Court Opinion

ID: 2998501
Source: CourtListenerOpinion
Date Created: 2015-09-24 19:44:28.361395+00
Date Added: 2024-06-11T15:03:01.715460
License: Public Domain

In the
 United States Court of Appeals
               For the Seventh Circuit
                          ____________

No. 05-1054
STEVEN E. JACOBS,
                                               Plaintiff-Appellant,
                                 v.

PAUL REVERE LIFE INSURANCE COMPANY,
d/b/a UNIPROVIDANT,
                                 Defendant-Appellee.
                    ____________
            Appeal from the United States District Court
       for the Northern District of Illinois, Eastern Division.
         No. 04 C 995—Charles P. Kocoras, Chief Judge.
                          ____________
 ARGUED DECEMBER 1, 2005—DECIDED DECEMBER 19, 2005
                    ____________

 Before FLAUM, Chief Judge, and BAUER and EVANS, Circuit
Judges.
  FLAUM, Chief Judge. Steven Jacobs took out a disabil-
ity insurance policy (“the Policy”) from Paul Revere Life
Insurance Company (“Revere”). When Jacobs purchased the
Policy, he had recently undergone successful back surgery.
For that reason, Revere included a “back exclusion” in the
Policy, whereby Jacobs would receive only twelve months of
disability pay for any back injury. The Policy also included
a reconsideration offer that would allow Jacobs to request
reconsideration of removal, modification, or reduction of the
back exclusion if Jacobs’ back was symptom-free for two
years. Jacobs’ back was symptom-free for two years, but he
2                                                No. 05-1054

never requested that Revere reconsider the Policy’s back
exclusion.
  Jacobs injured his back playing tennis ten years after
purchasing the Policy. He filed a claim with Revere. The
company agreed to pay only twelve months of disability
benefits, citing the Policy’s back exclusion. Jacobs claims
that because he was symptom-free for two years, Revere
was contractually obligated to remove the back exclu-
sion upon request, even if that request came after a sig-
nificant back injury. Jacobs claims that the only valid
ground for not removing the exclusion would be if Jacobs
had exhibited back symptoms within two years of pur-
chasing the Policy. Revere claims that under the Policy, it is
allowed to take into account any back problems which arose
before Jacobs asked the company to reconsider the back
exclusion, including Jacobs’ current, debilitating injury.
  The district court granted summary judgment to Revere,
favoring its interpretation of the contract. For the following
reasons, we now affirm.

                      I. Background
  Steven Jacobs is a commodities trader. In 1991, he
purchased a disability insurance policy from Revere. Jacobs
had previously injured his back and undergone surgery. He
disclosed this condition on his policy application, and the
issued policy contained a rider stating that disabilities
resulting from lower back injuries would only be covered for
a one-year period. (Jacobs would receive benefits for all
other injuries covered by the Policy until he turned 65.)
  The Policy also contained a reconsideration clause that
has become central to this case. When Revere’s agent
gave Jacobs a copy of his policy, he also gave Jacobs an
“information sheet” that was later ruled to be part of
Revere’s insurance contract with Jacobs. The information
No. 05-1054                                                 3

sheet underscores the back exclusion, then states, “On
request, reconsideration can be given to removal, mod-
ification, or reduction subject to:
NO RECURRENCE       PHYSICIAN’S STATEMENT        IN 02 YEARS.”

  The Policy also contained an additional information sheet
that detailed a rate increase of 120% because of Jacobs’
“build” (or, more accurately, weight), and an insured salary
amount of $5,000 per month. That page contained a sepa-
rate reconsideration offer for those provisions, which stated,
“On request, reconsideration can be given to removal,
modification, or reduction subject to:
EVIDENCE OF INSURABILITY         IN 02 YEARS.”

  Before 2001, Jacobs never filed for reconsideration on
the back exclusion. He did, however, apply for and re-
ceive salary increases under the salary/“build increase”
reconsideration offer. Jacobs contends that the insur-
ance agent filled out the appropriate paperwork for the
salary increase, because Jacobs had made it clear when
purchasing the Policy that he wanted the maximum
possible salary coverage. Jacobs claims that he was
also clear when purchasing the policy that he was very
concerned about coverage for back injuries, and expected to
be fully covered. All parties agree that the agent told Jacobs
that he would probably have a back exclusion for two years.
Jacobs claims that he was told that the exclusion would
automatically be dropped if he showed no symptoms for two
years. Revere claims that Jacobs was told that he could
request removal of the exclusion after two years.
  In October 2001, Jacobs injured his back playing tennis.
He required another surgery to treat the injury. This
surgery left Jacobs with significant pain, and all parties
concede that after the surgery he was unable to work as
a trader, which required standing in excess of seven hours
per day.
4                                               No. 05-1054

  In November 2001, Jacobs filed a disability claim under
the Policy. Revere approved benefits, but limited them
to one year, citing the back exclusion. Jacobs informed
Revere of his view that the exclusion should have been
removed from the Policy in 1993 (two years after he pur-
chased the Policy).
  At first, Revere informed Jacobs that the exclusion had
not been removed because Jacobs had never requested
that it be removed. The company eventually agreed to
characterize the correspondence from Jacobs’ lawyer as
a formal request for reconsideration. Subsequently, an
underwriter for Revere sent Jacobs’ lawyer a letter stat-
ing that Revere was denying Jacobs’ request for removal
of the exclusion due to Jacobs’ recent back injury.
  Jacobs filed suit in Cook County. Revere removed the suit
to federal district court as a diversity action. The district
court ruled that the information sheets were part of the
Policy and created contractual obligations. Jacobs then filed
for summary judgment, and Revere filed a cross-motion for
summary judgment. The district court dismissed Jacobs’
motion and granted Revere’s. Jacobs now appeals both
decisions.

