agree that Indiana law applies here. Officer does not argue that Indiana law prohibits the exclusion of suicide under life insurance policies; Indiana has long permitted exclusions of this type. See, e.g., Nw. Mut. Life Ins. Co. v. Hazelett, 4 N.E. 582 (Ind. 1886) (discussing a suicide exclusion and noting that “[i]t is neither unlawful, nor against public policy, for a contract of life insurance to stipulate that upon certain conditions or con- 4 No. 07-2826 tingencies the policy shall become void”); Kunse v. Knights of the Modern Maccabees, 90 N.E. 89, 91 (Ind. App. 1909) (enforcing a suicide exclusion). Instead, Officer argues that the provision is ambiguous and should be construed in his favor. To determine whether Officer is entitled to receive the face amount of the insurance policy, we refer to Indiana’s law of contract interpretation. Nat’l Athletic Sportswear, Inc. v. Westfield Ins. Co., 528 F.3d 508, 512 (7th Cir. 2008). An insurance contract is subject to the same rules of interpretation as other contracts under Indiana law. Morris v. Econ. Fire & Cas. Co., 848 N.E.2d 663, 666 (Ind. 2006). “If the language in the insurance policy is clear and unambiguous, then it should be given its plain and ordinary meaning, but if the language is ambiguous, the insurance contract should be strictly construed against the insurance company.” Id. Indiana law is clear that an ambiguity does not arise merely because the two parties are able to create different interpretations of the policy language at issue. USA Life One Ins. Co. of Ind. v. Nuckolls, 682 N.E.2d 534, 538 (Ind. 1997). “Rather, the policy is ambiguous only if it is susceptible to more than one interpretation and reasonably intelligent persons would differ as to its meaning.” Id. (internal quotation omitted). Chase’s suicide provision states: We will limit the proceeds we pay under this policy if the insured commits suicide, while sane or insane:
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but within 2 years from the effective date of the last reinstatement of this policy. The limited amount will equal all premiums paid on this policy. Although courts in Indiana and other others states have frequently analyzed suicide clauses in insurance contracts, no court has construed the exact language at issue here. See, e.g., Commonwealth Life Ins. Co. v. Jackson, 432 N.E.2d 1382, 1384 (Ind. Ct. App. 1982) (construing a suicide clause that stated: “the amount payable . . . shall be limited to the premium or premiums paid hereunder without interest”); Cont’l Assurance Co. v. Krueger, 66 N.E.2d 133, 134 (Ind. App. 1946) (construing a suicide clause that stated: “the liability of the company shall be limited to an amount equal to the premiums actually paid on this policy”); Aetna Life Ins. Co. v. Doerr, 115 N.E. 700, 701 (Ind. App. 1917) (construing a suicide clause that stated: “If the insured shall commit suicide within one year . . . this policy shall be null and void.”). Officer argues that the exclusion is susceptible to two meanings. First, the amount payable could equal the face value minus the premiums paid, or $999,460. Second, the amount payable could equal the amount of premiums paid, or $540. Obviously, Officer prefers the first interpretation and Chase prefers the second. The district court rejected Officer’s interpretation of the suicide provision and concluded that it was unambiguous as written. The court noted that the plain and ordinary meaning of the words “proceeds” and “amount” 6 No. 07-2826 are “virtually interchangeable.” Officer v. Chase Ins. Life & Annuity Co., 478 F. Supp. 2d 1069, 1075 (N.D. Ind. 2007). Although we can imagine improved ways to write this exclusion, we, too, conclude that the policy is not ambiguous as written. The first clause of the insurance provision sets out Chase’s exclusion by stating: “We will limit the proceeds we pay.” It then sets out the circumstances under which it will limit the proceeds. The final sentence states: “The limited amount will equal all premiums paid on this policy.” None of these terms is defined, and so “the limited amount” most logically refers back to the first phrase. Combining those two phrases, the policy’s meaning is clear: “The limited amount [of proceeds we pay] will equal all premiums paid on this policy.” Officer’s alternate interpretation—“We will limit the proceeds, and the amount by which they will be limited will equal the premiums paid”—is not a reasonable interpretation. If, as he suggests, the limited amount were equal to the face value minus the premiums paid, Chase would be required to pay more money where an insured committed suicide one day after buying the policy than it would have to pay one day before the suicide exclusion expired. Reasonably intelligent persons would not find that the provision was susceptible to Officer’s interpretation. Officer also argues that another portion of the policy uses clearer language: “The proceeds payable on the death of the insured are equal to . . . .” He asserts that because Chase knew how to clearly write “proceeds payable” elsewhere, the term “limited amount” can reasonably mean something else in the suicide provision. It is approNo. 07-2826 7 priate to look at the insurance contract as a whole in determining ambiguity, and courts should attempt to harmonize provisions rather than placing them in conflict. Dunn v. Meridian Mut. Ins. Co., 836 N.E.2d 249, 252 (Ind. 2005). These two provisions are not in conflict, though. Chase could have used the same language in both provisions, but the fact that it used different language to express the amount of proceeds payable does not compel the conclusion that two otherwise unambiguous statements have become ambiguous.