                      II. Discussion
  This case is a case of contractual interpretation. Jacobs
claims that the language on the information sheet is a
contractual promise to remove the back exclusion in the
Policy if Jacobs’ back showed no symptoms for two years
after the policy issued. Under Jacobs’ view, Revere should
not have been allowed to consider any back symptoms after
the two-year period had expired in 1993.
  Revere claims that it merely promised to re-evaluate
Jacobs’ back problems after two symptom-free years, upon
Jacobs’ request. Under Revere’s interpretation, the two
No. 05-1054                                               5

years were essentially a time limitation on when Jacobs
could first apply for reconsideration, and it in no way
limited the scope of Revere’s review once Jacobs applied.
  Based on the plain meaning of the provision found on
the information sheet, we conclude that Revere’s inter-
pretation is correct. It is hardly fair to claim that an
agreement to “reconsider” a contractual provision is
legally equivalent to an agreement to “remove” the provi-
sion altogether, especially since the agreement itself
states that “reconsideration can be given to removal,
modification, or reduction” (emphasis added). Neither
side claims that “reconsider” is a term of art in the in-
surance industry, and Webster’s dictionary defines re-
consider as “to consider again with a view to changing
or reversing.” WEBSTER’S NINTH NEW COLLEGIATE DIC-
TIONARY 984 (9th ed. 1990). A reasonable person would
not understand a promise to “consider again with a view
to changing or reversing” as equivalent to a promise
to reverse. Adopting Jacobs’ interpretation would require us
accept this strange result, because under it, Revere would
have been required to remove the back exclusion if Jacobs
was symptom-free for two years.
  Jacobs makes two arguments in favor of his interpreta-
tion of the promise in the information sheet, neither of
which are availing. He argues, firstly, that Revere’s inter-
pretation of the language imposes an improper evidence of
insurability condition on the back exclusion reconsideration
offer. Jacobs points to the language of the reconsideration
offer for the “build” premium, in which Revere expressly
creates an “evidence of insurability” requirement. Jacobs
argues that reconsideration offer at issue is a part of the
same contract. It does not include an “evidence of
insurability” requirement and therefore Revere cannot
fairly be allowed to impose one.
  Revere argues that “evidence of insurability” is a term
of art in the insurance industry that encompasses an
6                                               No. 05-1054

insured’s entire lifestyle, such as marital status, age,
general health, etc. Revere agrees that it was not allowed to
evaluate Jacobs’ overall insurability when reconsidering the
back exclusion; it was limited to considering Jacobs’ back
condition. However, Revere argues, this is not the equiva-
lent of promising to ignore all back problems between 1993
and when Jacobs formally applied for reconsideration of the
back exclusion. We agree with Revere.
  Jacobs also argues that ambiguous insurance con-
tracts, under Illinois law, should be strictly construed
against the insurer. See, e.g., Grevas v. U.S. Fidelity &
Guar. Co., 604 N.E.2d 942, 944 (Ill. 1992) (“[A]n insurance
contract should be construed liberally in favor of the
insured and strictly against the insurer.” (citing Glidden v.
Farmers Auto. Ins. Ass’n, 312 N.E.2d 247 (Ill. 1974))).
Therefore, Jacobs argues, his interpretation must prevail.
This argument is also unconvincing. Illinois state law is
also clear that when the meaning of a contract can be
discerned, the court will give effect to that meaning. Id. We
are required to construe ambiguous language liberally for
the insured, not to impose a new definition on the words
used in the contract, which is essentially what Jacobs
requests. We believe it is unreasonable for Jacobs to read
Revere’s agreement to “reconsid[er] . . . removal, modifica-
tion or reduction subject to [certain conditions]” as an
agreement to “completely remove after certain conditions
occur.” We therefore cannot fairly construe the language in
his favor, and must effectuate the contract’s meaning.
  In sum, we find that Revere merely promised to “recon-
sider” Jacobs’ back exclusion upon request. It did recon-
sider, and, in light of the fact that removing the exclusion
would result in a 100% risk of paying years of benefits,
declined to do so. Revere has fulfilled its obligation to
reconsider, and was within its rights under the contract
to enforce the back exclusion.
No. 05-1054                                              7

                    III. Conclusion
  For the foregoing reasons, we AFFIRM the district court’s
summary judgment ruling in favor of Revere.

A true Copy:
      Teste:

                       ________________________________
                       Clerk of the United States Court of
                         Appeals for the Seventh Circuit

                  USCA-02-C-0072—12-19-05